On June 3, 2003, the Law for the Transparency, Prevention and Combating of Improper Practices in Advertising Contracting (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 media outlets in order to make advertising space more accessible to advertisers. The prohibitions established include, among others, (i) that the advertising agency cannot purchase advertising space on its own account and then resell it to the advertiser; instead, the agency will now act as an intermediary between the media outlet and the advertiser; (ii) that an agency cannot provide services to an advertiser and a media outlet simultaneously; and (iii) that advertising agencies may not receive 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 the contract 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 purchased and its price; something that is more clearly pursued with the obligation of the media to deliver invoices directly to the advertiser.
Finally, the Advertising Law contains a series of fines in case of non-compliance with its provisions, such as failure to enter into a mandate contract, failure to deliver invoices to the advertiser, or failure to comply with any of the prohibitions imposed on advertising agencies. It is clear that the purpose of this law is to protect advertisers by preventing the media and advertising companies from entering into agreements that are advantageous to them and unfair to advertisers and consumers.
