A university student union banned Sombreros from a freshers' fair because they could be deemed "discriminatory".
The University of East Anglia union had organised the fair on the Norwich campus last week to welcome new students to the city.
Among those setting up stall was the local Tex-Mex restaurant Pedro's.
But a plan to give the free Mexican hats to students was short-lived after the business was told the idea did not meet the union's advertising policy on "equal opportunities".
The hats were deemed discriminatory on the basis that non-Mexicans wearing the large floppy hats could be considered offensive.
Speaking to student newspaper The Tab, one anonymous first year said: "It's ridiculous - it's a comedy hat, not some sort of sacred religious dress.
"Who is going to get offended? Speedy Gonzales?"
Chris Jarvis, the union's campaigns and democracy officer, said it was important for all members to feel "safe and accepted".
In a statement, he added: "At all events we try to ensure that there is no behaviour, language or imagery which could be considered racist, sexist, homophobic, transphobic or ablest.
"At the fair all our stallholders were sent a copy of our advertising policy prior to the event and were also given a physical copy of the policy on the day, so we're confident that all stallholders should have been aware of our restrictions on advertising in relation to equal opportunities and cultural appropriation.
"The company in question was Pedros restaurant, and the stallholders stopped once asked and were amicable in ceasing.
"That said, we know that when it comes to cultural appropriation the issues can sometimes be difficult to understand and many don't realise that they may be about to cause offence or break a policy.
"So we're discussing internally how we can improve our briefing to both external organisations and our own members so that people aren't caught out at the last minute."
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