Market report: New WPP boss Mark Read already under pressure as FBI moves to probe US advertising industry

Mark Read has only just got his feet under the desk at WPP but already the new boss has an industry-wide scandal on his hands.

Late last night reports surfaced that the FBI was set to investigate advertising agencies and their media-buying practices. The US domestic intelligence and security service has reportedly issued subpoenas to subsidiaries of WPP, Omnicom, Publicis, Interpublic and MDC Partners.

The investigation is looking specifically at whether advertising agencies manipulated the media-buying process by receiving rebates from media outlets, but not passing that rebate on to their clients. Rebates, bonuses and discounts are common business practices in some parts of the world, including Europe, China and Brazil, but they have not historically been a part of deals in the US, and are prohibited under federal antitrust law.

Media buying is a highly profitable part of the industry and makes up a large proportion of WPP’s business.

Analyst Ian Whittaker at Liberum said: “In the short-term, it is likely to be another reason for investors to avoid the agency space. WPP will be in the spotlight — it is probably the biggest media-buying player in the US. This probe may focus attention on units such as WPP’s Xaxis, which buys digital inventory for clients but where advertisers have little transparency on the margins earned.”

Shares in WPP fell by 18.5p at 1128.5p on the same day that it’s former boss Sir Martin Sorrell returned to the stock market via his new business S4 Capital Group. The firm has relisted and shares are down by 7.5p at 149p.

Overall the FTSE 100 ended the week on a bum note, down by 6.1 points at 7539.39.

Banks also had a torrid session, after Italy agreed to set a higher-than-expected budget deficit target that could put Rome on a collision course with Brussels. Shares in Italy’s two largest banks, Intesa Sanpaolo and UniCredit both fell by more than 4%, while in London, Royal Bank of Scotland lost 4.5p at 251.1p and Barclays was off 2.4p at 174.4p.

Tech stocks managed to tick higher despite news the SEC has filed a lawsuit accusing Tesla boss Elon Musk of securities fraud. It is seeking to bar Musk from acting as an officer or director of a publicly traded company. Micro Focus added 16p at 1403p and Sage added 4p at 590.2p.