Mexican reform bill for the transparency of advertising contracts

On November 11, 2020, Senator Ricardo Monreal Ávila, member of the National Regeneration Movement (MORENA) political party, presented a bill for consideration concerning the “Law of transparency, prevention and fight against abusive practices in advertising procurement, Which was approved by both legislative chambers on April 30, 2021, establishing the following:

The bill argued that the media are encouraged to pay agencies, so that they favor them when making selection decisions, which could be directly via sales commissions, or indirectly via the sale of advertising space, prices below the market average for subsequent resale, resulting in fictitious consulting contracts as well as prices higher than the market. For this reason, agencies may have difficulty identifying indirect compensation as compensation that “favors” media selection in an advertiser’s campaign design, given the lack of transparency in the advertising market.

The above usually involves a conflict of interest on the part of the agencies. They are encouraged to “pick” (or suggest selection) of the media that offer them the highest earnings, even though this may not be in the best interest of the advertiser who hired them in the first place. These practices can distort the functioning of the advertising market as a whole with the engagement of commercial practices which constitute an unfair advantage in favor of certain sectors.

The proposal consists of the following elements:

  • The agency will not be able to buy space to resell later to advertisers.

  • The agency will only be able to purchase spaces ordered by an advertiser.

  • The agency can only receive remuneration that has been accepted by an advertiser.

  • If the agency receives a discount from the media company, this must be passed on to the advertiser.

  • Neither the agency nor a contracted third party may receive any remuneration, commission or financial benefit from the media company.

  • An agency providing services to an advertiser cannot provide services to a media company at the same time.

  • The media company will need to issue the invoice directly to the advertiser and not to the agency, although the invoice may be paid by the agency.

  • The media company must comply with transparency obligations vis-à-vis advertisers: dates and location of the campaign, advertising format, unit prices and tariffs including any discounts offered by the media company.

  • The agency must inform the media company of the identity of the advertiser as soon as possible.

  • The agency must submit detailed reports to the advertiser within one month of the advertisement being broadcast.

  • The agency must inform the advertiser of the financial relations it has with a certain medium.

  • The law will apply to acts, contracts, agreements or procedures, regardless of the name or denomination that is given, that two or more of the economic agents pass.

  • The law establishes offenses ranging from:

A fine of up to the equivalent of two percent of their income:

  1. a) The advertiser or the agency that does not conclude a contract,

  2. b) The medium that does not deliver the invoice and associated information directly to the advertiser within the meaning of the Law,

  3. c) The agency that does not provide the information established by law.

A fine of up to the equivalent of four percent of his income:

  1. a) The agency which itself acquires advertising space to subsequently resell to an advertiser;

  2. b) The agency which recommends to an advertiser, or rents on its behalf, a medium with which it maintains a financial relationship, if it deliberately communicates to the advertiser false or distorted information on the characteristics of the referred medium or of the companies of alternative media;

  3. c) The agency which, acting on behalf of an advertiser, receives remuneration, commission or benefit in kind from any person other than said advertiser;

  4. d) The medium which provides remuneration, a commission or a benefit of any kind whatsoever to an agency which acts on behalf of and on behalf of an advertiser or to third parties which the agency uses for the provision of services to the advertiser; and

  5. e) The agency which directly provides services to a medium in terms contrary to what is stated in the law. In the event of a subsequent offense, a fine of up to double the amounts indicated in this article may be imposed.

  • Complaints arising from the provisions of the law will be motivated and dealt with by the Federal Commission for Economic Competition in accordance with the procedures provided for by the Federal Law on Economic Competition.

  • The administrative sanctions referred to in the Law will be without prejudice to any civil and criminal liability that may apply.

  • The provisions established in this law are applicable regardless of the place of establishment of the agency, if the advertiser has his residence in Mexico and the advertisement is disseminated in the national territory.

  • The law will come into force 90 days after its publication in the Official Journal of the Federation.

The publication of the law in the Official Journal of the Federation and the publication of the regulations of the law are pending.

Some associations in the advertising sector have reported in the media that they oppose the legislative reform, noting that since the start of the initiative there has been “ignorance” on the part of lawmakers, who seem to ignore the effect of legislation on their competitive ability, as well as their employment in general.

Manuel Santin contributed to this article.

© 2005-2021 OLIVARES Y COMPAÑIA SCRevue nationale de droit, volume XI, number 154

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