As a leading Entertainment law firm in Lagos, Nigeria, we regularly advise Advertising companies. We often find that Advertising companies incur legal problems mainly due to lack of proper legal advice and at times honest mistakes or omissions. However these failures can often result in costing the advertising agency a lot of money and could also cost the advertising agency important clients.
Sources of Legal Mistakes
So, what are the legal mistakes that advertising companies normally make? The Advertising business like any other business has legal obligations; regulatory and compliance obligations such as corporate and tax obligations of a general business nature. However, we have notices that most of the mistake arise as result of either
- Failure to comply with applicable regulations or
- Failure to comply with applicable statutes or
- Failure to comply with contractual terms and obligations or
- Defects in contract drafting or
- Poor dispute management and resolution or
- Poor Intellectual Property Asset management or
- It can also be a combination of one or more of the above.
Failure to Comply With Applicable Regulations
Advertising Practitioner’s Council of Nigeria (APCON) was established in 1988, and APCON says it was established “to control and regulate advertising in all its aspects and ramifications”.
However Section 1 of the Advertising Practitioners (Registration Etc.) Act clearly shows that APCON was established to register advertising practitioners and regulate their practice of advertising. The Court of Appeal has also determined in MIC ROYAL LTD v. APCON (2018) LPELR-45314(CA) that the scope and extent of the APCON Act is limited to the regulation and control of practitioners of the profession of advertising.
The Governing Board of APCON approves the Nigerian Code of Advertising Practice and Sales Promotion and is binding on all persons registered as advertising practitioners, and applies to the entire content of an advertisement including words, numbers, presentations, music, sound effects and exposure. The Code bothers on legality, decency, honesty etc. of advertisements.
It further states that all categories of advertisements must be vetted by Advertising Standards Panel (APS), a statutory committee of APCON except:
- Financial Statements;
- Goodwill messages;
Categories such as Foods, Consumables, Person Hygiene, Drinks, Cosmetics, Over-the Counter Medicines, Tobacco Promotions, Financial Services, Religious Programmes, Corporate Advertisements of Regulated Products or General Nature, Telecommunications, Etc. must be vetted before exposure or publication.
It is important to advertising companies to know these regulations or have a lawyer focused on Entertainment Law practice who can help advise you on the regulations. The Failure to have proper legal advice is costly
Penalties for lack of compliance include:A minimum penalty of N200, 000 (Two Hundred Thousand Naira) for a media house that publishes an advertisement that was not approved;
- A minimum penalty of N200, 000 (Two Hundred Thousand Naira) for an agency that places for publication of an advertisement that was not approved;
- An advertising practitioner may be subject to disciplinary procedure for publishing or aiding in the publication of an unapproved advertisement.
- An advertisement may be discontinued or its publication and exposure stopped not minding huge costs that may have gone into its production.
- An advertisement may be unapproved and therefore useless and a financial loss to both the advertiser and the agency
- Failure to Comply with Other Regulations
There are other regulatory bodies and agencies of government that regulate advertising for various sectors and products. For example;National Agency for Food and Drugs Administration and Control (NAFDAC) provides some restrictions for the advertising of certain products within its regulatory control.
– Guidelines For Advertisement Of NAFDAC Regulated Products In Nigeria Advertisement of food and drugs should be approved by NAFDAC before airing, exposure or publication
- Advertisement materials for Prescription-only-Medicines (POM) must contain abridged prescribing information including composition, indication, dosage, administration, adverse effects, drug interactions, contraindications, warnings and precautions.
- Advertising materials of alcoholic beverages must include the phrases “18+” and “Drink responsibly.”
- Advertisement of Over-the Counter (OTC) medicines should include the Caveat “If Symptoms Persists after 3 Days, Consult Your Doctor/Physician”.
- Herbal medicinal products (without established clinical studies) labels and advert materials shall include the caveat, “These claims have not been evaluated by NAFDAC”
Although the NAFDAC regulations on advertisements have no express sanctions for lack of compliance, Section 25 of the NAFDAC Act prescribes fines between N50, 000.00, N100, 000.00 and/or prison terms of one year for individuals, corporate persons, directors and other principal officers of non-compliant companies as the case may be.
If you are advertising Cosmetics, Food or Drugs, the provisions under the National Drug Formulating and Essential Drug List Act and The Food and Drugs Act needs to be kept in mind.
The National Broadcasting Corporation (NBC) is mandated to foster the monitoring, broadcasting for harmful emission, interference and illegal broadcasting.
Additionally, Lagos State Signage and Advertisement Agency (LASAA) are established for the management, regulation and control of the signage and outdoor advertising environment in Lagos State. Thus, they manage all forms of signage and outdoor branding opportunities in Lagos State.
The Nigerian Communications Commission (NCC) has been given powers under the Nigerian Communications Actand the Nigeria Communications (Enforcement Processes, etc.) Regulations 2005 to publish guidelines specifying minimum standards and requirements in respect of advertisements and promotions of products and services by licensees for the purposes of protecting consumers and ensuring ethical marketing and promotional standards by licensees.
Under the Nigerian Communications Commission Guidelines on Advertisements and Promotions 2011 , The Commission reserves the right to place appropriate sanctions on defaulting licensees including fines in several millions of Naira and withdrawal or suspension of operator’s license.
Furthermore, The Consumer Protection Council has made the Consumer Protection (Sales Promotions) Regulations.
Sales promotions with prizes worth more the N250, 000 must be registered. Lack of compliance could attract fines or preclusion from carrying on or conducting the sales promotion permanently or for a specified duration.
Defects in Contract Drafting
An advertising agreement is a contract between a person or company who wants to promote their products on the one side (the Advertiser) and person or company who would help advertise their product and help them in reaching the mass on the other side (the Agency).
The possible defects in an advertising agreement will depend on the type of advertising services required; creative services, production services and/or media services – in some instances public relations services may be involved.
- Medium/media: This has to do with HOW the advertisement is delivered to the public; this could be by print, electronic, online etc. media. It is important to clearly specify this so that advertising materials would be specially prepared for the applicable media. Failure to clarify this could be costly. This term will also determine what kind of arrangements the agency will enter into with third parties and suppliers. It will also provide an important guide for clarity on scope of work.
- Payment: Failing to clearly state how much is to be paid, when payment will be due, whether payment is to be made in installments, whether commissions are also to be chargeable, what fees are for what particular services, and such other considerations could be very costly.
- Competition: It can cause an advertising agency potential new clients or old clients, if to what extent an agency can work for competitors in a market is not well stated in advertising contracts. An error of this nature can cause agencies not to take on some new clients, or stop working with some others.
- Confidentiality: Information can be very valuable, and care must be taken to ensure that a confidentiality clause is not too broad as to cover information that parties may already have. Otherwise, one may find that one is precluded from using valuable information in other transactions simply because such was also disclosed in the course of the performance of an advertising agreement.
- Legal and Compliance Issues: One should be careful to avoid advertising obligations that are contrary to laws and regulations. Any such services or clauses that breach legal provisions will cause disputes later on when it comes to performance. The disputes may become complex and expensive as significant resources may have been expended already, and the agency may already be liable for a variety of penalties and/or incurred unexpected costs, which may not be subject to indemnification.
- Indemnification: Advertising agreements should provide for adequate indemnification for losses incurred by one party on account of the conduct or failure of the other party.
- Intellectual Property: This is very important not just for the advertising agreement, but with third party contracts too. There is a very important need also for agreements with creators of all kinds to be alignment with the advertising agreement. Conflicts in this area could be costly to the agency. For instance, if the advertising agreement requires full assignment of rights in favor of the advertiser but agreements with creators only acquire limited licenses.
- It is also important to properly spell out ownership of all intellectual property created during the performance of advertising agreements.
- it is important to set out all the details explicitly in the agreement with regards to whether any additional remuneration would be payable by the company to the advertiser for creating any Intellectual property, consequences for non-disclosure of intellectual property, whether the advertiser after the termination of the agreement would be allowed to use the intellectual property, etc.
Failure to comply with contractual terms and obligations
Failing to meet contractual obligations can cause a person to incur serious consequences. A lot of money may have to be spent for legal services, settlement fees or payment of damages. It is best to comply or renegotiate terms of a contract, particularly terms such as the foregoing.
Poor Dispute Management and Resolution
A stitch in time saves nine. When things go wrong in the performance of advertising obligations, it is best not to allow disputes escalate or endure to the extent that it affects other obligations, particularly with third parties. Many disputes end up being more costly simply because they were not properly managed.
Poor Intellectual Property Asset management
In the advertising business, a lot of intellectual property, mostly copyright is developed; literary and musical works, dramatic and audiovisual works, sound recordings, artistic works and photographs etc. are all made.
A good record of ownership and authorizations for the use of these works should be kept and constantly examined. Otherwise, works could be used by persons without authorizations to use them or beyond authorized durations, territories or purposes.
Where works are used without appropriate authorizations, liability for infringement occurs and these could amount to having to pay compensations and for legal services far exceeding what proper authorizations would have cost.
After examining all the various costly legal mistakes that one could make in the advertising business, the next natural question would be how to avoid these mistakes. The answer is obvious – the engagement of competent legal professional to oversee the legal and compliance matters in the advertising industry. It is important that Entertainment Law, Copyright Law, Intellectual property law and sector specific knowledge is needed for any lawyer in Nigeria to advise on the laws and regulations surrounding advertising. As lawyers specialized in the field of Entertainment law, Media Law and Intellectual Property Law we regularly advise Media and Advertising companies.
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