UK: Digital Media Are Now Caught By French Regulation And In Particular By Stringent Transparency Requirements

By virtue of the French "Sapin" law of January 29, 1993, France has become one of the most transparency-regulated media market in the world and remains so today.

With the new Decree No 2017-159 of February 9, 2017, the protection of advertisers is further strengthened by extending the transparency requirements of the Sapin law to digital media as well.

Background

In the early 90's, the French media market was negatively affected by a number of abuse practices that become part of everyday practices (e.g. double invoicing, fictitious invoicing, over-invoicing, etc.).  At that time, media agencies could act as a wholesaler by purchasing advertising space on their own behalf and re-selling it to advertisers. This scheme facilitated possible abuses, as the advertisers did not receive any invoices from the media owners and were therefore often neither aware of the real price of advertising space paid by the media agency, nor of any potential discounts granted to it. In order to prevent such abusive practices and to eradicate corruption in the relationship between advertisers and media agencies, the French Sapin law established the principle of transparency by imposing to the media agency the status of an "agent" under French law.

Principal mechanisms established by the Sapin law

The principle of transparency established by the Sapin law was implemented by a series of prohibitions and obligations, notably:

– media agencies must be subject to the status of an agent – "mandat" (i.e. act in the name and on behalf of the advertiser) and must sign with the advertisers a specific written agreement which specifies the services to be provided and the payment terms. The "mandataire" has similar duties to the fiduciary under common law, although acting in the best interests of the principal is implied under French law;

– any direct payment or benefit from the media owners to the media agencies is strictly forbidden;

– media agencies must disclose in their general terms of sale any financial ties with media owners;

– media agencies must provide the advertisers with (i) reports on the media diffusion, within one month following such diffusion and with (ii) detailed invoices relating to the purchase of advertising space, specifying every advantages granted by the media owners.

Failure to comply with these rules is severely punished with a fine up to 300.000 euros and a possible exclusion from public procurements up to 5 years.

The increasing need to regulate the transactions in the digital media market

The French legislator ensured from the beginning that the Sapin law would have a broad territorial scope of application, by stating that it applies as soon as the advertising message is created for a French enterprise and is mainly received on the French territory, regardless of the agency or the media owner's place of establishment. However, initially, the transparency regulations was aimed at the so-called traditional media, i.e. television, radio and press, which were the main media at the time of the adoption of the Sapin law. This means that, up to 2017, the digital media market was not affected by this regulation.

Faced with the constant increasing number of transactions in the digital media market, the French government has decided to regulate and control online transactions in a general context where French regulatory bodies are (a) scrutinizing the use of user data for "intelligent advertisement", (b) looking closely into the terms of use of digital platforms from a consumer protection and privacy prospective and (c) enforcing against these digital players. For example, the French Competition Authority has announced, on May 23, 2016, the beginning of investigations on the sector of digital advertisement, focussing especially on the weight and strategies used by large media companies such as Facebook and Google.

It is against this background that the so-called Macron law No 2015-990 of August 6, 2015 extended the scope of Sapin law to digital media, referring to a Council of State decree on the need to specify the terms of such extension.

The new implementation Decree of February 9, 2017

The much awaited application Decree was published eighteen months after the enactment of the Macron law.

  1. Article 1 of the new implementation Decree No 2017-159 of February 9, 2017 gives a clear definition of digital advertising services. According to the Decree, this term encompasses services related to the diffusion of advertisements on any devices with internet access such as computers, mobile phones and digital panels;
  2. Pursuant to article 2 of the Decree, the media owners will have to provide the advertisers with (i) a report detailing the date and place of diffusion of the advertisements, (ii) the global price of the advertising campaign and (iii) the unitary price of each advertising space that is invoiced;
  3.  Article 3 of the said Decree establishes a specific reporting obligation in case of digital advertising campaigns that rely on real rime services purchasing methods, notably by auction mechanisms where the web user's profile and the optimization of the message performance are the determining criteria. The media owners shall communicate to the advertiser a report with information on (i) the effective implementation of the advertising services and (ii) the technical quality of such services and on (iii) the means implemented to protect the image and the reputation of the advertiser.
  4.  Article 4 of the new Decree specifies that it is not applicable to media owners established in another EU or EEA Member State, provided that they are subject to similar report obligations in their Member State of origin. As transparency obligations are to date less propagated in other EU States, French regulations should apply to media owners based in another EU State once the advertising message is made for a French enterprise and is received mainly on the French territory. This constitutes one of the main points of discussion in particular by digital media platforms. Large media companies such as Facebook and Google would therefore be obliged to substantially amend their current practices. A particular vigilance will have to be put on the involvement of holding companies owning the media buying agencies in that respect.

Finally, the Decree will enter into force on January 1, 2018. The entry into force of this new set of regulations therefore constitutes a landmark modification in the way advertisement spaces are sold in France.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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