Sapin Law Application Circular 1994

on transparency and non-discrimination in advertising

Paris, September 19, 1994.

The Minister of the Economy and the Minister of the Budget, spokesperson for the Government, to the Prefects

Law n ° 93-122 of January 29, 1993 defined new rules for the advertising sector. This sector was previously characterized by a great opacity, not very favorable to a good allocation of resources. To improve its functioning, the law wanted to restore transparency, basing it on two main provisions:

– subject all service activities, and therefore advertising, to the rules of common law on the communication of prices and the issuance of invoices;
– impose the particularly transparent agent regime on intermediaries.

While these two provisions are simple in principle, for many operators they have constituted an important change which, one year after the publication of the law, continues to raise questions, in particular on its practical terms of application.

This text being relatively concise, the answer to these questions does not always appear on reading the law itself; but it can be obtained by a return to parliamentary debates and an adaptation to the advertising sector of the practices observed in activities subject to the same rules.

To guide the action of the control services and facilitate the work of the operators, it seems useful to specify various practical consequences of this text: beyond the reminder of the obligations imposed by the law, this circular seeks to provide practical solutions of Implementation.

I. – The scope of the law

The two main provisions of the law have a different scope:

– article 18 modifies the wording of article 33 of ordinance n ° 86-1243 of December 1, 1986 relating to freedom of prices and competition. In the list of activities subject to the obligation to communicate scales or draw up a written contract in the event of commercial cooperation, the activity of service provider is now explicitly included.

Thus, these obligations apply to all production, distribution or service activities. They therefore apply in particular to advertising activities, without it being necessary to specify which definition of advertising must be adopted:

– Articles 20 et seq. concern the obligations imposed on the intermediary for the purchase of advertising space and the purchase of services having as their object the publication or distribution of advertising printed matter. They therefore have a specific field whose limits must be specified.

These transactions are not specifically defined in the text of the law. However, they were clarified during parliamentary debates and on this basis we can clearly delimit the scope of this text.

I. Activities

The explanatory memorandum to the bill stated that “the advertiser is the person who wishes to promote his action, his products or his services”. This is a relatively broad definition, since it covers both the non-profit association that promotes its action and the company that wants to sell its products. However, this notion of advertising does not cover any paid publication: for example, judicial and legal announcements which do not have a promotional purpose are excluded.

The consequences to be drawn from this definition were specified during parliamentary debates, from which two ideas can be drawn: the advertising concerned by the law is:

– a voluntary operation, which means that any publication imposed by a legal or regulatory text does not meet the definition of advertising which is the subject of this law;
– and it has a promotional purpose, which goes beyond simple information. It was thus explicitly said, during the debates, that classified advertisements such as job offers or bereavement announcements did not meet the definition of advertising and did not fall within the scope of the law.

In general, it will be admitted that classified ads, whatever their purpose, do not fall within the scope of the law.

Likewise, it will be considered that a publication of a compulsory nature does not fall within the scope of the law.

The case of financial advertising, which covers both compulsory publications intended for market information and voluntary publications, was the subject of a response in principle during the parliamentary debate, a response that was developed in a circular published in the Official Journal of 23 November 1993.

Moreover, Articles 20 to 29 do not concern all advertising thus defined. They concern, insofar as the purchase goes through an intermediary, the purchase of space in the media and, for non-media, only printed advertising. Direct purchase by the advertiser is not intended.

Advertising space has not been defined by law. This notion seems sufficiently clear, even if it can evolve with the techniques (multimedia, electronic media) or if the same media can be declined in several forms: thus the display can also be done on panels in the stadiums or on shopping carts in supermarkets: the press can be paid or free, intended for all types of public or, like the company or association press, for a predetermined public. The law applies in all cases as soon as the purchase goes through an intermediary.

The original bill dealt only with the purchase of space. It appeared, during the discussions, that many speakers wanted the obligation imposed on an intermediary to work as an agent to be extended to non-media. This intention came up against the difficulty of defining the non-media, which can take very diverse forms. Ultimately, the law was only extended to printed advertising material.

It does not appear that anything that is both printed and intended for advertising can be considered as advertising material. There are, in fact, many objects (caps, T-shirts) which bear a printed advertising inscription. Regardless of the fact that such objects would not be qualified as printed advertising material by those who have them manufactured, the legislator’s desire was to target the objects which were most directly in competition with the traditional media, and in particular the written press. The objects cited hardly fall into this category and must, with some exceptions, be considered as advertising items and not as advertising material.

By using the terms of the law and remembering the objective of this extension, we will consider that the law applies only to objects which are essentially printed matter (which eliminates objects which have a specific function and which incidentally carry an inscription) and intended for the target audience of the advertisement.

Posters, including those intended to be displayed in points of sale or to be sold, will therefore be considered as excluded for the purposes of advertising print, even if they may be concerned for the purchase of space, promotional items, which have a use, regardless of the advertising they carry, displays in storefronts and stores, which are not distributed.

On the other hand, we will consider as covered by article 20 of the law, insofar as the purchase goes through an intermediary, all the printed matter – from the prospectus to the catalog – intended to be distributed, either manually, in the mailboxes. letters, by personalized direct mail or by making freely available to the public.

Sponsorship, which covers various operations, is not, as such, mentioned by law. It is only if it is analyzed, at least for the most part, as a purchase of space, that it must be considered as covered by the law and that the intermediary must work as an agent. This concerns, in particular, radio and television broadcasts for which sponsorship results in the announcement of the sponsor’s name in the credits or during the broadcast. However, services of a different nature, such as support for a cultural event or a humanitarian operation, are not concerned.

2. The operators

The main effect of the law is to require intermediaries to work under the mandate regime and to be remunerated only by the advertiser.

When it comes to buying space, the intermediary function is generally clear, with the roles of the support and the advertiser themselves being well defined. In some cases, however, there may be doubt about the quality of a speaker.

The case of management, which could have given rise to questions, was dealt with by article 26 of the law, which equates management with support.

For advertisements that benefit more than one company, it must be determined whether the broker should be considered an advertiser or an intermediary. This is the case, for example, when a franchisor advertises its brand and its franchisees. The order broker will be considered to act as an advertiser and not as an intermediary if it is up to him to make the decision to advertise; on the other hand, if it only applies the decision of its correspondents, it acts as an intermediary and must take the status of agent.

In the case of orders placed by companies belonging to the same group, the autonomy of the companies of the group being difficult to assess, it will be considered that a company of the group can place orders for the various entities of this group without being subject to the obligation of the mandate.

Similarly, organizations representing a sector of activity, for example a professional union, or showing an economic or social interest, will be presumed to act as advertisers.

For the purchases of services having for object the edition or the distribution of printed advertising, the roles are not defined a priori : an advertising agency can perfectly edit itself of the printed matter.

For the advertising space, the three-way relationship – support, advertiser, intermediary – has led to a particular device intended to ensure the transparency of the intermediary: this device is obviously irrelevant if the advertiser buys directly from the medium. For printed advertising, a distinction must also be made according to whether the advertising agency has an intermediary role or a service provider.

The agency which, having a service performed by another company, specifically pays for this service by the advertiser will be considered as an intermediary in view of or according to the service provider’s invoice. The agency must then, for this purchase, act as the advertiser’s agent and cannot receive any remuneration from the service provider, who must also bill the advertiser directly.

On the other hand, the agency which ensures all the functions and responsibilities of publisher and, consequently, offers the advertiser a global service, at an agreed price, does not act as an intermediary and is not, for these operations , required to take the status of agent.

The choice between one or the other of these two modes of exercise is negotiated between the companies concerned. The desire for transparency which inspires the law implies that the choice be clear, and in particular that the chosen option appears explicitly in the contract between the agency and the advertiser.

There are, mainly with the local and regional press, brokers, whose task is to prospect, for the benefit of a space seller, potential advertisers and to transmit their orders to the latter. They pointed out the great difficulty they would experience in working under the mandate regime: they should, in fact, be paid by the advertiser and, as they only deal with small-value transactions, their remuneration per transaction is itself weak and they fear they will have the greatest difficulty in collecting their bills.

To take into account this situation specific to the written press, in the event that the broker is a natural person and is therefore totally independent of an agency or a central purchasing agency and works exclusively for a space seller, we will consider this broker to be a board or a sub-board; the management being assimilated, by law, to the space seller himself, the invoice issued by the latter may include a global price, including the broker’s remuneration, and the space seller may pay the broker what is due to him of.

Finally, for the application of the law to foreign advertisers, two cases should be distinguished, depending on whether or not the intermediary himself is abroad.

If the intermediary is abroad, article 27 of the law specifies that the law applies “as soon as the advertising message is made for the benefit of a French company and is mainly received on the territory. French”.

This article is the result of an amendment being debated. Its objective was to prevent the law from being circumvented by an intermediary who would forward the orders it receives through abroad. This intermediary located abroad, which could have been a simple French agency or central office, would normally have escaped the regime provided for by law and could have received kickbacks from the support.

As soon as the advertiser is a French company and the support is itself in France, the law obliges him to accept an intermediary only if he is an agent, to reserve all discounts for the advertiser and send the invoices directly to him.

The law does not specify in this case what a French company is. Taking into account the objective of the text, we will consider that an advertisement emanates from a French company only in the cases where another interpretation would lead to an obvious fraud. This would be the case, for example, if a French group had its advertising carried out in France by placing its orders through a subsidiary located abroad and an intermediary also located abroad. On the other hand, it will be considered that, when a foreign group established in France places, as part of an international advertising campaign, its advertising orders for France from abroad, and that the

The second case is when the medium and the intermediary are in France and the advertiser abroad. In this case, the law requires that the intermediary have the status of agent.

This situation can pose some practical problems, both for the advertiser, who is not necessarily familiar with the French mandate regime, and for the support, who does not always want to be settled by an unknown client located outside our borders.

But, if the mandate regime is compulsory, the form of the contract – apart from the fact that there must be a written contract providing for the services rendered and their remuneration – is not. It can therefore be considered that the requirements of Article 20 are met once the intermediary has been accredited by a foreign advertiser or his representative, that he actually works as an agent and that he has specified in writing to his principal. the services he will render to him and the remuneration he will receive. Regarding the support, who may be afraid of committing an offense by working with an intermediary who would not be able to present him with an agency contract, his liability cannot be engaged as long as he himself complies with the obligations imposed on him by law, in particular on the issuance of invoices. If, on the other hand, support considers that this situation does not give it sufficient guarantees for subsequent payments, this is a different problem; this can also be resolved: to the extent that the partners so wish, the support can ask the intermediary to vouch for the payment by its foreign customer:

In general, it will be noted that while the situation of the intermediary and the advertiser may lead to the observation that French law is not necessarily applicable to them, the medium remains subject to the obligations that the law imposes on him personally. This is true as much for the provisions concerning invoices as for its responsibility in the event of discrimination, which would be engaged if it favored foreign advertisers to the detriment of French advertisers.

The details thus provided on the scope of the law should answer most of the questions. However, in certain specific cases, operators may still have doubts about the exact limits of the scope of the law. To avoid any legal risk, we cannot over-recommend, whenever there is any doubt, to retain the mandate regime and to respect the other obligations provided for by law.

II. – The implementation

The changes to which operators are subject are of two kinds. Some are linked to the specific advertising provisions contained in the law; the others are subject to the general regime provided for in the 1986 ordinance.

I. Terms specific to advertising

a) Contract:

Article 20 of the law requires the intermediary to make his purchases on behalf of the advertiser under the mandate regime. It specifies that this mandate must be the subject of a written contract and that it must set out the services rendered and their remuneration, distinguishing between those which are rendered within the framework of the mandate and those which, if applicable, do not fall within the scope of the mandate. not of the mandate.

These rules call for two remarks:

– apart from these obligations, the form is free. It is therefore not forbidden, to simplify the formalities, to refer to the general conditions of the intermediary – subject of course that these comply with the law;
– the mention on the contract of services outside the contract itself is intended, after a period when the determination of remuneration was global and not very transparent, to clearly show the amount of remuneration for services or their method of calculation. It is in no way intended to freeze this and nothing prevents the contracts thus subscribed from subsequently being the subject of amendments relating both to the services provided and to their cost.

b) Billing and remuneration:

The same article 20 provides that the invoice is sent directly to the advertiser and that it mentions all the discounts granted by the seller, discounts which can only be granted to the advertiser.

The law does not modify the obligations on the content of the invoice, which remain defined by article 31 of ordinance n ° 86-1243 of December 1, 1986. The invoice, which is in the name of the advertiser, must contain in particular “all rebates, discounts and rebates the principle of which is established and the amount quantifiable during the sale or provision of services, regardless of their payment date”. Rebates which are not in principle acquired and of a quantifiable amount must be the subject of subsequent corrective invoices, to be issued under the same conditions as the initial invoice. However, it is recalled that, for the most part,

In addition to this rule of general application, advertising is subject to two specific provisions:

– the invoice is sent directly to the advertiser, a copy can be sent for information to the intermediary;
– any discounts and tariff advantages are granted to the advertiser and to him alone.

This provision is supplemented by those of Articles 21 and 22. These articles prohibit the agent who purchases space as well as the service provider who gives advice for them from receiving any remuneration whatsoever from the support.

Thus, the remuneration of the intermediary or the space purchase advisor can only come from the advertiser himself. The purpose of this system is to have the intermediary’s remuneration fixed by negotiation between the intermediary and the beneficiary of the service provided, while ensuring complete transparency with regard to the latter. The law thus eliminates occult remuneration practices that were common before 1993.

It does not prevent the support from granting discounts for services rendered to it by the intermediary, such as, for example, a payment guarantee. But such discounts are obligatorily attributed to the advertiser. It is up to the intermediary and the advertiser, by negotiating the contract that binds them, to modify if they wish the final allocation of these flaps to possibly transfer all or part of them to the intermediary. .

This prohibition of direct remuneration is very general: the drafting of the law, by prohibiting any remuneration of the intermediary by the support, does not allow the intermediary to render remunerated services to a support, even if they are unrelated. with a space purchase or consulting operation.

However, when a medium advertises for its own account, it must be considered as an advertiser and, as such, it can remunerate an intermediary, both for its purchases of space and for the studies it would request.

This freedom should obviously not be used to circumvent the law. In the event that it appears, for example due to the fictitious nature of the studies or abnormal prices, that these operations are used to remunerate the intermediary for other operations where the medium sells its space through this intermediary, the courts should be entered.

In the event of a barter agreement, since the intermediary cannot receive any remuneration whatsoever from the medium, the invoice corresponding to the goods or services received by the medium must be issued by the producer, and not by the intermediary. The latter’s remuneration is invoiced only to the advertiser-seller, for the purchase of space as well as for the sale of goods or services.

c) Payment channels:

The law does not make any specific provision for the terms of payment. The subject is only broached in article 20, which considers the case where the purchases are not paid directly by the advertiser to the support.

The advertiser therefore has the choice, as in the past, to pay the medium directly or to pass the payment through the agent. Likewise, those who do not wish to pay separately for the media they use in their advertising campaigns can make a global payment to the intermediary who will return their due to each space seller.

This global payment, when it results from the contract between the advertiser and the intermediary, is compatible with the provision of the law which requires each medium to send its invoice directly to the advertiser, and the risks of error to receipt of invoices can be reduced by simple precautions:

– the support can add on the invoice that it sends to the advertiser the mention that this invoice does not have to be paid directly, the agent having to take care of it; he can, on the copy that he sends to the agent, remind him that it is the agent who is responsible for payment;
– the intermediary can send the advertiser a summary of the sums due to the various media and the amount of his own fees, in order to receive a global payment.

d) Accounting:

When the payment for the purchase of space passes through the intermediary, the latter, who acts as agent, must enter the sums received not in its turnover, but in third-party accounts.

Some intermediaries regretted that this obligation led them to show a reduced turnover compared to their previous accounts and especially compared to those displayed by their foreign competitors, who are not bound by the same obligations.

This display effect can be corrected. The chart of accounts provides that a company can append to its corporate accounts any presentation that is essential for their understanding. Nothing therefore prevents intermediaries from drawing up and having certified accounts presented in accordance with international standards, from publishing them as an appendix to their accounts and from providing them for international comparisons.

The sums which pass through the agent can be invested and bear interest. In this case, and insofar as this is compatible with the stipulations of the mandate contract, this interest may be paid directly to the intermediary. The treatment of these sums, paid by a bank, is different from that of the sums which would be due by the support and in particular of the possible discount paid for cash payment: like any discount granted by the support, this one must, under of section 20, go back to the advertiser. If, under the mandate contract, it is finally retroceded to the intermediary, in whole or in part, this retrocession must be subject to

Conversely, if, because of the agent, late payment incurs a penalty on the advertiser, the intermediary’s liability is incurred vis-à-vis the advertiser.

2. Trade relations

By imposing a certain number of specific conditions on advertising, the law specifies the margin of discussion for operators.

Some have already been commented on in this circular: the obligation of the mandate; the obligation to send the invoice to the advertiser; the prohibition for the intermediary to receive remuneration from the support.

Others have not been examined, because they do not seem to pose a problem: for example the obligation, provided for in article 23, to report to the advertiser on the conditions under which a message was broadcast; or the obligation, provided for in article 24, for the one who gives advice on purchases, to indicate to the advertiser the financial links that he may have with the sellers.

Finally, the law subjects advertising, like all service activities, to the obligation to communicate price lists to whoever requests them. Establishing scales and respecting them constitute a novelty in this field, where the negotiation had cost of such magnitude that the scales had lost all meaning. It is undoubtedly a question of a framework for commercial freedom, but not of its disappearance. Commercial freedom is maintained, in accordance with common law, as defined in particular by the ordinance of December 1, 1986. There is no need to recall here common law,

The supports must now have a price list and communicate it to whoever requests it.

The scale must include the statement and the price of all the services normally offered by the support. After discussion with a buyer, a support can offer its services under conditions different from those which appear in its scale and its general conditions of sale. However, in order to avoid practicing discriminatory conditions, the difference must be justified by a real consideration and any buyer who would be in the same situation and who would be willing to obtain the same conditions must be able to obtain them.

Similarly, the preparation of the scale is free and may include discounts and rebates for various reasons, subject to not violating the provisions of the ordinance.

First, the allocation of rebates must not be discriminatory. It should be remembered, in this regard, that article 36 of the ordinance only covers discrimination which is likely to create, for the person who benefits from it or who is the victim of it, an advantage or a disadvantage in competition. As a result, it is possible to apply different conditions to partners who are not in competition. This can lead to different prices depending on the buyer’s economic sector. Thus, there is no discrimination in granting to a great national cause more favorable conditions than those practiced with regard to

Likewise, it happens that the supports occasionally grant looping tariffs, that is to say preferential conditions for purchases made at the last moment to occupy a space that remains available. Insofar as these tariffs are offered equitably to all operators, one cannot speak of discriminatory conditions. It would be different if it appeared that only a privileged few were informed of these possibilities – or if some benefited from them before their competitors were granted the same rights.

Likewise again, it is not a priorinot discriminatory to grant a special discount to purchases that go through an intermediary. The debate that took place in Parliament to lead to the drafting of Article 20 – which mentions the possibility of discounts and rebates – shows that the legislator did not want to prohibit media from including in their scale a discount inspired by the old agency commission, regardless of the name that is suitable today or the agency can no longer be remunerated by the support. It remains that the conditions for granting such a discount must not be discriminatory and that, if its granting is linked to the quality of intermediary, it must be granted to all those who render the same services as an intermediary, even if this is not their usual profession. Wanting to reserve this discount for members of certain professions or certain associations would fall under Article 36.

Second, the scale must not be capable of being qualified under Articles 7 and 8 of the Ordinance, which respectively deal with agreements or abuses of a dominant position. This could be the case if a tariff schedule led to the exclusion of certain operators from the market. To take the example of the rebate granted to purchases that go through intermediaries, a scale comprising a rebate such that in fact it would lead to excluding from the market those who would like to make direct purchases could be considered a prohibited cartel. Likewise, a scale which, by linking the prices to the share of an intermediary’s purchases made with the space seller,

Compliance with these rules may seem complex to a sector which was hardly familiar with them until 1993.

The services in charge of control will therefore ensure, whenever they have the opportunity, to make known and to explain these provisions in order to facilitate their rapid and complete application.

The Minister of the Economy,

EDMOND ALPHANDERY

The Minister of the Budget, spokesperson for the Government,

NICOLAS SARKOZY