Mexico City, December, 2020
On November 4, 2020, Senator Ricardo Monreal Ávil a from the MORENA party presented to the Chamber of Senators an initiative with a draft decree issuing the Law of Transparency, Prevention and Combat of Improper Practices in Hiring Advertising Matters (“Law”).
According to its statement, the purpose of the Law is to regulate the activities of Advertising Agencies (“Agencies”) for the benefit of Advertisers and consumers. It seeks to eradicate practices such as double charging by Agencies to Advertisers, from the private or public sector to the Media, such as the sale of advertising space by the Media to the Agencies for subsequent resale to Advertisers, the existence of simulated service contracts, and the sale of advertising space on a higher price than the market one.
On this purpose, an Agency may only acquire advertising space on behalf of an Advertiser in accordance with a written mandate agreement (contrato de mandato) between both parties.
The mandate agreement between the Agency and the Advertiser must establish the remuneration conditions of the Agency, which may only receive as remuneration for the services provided to the Advertiser, the consideration established in the agreement itself.
When it comes to Media, any discount granted by it to the Agency must be fully transferred to the Advertiser, who will have the right to control the execution of the advertising campaign. Neither the Agency nor third parties used by the same for the provision of services to the Advertiser may receive remuneration, commission or benefit in kind from a Media.
It establishes that an Agency that provides services to Advertisers may not simultaneously provide services to the Media, the services provided to the Media must be performed by a person pertaining to the same economic group of the Agency, but different from it.
Likewise, the Media will have to send the invoice for the sale of the Advertising Spaces directly to the Advertiser, even when the Agency makes the payment on its behalf, and also the Media must deliver the following information directly to the Advertiser:
- The dates and places of distribution
- The Advertising Spaces distributed and the formats used
- The unit prices of the Advertising Spaces, including, where appropriate, the amounts of any discount granted by the Media
Additionally, it states that the Agency that acquires Programmatic Digital Advertising on behalf of an Advertiser must communicate the identity of the Advertiser as soon as possible to the Media seller of the Advertising Spaces.
It also states that the Agency must inform the Advertiser in writing of the financial relationships that the Agency, or the economic group to which it belongs, has with the Media that it intends to hire.
The Law establishes sanctions in various cases for both the Agencies and the Media, both types of sanctions focused on transparent contracts, operations and any type of relationship or activity between them, limiting the margin of action of each of them to avoid any undue operation. In this sense, the sanctions established are the following:
- To the Agency, when:
- Doesn’t deliver the information related to the results of its services, own technological instruments and third-party services used in the provision of services; Ways used to prevent the distribution of Advertising Spaces on platforms or environments considered by the Advertiser as harmful for its image
- Acquire Advertising Spaces on its own account for subsequent resale to an Advertiser
- Recommends to an Advertiser, or hires on behalf of the Advertiser a Media with whom it has financial relationships, If it deliberately communicates false or distorted information to the Advertiser about the characteristics of the referred Media or the possible substitute Media
- Acting on behalf and order of an Advertiser, receive any remuneration, commission or benefit in kind from any person other than said Advertiser
- Provide services directly to a Media from which it receives commission or benefit in kind, or simultaneously provides services to an Advertiser and a Media.
- To the Media, when:
- Doesn’t deliver the invoice or any sort of information directly to the Advertiser
- Deliver remuneration, commission or benefit in kind whatsoever to an Agency that acts on behalf of an Advertiser or to third parties used by
the Agency for the provision of services to the Advertiser
Finally, the Law establishes that it will correspond to the Federal Economic Competition Commission to substantiate and process the complaints derived from it, in accordance to the procedures established by the Federal Economic Competition Law.
In this regard, we will be monitoring the corresponding legislative process and see how it could affect the interests of our clients. If you have any doubt or comment regarding the information aforementioned, do not hesitate to contact us.
*This article is authored by Israel Ledesma and Carlos Solano and it may reflect their personal opinions independently from the law firm they work for. Shall you intend to apply any of the debated interpretations within the article, we highly recommend to formally consult Jáuregui y Del Valle, S.C. or any other qualified advisor.
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