On April 30, 2021, the Mexican Chamber of Senators and Deputies passed a new law on “Transparency, Prevention and Combating of Unfair Practices in Advertising Contracting.” The law seeks to eliminate and prosecute non-transparent media practices between advertisers, media owners, and agencies. The law will go into effect on September 1, 2021.
The new law signals significant changes to common industry practices, including (i) prohibiting agencies from buying media in their own name with the purpose of re-selling such media afterwards to advertisers, and (ii) ensuring agencies may now only buy media space that has been ordered by advertisers. The law also ensures that:
- An agency may only receive compensation that has been agreed to by an advertiser pursuant to a contract.
- All discounts that the agency receives from the media must be passed on to the advertiser in full.
- Neither the agency nor a contracted third party can receive compensation, commission, or benefit from a media vendor.
- An agency that provides services to an advertiser cannot provide services to a media vendor at the same time – thus, services to a media vendor must be provided by a separate legal entity.
- The media vendor will have to issue the invoice directly to the advertiser and not the agency, although the invoice can be paid by the agency.
- The media vendor will have to comply with transparency obligations with the advertiser by providing detailed information on the dates and location of the campaign; ad format; unit prices; and rating, including any discounts offered by the media vendor.
- The agency must inform the media vendor as soon as possible of the advertiser’s identity.
- The agency must submit a detailed report to the advertiser the month following the airing/publication of the advertising.
- The agency must inform the advertiser about the financial relationships it has with the media vendor.
The law imposes a range of penalties up to 4 percent of total annual revenue for noncompliance.
Takeaway: Mexico’s new law signals the country’s aim to tackle media transparency issues head-on. The law, which applies to advertisers located in Mexico and advertising placed in Mexican media, regardless of the place of establishment of the agency, will require advertisers to review and adjust current and future media agency agreements in Mexico to ensure compliance with the new law’s provisions and avoid potential penalties. The new law makes Mexico the second country to legislate transparency in media buying, with France being the first.
Transparency in media buying has been an issue that has plagued the advertising industry for years. In the United States, it came to the forefront when the Association of National Advertisers (ANA) published its 2016 “An Independent Study of Media Transparency in the U.S. Advertising Industry” report with K2 Intelligence. The report uncovered rebates arrangements and other non-transparent business practices in media buying. Since then, other industry reports have either reaffirmed the ANA’s findings or have highlighted other transparency issues in media buying, such as the lack of visibility into the programmatic supply chain. The ANA also issued an RFP earlier this year to commence a study to further probe the programmatic media buying ecosystem.