Is the Failure to Comply with Contractual Terms Cheating?

3 Feb

contract complianceHaving been involved in developing marketing accountability systems and monitoring supplier compliance for the last decade or so, this is a question which has been posed many times, in many ways: 

 

  • Was this action or inaction an oversight or an ethical breach? 
  • Did they know or should they have known? 
  • Was their behavior consistent with industry standards? 
  • How could their interpretation of the agreement vary so wildly from ours? 
  • Were they intending to cheat us?
  • How could we have prevented this?

Long a subscriber to the principle of “caveat emptor” or “let the buyer beware”, I have long felt that advertisers need assistance to level the playing field when it comes to the financial stewardship of their marketing investment.  The fact of the matter is that “sellers,” which include marketing services agencies, media publishers and the myriad of third-party vendors whose goods and services are being procured on an advertiser’s behalf by their agency partners are better informed than their client-side counterparts or “buyers” when it comes to the intricacies of these transactions. 

Establishing sound Master Services Agreements with well defined terms and conditions designed to guide agency behavior and provide the requisite legal and financial safeguards are a great first step in any client-agency relationship.  Integrating a performance monitoring system with contract compliance testing further enhances a client’s controls, while yielding greater transparency into the financial management of their marketing spend.  Some may still ask; “But is this enough?”

Thus, it was with great interest that I read an article on the Knowledge@Wharton website entitled; “Cheaters… Win? Why Systems to Prevent Deception Don’t Work.”  Conventional wisdom among psychologists has held that “unethical behaviors” typically “evoke a negative emotional response after the event – if the mere promise of feeling guilt or remorse doesn’t stop the individual from doing it in the first place.”  However, a new research study conducted by Maurice E. Schweitzer of Wharton and colleagues from the HarvardBusinessSchool, LondonBusinessSchool and the University of Washington’s Foster School of Business suggests that there are other forces at work.  The study found that unethical behavior may not create a negative emotional reaction but conversely may “trigger positive feelings” among cheaters.  Why?  Mr. Schweitzer suggests that “part of the cheater’s high comes from a sense of accomplishment when an elaborate system is defeated.”

We’re all familiar with the euphemism, “Gaming the System.”  Could it be that some questionable behaviors in the minds of some “cheaters” are perfectly acceptable in this context?  The aforementioned research would suggest that this is the case.  Sadly, given the size of the global advertising ecosystem, which Magna Global estimates will reach $515 Billion in 2014, and the complexity of the marketing supply chain, this mindset raises the risks to advertisers when it comes to insuring that they are receiving value commensurate with what they have paid for. 

Farfetched?  Not really.  Just consider the steady stream of concern raised about the various ways in which digital media advertisers are defrauded.  You may recall the October 2013 story from Adweek’s Mike Shields entitled, The Amount of Questionable Online Traffic Will Blow Your Mind: The Worldwide Rip-offin which Wenda Millard, President of MediaLink purported that “a quarter of the online ad market is fraudulent.”  According to the article, Millard categorized actions such as, “piracy, non-viewable ads, ads stacked on top of one another, inappropriate content and, of course, deliberate malicious behavior” as fraudulent.  This is but one relevant example of the impact of cheating within the marketing sector.

The fact of the matter is that cheaters exist and always will.  They exist in every walk of life, in every industry, within every organization and at every level.  The best course of action to be taken to insulate an organization from cheaters has always been to find effective and efficient means to incent ethical behavior within one’s organization and across its supplier base.  Supplemented of course by an accountability initiative that includes ongoing oversight, performance monitoring and in the case of contract compliance, independent audit support.  In the oft cited words of President Ronald Reagan: “Trust, but verify.”

Interested in finding out what an advertiser can put into action to reduce its exposures to these kinds of abuses?  To learn more, contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: