Earlier this month, the Advertising Regulatory Council of Nigeria (ARCON) announced that it was suing Meta and its local partner, AT3 resources, for breach of conduct in the platform’s “continued publication” of various ads on Facebook and Instagram without proper vetting process through the council. Recall that two months prior, President Buhari had signed into law a bill allowing ARCON to change its name from Advertising Practitioners Council of Nigeria (APCON) to the current, in a bid to repurpose the organisation’s role to a more regulatory one. The structural rearrangement was seemingly a needed action, given the rapidly changing nature of the advertising industry, the need to protect local advertising businesses and public consumers from those shocks, and the desire to align with global best practices. It does make sense, then, in part, that since its establishment, ARCON has swiftly stepped in with some notable actions in the industry. The suit against Meta is one of the few ‘radical’ moves from the council; just this August, ARCON had passed a law banning the use of foreign models and voice over artists in any advert ‘targeted’ at or ‘exposed’ in Nigeria. A reasonable argument for this is that it would create more jobs for local artists and prevent capital flight in the form of huge wages hitherto paid to artists who neither reside nor pay taxes in the country.
As its proposed suit against Meta demonstrates, ARCON remains steadfast in expanding these regulatory ambitions. Considering how digital tech has disrupted the advertising industry globally, ARCON’s move in protecting Nigeria’s advertising ecosystem syncs with similar push backs from other technologically developed countries of the continent. For example, South Africa’s Competition Commission (CompCom), is currently investigating 11 tech giants, including Apple, Google, and AirBnB for anti-competitive behaviours and unethical market conduct. In July this year, the Kenyan National Cohesion and Integration Commission (NCIC) had proposed a ban on Facebook over Meta’s hesitance to take actions against the spread of online hate speech and misinformation on the platform.
But how much of this is Nigeria just ‘keeping-up-with-the-joneses’ — simply not trying to be left behind in the (justifiable) continent-wide regulatory crackdown against big-techs? Is it probable that ARCON, while meaning well with the suit, muddies the waters by lumping together policy issues that should be separate (e.g., anti-competitiveness Vs unethical advertising)? The answer lies in the content of the ARCON suit itself.
Let’s tease it out.
The ARCON Suit
“ARCON is seeking a declaration among others that the continued publication and exposure of various advertisements directed at the Nigerian market through Facebook and Instagram platforms by Meta Platforms Incorporated without ensuring the same is vetted and approved before exposure is illegal, unlawful and a violation of the extant advertising Law in Nigeria”.
Figure 1: Breakdown of ARCON’s suit against Meta
ARCON’s case against Meta primarily sits on two strands: loss of revenue to the federal government and illegal publication of adverts (unvetted ad process and unethical advertising). However, the content of the suit is vaguely, or perhaps too widely framed, it leaves one wondering what ARCON truly intends with it. Is the question broadly a political one — in which case ARCON is concerned about content moderation and ethical implications of the ads placed on Facebook and Instagram, to safeguard the Nigerian public against online harm? Or is the request to have Meta seek approval from the council simply based on the economics of overseeing revenue flow in the social media advertising industry in Nigeria? Or is it to curb possibly ongoing anti-trust behaviours such as limit pricing (Facebook Ads are as cheap as NGN100 per ad, way below traditional ad-market pricing)? Whichever of these 3 grounds it is pursuing, ARCON is well placed to file a suit against Meta; but the Council currently risks lumping up separate policy issues together as one.
AD APPROVAL
Let’s begin with the ad approval side of things. Elsewhere, I have written about the potentially damaging effect of social media platforms’ poor responses to online harms in Nigeria. ARCON’s call to vet the continued publication of ads on Facebook and IG is perhaps a good response to this. Apart from curbing misinformation and online harm, reviewing ads for approval also gives the Council an overview of what revenue flow looks like in the sector, and this information could be used to help small businesses and local advertisers who are already struggling from the grip of social media giants’ huge brand equity.
As it is currently, ARCON is suing Meta widely because the platform has failed to seek approval before publishing social media ads. This charge has merit when examined viz a viz ARCON’s legal responsibility to regulate and control advertising practices across various media channels — social media without exception. The challenge however is that there are currently no clear guidelines or laws on social media advertising in Nigeria; making an extrapolative assumption that existing rules of traditional advertising should apply to Meta a weak one. It was just in August this year that the commission conducted its stakeholder meeting to draft a guideline for advertising and promotion in the telecoms industry. If the laws have not been set, how can Meta be subject to them?
ARCON claims it had written to online platform operators calling for a meeting to design regulatory framework for social media advertising, but Meta “neither acknowledged nor attended the meeting”. While these are reasonable policy frictions, the claims are probably not justifiable enough to pursue a charge in court.
On the practical front, seeking approval for every ad placed on Instagram and Facebook is a cumbersome, repetitive, and potentially unproductive process. Currently, ads placed on FB and IG are internally reviewed by Meta using an automated system that applies all Meta’s advertising policies to every advert. This process takes 24 hours but could be longer in certain circumstances that require further investigation, such as examining previous practices of specific advertisers. This process is hardly human moderated, except in a few cases.
Figure 2: Facebook’s Ad Review Process
Probable result of extending the approval process to ARCON is that ad reviews take longer than 24 hours (slowing down efficiency in businesses that are heavily social-media reliant). Besides, ARCON currently lacks the capacity to automate the process; requiring humans to process such a large number of ads (possibly thousands in a day) is practically exhausting, if not impossible. The essence of regulatory approvals is that ads approved by Meta are re-run through ARCON’s policy to ensure compliance — this will require creating new organisational systems, employing more hands, and possibly designing new in-house technologies to capture oversights in Meta’s approval. Someone has to pay for those costs, and it is less likely ARCON, or Meta which seeks to continually minimize marginal costs. Such an increase in ‘policy implementation cost’ would likely fall on the citizens, who already face a 7.5% increase in Facebook ad costs as a result of the recent Value Added Tax (VAT) regulations in Nigeria. As mentioned, there are some advantages in ARCON moderating social media ads, but the onus to verify fake or unethical ads should rest on social media platforms, not ARCON.
What ARCON should rather aim at, is a periodic review of human-prepared reports of Meta’s ad approval process; this could be on a rolling 3-month, 6-month, or annual basis, depending on how much the Council’s capabilities can accommodate. ARCON could then require Meta to seek approval for extremely outlier cases and investigation into advertiser practices (which are very few and are therefore manageable by already existing internal mechanisms). These procedures could be better facilitated through the establishment of a policy liaison, between ARCON and Meta (as well as other social media advertising platforms) — a responsibility that falls on respective social media companies. It might be helpful for ARCON to think of its role in ad review as a broader policy one, rather than operational.
The Economic Angle: Revenue Loss
One way to imagine the FG’s concern on revenue loss arising from Meta’s ad procedure is to picture the enormity of the digital advertising industry in Nigeria. According to Statista, between 2022 and 2027, social media ad spend in Nigeria is projected to grow at an annual rate of 11.41% — that is approximately USD 89 million (33.3 Billion Naira) in 2022 alone; a huge share of the advertising sector.
What’s more; 65% of the digital advertising revenue in Nigeria goes to foreign companies, while Meta alone maintains an estimated market share of 80% in the social media advertising industry.
These are obvious grounds for policy reactions from the government. The question, though, is, how does ARCON legally prove such revenue loss? Social media companies are already mandated by law to charge VATs on their products on behalf of the government. Tech service providers that are non-resident in Nigeria are also mandated to remit 6% of their annual business turnover in Nigeria to the government. What possible new case could ARCON make for this revenue loss?
The current Guidelines for Advertisement and Promotions were developed in 2011, and it is only through the recent structural changes to ARCON that the commission began reviewing the content to fit into the rapidly changing social media industry— including the recent attempts to work with online platforms operators in drafting a new advertising regulation. Besides, the powers that enact such laws — the Advertising Regulatory Council of Nigeria Act, 2022 — were established less than 2 months ago. Is ARCON suing Meta based on laws it is itself yet to institute?
What ARCON probably wants is that, following the draft regulation for promotional advertising in the broader telecoms industry (which was only convened in August this year), Meta must make payments (commission) to the council before social media ads are approved, as it is done in the traditional advertising sector. This is a practicable policy, but if my rudimentary knowledge of law serves me right, ARCON cannot sue Meta based on a draft policy, yet to be passed into law. While the Council should rightly consider a penalty for Meta’s disregard for policy-formulation dialogues, failing to acknowledge meetings isn’t a defensible ground to sue, unless it were a summon from an institution such as the court or the National Assembly.
The court case aside, it is worthwhile to consider the implication of ARCON receiving commission on every social media ad. Unlike traditional ads, social media ads have a somewhat distinct nature in that the individual user is also the ad publisher — and thus both the platform (Meta) and the ad user (publisher) benefit directly from ads placed. As such, questions arise as to who should pay these commissions? If the consumer, that would amount to double charges, as consumers already pay VATs on every ad. On the government side, there is also the risk of duplicity — who should receive the commission from Meta? The NCC — which broadly regulates the telecoms industry? Or the advertising council— bearing in mind that Facebook’s primary source of revenue is adverts?
It is perhaps more helpful for ARCON to focus on broader economic policies such as anti-trust, which might help to better capture big tech insider practices that ‘cannibalize’ local and small advertising outlets. A possible point to focus on here is injury pricing or limit pricing. With adverts as low as NGN100, Meta offers the same services and reach that radio, newspapers or TV stations would have to offer for higher prices; by implication capturing more consumers from the traditional ad sector. Since unlike traditional ads, social media ad prices are typically not set, it might be worthwhile for ARCON to consider some form of price-flooring mechanisms, to prevent this race to the bottom in the industry. Other behaviours such as preventing interoperability (e.g., lack of open transfer of tacit knowledge with competitors), undue inflation of prices facilitated by vertical integration (e.g., Meta has both customers’ raw data and algorithmic designs that continually influence users’ preference of social media advertising)
Overall, below I propose a forward-thinking approach that could help ARCON address both the economic and political implications of an expanding social media advertising industry. Going to court, while justified on obvious policy grounds discussed above, is probably too early and built on fallible assumptions. With an unbiased judicial system, it is possible for a government agency to lose a suit, as seen in a US’ court dismissal of a suit brought against Meta (then Facebook) by the US’ Federal Trade Commission. ARCON should prepare for such a possibility.
Figure 3: PROPOSED FRAMEWORK FOR ARCON’S SOCIAL MEDIA ADVERTISING POLICY
*Opinions expressed in this article are those of the author and do not reflect the views or beliefs of Dataphyte