• Tuesday, May 28, 2024
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Fast-Moving Consumer Goods – legal and regulatory implications for online retailers

Local demand makes investment in FMCG sector attractive

The Fast-Moving Consumer Goods (FMCG) sector has witnessed remarkable growth, especially with regard to making use of online sales across different categories of goods. Facilitated by the changes in consumer behaviour, rapid urbanization, rising disposable incomes and internet penetration, e-commerce has grown exponentially providing growth opportunities to both big and small players in the FMCG industry.

Research by Allied Market Research reveals that the global FMCG e-commerce market size has been valued at $520.8 billion in 2021, and is projected to reach $1220.5 billion by 2031, growing at a rate of 9% from 2022 to 2031. The FMCG sector has largely expanded as a result of scalability and a reachable system of support from E-commerce.

The digital commerce of FMCG products has created wide opportunities for companies and businesses in the FMCG e-Commerce industry. It also promotes consumer impulsive purchase that contributes to the huge sales of FMCG products in the market. In addition, the integration with new technologies tends to make the transactions seamless for both consumers as well as sellers and boosts the FMCG e-Commerce market growth.

People around the world are increasingly using online platforms to purchase products. E-commerce has revolutionized the way businesses operate, making it easier for consumers to purchase goods and services from anywhere in the world and allowing businesses to reach a wider audience without the need for a physical storefront. This article explores the impact of e-commerce on the FMCG industry in Nigeria as well as the legal and regulatory implications.

Impact of E-commerce on the FMCG Industry
E-commerce has significantly impacted the FMCG industry, especially as it now focuses on both the B2B (business-to-business) and the B2C (business-to-customer) business models. The imminent technology trend however does not come without its underlying issues and potential business hassles, especially within the Nigerian market. While the adoption of e-commerce in the marketing of FMCG products has facilitated the growth of the industry, it has also undoubtedly increased the risks and liabilities within the industry, some of which have been identified below:

1. Trade Convenience: E-commerce has made it easier for consumers to purchase FMCG products in the comfort of their homes, a trend that has led to an increase in sales for FMCG products. Consumers have the option of choosing any product or service they want, from any supplier, anywhere in the world. This is a much wider choice than in brick-and-mortar stores, and the freedom to browse digital catalogues without any stress or hurry is priceless. The traditional store has boundaries that allow it to offer only a limited quantity of goods. With e-commerce in the FMCG Industry, consumers now have a variety of options to choose from when purchasing products or services.

2. Market Competition: With the rise of e-commerce platforms, new and smaller FMCG brands have been able to enter the market and compete with established brands. This phenomenon has created a breeding ground for counterfeiting and infringement matters because most smaller brands, in a bid to make available products that are less cost-intensive, seek to thrive on the popularity and goodwill of core industry players by proliferating the industry with counterfeit goods that closely resemble or are similar to renowned industry brands.

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3. Availability of Data: There is a saying which goes thus, “data is the new oil.” This statement finds expression in this discourse as e-commerce provides FMCG brands’ manufacturers, distributors, and retailers with more data on their customers, including personal information, shopping habits, preferences, etc. This has allowed brands to develop more targeted marketing campaigns and product offerings. However, this is not without the associated risks of probable cyber-attacks, data breaches and the violation of the privacy of data subjects.

Legal and Regulatory Implications of E-commerce
Mirroring the various issues that abound in the sale and distribution of FMCG products on e-commerce platforms, it is vital to take into account the legal and regulatory responses that attempt to ameliorate these issues.

1. Consumer Protection Laws: Nigeria is yet to develop direct laws which would apply to e-commerce transactions. Thus, recourse is made to general laws applicable to trade in goods and services, and whether such laws can apply to an e-commerce transaction. The law governing the sale of Goods in Nigeria is the Sale of Goods Act, 1893 (SOGA). As it concerns e-commerce, Section 29(2) of the SOGA is to the effect that a seller is bound to send goods to a buyer within a reasonable time, where the timeframe for delivery is not stated by the parties. The Act further provides in Section 30 that the buyer may reject the goods if they are delivered of less quantity, and if of more quantity, the buyer may reject the extra goods. Section 32 further provides to the effect that where a seller sends the goods through a courier to be delivered to the buyer, the delivery is said to occur once it is delivered to the courier.
The legal implication here is that if an e-commerce trader was to sell goods online to a consumer, it is assumed (unless otherwise agreed), that the goods would be delivered via a courier service or postal delivery service (carrier). Thus once the trader delivers the goods to the carrier, delivery will be deemed in law to have occurred.
Also, the Federal Competition and Consumer Protection Act (FCCPA), which establishes the Federal Competition and Consumer Protection Commission (FCCPC), makes robust provisions as well as Regulations and Guidelines as it affects consumer goods. Consumers are entitled to goods free from defects, suitable for use, and possessing good quality as represented by the sellers. This is particularly important for the FMCG industry, having goods with short shelf life. In light of a competitive market, Section 127 of the FCCPA guards consumers against unfair and unreasonable terms of sale from retailers. Consideration of the Regulations and Guidelines as promulgated by the relevant industry regulators (FCCPC, NAFDAC, SON, etc) as it relates to registration, licensing and certifications, labelling, advertising, electronic sale, etc are also pivotal. In essence, although FMCG products are being retailed on the internet, this does not in any way downplay the applicability of contemporary consumer protection laws.

2. Dispute Resolution: With the advent of Online Dispute Resolution (ODR) as a form of Alternative Dispute Resolution (ADR) in resolving disputes arising from e-commerce transactions, Nigeria seems not to have statutorily adapted to this expeditious dispute resolution mechanism, as there is no provision in the current Arbitration and Conciliation Act giving credence to ODR. ODR makes use of ADR mechanisms such as arbitration, mediation and negotiation, which are all employed online. One area of ODR that has won the attraction of international organizations and private institutions is online arbitration. Online arbitration has mostly been used to resolve both online and offline disputes, as disputes are resolved using various technological devices such as video conferences, e-mail, chats and electronic signatures. The ODR process has been hailed for its simplicity, speed, convenience and cost-effectiveness. It promotes confidentiality and win-win resolutions and is a more efficacious mechanism for resolving disputes for sustainability. On the other hand, the process has been criticized as lacking face-to-face interactions, having security and confidentiality issues, and problems with e-arbitration agreements and awards amongst many others. The good news is that most of these challenges are solvable, thus establishing ODR as a viable online equivalent of ADR.

3. Data Privacy and Security: Online retailers must at all times comply with provisions of the Nigerian Data Protection Regulation, under the auspices of the Nigerian Data Protection Bureau and by virtue of the Applicability of the National Information Technology Development Agency Act (NITDA). They must take established measures to protect customer data from breach, theft, or unauthorized access. The use of the data collected and processed from data subjects must be communicated at all times. Data must not be retained past the duration for which it is required. Obtaining relevant e-marketing consent is also an important consideration for online retailers. However, vendor-customer relationships will require specific legal advice for these marketing activities given that it remains a complex area of law. It is required to use secure payment processing systems and ensure that customers’ payment information is protected. In order to ensure compliance, it is necessary that online retailers are particular to transact with e-commerce platforms engaging a Data Protection Compliance Organization.

4. Intellectual Property: In Nigeria, there is no consolidated law governing Anti-counterfeiting. This has left a gap in the enforcement of anti-counterfeiting measures, especially in establishing the liability of e-commerce platforms over the sale of counterfeit goods. However, some relevant laws seeking to protect the intellectual property rights of manufacturers and retailers will include the Copyright Act, Companies and Allied Matters Act, Trade Marks Act, Patents and Designs Act, Merchandise Marks Act, FCCPA, National Agency for Food and Drug Administration and Control Act, Standard Organization of Nigeria Act, Customs and Excise Management Act, and their relevant regulatory bodies. More practically, for online retailers who are licensed distributors, it is necessary that the relevant licensing agreements are entered into and filed where necessary, according to the provisions of the law. There is also a duty on the retailers not to infringe on the rights of other retailers or manufacturers by selling fake products or products with trademarks that are closely similar to already existing trademarks.

In conclusion, the rise of e-commerce has had a significant impact on the FMCG industry, with online retailers and customers facing a range of legal and regulatory implications. While the growth of e-commerce has created new opportunities for online retailers to expand their customer base and increase sales, it has also presented issues of concern related to consumer protection, data privacy, intellectual property, and dispute resolution. To navigate this terrain, online retailers must stay up-to-date on the laws and regulations and implement robust compliance measures. Most importantly, online retailers should seek the expertise of FMCG lawyers, as they will provide crucial legal advice and guidance on a range of legal issues including compliance with laws and regulations, as well as dispute resolution for matters not limited to breaches on contract, product liability claims and consumer complaints.

Christian Aniukwu is a Partner at Stren & Blan Partners and heads the Firm’s Intellectual Property (IP) Prosecutions and Commercial Services Practice Groups. Radiance Onu is an Associate in the Firm’s Intellectual Property and Dispute Resolution Departments, while Lois Iheanyichukwu is an Associate in the Firm’s Fast-Moving Consumer Goods (FMCG) sector.
Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners dedicated to providing thought leadership insight on business and legal matters.
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