Nigeria’s advertising sector appears to be in quiet unrest with the contentious Advertising Industry Standard of Practice (AISOP) introduced by the Advertising Practitioners Council of Nigeria (APCON) set to be operational in 2022. Advertisers, majorly in the private sector have identified certain policies they deemed detrimental as it impugns their right to enter into a contract with the advertising agencies. This, they believe affects their constitutional right to freedom of contract and want APCON to engage practitioners on how to resolve the disputes. Legal and business experts weigh in as they said it will set the sector backward.
The Advertising Industry Standard of Practice (AISOP) as formulated by the Advertising Practitioners Council of Nigeria (APCON) is meant to revitalize the advertising sector and grow the Small and Medium Enterprises (SMEs) operating in the space. They also came to the fore as part of the measures to cushion the effects of the COVID-19 pandemic on businesses in the country.
The AISOP, according to the formulators, is expected to create a standard operating system that will stimulate advertising practice and the Integrated Marketing Communications (IMC) environment as a whole. This came about as a result of various calls by stakeholders in the advertising space who have been calling for regulation as a result of various malaises – audience measurement; debt recovery; pitch fee; payment terms; and others – affecting them.
The standard of practice is being hailed in various quarters, especially by the Heads of Advertising Sectoral Groups (HASG) comprising of the Association of Advertising Agencies of Nigeria (AAAN), Experiential Marketers’ Association of Nigeria (EXMAN), Media Independent Practitioners Association of Nigeria (MIPAN), Outdoor Advertising Association of Nigeria (OAAN), and Broadcasting Organization of Nigeria (BON), as the best thing to happen to the advertising sector. Only the Advertisers Association of Nigeria (ADVAN), the only member of HASG in the demand side that pays for the advertisements has rejected certain elements of the rules.
APCON Registrar and Chief Executive Officer, Dr. Olalekan Fadolapo was quoted at a recent function to have said that the faithful application of the Advertising Industry Reform in the country will not only grow the business of advertising and marketing communications but will also create well over 100,000 jobs directly and indirectly in the next 12 months.
The benefits of AISOP as stated by APCON and others will lead to the development of the advertising space but on a closer look and upon examination by legal and business experts unless APCON urgently reviews the contentious elements inside the AISOP policies, retrogression and not development will be the result. The policies, they say, negates some aspects of the Nigerian constitution that allows businesses to freely enter into contractual agreements and it is ironic that a government regulatory agency that’s not a player will come up with rules for a wholly private sector-led endeavour.
A foremost business, and human rights lawyer, Jiti Ogunye in his examination of the 11 broad sections and other appendices that make up the AISOP document said the rules strive to put in place regimentation of the sector rather than regulation that it ought to be.
Ogunye said he has looked at the AISOP provisions and he is shocked that a sector that is not entirely a public sector, which, indeed, largely is private sector-led in terms of those who are on the demand side and the supply side in the advertising industry, 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 advertising contracts must contain.
That, he believes is an affront to the principle of freedom of contract and any basic text on the law of contract, business law or commercial transactions that one reads will make it known that contract, essentially is a concept, an arraignment 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 and parties are expected to voluntarily engage’’.
Giving an example of a section of the rules that needs a review, he cited section 3 that governs payment terms. Part of the specific subsections prescribe days within which payment must be made which must be within 30 days and no later than 45 days and if there’s a default, there must be Interest and that interest must be at the Central Bank’s interest rate.
He said the AISOP provisions offend the right to contract in freedom, and if its looked at in the larger context, it is tantamount to restriction of trade, restriction of business, and this will stifle advertising businesses when it comes into operation, 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.
For Prof Martins Ike-Muonso, a business expert that consults for various governments, and heads ValueFronteria, the AISOP rules, if operational without editing to some of its antibusiness rules, will set the industry backward, kill competition and innovation that it seeks to create.
He said though some of the rules are great for the sector, but there are challenges some other rules will pose. The first challenge is the horizontal price-fixing, the second is undue bloating, bourgeoning, increasing advertising costs, and the third is the interference in the freedom of contract, and contract enforcement.
The horizontal price-fixing, he said, is not accepted in any progressive community in the world because it infringes on the capacity of the market to independently connect or clear the subjective choices of the demand and supply sides. What APCON has done at the price-fixing, he said, for instance, in the pitch fee, that it has to be between N1m and N2m, which is fixed and that’s horizontal fixed range. The implication is that If the advertiser, which is the supplier of advert jobs does not have the capacity because it is managing its cash flow to offer more than or to offer up to a N1m for pitch production, that means it would not go into the market at all because it would go off the regulator’s range.
He said bloating happens when it becomes obvious that a professional fee will be paid, and if it’s assumed to be N1m, ‘’it has already been paid for five ad agencies. These five ad agencies make their pitches but only one is going to be selected. So, the company selects one, the other four are going to be paid between N500,000 and N1.5m for rejection. This means from point one, it is obvious that no matter how useless anything is brought to the table, I know that I’m going to have enough to cover my costs plus a surplus, which perhaps I don’t even need to work for.
‘’Therefore, if there are errors in the selection of ad agencies pitching. You are going to be paying off much more than ordinarily, you would. The number one implication is that advert suppliers will reduce the number of agencies involved in pitching. That again drops the opportunities open to the market to learn and all of that. Number two, because I know that whatever the case, I’m going to get my pitch fee and I am also going to get my rejection fee, these two will always go beyond whatever I have budgeted for in preparing for the pitch. I am walking away with something for just being invited to pitch, so I have some profits anyway’’.
This kills innovation, according to him because one is not working for this profit and it makes people run out to improve on those skills and rather than improve on competition, rather than innovating to compete, what you see is advert agencies lobbying to get the jobs.
On contract enforcement, the professor of business said the life of every market is the freedom that individual actors have to interact with all the participants in the market to agree and to have these contracts enforced. ‘’One cannot, as a regulator, determine these terms as the moment you begin to determine these terms, you are already beginning to whittle down the capacity of the market to independently determine its progress’’, he added.
Noting that it is those on the supply side that appear to be attuned to the new proposed rules, some observers are of the view that APCON appears biased as the council doesn’t want to dialogue with the only party paying for the advertisements.
Appearing to collaborate the assumptions that APCON is biased in coming up with the rules, the Managing Partner of Gee Law firm, Nosakhare Uwadiae at the 9th Annual General Meeting (AGM) of Brand Journalists Association of Nigeria (BJAN), suggested that advertising stakeholders in Nigeria be allowed to take another look at the AISOP regulation and come up with recommendations that are balanced to resolve the contentious clauses contain therein, as though various recommendations were made on payments, however, no reference was made to ensuring that the agencies fulfill Service Level Agreements (SLAs) and quality service delivery to clients.
He said, “AISOP was gladly embraced by stakeholders in the marketing communication sector in Nigeria. However, the Advertisers Association of Nigeria (ADVAN) rejected the implementation as it makes an unconstitutional attempt to infringe on the rights of private entities to determine their contractual terms and does not serve the collective interest, but rather permits unfair authority of certain parties over others and creates an unfriendly business framework.”
To save the advertising industry, stakeholders have often called for self-regulation like it is done in some other countries, but it is obvious that the AISOP might not be the solution to grow the data-deficient sector if players are not allowed to dialogue and iron out the differences already causing friction before it becomes operational.