By Saheed Akinola Esq
In Nigeria’s dynamic business landscape, Section 54 of the ARCON Act introduces a significant layer of regulation to advertising, affecting how businesses communicate with their target market.
Section 54 of the Advertising Regulatory Council of Nigeria (ARCON) mandates that no person, corporate entity, or agency can advertise products or services without obtaining prior approval from the Standards Panel.
This regulatory requirement applies across all media—whether print, online, or audiovisual. While the law intends to regulate advertising practices and ensure standards, its far-reaching scope and the heavy penalties attached raise several concerns about its impact on business operations, especially for small and medium enterprises (SMEs). For clarity purposes, Section 54 is hereinunder reproduced seriatim:
“Any person including sponsor or beneficiary of an advertisement, body corporate, organization or agency which creates or places for publication or exposure of an advertisement in any medium directed at or targeting the Nigerian market without the prior approval of Standards Panel commits an offence and is liable to such fine as stated in the Nigerian Code of Advertising Practice.”
Broad Scope of Section 54: A one-size-fits-all approach
One of the most significant issues with Section 54 is its broad application to all products and services across all media platforms. The requirement for prior approval is not limited to specific sectors, meaning that even a small business offering simple services or skill acquisition programs is held to the same standards as large multinational corporations.
This “one-size-fits-all” approach disregards different businesses’ varying capabilities and needs, placing undue burdens on smaller enterprises that may lack the resources to navigate complex regulatory processes.
For example, whether a company is advertising foodstuffs, clothing, or professional services, it must first seek approval for every advertisement, regardless of the medium. This is especially challenging for businesses that rely on frequent advertising updates, such as those in the tech and retail sectors. Delays in obtaining approval could result in missed marketing opportunities and hinder their ability to compete effectively.
Random checks and online surveillance
Another bizarre aspect of Section 54 is the practice of ARCON officers randomly checking online platforms and publications like Castle Magazine to ensure compliance. If they find any advertisement that lacks prior approval, they charge the company responsible, even if the business is unaware of the requirement.
This creates an environment of constant surveillance, particularly in the digital marketing space where advertisements are posted in real-time and updated frequently.
The rapid pace of online advertising conflicts with the bureaucratic nature of approval processes, which may not be equipped to handle the speed at which companies now operate. For businesses, especially those leveraging social media and other digital platforms, requiring prior approval for each ad is impractical and could stifle innovation in how they engage with their audience.
Corporate liability and director responsibility
One of the most troubling features of Section 54 is the way it extends liability beyond just the advertising agency or company responsible for placing the ad. The law holds both the company and its directors personally liable for any infraction, regardless of whether the advertisement was placed by an agent or third party.
This transfer of responsibility means that even if a marketing agency, hired by a company, fails to obtain approval for an advertisement, the directors of the company could still face prosecution.
This creates significant legal risks for directors who may not have direct involvement in day-to-day marketing operations. Directors in large organizations, in particular, may have little oversight over every advertisement produced, yet they are exposed to the possibility of fines, bench warrants, and even arrests for non-compliance.
The Advertising Offences Tribunal, which is empowered to enforce this section, has the authority to issue bench warrants against directors, escalating what is essentially a regulatory infraction into a criminal matter.
Erosion of corporate liability protections
From a jurisprudential perspective, Section 54 raises important questions about fairness and corporate responsibility. Under Nigerian corporate law, particularly CAMA 2020, the principle of separate legal personality generally shields directors from personal liability for the actions of the corporation, unless there is evidence of fraud or misconduct.
Section 54 undermines this protection by imposing strict liability on directors for advertising violations committed by the corporation, even when the directors were not directly involved in the infraction.
This goes against the basic legal principle that individuals should only be held liable for actions they control or influence. Moreover, the issuance of bench warrants for advertising infractions, a common practice of the Advertising Offences Tribunal, criminalizes what should be a civil or regulatory issue. Directors may find themselves facing arrest for minor oversights in compliance, which creates an environment of uncertainty and risk for businesses operating in Nigeria.
The chilling effect on business growth and innovation
The broad application of Section 54 and its enforcement through the Advertising Offences Tribunal have far-reaching consequences for Nigeria’s business environment. For SMEs, the compliance burden could be particularly stifling. These businesses often rely on agile marketing strategies to compete in crowded markets, and the need to seek approval for every advertisement could significantly slow their growth.
In sectors like technology, where advertising plays a critical role in customer acquisition and brand visibility, the potential delays caused by the approval process could result in missed opportunities.
Additionally, the law’s overly punitive nature could have a chilling effect on innovation. Creative advertising campaigns that push boundaries or explore new ways to engage customers may be avoided altogether if businesses fear potential legal repercussions. Rather than fostering a competitive and dynamic market, Section 54 could result in cautious, risk-averse advertising, which may hinder both domestic and foreign investment in the Nigerian market.
Conclusion: Striking a balance between regulation and business growth
While the regulation of advertising is necessary to ensure ethical practices and protect consumers, Section 54 of the ARCON Act presents challenges that need to be addressed. The law’s broad scope, its ambiguity regarding compliance, and the potential for criminal liability for directors create an uncertain and restrictive environment for businesses.
A more balanced regulatory approach should be adopted- one that differentiates between the different players in the advertising processes, and recognizes the varying capacities of businesses.
Streamlining the approval process, providing clearer guidelines, and ensuring that enforcement is fair and proportionate will promote compliance without stifling business growth or innovation. Any regulation that seeks to control it should do so in a way that balances the need for oversight with the rights of businesses to communicate freely and effectively with their consumers.
