Consent Decree

As one of the top U.S. trade associations, the American Association of Advertising Agencies has long worked to raise the standards and ethics of its profession. It was founded to bring order out of advertising's pre-World War I chaos, when ad agencies often kicked back part of their commissions to publishers, or split fees with advertisers. A.A.A.A. also helped to change the agency's original role as a publishers' space broker. Today's ad agency works not for the publishers but for the advertiser, helps him find markets, choose media, check results. By standardizing the agency fee at 15%, A.A.A.A. virtually eliminated price wars in the advertising industry.

But last year the U.S. Justice Department objected to A.A.A.A.'s powerful influence in the business, charged it with restraining trade by fixing agency fees (TIME, May 9). Last week, with little to gain by going into court and little to lose by settling, A.A.A.A. signed a consent decree with Chief Trustbuster Stanley Barnes. (Suits against five other associations are still unsettled.)

Stoutly denying that it was guilty of any of the Government's charges, the A.A.A.A. agreed to end the requirement that members collect a 15% commission and its ban against rebates, and stop policing the industry. To admen, A.A.A.A.'s concessions will mean little. The 15% commission is not all profit, but covers the costs of preparing copy, researching markets, planning layouts, advising on public relations, and a score of other important selling services. For many an agency profits run about 3/4% of billings; with that little margin nobody expects the advertising agency to revert to big-scale fee-splitting. Every man in a grey flannel suit knows that no modern ad agency competes on price, but on quality of service and results.

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