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GC Alert | Imminent Changes to Advertising Market arising from new Contracting Statute

As of September 1st, 2021, the Mexican advertising market will suffer radical changes as a result of the entry into force of new legislation that will regulate advertising spaces and the way these are purchased: the Transparency, Prevention, and Combat of Improper Practices in Advertising Contracting Statute (the “Advertising Contracting Statute”).

Advertising Agencies (domestic and foreign), Advertisers and Media Outlets (those in traditional formats as well as digital, both national and international) will be subject to a new way of doing business to build, plan, execute and promote their contents in Mexico for Advertisers located in the country. The Advertising Contracting Statute will be enforced by COFECE (Mexico’s antitrust agency).

The most relevant provisions are:

  • Advertising Agencies:
    1. Are forbidden from working for both media outlets and advertisers simultaneously;
    2. Will not be able to buy wholesale advertising slots on their own, for subsequent resale to their client advertisers;
    3. May only purchase advertising slots on an Advertiser’s instruction, and must transfer to the latter all discounts from media outlets; and
    4. Shall disclose the existence of financial relationships with media outlets they recommend buying advertising slots in.
  • Media Outlets must invoice advertising slots directly to Advertisers. Payment of consideration, commission, or other in-kind benefits to Advertising Agencies will be strictly forbidden.
  • Advertisers shall execute mandate agreements with Advertising Agencies, with certain formalities.

In connection with programmatic digital marketing, Agencies shall reveal to the media outlets relevant information that may include sensitive/confidential information, personal data, or even trade secrets, such as:

  • The Advertiser’s identity;
  • Quantitative performance indicators for each campaign;
  • Criteria agreed between the Advertiser and the Advertising Agency regarding objectives, audience segmentation, improvement mechanisms, among others; and
  • Technology tools owned and third-party services used when carrying out services.

There are two types of fines for the infraction of the Advertising Contracting Statute’s provisions:

  • Up to 2% of the offender’s turnover, for example, for failing to execute a mandate agreement or not disclosing information about the results of the marketing campaigns; and
  • Up to 4% of the offender’s turnover, inter alia, for buying and reselling advertising slots, paying or acquiring additional consideration to that originally set out, or in the event the agency works simultaneously for both advertisers and media outlets.

The Advertising Contracting Statute will act as a catalyst in reshaping the advertising business in Mexico as we know it. It is expected to create asymmetries that may impact competition and increase advertising prices, as operative costs from Advertising Agencies, Media Outlets, and Advertisers will increase in light of the need to invest in new infrastructure and protocols. Many advertising agreements will likely have to be renegotiated.

Our team stands ready to advise, discuss and support the design and implementation of strategies for companies to comply with the new provisions in the Advertising Contracting Statute.

Click here to read the PDF version.

About Gonzalez Calvillo

For over 30 years, Gonzalez Calvillo has been at the forefront of the legal market in Mexico as a full-service leading law firm due to its transactional core and expertise in a wide range of practice areas. The firm is recognized for its ability to build cross-disciplinary teams for the most complex legal challenges and long track record of successfully providing groundbreaking business and regulatory advice to high profile domestic and international companies. Often described as a pioneer of the Mexican legal services industry, the firm is known for its commitment to do things differently, bespoke solutions, and creating transformational legal changes that enable clients achieving their objectives.

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