Under the new rules, all media are required to stick to a published rate card. Greece's six TV channels had been offering their biggest advertisers free airtime as a bonus, prompting the crackdown.
The new law also severely limits the hefty yearend bonuses ad agencies collect from the media. Instead of getting back from media owners about 20% of what they bought during the year, agencies will be limited to a maximum bonus of 9.9%.
"Agencies are paid on a commission basis, but through the years the agencies got soft [in negotiations] and settled for 8% or 6% commission based on the fact that they got a very good yearend bonus" from media owners, said Petros Venetis, chairman of Leo Burnett S.A., Athens, and chairman of Greece's Association of Advertising Agencies. "Advertising agencies will suffer a lot."
In another change, advertisers will now pay a 50% tax on TV ad spending and 20% on print ad spending directly to the government. In the past, the tax was included in the media buy and therefore in the total upon which marketers paid agency commissions.
So far, it's not clear how the changes will impact spending by local marketers or by the big multinationals, such as Unilever, Procter & Gamble Co. or Colgate-Palmolive Co.
TV spending in Greece last year totaled $600 million.
As for agencies, "revenue will decrease dramatically, but it's very early to say how much it will be reduced," said Christos Tzouaneas, finance director of Carat, Athens.
Media in Greece primarily is bought by agencies or by agency media buying groups, while in France, buying was dominated by media specialist Carat.
French agency profits plunged as a result of Loi Sapin, which took effect in April 1993 and required fixed rate cards while outlawing a widespread volume-based kickback system.
The Greek ad industry's lobbying efforts against the new law were hampered by government officials' preoccupation with ailing Prime Minister Andreas Papandreou.
Mr. Venetis said the Greek government has agreed to review the law after six months.