A Federal High Court in Lagos has nullified the N60 billion sanction imposed by Advertising Regulatory Council of Nigeria (ARCON) on Facebook Nigeria Operations Limited over alleged unapproved advertisements targeted at the Nigerian market, holding that the regulator acted outside its statutory powers and violated the company’s constitutional right to fair hearing.
Delivering judgement in Suit No. FHC/L/CS/2205/2024, Justice YellimBogoro declared ARCON’s Notice of Violation/Demand for Compliance dated October 21, 2024, unconstitutional, unlawful, null and void, and restrained the regulator from taking further steps to enforce the sanction.
The judge held that ARCON lacked the statutory power to impose fines for alleged criminal violations under the Advertising Regulatory Council of Nigeria Act, 2022, without a prior conviction by a court or other competent tribunal.
The dispute arose after ARCON accused Facebook Nigeria of exposing advertisements on Facebook and Instagram to the Nigerian market without obtaining prior approval from the Advertising Standards Panel, contrary to the ARCON Act and the Nigerian Code of Advertising.
In its notice, the regulator directed the company to immediately stop exposing unapproved advertisements to Nigerian audiences and demanded payment of N60 billion for what it described as repeated violations.
Facebook Nigeria, through its counsel, Mofesomo Tayo-Oyetibo, SAN, challenged the notice. It argued that ARCON had no legal authority to determine criminal liability or impose punitive sanctions through an administrative notice without first affording the company a fair hearing.
The company also maintained that it neither owned nor operated Facebook or Instagram, contending that both platforms are owned and controlled by Meta Platforms Inc., a separate foreign corporate entity.
ARCON, represented by Akinlolu Kehinde, SAN, opposed the suit, arguing that Facebook Nigeria represents Meta’s operations in Nigeria and should, therefore, bear responsibility for regulatory breaches relating to advertisements displayed on the platforms.
The regulator further contended that its notice was merely a regulatory compliance measure giving the company the option of complying with its directives, paying the prescribed violation fee or facing prosecution.
Bogoro rejected the regulator’s arguments.
The court held that Facebook Nigeria was a distinct legal entity from Meta Platforms Inc. and ruled that ARCON failed to produce sufficient evidence establishing that the Nigerian company owned, operated or controlled Facebook or Instagram.
According to the judge, mere assertions that Facebook Nigeria represents Meta’s interests in Nigeria are insufficient to impose liability for the alleged advertising infractions.
On the issue of fair hearing, the court held that ARCON violated Section 36 of the constitution by making allegations and simultaneously imposing a substantial financial sanction without first giving the company an opportunity to respond.
Bogoro further held that Section 57(4) of the ARCON Act expressly required the regulator to accord any alleged violator fair hearing before imposing any penalty.
The court also found that the alleged breaches relied upon by ARCON were criminal in nature because Section 34 of the ARCON Act provided that exposing advertisements in contravention of the Act constitutes an offence.
The judge held that since the Act stipulated that punishment might only follow “upon conviction,” ARCON lacked the authority to impose the N60 billion penalty through an administrative process.
He ruled that regardless of the description given to it by ARCON, the N60 billion demand was, in substance, a fine that only a court of competent jurisdiction could impose after due judicial proceedings.
Consequently, the court declared the Notice of Violation/Demand for Compliance unconstitutional, unlawful and issued ultra vires ARCON’s statutory powers.
Bogoro also declared that ARCON had no authority to impose fines for alleged violations of Sections 34(3) and 54, or any other criminal provisions of the ARCON Act.
The court accordingly set aside the notice and granted a perpetual injunction restraining ARCON, its officers, agents and privies from taking any further steps to enforce the October 21, 2024 notice against Facebook Nigeria.
The judgement is expected to have significant implications for the regulation of digital advertising in Nigeria, particularly by clarifying the limits of regulatory agencies’ enforcement powers and reaffirming that criminal sanctions can only be imposed through due judicial process.