Kraft pitch requirements are insane

+ Kraft's ad review for the Oscar Mayer, Kraft Singles, Ritz, Triscuit and Grey Poupon brands has given some of the participating agencies a nasty bout of indigestion.

The unpalatable lump: A demand that the shops give up ownership of ideas presented in the review -- but accept legal liability should the marketer end up using those ideas at some later date.

Although it's become increasingly common for marketers to include the unpopular stipulation that agencies surrender rights to anything pitched in a review, the notion that a losing shop might be sued for an idea they presented was just too much -- even for agency executives who've found themselves knuckling under increasingly draconian review requirements from marketers rather than risk losing out on an important account.

It appears even Kraft may have belatedly come to that realization. This week, as Ad Age was reporting on its review agreements, the marketer gave the impression it was backing down. "We're in the process of refining our agency-pitch requirements," said Kraft spokeswoman Renee Zahery, who declined to offer specifics. "Kraft values the relationships we have within the advertising community and wants to be fair. ... We realized these practices needed to be adjusted to align more closely with industry standards."

Duh...you think? Come on.

Tom Finneran, 4A's exec VP-management services, described the idea of agencies retaining legal liability for the work they pitched as "totally outrageous." He added: "We are talking to members about the best practices ... and we recommend that agencies should preserve ownership of ideas and work product. ... On the issue of indemnification, we recommend that agencies seek counsel from their attorneys."

It's not the first and won't be the last time agencies have been asked to fork over all their ideas in a review. Back in 2005, Hilton Hotels caused a stink when it demanded agencies vying for its $40 million creative account sign over rights to ideas pitched even if they didn't win the business and offered no compensation.

In the Kraft situation, the food marketer is paying contenders "about 25 grand," according to one agency executive. Ms. Zahery would not comment. Agencies' beef with Kraft, however, was over the liability clause, not over whether they're paid a stipend for ideas or expenses -- although most agree that $25,000 is just a token, not even enough to pay the bill for the research required on a big-ticket brand pitch.

The idea of remuneration for pitches is something that has been evaluated in recent years. Many design and advertising groups around the world have been working to create policies that will create a happy medium for all parties involved in new biz pitches.

Agencies say work developed for a competitive review is intended as speculative, not finished product, making it even more important that they're not held liable for it if they're not executing it. "It's supposed to demonstrate a process -- how an agency works. It's something that can be pursued further in the event that a client and agency work together," Mr. Finneran said. In a pitch, agencies have neither time nor money to fully vet creative by ascertaining rights for photos or whatever else is necessary. "Due diligence hasn't been done," Mr. Finneran said.

Rick Kurnit, partner, Frankfurt, Kurnit, Klein & Selz, who regularly advises agencies on contracts with marketers, said: "In today's world, where there are 300 consumer touch points, there's no way to know how the materials themselves may be repurposed and used beyond what the scope of the initial project was." Agencies have little appetite for having to assume legal liability for work that's not finished advertising and could be used in any number of formats.

Another issue, agencies say, is that agreeing to transfer ownership of ideas and strategy presented in a pitch exposes them to unnecessary risk. How can an agency that's sold an idea to a marketer be certain that the idea will never be published by anyone but the buyer? "Ideas aren't protected by copyright," Mr. Kurnit said. "Only the execution is protected. It's almost silly for a client to expect that it is an enforceable agreement."

Perhaps this thinking is due to the rash of consumer-generated ad/ideas/concepts of late and so then they feel they need to have the legal side backed up - by why make it the responsibility of a company that 1) you did not choose to work with and 2) has no idea of the way in which you will be using the concepts and ideas that were presented? Most work in pitches requires some smoothing before it goes out into the real world. It's just barmy.

And at least now, apparently after some "advice" from the AAAAs, Kraft is adjusting it's requirements. A part of that is probably due to the fact that no agency would touch that pitch with a 10 foot pole with requirements like that.