Do you remember that class mate of yours in college who seemed to be always up to the demands of school work? Among other ‘effico’ qualities that s/he must have had, s/he was the ‘go to’ classmate whenever you needed to be reminded of a point that the teacher had made earlier on in class because surely, s/he must have jotted down every single point. And if you wanted to update your class note, you’d be sure to recourse to him/her although you just might be the 5th in-line among your class mates who had already booked to use his class note for the same purpose.
While you may have easily scaled through exams back then just like this ‘effico’ classmate, if you were to be entrepreneurs back then, it wouldn’t have been quite the same. This is because part of being a successful entrepreneur is that you always maintain a competitive edge over your peers by remaining ahead of times. This includes being up-to-date with the latest trend in his/her industry practice.
THE E-COMMERCE TREND.
Lately, smart entrepreneurs in Nigeria have started to adopt a relatively new business model which has tremendous advantages and growth potentials. This new business model is the E-Commerce or Online business model. While some have adopted E-Commerce as their sole business model, others have adopted it as part of their business model.
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 a business. My aim in this article is to brief entrepreneurs who may want to adopt the E-Commerce business model, on the legal considerations for an E-Commerce start-up 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 the 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.
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 in use by others.
Although a quick search on https://godaddy.com/will quickly reveal whether a name is available for use on the internet or not.However, you will still need to make sure that the name is not already registered as a business name elsewhere other than the internet. A search at the CAC or other appropriate quarters will be an extra layer of protective measure on your part.
3. WEBSITE DEVELOPMENT:
An E-Commerce 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 that such things already belong to another person.
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 boundaries between you two. One of the reasons why it is important to create these boundaries is because as an Entrepreneur, you do not want the web developer or a third party to leverage on insider information of your business niche obtained while developing your website to compete against you.
4. DATA PRIVACY:
As an E-Commerce Entrepreneur, a good part of your business transactions would require that your customers disclose sensitive private data about themselves over the internet. Sensitive private information could be; credit card and bank account details, name, address employment status, age, marital status, family and ethnic background of an individual.
Because the internet is a breeding zone for hackers who usually exploit this information to the detriment of the people that disclose it, it becomes very necessary that you protect your customers from these potential hackers.
The NITDA Draft Guideline on Data Protection and the Cyber Crime Act, 2015 contains rules and regulations that an E-Commerce should follow. It is an offence to breach these rules.
5. CREDIT CARD TRANSACTIONS
It is common for E-Commerce owners to integrate a payment gateway in their websites through which customers pay for goods bought or services rendered online by them. 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 merchant account (e.g. GTpay, Pay pal, E-transact)
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) guideline. 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.
With the surge in E-Commerce related activities, it is now easier for one’s trademark rights to be stolen or infringed upon by others. By registering your trademarks, you will have exclusive right of use and can institute a legal action against any body 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.
7. ONLINE ADVERTISING RULES
Advertising of goods & 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 wish not to receive 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 owner whose business is targeted to the Nigerian market and who derives his/her 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 or a neglect of duty owed to your customers (e.g. duty to ensure customers’ data protection) can be very unpalatable. It may attract unnecessary legal costs to 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.
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