The Hungarian Parliament has recently adopted an act (“Bonus Act”) that amends the 2008 law on commercial advertising activities (“Advertisement Act”) with regard to advertising agency bonuses.
The Bonus Act extends the scope of the Advertisement Act to advertising agency and advertisement spot sales activities. The scope of the Advertisement Act extends to advertising activities carried out in the territory of Hungary, this, however, does not exclude extraterritorial application of the regulations herein described, e.g. in case of foreign contracting parties.
Advertising agency agreements
In regards to advertising agency agreements, the Bonus Act:
- Sets out mandatory provisions regarding advertising agency agreements - advertisers and advertising agencies may not deviate from these provisions;
- Requires that advertising agency agreements be concluded in writing (including by electronic means);
- Enables advertising agencies to conclude agreements on the publishing of advertisements with the publishers, in the name of and on behalf of the advertisers;
- Obliges advertisement publishers (or the sales house acting on their behalf) to notify the advertisers (or advertising agencies) about the circumstances of publishing the advertisement and modifications thereof; and
- Requires publishers to issue invoices for their services to the name of the person they contract with, either the advertiser, or the agency. Invoices must indicate all applied discounts (bonuses) and be paid within 30 days of their receipt.
Fees and bonuses
Under the Bonus Act, advertising agencies are only permitted to accept (i) the fee for the agency activity and (ii) the discount received from the publisher or the sales house acting on the publisher’s behalf. Agency fees paid by the advertisers are fixed at 15% of the fee for publishing the advertisement. Agencies may not accept, directly or indirectly, any other financial gain, gifts or grants from publishers or other third persons. Entities who obtain financial gain in violation of the Bonus Act may face a consumer protection fine equal to ten times the financial gain obtained.
Although discounts are allowed under the Bonus Act, such discounts must always be passed along to the advertisers in order ensure that the advertiser is the final beneficiary of all discounts. The government’s reasoning for this provision is that the discount system in effect before the Bonus Act distorted the market because agencies mainly pursued their own interests in choosing the advertising publishers instead of the interests of the advertisers.
The above detailed provisions of the Bonus Act enter into force on 4 July 2015. Parties with agreements already in force on 4 July 2015 will have until 30 September 2015 to modify them, if necessary, in accordance with the Bonus Act.
The Bonus Act was published as Act LXXII of 2015 on Establishing the Central Budget of Hungary for Year 2016 in the official gazette of Hungary on 18 June 2015.