By Suzanne Vranica and Anne Steele
The U.S. Justice Department's investigation into potential price-fixing in video advertising production has reached at least three of the world's biggest ad holding companies.
French advertising giant Publicis Groupe SA and Omnicom Group Inc., of the U.S., on Friday each acknowledged that subsidiaries received subpoenas from the Justice Department on Wednesday.
Last week, TheWall Street Journal reported the Justice Department is investigating whether advertising agencies inappropriately steered business for producing commercials to their in-house production units over independent companies.
Omnicom owns a long list of advertising firms such as BBDO Worldwide, DDB Worldwide, TBWA Worldwide and GSD&M. Publicis owns ad agencies such as Leo Burnett, Saatchi & Saatchi and Publicis Worldwide.
Interpublic Group last week acknowledged it was contacted by the DOJ's antitrust division "for documents regarding video production practices"
All three companies said they are cooperating with the investigation.
WPP PLC and Havas SA, two other big advertising companies, declined to comment on Friday.
The production and postproduction work on commercials is a roughly $5 billion business in the U.S. and involves services such as directing, sound editing, special effects and color correcting. The sector includes hundreds of small independent companies that often compete for contracts.
Creative agencies, including those owned by the big holding companies, are typically charged with conceiving a commercial idea. Then, a production company is hired to film and direct the ad shoot. After the ad is filmed, postproduction firms are generally hired to finish off the process.
Ad agencies have offered their own production and postproduction services to some extent for decades. But they have doubled down on this business over the past few years to find new revenue streams and to help address marketers' growing need for more ad content because of the rise of social media.
Many ad holding companies have also set up separate companies to do more production and postproduction work.
Rebecca Meiklejohn, a government antitrust attorney based in New York, has been interviewing ad-industry executives on the subject over the past few months,according to people familiar with the matter.
The government is investigating whether agencies essentially rigged the bidding process, telling independent firms that compete for business to inflate their prices so that contracts would be awarded to agencies' production units.
FBI agents have also interviewed postproduction companies about their experiences with the bidding process, according to a person familiar with the situation.
Price-fixing and bid-rigging are prohibited under federal antitrust law.
The Justice Department investigation has some connection to the recent investigation of the ad-buying industry by the Association of National Advertisers, a trade group that represents big marketers. That probe found agencies are shortchanging clients through a range of nontransparent business practices.
The ANA uncovered allegations of bid-rigging in the post production business and that information was turned overto Ms. Meiklejohn, the Journal reported.
Write to Suzanne Vranica at firstname.lastname@example.org and Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
December 16, 2016 16:35 ET (21:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.