3 factors to consider to ensure your advertising is deemed proper in a legal point of view
One of the most useful tools for starting and running a business is marketing, which can help a company’s product or service reach the masses and raise awareness of its brand in line with market needs. There is a wide range of marketing tools available in different sectors, but in order to ensure that the values that the company wishes to convey and the ethos that its managers represent are conveyed in advertising, it is necessary to respect the legal, ethical and tasteful boundaries through which the marketing tool can achieve the best possible impact.
It can be said that in today’s world, the primary platform through which a large percentage of consumers come into contact with specific products and services is the internet and various social networking sites. In order for businesses to compete and deliver value to consumers in the fastest possible way, it is essential to use these platforms, but behind this lies a whole body of legislation that must be complied with to ensure smooth operation.
In this article, we outline 3 aspects that will help you to get the advertising law right.
1) Correct regulation of the contract, including advertising law
2) Proper definition of roles in advertising law
3) Other necessary additions to advertising regulations
Based on the details of the 3-Point Test Guide, the following will clearly set out the cornerstones that are essential for the proper regulation of the legal relationship behind an advertisement.
Adequate regulation of the contract also in the field of advertising law
Recently, our firm assisted a company that had a clear vision for advertising and marketing its products and services, but needed to regulate the legal framework for doing so. In the course of the consultation, we carried out a comprehensive assessment of the client’s intentions and plans with regard to the service in question, which showed that, in addition to the general civil law contractual provisions, it was essential to include in the contract rules and provisions in line with the provisions of the Advertising Act in order to clarify the legal relationship and roles.
The most important provisions in the case of advertising law contracts are the precise definition of liability and the obligation to comply with the mandatory advertising law rules recommended for such transactions. It is also an essential clause that, when advertising another company’s product, the company that produces the product must guarantee the quality control and conformity certification of that product.
2.) Proper definition of roles in advertising law
It is important to emphasise that in contracts where advertising is included in the service, or where the service itself is intended to promote another company’s product, it is essential to define the roles, as imprecise definitions can have not only legal but also tax implications.
The figure above illustrates the chain of interlocking roles in advertising law. In defining all these roles, it is important to note that at each step there is not only a division of responsibilities but also a division of obligations between the actors.
A simple example to understand the advertising intermediary is that of a website operator who provides a website to another company to promote its product, and the company that operates its own website is therefore the advertising intermediary.
A media platform advertiser is any platform that displays different ads from different companies. In such cases, we usually recommend the conclusion of a type of contract for the sale or purchase of advertising space, whereby media space owners can enter into an agreement with an advertiser or agency for the publication of advertising.
An advertising intermediary is a company that engages another company to buy impressions for that company, i.e. it brokers the content, products or services of the engaging company to another site. It is important to note that the advertising intermediary is entitled to a 15% fee from the advertiser, based on the publication fee for the advertisement, and cannot accept any other free payment from the advertiser. A fundamentally different contract must be drawn up in the case of advertising mediation.
If the service provider is acting as an agency and it is an advertising intermediary, the following is a brief outline of what you need to know:
According to the provisions of the Advertising Act, advertising intermediation means the activity of facilitating the conclusion of a contract for the publication of an advertisement on the basis of an intermediation contract with an advertiser, excluding the activity of providing advertising services.
Pursuant to the Advertising Act, an advertising intermediary may not, in the course of or in connection with its advertising intermediation activities, directly or indirectly, accept from the advertiser or from a media advertising space sales agent acting on behalf of the advertiser, any gift, other than a discount, or any other benefit, other than a pecuniary or other advantage, from the advertiser or from any other person, in addition to the fee for its advertising intermediation activities. The advertiser or the media advertising space sales agent acting on his behalf may not grant the advertising intermediary any material or other advantage other than a discount. In accordance with the Advertising Act, the advertising intermediary shall fully enforce any discount received on behalf of the advertiser.
Essentially, there are two types of advertising mediation:
3.) Further necessary additions due to advertising regulations
In the context of advertising law, a number of important provisions need to be laid down in a contract, which are very different from what is already customary in a more typical transaction. If the advertisement is accompanied by a video, a separate contract should be concluded with the actors or the video producer. As an annex to the original advertising contract, it is recommended to include the Hungarian Competition Authority’s information on content production in the case of influencer cooperation, as well as the Hungarian Code of Advertising Ethics and the Self-Regulatory Advertising Council’s recommendation on the minimum rules for the inclusion of children in advertising and influencer cooperation. In addition, if other persons are involved, it is recommended that, in addition to the separate contract, a data processing information and consent form be drawn up for them, stating for what purpose, for how long, on what legal basis and for what activity the personal data, image or name will be processed.
To sum up, if we were to describe the legal relationships in relation to advertising in a single term, it would certainly be a complex and intricate set of relationships, which shows that there are many factors and concepts to be aware of and take into account when drawing up a business plan, and that it is therefore necessary to consult a legal expert in order to obtain a clearer picture.
If you feel that you need to draft your advertising contracts in accordance with advertising law and require legal advice on this subject, please contact our office.
Authors. dr. Márta Szoboszlai, dr. Gergely Bajcsay
Please note that the general information provided in this article is for informational purposes only and does not constitute legal advice. We accept no liability for any misinterpretation of the above information or for any changes in the law which may have occurred in the meantime. If you have a specific question or legal problem, we are able to provide individual advice after consultation with our office and after a full investigation of the case.