The e-Commerce Trend
In today’s global world businesses must maintain a competitive edge and constantly look to being ahead of the competition. They’ve got to be up-to-date with latest trends in their industries.
Lately, smart entrepreneurs in Nigeria have started to adopt a relatively new e-commerce business model because of its tremendous advantages and growth potentials. While some have adopted E-Commerce as their sole business model, others however have adopted it as part of an offline business. This is now a trend. While the Kongas and the Jumias immediately come to mind, there are lesser known businesses that have adopted e-commerce in recent. And with the growth of technology, this will only increase.
While E-Commerce has lots of advantages that an Entrepreneur can leverage on to grow his business, there are also legal considerations that are unique to it which if ignored can greatly impact on the success or otherwise of an E-Commerce business. My aim in this article is to brief Entrepreneurs on the legal considerations for an E-Commerce Startup in Nigeria and how to protect your business accordingly.
Legal Considerations for an e-Commerce Startup
- Business Registration
An e-commerce entrepreneur is still seen as a real business owner thus, you will need to register your business. The first step that you need to take is to choose a business structure. The type of business structure chosen will depend on certain factors such as budget and funding, taxation, etc. To read a comprehensive guide on the procedure for business registration in Nigeria, click here ( http://millennialegal.com.ng/2016/11/12/legal-guide-for-a-small-or-meduim-sized-business-set-up-in-nigeria/)
2. Domain Name
The major legal consideration to have when choosing a domain name is to ensure that your domain name is not already in use by another person. This is because the Nigerian Cyber Crime Act 2015 makes it a punishable offence for anyone to intentionally register a domain name that is already been used by another.
A quick search on https://godaddy.com/ will quickly reveal if a name is available for use on the internet. However, you will still need to make sure that the name is not already registered as a business name elsewhere. A search at the CAC or other appropriate quarters will be an extra layer of protective measure for the entrepreneur.
- Website Development
An e-commerce business would typically require that you develop and maintain a website. In developing your website there are usually two options:
- Develop it by yourself; or
- Hire a professional web developer.
If you choose the first option, ensure that images, logos and design used in developing your website are not already owned by another person. Try not to just copy images, logos or designs on the internet without getting due consent from the owner. This is because there is always the potential risk of being subject of copyright-violation claim.
If you choose the second option which is to hire a web developer, you would need to sign a contract with your web developer that would spell out the intellectual property rights and obligations. It would be wise for this contract to include non-disclosure obligations as well. This is important to prevent exposure to liabilities and preventing the web developer or a third party from leveraging on insider information about your business idea obtained while developing your website.
4. Data Privacy
As an e-commerce entrepreneur, a good part of your business transactions would require that your customers disclose sensitive private information about themselves over the internet. Such could include: credit card details, bank account details, names, addresses, employment status, age, marital status, family and ethnic background of an individual. Because the internet is a breeding zone for hackers who usually exploit these data to the detriment of the people that disclose them, it becomes very necessary that you protect your customers from these potential hackers.
The NITDA Draft Guideline on Data Protection and the Nigerian Cyber Crime Act, 2015 contains rules and regulations that an e-commerce outfit should follow. It is an offence to breach these rules.
5. Credit Card Transactions
It is common practice for online business owners to integrate a payment gateway on their websites through which customers pay for goods bought or services rendered online. This can be done via two methods; (1) by directly applying to be issued a merchant account or (2) by using the services of third-party provider (e.g. GTpay, Pay pal, E-transact) who is already registered as a merchant account.
Whatever method that you choose to use, it is important that you conduct your due diligence to ensure that the merchant account chosen complies with the Payment Card Industry Security Standard Council, (PCI SSC) guidelines. The PCI SSC is a widely accepted set of policies and procedures created jointly in 2004 by four major credit-card companies: including Visa and MasterCard. It is intended to optimize the security of credit, debit, and cash card transactions and protect cardholders against misuse of their private data.
Trademarks are images, logos, pictures, symbols, names, signs, designs, colors, sounds and jingles etc. which distinguish your product or service from others. With the surge in e-commerce related activities, it is now easier for one’s trademark rights to be stolen or infringed upon. By registering your trademarks, you will have exclusive right of use and can institute a legal action against anybody who infringes on this right.
You should also look at trademark issues as a duty you owe other people not to infringe on their own trademarks rights.
7. Online Advertising Rules
Advertising of goods and services in Nigeria is regulated under the code of Advertising Practice and Sales Promotions Guideline of Advertising Practitioners Council of Nigeria (APCON).
It provides amongst other things that:
- The commercial nature of the communication must not be concealed or misleading; it should be made clear in the subject header.
- There should be clarity of the terms and offer and devices should not be used to conceal or obscure any material factor such as the: the price or other sale conditions likely to influence the customer’s decision
- There should be clarity as to the procedure for concluding the contract.
- All marketing communications sent via electronic media should include a clear and transparent mechanism enabling the consumer to opt-against receiving future solicitations.
8. Tax Considerations
The law on taxation in Nigeria requires that so long as you have a business in Nigeria or you derive your income from Nigeria, you would be liable to pay tax. Therefore an e-commerce business owner whose business is targeted at the Nigerian market and who derives revenues or income from such a business is liable to taxation in a manner applicable to businesses with traditional offices in Nigeria.
In conclusion, remember that ignorance is not bliss. Thus, it is important that as an e-commerce entrepreneur, you get acquainted with these legal considerations and protect your business accordingly. This is because any mistakes made and any neglect of duties owed to your customers (e.g. duty to ensure customers’ data protection) can be very expensive. It may attract unnecessary legal costs to your business while undermining the longevity of your business.
In any case, while you educate yourself on these legal considerations and comply with the relevant rules and regulations that have been laid down, do not shy away from letting your customers know how you are protecting their business transactions. It is a sure way of promoting the integrity of your business, attracting and maintaining a loyal customer base.
Chinemerem Rita Nweke practices law in Nigeria at Millennia Legal Virtual Law Firm, where she constantly provides commercially relevant legal services to SMEs in Nigeria.