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As a mid-sized, full-service agency, conflicts are an issue we bump up against frequently. And, given our size, we do not have the infrastructure in place to create a total separation between conflicting brands within our organization.
I’m not so sure how much of it has to do with contract negotiation, since agencies are often asked whether a conflict exists very early on in the pitch process. It seems that most clients have an expectation that the agency they hire will not do business with their competitors. But we have found that clients vary in how rigidly they define competition, and in how hard they will push the point with their agency. So, we address conflicts on a case-by-case basis. Some clients are open to letting us work with another brand within their category, as long as it is not their top competitor. Some are okay with it, as long as the work is limited in scope (development of a Web site, for example) and does not overlap with the type of work we are doing for them. Others are less flexible. While this approach means that we walk away from some opportunities, there are others that have worked out for us.
I think what it comes down to is the type of relationship and amount of leverage you have with your existing client as well as how the client defines its competition. If you are offering them service and expertise they value and are unwilling to jeopardize, they may be more open to allowing conflicting relationships. If their view of their competition is very broad and ridged, you may need to be willing to walk away from that business to pursue clients that they perceive to be conflicts.
I think the problem with trying to resolve this matter up-front in contract negotiation is that contracts by their very nature usually don’t provide case-by-case flexibility and tend to establish a singular framework. Additionally, in contract negotiations when the parties are not really familiar with each other, clients will typically lean toward language and provisions that are more conservative and client-protective, which would make case-by-case negotiation more difficult later on.
I would love to hear about other agencies’ experiences and perspectives on this matter.