INFORMATIVE NOTE ON THE NEW LAW FOR TRANSPARENCY, PREVENTION AND COMBAT OF IMPROPER PRACTICES IN THE CONTRACTING OF ADVERTISING.
On June 3, 2003, the Law for the Transparency, Prevention and Combating of Unfair Practices in Advertising Contracts (the “Advertising Law”) was enacted. The purpose of this new law is to regulate advertising broadcasting relations in order to seek a healthier commercial competition and avoid practices that generate undue advantages that affect advertisers and consumers.
The Advertising Law focuses mainly on establishing prohibitions to advertising agencies and the media in order to make advertising space more accessible to advertisers. Among the prohibitions established are, among others, (i) that the advertising agency may not acquire advertising space for its own account and then resell it to the advertiser, but now the agency will act as an intermediary between the media and the advertiser; (ii) that an agency may not provide services to an advertiser and a media outlet simultaneously; and (iii) that advertising agencies may not receive any consideration from the media. The listed prohibitions reflect a clear limitation to the contractual relationship that may exist between a media outlet and an advertising agency, resulting in advertising agencies acting passively in the contracting of advertising space.
It also establishes the need for a written mandate contract between the advertiser and the advertising agency. The purpose of this contract is that the advertising company acts only as an intermediary between the advertiser and the media, establishing in it the remuneration of the advertising company and the services to be rendered in favor of the advertiser. This is intended to ensure that the advertiser is clear about the advertising space it acquires and the price thereof; something that is pursued more clearly with the obligation of the media to deliver the invoices directly to the advertiser.
Finally, the Advertising Law contains a series of fines in case of non-compliance with its provisions, such as not entering into a mandate contract, not delivering invoices to the advertiser, or not complying with any of the prohibitions imposed on advertising agencies. It is evident that the purpose of this law is to protect the advertiser by preventing the media and advertising companies from entering into agreements that are advantageous for them and unfair for advertisers and consumers.