Interpreting the advertising law

As of 4 July 2014 the Hungarian parliament amended the Advertisement Act (Act 48 of 2008) with Act 72 of 2015 (Budget Act). In order to see clearly in the new situation, the Association of Communication Agencies in Hungary (MAKSZ), the Hungarian Advertising Association (MRSZ), the Association of Hungarian Electronic Broadcasters (MEME) and IAB Hungary, together with leading lawyers and legal consultants from Hungary and abroad, prepared a document aiding market players in interpreting the new law. This article summarises the most important information in this document. Media agencies can only sign a contract with a media owner if the customer – who wishes to advertise using the services of the agency – specifically authorises it in the contract they sign. This means that media agencies are allowed to be in a direct contractual relationship with media owners just like earlier. Media owners issue invoices to the media agencies, who pay them and issue their own invoice to the customer who ordered the advertisement. The new law preserves the system of bonuses (e.g. AVB) and they have to be passed on to the advertisers in the form of a discount. For their services the media agencies are entitled to be paid – by the customer who ordered the advertisement – 15 percent of the fee the customer pays for having the advertisement published. The amendment of the 2008 law doesn’t prohibit media agencies – who qualify as both advertisement brokers and providers according to the law – from entering into bilateral contracts with media enterprises (the publishers of advertisements) to buy advertising space. When the law became effective on 19 June 2015, it set the deadline for modifying contracts with customers for 30 September 2015. The modification obligation refers to all contracts which contain elements that contradict or don’t fully meet the rules laid down by the new law. Media agencies are obliged to pass on the discount they receive from the advertisement’s publisher to the customers, in the case of new contracts from 4 July 2015 (the date when the act’s amendment entered into force) and in the case of existing contracts from 30 September 2015 (the contract modifying deadline). The basis of the obligation to pass on a discount is the date of publishing the advertisement that forms the basis of the discount, because the discount is realised based on this performance, only at a later date. Invoice dates and payment deadlines are also set in accordance with the advertisement’s date of publication. In the advertising trade the practice is that agencies get an Agency Volume Bonus (AVB) from the media they work with, most of the time depending on the volume of their media purchases undertaken for a 1-year period in advance. The law states that the AVB is a discount realised post-purchase. In the Advertisement Act there is no definition for discount and it doesn’t contain the criteria for how this payment should be realised and how frequently a discount is supposed to be given.