CONTRIBUTED BY CYRIL SAMUEL DANDISON
INTRODUCTION
The widespread occurrence of information asymmetry is a significant rationale for the regulation of consumer transactions. Advocates of information economics contend that while market information is exceptionally valuable, it remains imperfect.[1] Their theoretical framework posits that one contracting party, typically the seller, usually possesses more information than the consumer. In the absence of appropriate regulations, sellers have insufficient incentives to disclose critical information to consumers. Consequently, consumers are often unable to make decisions that accurately reflect their genuine preferences, thus compromising their financial interests.[2]
To address this issue of consumer rights in Nigeria, the Federal Competition and Consumer Protection Act (FCCPA) and other relevant laws like the Constitution of the Federal Republic of Nigeria[3] play a crucial role in propagating consumer rights, particularly the right to information in e-marketing. The FCCPA outlines key consumer rights such as the right to safety, the right to information, the right to choose, and the right to be heard. Additionally, the United Nations Guidelines on Consumer Protection (UNGCP) expand these rights to include the right to a healthy environment, the right to redress, the right to consumer education, and the right to the satisfaction of basic needs.[4]
In the realm of electronic commerce (e-commerce), information disclosure requirements are the most commonly employed method to protect consumers’ economic interests, though other measures exist.[5] This article focuses on the necessity of information disclosure in safeguarding consumer rights, detailing its application in customer transactions.
WHAT IS ONLINE–CONSUMER AND THE RATIONALE FOR ONLINE-CONSUMER PROTECTION?
An online consumer is considered as any person who conducts business transactions over the Internet or other computer networks.[6] There is no substantial difference between an online consumer and a conventional consumer. The only difference is the medium through which they transact.[7] While traditional customers use traditional markets, online consumers utilize digital platforms such as the Internet for their transactions.[8]
Consumers engaging in e-commerce transactions with online vendors do so without physical interaction or the opportunity to inspect goods prior to purchase, necessitating protective measures for their benefit.[9]
Consumer protection entails safeguarding consumer rights in the provision of goods and services and protecting the public against unfair market practices. Within economic transactions, this concept encompasses strategies aimed at ensuring fair treatment of consumers.[10] It is closely linked to consumer rights, which were notably categorized by the Federal Competition and Consumer Protection Act (FCCPA)[11] These rights include the right to information for making informed decisions, the right to choose from a variety of goods, the right to protection from harmful products, and the right to be heard, which entails considering public welfare in government policymaking regarding safety and product improvement.[12]
CHALLENGES OF E- E-MARKETING FACED BY ONLINE CONSUMERS
The expansion of the Internet and electronic commerce has created numerous legal and economic challenges, particularly for consumers. Firstly, one significant challenge is the high vulnerability of consumers in e-commerce.[13] This is primarily because consumers have limited information about online goods or transactions (Information Asymmetry).[14] Where there is an unequal distribution of information between sellers and buyers, this imbalance results in the consumers lacking relevant information about the products to be purchased. Therefore, there is a need to enable consumers to make informed decisions, protect their financial interests, and balance the bargaining power between them and sellers by enforcing fair trade practices.[15]
Secondly, the level of trust and confidence in e-commerce are often compromised by the hazardous behaviour of certain online sellers, this includes; fraud and impersonation.[16] Thirdly, are the unnegotiated contracts, where online sellers use standard contract forms that disproportionately favour them, reducing the consumers’ bargaining power and increasing their liabilities.[17]
To address these challenges, organizations such as the Organisation for Economic Co-operation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD) advocate for robust legal and institutional frameworks. These frameworks are essential to eliminate these problems and ensure that online consumers enjoy the rights as identified by President Kennedy and several others, without interference from online sellers.[18] Besides, online consumers are affected by practically every governmental and private economic decision, yet they are the only significant group whose opinions are frequently ignored. As a result, adequate rights must be accorded to them, as well as adequate means for protecting and enforcing such rights.[19]
NATURE AND JUSTIFICATION OF THE USE OF INFORMATION DISCLOSURE REQUIREMENT
Recognizing the harmful impact of information asymmetry on consumers and the need to balance the knowledge gap between consumers and sellers, many jurisdictions, including Nigeria, have enacted laws requiring sellers to disclose information. These laws prohibit misleading information and mandate accurate disclosures or warnings to consumers, a regulatory approach for consumer contracts has been in use since the 1970s.[20]
Whitford notes that common law misrepresentation can require contractual information disclosure.[21] Courts have sometimes ruled that a party cannot rely on an exclusion clause to avoid liability unless the term was clearly communicated beforehand. Examples of relevant legislation include the Sale of Goods Act, the Hire Purchase Act 1965, and several others. However, these laws often do not cover e-commerce. Recent consumer protection laws in places like the United Kingdom include detailed information disclosure requirements for distant transactions, such as online sales.[22]
Information disclosure is the least intrusive consumer protection measure, avoiding significant interference with the supplier’s choices and preserving access to varied products. Information disclosure requirements are designed to enhance transparency, protect consumer autonomy, and contribute to market efficiency. [23]They ensure that parties provide informed consent and have a mutual understanding of the contract’s specific terms and subject matter.[24]
Information disclosure requirements aim to transfer the duty of care to consumers by providing essential information, thus granting them autonomy and responsibility for their purchasing decisions.[25] This method addresses information asymmetry without distorting market prices, quality, or contract terms. Proponents argue that comprehensive disclosure deters harmful consumer choices and promotes careful shopping. However, critics highlight that many consumers do not even read or understand the provided information which leads to excessive costs.[26]
Despite these criticisms, information disclosure offers benefits such as enhancing accountability, deterring seller misconduct, empowering intermediaries and watchdogs, and aiding government enforcement. It also improves consumer autonomy and choice. Proponents argue that, although not perfect, information disclosure should be used alongside direct regulatory techniques, especially in electronic transactions where the impersonal nature and information asymmetry are heightened, increasing consumer vulnerability to deceptive practices.[27]
STATUTORY REQUIREMENT OF INFORMATION DISCLOSURE FOR ONLINE – CONSUMERS
Prior to now, there has not been any legislative framework to regulate sellers on the need for information disclosure to consumers, particularly online consumers. With the advent of the Federal Competition and Consumer Protection (FCCP) Act 2019,[28] it introduces comprehensive provisions to protect consumers in e-commerce, emphasizing the importance of accurate and efficient information disclosure for market functionality.
- Information about the Seller
Under Section 119(a) and (b) of the FCCPA, 2019[29], sellers are required to provide a written sales record for each transaction, which must include the supplier’s full name or registered business name and the address of the premises where the goods are sold or supplied. However, this section does not mandate the inclusion of contact details such as telephone numbers or email addresses, which are essential for distance communication between the seller and consumer.
- Information about the Product
Section 117 of the FCCPA, 2019[30] deals with product labelling and trade description. Although the section does not explicitly detail the required information, it implies the need for clear product descriptions. Recommendations for compliance suggest that product descriptions should include details such as size, colour, manufacturer, country of origin, condition (e.g., new, used, refurbished), and any necessary components for functionality.
- Information about the Transaction
Section 116 of the FCCPA, 2019[31] focuses on the disclosure of the price of goods and services. It requires sellers to display the price in the currency of the Federal Republic of Nigeria and ensure that consumers are not charged more than the displayed price. If multiple prices are displayed, consumers should pay the lower or lowest price. Additionally, Section 116(2) of the Act[32] explains how price disclosure should be achieved, to ensure transparency in cost representation. This includes; the total price, payment methods, delivery details, return policies, privacy policies, and consumer rights.
- Communication and Presentation of Consumer Information
Section 115 of the FCCPA, 2019[33] establishes the right to plain and understandable language. It stipulates that any notice, document, or visual representation provided to consumers must be in plain and understandable language. The information should be presented clearly, enabling an ordinary consumer to understand without undue effort. Factors to determine plain language include context, organization, vocabulary, and sentence structure.
CONCLUSION
E-commerce transactions are characterized by the lack of personal interaction and the inability to physically inspect products, making consumers reliant on the information provided by sellers. Therefore, the focus of consumer protection in e-commerce should shift from debating the necessity of information disclosure to enhancing its effectiveness. Regulations should not only mandate the provision of relevant information but also ensure it is presented in a clear, attractive, and comprehensible manner. This approach will help prevent information overload, encourage consumers to utilize the provided information, and facilitate comparisons by consumers and third parties such as reviewers and consumer groups.
- V. Williams, Counter Speculation, Auctions, and Competitive Sealed Tenders, 16(1) Journal of Finance (1961) 8-37 ↑
- J. E. Stiglitz, The Contribution of Economics of Information to Twentieth Century Economics, 115 (4) Quarterly Journal of Economics (2000) 1441-1478. ↑
- Cap C23 Laws of Federation of Nigeria.SS ↑
- Supra Stiglitz @ 2 ↑
- Ibid ↑
- N. Amin, R. M. Nor, “Online shopping in Malaysia: Legal Protection for E-consumers” (2013) 5 European Journal of Business and Management, 79–87. ↑
- Ibid ↑
- Ogaku Kalu, “Legal framework for the protection of consumers in the context of electronic commerce”, Dissertation submitted to the University of Lagos, Nigeria, 2019. ↑
- Ibid ↑
- F.N Monye, Law of Consumer Protection (Spectrum Publishers, 2003) 19 ↑
- Federal Competition and Consumer Protection (FCCP) Act 2019. ↑
- Venus C. Ibarra, Charito D. Revilla, “Consumers’ Awareness On Their Eight Basic Rights: A Comparative Study of Filipinos In The Philippines And Guam” (2006) 7 International Journal of Management and Marketing Research 65-78 ↑
- Ibidapo-Obe T. “Online Consumer Protection in E-Commerce Transactions in Nigeria: An Analysis” Available at: https://ssrn.com/abstract=2683927 accessed 20th May 2024 ↑
- Ahmad Alhusban ‘The Importance of Consumer Protection for the Development of Electronic Commerce: The Need for Reform in Jordan’ Pg 24 Available at https://researchportal.port.ac.uk/portal/files/5767501/Thesis_Oct_2014_last.pdf accessed 19th May, 2023. ↑
- Zhiao Liu, Research on Information Asymmetry in C2C E-commerce: Based on the case of Alibaba, Available at: https://www.researchgate.net/publication/341201132_Research_on_Information_Asymmetry_in_C2C_E- Commerce_Based_on_the_Case_of_Alibaba accessed 17th May, 2023. ↑
- Ibid ↑
- Ibid ↑
- Para 1, OECD, “E-commerce Recommendation” Available at: <https://www.oecd.org/sti/consumer/ECommerce-Recommendation-2016.pdf>. accessed 19th May, 2023. ↑
- United Nations Conference on Trade and Development (UNCTAD), Consumer Protection in Electronic Commerce, Second Session of the Trade and Development Board, United nations Publications, (2017) ↑
- J. Hamilton and L. E. Gillies, The Impact of E-commerce Developments on Consumer Welfare – Information Disclosure Regimes, 11(4) Journal of Financial Regulation & Compliance (2003) 329-348 at 332 ↑
- W. C. Whitford, “The Function of Disclosure Regulation in Consumer Transactions” 1973(2) Wisconsin Law Review (1973) 400-470 ↑
- Ibid ↑
- G. Howells and T. Wilhelmsson, “EC and US Approaches to Consumer Protection-Should the Gap Be Bridged?” in Yearbook of European Law 1997. Oxford University Press (1999) 207-267. ↑
- M.B.M. Loos, N. Helberger, L. Guibault, C. Mak and L. Pessers, “Digital Content Contracts for Consumers” Centre for the Study of European Contract Law Working Paper Series No. 2012-05 (2012). ↑
- Ibid ↑
- Omri Ben-Shahar and Carl Schneider, More than you wanted to Know: the Failure of Mandated Disclosure, Princeton University Press (2014). ↑
- Ibid ↑
- Federal Competition and Consumer Protection (FCCP) Act 2019 ↑
- Ibid ↑
- Ibid ↑
- Ibid ↑
- Ibid ↑
- Ibid ↑