End Practice of Totally Delegating Event Management to Ad Agencies

Editorial

12:01 JST, March 8, 2023

Many event organizers entrust the management of large-scale events entirely to advertising companies. This practice must be reconsidered to ensure transparency in event management.

In a bid-rigging case involving the Tokyo Olympics and Paralympics, the special investigation squad of the Tokyo District Public Prosecutors Office has indicted for unreasonable restraint of trade in violation of the Antimonopoly Law six companies — including the Japanese advertising giant, Dentsu Group Inc. — and seven people — including a former deputy executive director of the Games organizing committee’s event operations bureau and a former Dentsu executive.

The seven individuals are alleged to have decided in advance which companies would receive contracts from the organizing committee in 2018, including ones for the management of test events and Games events. Other major advertising firms, including Hakuhodo Inc. and Tokyu Agency Inc., were also involved in the alleged misconduct.

The Japan Fair Trade Commission is considering issuing a surcharge payment order and other penalties to the six companies. People inevitably will say the advertising industry as a whole descended on Olympic rights and interests and effectively privatized the Games.

Dentsu, in particular, bears a heavy responsibility. In spite of the fact that Dentsu is the leading company in the industry, the former Dentsu executive allegedly led the bid-rigging by working with the former deputy executive director of the organizing committee and others to compile a list of companies that wanted to receive contracts.

The costs of running the test events and the Games events are estimated to be about ¥40 billion. There is a possibility that costs were inflated through the bid-rigging. Dentsu may have lacked awareness that it was responsible for highly public projects. The company should examine the problems on its own.

The dysfunction of the organizing committee cannot be overlooked. The majority of the staff were seconded from the central government, the Tokyo metropolitan government, corporations and other entities, and they lacked expertise in collecting sponsors and managing events.

That might have created a situation in which the projects were left entirely up to Dentsu, which is experienced in managing such events. As a result, the organizing committee could not make the organization’s supervisory function work to ensure fair bidding.

The indictment has effectively marked the end of a string of investigations that began with a case of alleged bribery involving the selection of Olympic sponsor companies. The Japan Sports Agency and other entities have released draft guidelines that include measures to ensure transparency in the management bodies and in the selection of the sponsors for large-scale sporting events.

In response to the bid-rigging case, the management body of the Osaka-Kansai Expo in 2025 and the Osaka prefectural and municipal governments have suspended Dentsu and others from the bidding process for Expo events. In addition, a number of local governments have suspended the participation of advertising companies and others involved in the scandal from designated competitive bids, causing widespread concern about the future management of events.

Local governments and other entities that organize events should carefully consider which parts of event operations they need help with, rather than relying too heavily on advertising companies.

To check operational contents in a fair way, it is also essential to make staff appointments and the selection of operators visible from outside. Management in a proactive and disciplined manner is important.

(From The Yomiuri Shimbun, March 8, 2023)