Tax Practice Group Newsletter

Law For The Transparency, Prevention And Combat Of Improper Practices In Advertising Contracting

On June 3, 2021, the Law for Transparency, Prevention and Combat of Improper Practices in Advertising Contracting was published in the Federal Official Gazette, and will enter into force 90 days after its publication.

The purpose of the law is to promote transparency in the advertising market, as well as to prevent and address improper commercial practices that create undue advantages over advertisers and consumers.

The law for Advertising Contracting states that its provisions will be applicable to any advertising act, contract, agreement, arrangement or procedure signed between Agencies, Advertisers and Media.

Among its most relevant provisions, it is stated that an Agency may only acquire advertising space in representation of an Advertiser and by virtue of a mandate agreement, executed between the Advertiser and the Agency, closing the possibility for Agencies to acquire advertising space on their own for subsequent reselling.

Likewise, it provides that the agreement must establish payment conditions for Agencies and that they can
only receive as payments for the services rendered, the amounts established in such mandate agreement.

Also, it provides that any discount granted by the Media must be transferred to the Advertiser.

In addition, the law states that the Advertiser has the right to control the execution of the advertising campaign. Neither the Agency nor third parties used by them to render the services can receive any kind of payment from the Media.

Also, an Agency that provides services to Advertisers would not be allowed to render services at the same time to Media. If this occurs, the services rendered to Media must be realized by a different person or entity that belongs to the same economic group.

In billing matters, the Agency must send the invoice for the selling of Advertising Space directly to the Advertiser, even when the Agency makes the payments on its behalf, in accordance to tax laws.

Furthermore, the Media must deliver the following information to the Advertiser:

• Dates and places of distribution;
• Distributed Advertising Spaces and formats used;
• Unit prices of Advertising Space, including, if applicable, the amounts of discounts granted by the Media.

Regarding Programmatic Digital Advertising, the Agency that acquires it on behalf of an Advertiser must provide the Media with the identity of the Advertiser and grant within the next month from the distribution of Advertising Space, the following information:

• The results of the provided services in terms of quantitative indicators agreed between the Advertiser and the Agency prior to the release of the publicity campaign, such as the number of digital printouts, visibility and duration of same, scope parameters and frequency, number of interactions, clicks and actions;
• The results of the provided services in terms of the criteria agreed between the Advertiser and the Agency prior to the release of the campaign, such as general objectives, audience segmentation, optimization methods, cost/benefit relation;
• The technological tools and third-party services used in the provision of services, specifying its identity and experience; the Advertiser would have access to the evaluation instruments given to the Agency, and;
• The means used to avoid the distribution of Advertising Space in platforms or environments identified by the Advertiser as harmful to its image

On the other hand, the Agency must inform the Advertiser of financial relations between the Agency, or its economic group, and the Media with which it intends to contract.

Finally, the law states the penalties applicable to the acts against the same, which may be fines for the equivalent of two to four percent of the offender’s income and, in case of reoffending, fines may double. We hope the information contained in this bulletin is useful, we are at your disposal to expand our comments if required.

This newsletter was jointly prepared by Guillermo Villaseñor-Tadeo ([email protected]), Emilio García-Vargas ([email protected]) and Andrés Alejandro Guzmán-Ruiz ([email protected])