Law sets fixed fee for ad agencies, promotes transparency

Competition

A law recently passed by the Hungarian government sets a fixed publication fee of 15% for advertising intermediaries and calls for complete transparency of signed contracts, the Hungarian unit of law firm Baker & McKenzie said yesterday in a report it compiled on the legislation.

According to the report, the law defines advertising intermediaries as “companies which facilitate advertising between advertising customers and advertisement publishers.” The report adds that “advertising intermediaries are prohibited from accepting any direct or indirect bonus, rebate, gift or other gain from the publisher or any other person” and “advertising intermediaries may agree to a discount; however, it must be passed on to the advertising  customer and indicated as such on the invoice issued to the customer.”

“Companies failing to follow the prohibitions may face a monetary fine which is 10 times the financial benefit gained from the violation,” János Puskás advertisement law specialist at Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie told the Budapest Business Journal. “The bill sets an unusually high fine amount.”

Before the legislation was passed, advertising intermediaries were able to operate using any desired publication fee, however the average fee the profession applied was approximately 20%, a rate which was not required to be included in the contract signed between the advertisement intermediary and the advertiser, market insiders told the Budapest Business Journal. Bonuses were granted annually to the advertising intermediaries from media outlets for bringing advertisers to the outlets.

Baker & McKenzie’s report also notes that under the law, all contractual agreements must be made fully transparent for all parties. “An advertising intermediary, acting on behalf of its advertising customer, may agree directly with the publisher about the fee to be charged. However, full transparency must be provided to the advertising customer concerning both the financial terms of the advertising and the publishing data.”

The new regulations of take effect as of tomorrow, July 1. Prior to the law being passed, the profession was in an uproar as a proposed bill was put forward that would have completely cut advertising intermediaries out of the market.

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