Over the last few years, the advertising industry has been witnessing how media agencies were pushing new trading models to increase their revenue while advertisers raise their concerns about the lack of transparency within the digital media value chain. The ANA report increased tensions and the global industry has been looking for innovative ways of self-regulation.
Latin America as a region, was far from the US or Europe. The two biggest markets had opposite realities: Brazil has legislation that prevents the operation of media agencies, allowing creative agencies to perpetuate an obsolete model that allows remuneration at standard commissions based on media investment and media rebates from media owners. On the other hand, Mexico saw the peak of new trading models pushed by media agencies. The rest of the region will follow between these two different realities.
In April 2021, Mexico approved a 13 article Law that aims to eliminate and prosecute non-transparent media practices between advertisers, media owners and agencies. The Law has been approved by the senate and it is yet to be published in the official book to be effective.
A summary of the main articles of this Law are described below:
- An Agency can only buy media inventory on behalf of an advertiser. An Agency can not buy inventory and re-sell it to any advertiser.
- The total agency remuneration will be defined within their contract with the advertiser. The only revenue an agency can receive is framed on this agreement. An agency therefore must pass through all media discounts to the advertiser. An agency (or any third party used by the agency on behalf of an advertiser) can not receive any remuneration from a media owner.
- Media owners must send an invoice directly to the advertiser, although an agency can pay them. The media owner must attach to their invoice a detailed report of placed media including prices.
- An agency buying programmatically must disclose the identity of the advertiser as soon as media is placed on a media vendor. Also, an agency is required to report (within 30 days) to the advertiser full media campaign results, disclose platform/technology fees, brand safety platforms used, and the full list of vendors used.
The new law also includes penalties for agencies, advertisers and media owners (up to 4% of total annual revenue) that will not comply with the articles of this law.
With this new Law, Mexico moves up in the rank of markets addressed transparency head-on. The changes involve a drastic shift in the usual dynamic of the industry and will have winners and losers until a new balance is reached. For now, advertisers must look into their contracts in Mexico as soon as possible to avoid potential penalties and ensure there is a fair compensation to their agencies and that the media placed is based on strategy and not in old trading models.