Business press attacks sequential liability: Crain Communications praised for its stance

Folio: The Magazine for Magazine Management, Jan 1, 1992 by Alan E. Sanderfoot

The trade press, having lagged behind in responding to the debate surrounding ad agencies' financial responsibility for paying for ad space, has finally caught up with other media groups. At the American Business Press's (ABP) recent fall conference in Chicago, trade publishers engaged in a heated discussion of sequential liability and what can be done to counter ad agencies' adoption of the policy.

In February, the American Association of Advertising Agencies (4As) revised its long-standing policy that declared agencies held sole liability for payment for ad space. In its place, the 4As adopted a non-binding policy recommending that members declare they won't be responsible for media costs until the agency itself is paid by the advertiser. Since then, the 4As has been defending that concept--sequential liability--against attacks from many media organizations, but not the ABP. "Of all the media associations, the ABP is the one I haven't heard from," says Burtch Drake, COO of the 4As.

ABP counsel Robert Saltzstein recommends, however, that publishers establish joint liability by having representatives of both the client and the agency sign the contract.

Steve Weiss, corporate credit manager for Miller Freeman Inc., says the business press should act in unison. "But I realize that some may not think that it's as serious as others do," he says. Weiss says he's recommending that top management in his company adopt a policy of joint liability.

One thing is certain: Publishers find sequential liability unacceptable, particularly at a time when the financial underpinnings of some of even the largest corporations are shaky. Because the policy diffuses liability, it forces publishers to credit check every advertiser, whereas now they need do checks only on agencies, they say. And sequential liability ties them up in a transaction that they cannot control--the arrangement between the agency and its client.

Drake says he's heard--and dismisses--the arguments against sequential liability. "We're never going back to sole liability. There's too much money at stake," he says.

Crain seen as role model

One publishing company that has confronted the sequential liability issue head on and is receiving praise for it is Crain Communications Inc.

Chicago-based Crain set up a policy eliminating all sequential liability language from insertion orders. When one of the company's magazines receives an order with sequential liability language, the agency is asked to remove the unacceptable language. If the agency refuses, the sales rep advises the agency that the magazine will contact the advertiser to ask if it is willing to accept liability, and if so, will bill the advertiser directly. If neither the agency nor the advertiser is willing to accept liability or pay in advance, the ad is rejected.

One lawsuit exemplifies the problems sequential liability creates for publishers. Fairchild Publications is seeking more than $85,000 from the New York agency Rosston Kremer Slawter (not a 4As member) to pay for ads bought by one of its clients, Fabrican, which filed for Chapter 11 bankruptcy protection in early 1991. The agency claims that although it bought the space, it is not liable to pay for it until it has beenpaid by the advertiser. The case is pending.

Drake says he is "convinced that there is no common ground among all the parties involved." Still, he adds, "I try to remind people that the world will not come to an end. Publishers are still getting ads."