Loi Sapin 2: This time it's digital

Federica Aperio, Managing Director - Digital 

Does the new law do enough to protect advertisers?

The French media market has always been considered to be one of the most transparent. After all, the creation of the Loi Sapin in 1993 dictated that advertisers must have access to all media owner invoices and so full transparency of the net cost of media. If only all markets operated like this!

The emergence and growth of digital advertising, however, has created ambiguity. Originally, the Loi Sapin was very clearly focused on traditional media, having been drawn up before digital was properly commercialized. That’s why, in 2015, an amendment was made to the law – technically Loi Sapin 2 –  to ensure it covered all media and, in particular, digital channels that didn’t even exist when the first law was passed.

At the time, there was concern in the market that the amendment didn’t go far enough. Critics said it failed to address the complex nature of digital. This is particularly true because the buying process today involves more than just the purchase of media. Consideration now has to be paid to data and technology and platforms.

So, it was back to the drawing board. A hastily-convened working group – comprising the Union des Annonceurs (UDA), the Union des Agences Media (UDECAM), and leading representatives from independent trading desks – sat down to address the gaps in the newly amended policy. What resulted was the application decree, published in February 2017, and confirmation that this decree would come into effect at the start of 2018. The contents of the application decree sound encouraging, but they still leave a lot of room for interpretation. This is most pronounced on the topic of financial transparency.

The new decree is designed to allow advertisers the same rights over financial transparency in online as the original law does with offline media for fixed-price buys. Loi Sapin 2 has been extended to give advertisers direct access rights to performance and quality data. This should enable them to validate that media budgets are being spent responsibly and with the best intentions. It should also help to minimize issues such as ad-fraud and low viewability rates by enabling open discussion of the data.

Despite this positive move, advertisers should consider how the new decree seeks to address financial transparency in programmatic activity. Under the terms of the legislation, media owners are required only to communicate the overall cost of each campaign. Under normal circumstances this would not be a cause for concern, but the alarm will doubtless sound when agencies use their wholly owned subsidiaries – aka Agency Trading Desks (ATDs) – to buy media inventory. This can lead to the net cost of the media being obscured, allowing agencies to make undisclosed margins.

A fundamental flaw in the new decree is that, increasingly, agencies are assuming the role of principal in the trades by using affiliate companies such as ATDs to perform the actual buy. Often in agency/advertiser contracts, the affiliate is referenced as the vendor of the media, selling inventory to the agency of record. Arguably, the decree therefore requires the agency only to provide the gross cost of media and does not demand disclosure of the price at which the affiliate purchased the inventory.

Where there is any ambiguity in contractual or legal language, there is an inherent risk in its interpretation – and application. Advertisers should be mindful of the loose phrasing in this decree. That’s why they should ensure they are satisfied that the language within their own contracts adequately protects them from the ambiguous nature of the new legislation that will come into force in January next year.

If advertisers ensure that they have the checks and balances in place, this will allow them to be confident in the level of transparency they receive in the French market.

The new law makes this more important than ever.