• Monday, July 22, 2024
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‘AISOP policy on contract terms too regimented for industry growth’

“AISOP policy on contract terms too regimented for industry growth” – Ogunye

The Advertising Practitioners Council of Nigeria (APCON) recently came up with a new Advertising Industry Standards of Practice (AISOP), which the Council touted as the required practice standard that can support the development of Advertising practice in Nigeria, but this has continued to stir controversies. In this interview, JITI OGUNYE, a business and human rights lawyer addressed some of the knotty areas of the policy. TEMITAYO AYETOTO brings the excerpts.

APCON recently came out with a policy to regulate the advertising sector and back the government’s goal of growing businesses post-Covid. What is your take on this policy?

Well, APCON has a statutory duty to regulate the sector. That’s why it’s a council and nobody is going to doubt that. In regulating, however, certain factors have to be taken into consideration. How far must regulation go?

No one in his right senses will call for the absence of regulations. Human affairs have to be regulated. Law regulates the conduct of human beings, right? So, there should be regulation and that’s why sometimes when there is under-deregulation, people also call for regulation. When there’s over-regulation, people also complain about over-regulation. The challenge is how to strike a balance that will ensure that what is being regulated is not killed, it’s not stifled, and the regulation does not even impede growth and creation of value.

We have had a look at the AISOP and it has 11 broad sections and then a lot of appendices. Our assessment, and I will say this with all sense of responsibility, is that as a whole, the document strives to put in place what I will call regimentation of the sector rather than regulation. I have said that regulation is not negative and that overregulation is bad, but I’m deliberately using a harsher word that what I see in that AISOP document is regimentation. I have looked at those provisions and I’m amazed that a sector that is not entirely a public sector, which, indeed, largely is private sector-led, is being dictated to on how to create a contract, on how to arrive at the contract; and not only that, on the terms that an advertising contract must contain.

AISOP rules are dictating terms of a contract, rather than allowing the parties to agree on their terms

That is an affront to the principle of freedom of contract. Any basic text on the law of contract, business law or commercial transactions that you read will tell you that contract, essentially is a concept, an arrangement by which two parties or more willingly and voluntarily come together to agree on a business relationship to create value. And there are certain inherent elements. There must be an offer; there must be an acceptance of that offer; there must be a consideration. A contract is not dictated but negotiated. Now parties are expected to voluntarily engage. Of course, certain contracts are not permissible in law, and that’s why we have what we call void and illegal contracts. Two parties, for example, cannot agree to engage in an illicit business, with one party agreeing to supply cocaine, for example, to another party and then if one party defaulted, the party that was supposed to be receiving the cocaine would then go to court and say, I want to enforce the contract. No, they’ll be arrested. That’s purely an illegal contract.

Certain contracts are domestic and cannot be regarded as a contract. If you agreed, for example, either orally or in writing with your daughter that should she pass an academic examination, you would buy her a car and you defaulted and the daughter then wants to enforce that contract against the father or parents, the court would say no, this is not the kind of contract to enforce. So, there are laws that govern contracts but save this, parties are expected to voluntarily come together and create their terms, including terms of payment.

Read also: Consequences of price-fixing in the Nigerian advertising market

Now the AISOP rules that we’re talking about, for example, in section 3, which governs payment terms, and it has specific subsections or subclauses prescribing days within which payment must be made. It says payment must be made within 30 days and no later than 45 days. If there’s a default, there must be Interest and that interest must be at the Central Bank’s interest rate.

I say, wait a minute! What kind of contract is that? Truly, I hope AISOP Rules will be revised because when it comes into operation, I fear they will stifle advertising businesses, whereas the intention may be to grow the industry, protect SMEs so that they are not exploited, and ensure that they continue to create business and generate income. That might be a good intention, but as it’s said, the way to hell is paved with good intentions. So, how will these provisions, how will these rules operate in real-life, and what will be the lasting impact on the industry regarding the creation of value and value flow?

Because when you do that, rather than focus on how to creatively expand the volume of value, you are engaged in regimentation. Not standardization. When you have AISOP Rules with the dictations, an advertiser, for example, or those on the demand side, may consider all they are being compelled to do and the timelines within which they must do them, and decide to revise their advertising schedules or calendar. They may say that “instead of advertising daily or weekly, as I should do, why can’t I be advertising on a monthly or quarterly basis? Because these new rules are now dictating the terms of payment to me”.

AISOP rules are dictating terms of a contract, rather than allowing the parties to agree on their terms, terms that are favourable to them, and terms that they knew at the time of engagement that they could easily carry out, that they could easily, mutually execute. That’s how contracts are done. And so, for me, that provision, that section, that clause is creating a regime, or I rather call it, regulatory diktat. The AISOP provisions offend the right to contract in freedom, and even if you look at this in the larger context, is tantamount to restriction of trade, restriction of business. Because I’m not even sure that studies and surveys were carried out before the formulation of these rules to determine or anticipate what will be the impact of such provisions if and when rolled out and enforced.

There are provisions in the AISOP policy that advertisers perceive as contradictions to freedoms in business contracts, affecting players in the sector. What’s your take?

Yes. The other provisions, for example, after the payment terms, you have the method of payment. The method by which payments will be made, and discounts and commissions. These are things that should be at the contractual discretion of the parties. Not something that a council can and should dictate in the name of regulations.

So that the point being made will be clear, let’s use two other professions as examples. I know this may be considered comparing apples and oranges, but I don’t think so as it’s about the provision of services. Does the Nigerian Medical Association (NMA) or the Medical and Dental Council of Nigeria dictate to doctors the cost of providing medical services or how much they must take to treat malaria or to carry out surgery? And the period within which those who need medical services must pay? Or that there should be an intervention that Doctors shouldn’t carry out surgery or help patients to save their lives if they are not paid first, because if they are not paid first, their businesses will suffer. Or are you aware of such rules in the legal profession, by which the NBA, or the Body of Benchers, or the Legal Practitioners Disciplinary Committee or the Bar Council dictate to lawyers the payment terms of the services they provide?

Yes, in the legal profession, there are provisions in the Rules of Professional Conduct for Legal Practitioners, governing remuneration and fees. But nobody is going around to say look, to recover your fees, you must be paid within 30 days as payment terms or you must be paid within 20 days. Nobody says that. The Rules have a provision, for example, allowing lawyers to conduct cases on a contingency fee payment arrangement. Meaning that you take legal action, the person whose action you are taking has a good case. The prospect of victory upon litigation is there but he is indigent or he doesn’t have the funds to pay for the services at that moment that he desperately needs legal service, the rules allow you to offer that service. That’s why it’s called contingency fee payment on the premise that upon the lawyer resolving the legal action or winning, he recovers his fees. It’s like no cure, no pay.

If a lawyer has a contingency fee payment arrangement with a client, he is permitted to charge more than he would have charged were the client to have funds to pay at the time of hiring the lawyer’s service. But the percentage that the lawyer must charge is not prescribed. The days within which or the month within which the lawyer must recover the fee is not prescribed because that’s left to the parties. So. what I’m saying is that any law of contract, any regulation of contract, any regulation of business, should not go beyond setting the ground rules that will govern how parties’ contract and should never attempt to go into the nitty-gritty, to go into the details of contracting as to be prescribing the terms of payment, the payment method, dispute resolution and so on. These are my valid objections to the AISOP Rules, and I wish that these Rules could be revisited so that such provisions are then taken out of the AISOP because I see stifling of advertising businesses, all in the name of encouraging small and medium scale enterprises and businesses.

What may be occasioned at the end of the day is that you have a skewed regime that is tilted in favour of those who are on the supply side, who can then say; if you want to advertise here, this is how we are going to recover our money, this is the discount you are going to enjoy, this is the payment method you must follow, et cetera. Because in truth, payment can be in kind in business, because that’s value. It’s not just about money.