Fighting disruption through rent-seeking

A masterclass in fighting disruption, Nigeria-style

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How to fight disruption

Our people say that when a man wakes up is his own morning, so good morning to me.

Sometime this week, my lawyer friend mentioned that he was representing someone at an Advertising Tribunal and was trying to perfect bail of ₦2 million for her. His client’s offence was advertising on Instagram without getting approval from the Advertising Regulatory Council of Nigeria (ARCON).

I’d seen a few advertising professionals rage against ARCON’s overreach in the past, but it always existed in the back of my consciousness; this week, I could not get over the absurdity of anyone needing to arrange bail of N2 million for posting ads on Instagram. The last time I checked, some of those ads cost something like $5 a day.

As it happens, my friend’s client is not an edge case. In early 2024, the Advertisers Association of Nigeria told PUNCH that roughly fifty of its member companies had been dragged before the Advertising Tribunal, with bench warrants issued for managing directors of firms that refused to appear.

Captain Ado Sanusi, the MD of Aero Contractors, was hit with a twenty-two-count criminal charge for tweets that said things like “Fly with us to Sokoto” and “The journey of a lifetime.”

If you take even five minutes to research this, you’ll find that this is one of the most ridiculous examples of a regulator refusing to get disrupted as the shape and form of advertising changed under its feet. You’ll also find an agency that got itself legislated from the brink of disruption.

To advertise lawfully on social media in Nigeria today, you must file a paper application addressed to the Director-General of ARCON, signed by a registered advertising practitioner. Your application must include the ad itself, a completed Standards Panel Form 001, and a payment receipt of N20,000 per concept.

Approval timelines are not built for real-time digital advertising, with ARCON’s guidelines showing that its approval Panel meets monthly, with accelerated vetting available.

You can pay N70,000 for a sixteen-hour turnaround for ten concepts, while N100,000 gets you an eight-hour turnaround for fifteen concepts.

If you used a foreign model or shot the ad abroad, there is a deterrent fee of N3 million. If you skip any of this and run the ad anyway, the regularisation fee is N1 million per infraction, demanded within seven days, rising to N3 million if you run three posts without approval.

Let’s back up a bit. For most of Nigeria’s history, if you wanted to put an ad in front of a Nigerian, you needed airtime, which was controlled by a handful of broadcasters, newspapers, and outdoor firms. You also needed a creative asset, which meant a production company doing a video or print for a billboard. Then you needed placement, a.k.a somebody who knew which slot on which station at what hour reached which audience at what rate. All of this complexity was handled by an advertising agency/media buyer.

The Advertising Practitioners Council of Nigeria (APCON), which was ARCON’s predecessor, sat on top of this structure and regulated the practitioners who worked within it. Everyone in the value chain, like copywriters, media buyers, and account managers, had to be registered.

But once we could pay for things online reliably, online advertising was within reach of anyone with a debit card and internet access. It was the beginning of the end of the monopoly broadcasters had on exposure.

Facebook, Instagram, WhatsApp, and the rest of the Meta stack also broke the placement monopoly, because you no longer needed a media buyer to decide who to show your ad to. Their algorithms did the targeting better than any human planner could ever dream of.

YouTube made a phone sufficient for video, and TikTok went further with ads that did not look like ads, made by creators, outperforming anything some production houses could create. Influencer marketing severed the final cord, and by the early 2020s, an ad could be a human being posting on their own feed about a product they had been paid to use, with no agency, production company, or registered practitioner in the value chain.

Each wave of disruption took away a function that the advertising regulator used to perform, and by 2022, a hairdresser in Surulere could reach hundreds of thousands of Nigerians without even knowing who a registered practitioner was.

The only cost was whatever Instagram/Facebook or Google charged, and then later in 2022, 7.5% VAT. A growing share of advertising could now happen outside the professional chain that APCON was built to regulate.

When you’re getting disrupted like this, you cannot put your head in the sand; your bottom line will let you know that there’s fire on the mountain, and you will fight like hell against it. In 2014, APCON began issuing violation notices and fines to the people who advertised without paying the stipulated fees.

The funeral home MIC Royal Limited was fined N500,000 for placing an ad in the PUNCH newspaper without going through an APCON-registered practitioner. The Registered Trustees of the International Covenant Ministerial Council got a similar fine, but both entities refused to pay and instead went to court.

As the courts interpreted it, the old APCON law was built around advertising practitioners, not advertising itself; ergo, if you were not a registered practitioner, APCON had no authority over you; my hairdresser in Surulere could go on with her ads.

At this point, the regulator had a choice. It could accept that the economy had moved somewhere its statute was not designed to follow, and build a new model, or even pivot to post-publication review like the UK’s Advertising Standards Authority.

But this is Nigeria, so the National Assembly enacted a new Act that guaranteed the survival of the advertising regulator.

In 2022, the APCON Act was repealed, and in its place came the ARCON Act, which included a provision (Section 54) that any person who places an ad targeting the Nigerian market without the prior approval of the Advertising Standards Panel commits a criminal offence.

So we went from an act that regulated advertising professionals to an act that targeted everyone who advertised to Nigerians; my Surulere hairdresser in Surulere was suddenly in danger.

Armed with Section 54, ARCON was emboldened. In a January 2024 PUNCH interview, Advertisers Association of Nigeria (ADVAN) president Osamede Uwubanmwen connected ARCON’s aggression to the Federal Government removing the regulator from national budgetary allocation. ARCON was tilting towards “an aggressive taxing regime” that was stifling the industry and “If we are not careful, we will be told to vet obituaries,” Uwubanmwen added.

Some people will argue there is a case for ARCON vetting ads, seeing as Nigerians got defrauded by Ponzi schemes, which did a fair bit of advertising. Meta’s moderation does almost nothing at the Nigerian end.

Yet, the argument for regulation ignores the fact that regulations exist. The Cybercrimes Act of 2024 makes it a crime to publish misleading content online, and the Federal Competition and Consumer Protection Commission already polices deceptive commercial practices.

The minimum daily Meta ad spend in Nigeria is about N2,500, and Meta collects 7.5% VAT on that and remits it to FIRS. So, when a small business wants to boost a single Instagram post for a week, it will pay N17,500 to Meta for the ad itself, N1,312 in VAT on top for FIRS, N35,000 in vetting fees to ARCON, then whatever a registered practitioner charges you to file the form on your behalf (call it N50,000 to N100,000 depending on the relationship). It will then wait ten working days, during which whatever trend or moment the business owner was trying to catch will have passed. If you skip the vetting, published guidelines list minimum penalties of ₦500,000, while industry reports say some notices have demanded up to ₦1m per infraction.

If you pay the fine, you have still not been approved, so you have to vet the ad afterward anyway. If you cannot pay the fine and refuse to appear before the Advertising Offences Tribunal, there will be a bench warrant out for you.

This is how my friend’s client, an honest-to-God business owner, ended up on bail of N2 million with two sureties in like sum.

The Tribunal charging her is a body whose members are appointed on ARCON’s recommendation to the Minister of Information.

Did I mention that Section 45 of the Act lets the Tribunal Chairman issue a warrant for the police to enter business premises by force?

My friend’s client will make her bail. She will probably fight the charge, or pay the fine, or both, because that is what people who run small businesses in Nigeria do when the state puts its hand on them.

Welcome to Nigeria.

See you on Sunday!