The Legality Of ‘No Refund Policies’ Adopted By Online Vendors In Nigeria

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Franklin Okoro V2
Franklin Okoro
Contributor

 

 

 

 

 

  1. Introduction

The emergence of modern technology has transitioned the manual operation of various activities and sectors to an electronic and digital format, thereby rationalising and prioritising the convenience of the average person’s day-to-day lifestyle. The acceptability rate of modern technology has recorded an all-time high, as the basic needs of man in terms of goods and services are made easily accessible, seamless and within reach.

Over the years, the providers of these goods and services have adjusted and engaged with this technological advancement by placing such goods and services on digital and social media platforms to reach a wider audience. Over 4.26 billion people have been recorded to use social media worldwide as of 2021, and a number projected to increase to almost six billion in 2027.[1]

In Nigeria today, and the world at large, business owners and providers have a preference for and migrated to the electronic method of marketing, advertising, and sale of their goods and services to potential customers and clients. Such business owners or vendors consider certain benefits and factors during the migration to include the low start-up cost, the low marketing cost, flexibility, preference of the consumer for a digital/electronic store than a physical store and easier and speedy financial transactions.[2] Items of value can easily be found for sale on social media platforms such as Instagram, Facebook, Twitter, Snapchat etc., which are exploited for marketing and advertising gains to reach a targeted wider audience and assure potential customers of a safe nationwide or international delivery of purchased goods and services.

Notably, another advantage of online business is the seamless payment process between a vendor and customer as vendors employ the use of digital payment methods such as Remita, Stripe, Flutterwave etc., which allow vendors receive payments from their customers through these platforms directly to their bank accounts. This process saves a lot of time and grants access to international customers/consumers by enabling foreign customers to validate their purchase of the vendor’s products in their local currencies or foreign exchange equivalents.

Also, vendors make use of direct bank transfers as an alternative/optional payment method. The vendors share their bank account details with potential customers and the customers are required to provide a receipt or evidence of payment. Upon confirming receipt of the funds, the customers’ orders are processed by the vendor and delivered to the customer.

Unlike what is obtainable in a brick-and-mortar store where products that are purchased by the customer may be returned and the customer refunded with only a certain percentage of money paid, most online vendors especially those that utilise social media platforms for their services usually stipulate a ‘no refund policy’. Customers are therefore often forced to likely purchase and contend with substandard products because the vendors usually have the upper hand having received payment already.

This article seeks to assess the legality of ‘no refund policies’ adopted by online vendors in Nigeria as it falls within the purview of the regulation of consumer protection in commercial transactions.

  1. Legal Guidelines Regulating ‘No Refund Policy’ Between a Vendor and a Consumer in Nigeria

The foremost applicable law that generally addresses consumer protection in Nigeria is the Federal Competition and Consumer Protection Act of Nigeria (FCCPA) 2018.[3] Consumer protection is a central principle founded upon the basis that consumers are usually the weaker parties in commercial transactions, therefore, the law should protect them.[4]

Black’s Law Dictionary[5] defines a consumer as “one who consumes, individuals who purchase, use, maintain and dispose of products and services. A member of that broad class of people who are affected by pricing policies, financing practices, quality of goods and services, credit reporting, debt collection and other trade practices for which State and Federal consumer protection laws are enacted”.

In Nigeria, the Federal Competition and Consumer Protection Act (FCCPA) 2018 provides for the respective and enforceable rights of a consumer as follows:

  • Right to be given information in a plain and understandable language;[6]
  • Right to disclosure of the prices of goods and services;[7]
  • Right to adequate trade description and to have products labelled;[8]
  • Right to disclosure of second hand or reconditioned goods;[9]
  • Right to adequate information and sales records of every transaction;[10]
  • Right to not be given a condition before purchase and the right to select the supplier;[11]
  • Right to cancel reservations, bookings or orders made in advance;[12]
  • Right to examine or choose goods before purchase;[13]
  • Right to return goods;[14]
  • Right to fair dealings;[15]
  • Right against goods with false, misleading, and deceptive representations;[16]
  • Rights against unfair prices and contract terms;[17]
  • Rights pertaining to the quality and safety of goods and services;[18]
  • Right to safe and quality goods.[19]

Regarding the legality of ‘no refund policies’ adopted by online vendors in Nigeria, section 122 of the Federal Competition and Consumer Protection Act (FCCPA) 2018 contemplates and puts into perspective whether a consumer is entitled to a refund upon proof of dissatisfaction of quality of product and/or any other lawful basis for rejection of such product.

According to section 122 of the FCCPA, it states that:

“In addition to the consumer’s right to return unsafe or defective goods under any law or enactment, the consumer may return goods to the supplier and receive a full refund of any consideration paid for those goods, if the supplier has delivered-

(a) goods intended to satisfy a particular purpose communicated to the supplier and within a reasonable time after delivery to the consumer, the goods have been found to be unsuitable for that particular purpose; or

(b) goods that the consumer did not have an opportunity to examine before delivery, and the consumer has rejected delivery of the goods within a reasonable time after delivery to the consumer for the reason that the goods do not correspond with description, sample or that they are not of the type and quality reasonably contemplated in the sales agreement.”

This section primarily recognises the consumer’s right to return unsafe or defective goods under any other law or enactment that guarantees such right and in addition, makes provision for the same right which will be enforceable by a dissatisfied consumer upon the proof or fulfilment of any of the two conditions set out in paragraphs (a) or (b) of section 122.

The fundamental prerequisite for a consumer/customer to obtain refund from a vendor or supplier before fulfilling any of the two conditions provided in section 122 is the actual return of goods to the supplier or vendor. Section 122 of the FCCPA does not provide for the condition/state of such returned goods. It may however, be presumed that such goods should be in a good condition as it was at the period of purchase except for any evidence of deficiency that is prompting such return and demand for refund.

Where the above prerequisite is fulfilled, the consumer or customer is required to further prove either of the following conditions:

  • That the supplier has delivered goods intended to satisfy a particular purpose communicated to the supplier and within a reasonable time after delivery to the consumer, the goods have been found to be unsuitable for that particular purpose. Hence, the right to return unsatisfactory goods and right to a refund can be raised where the goods delivered are not fit for the purpose for which they were purchased, and such purpose had been initially disclosed to the vendor. OR
  • That the supplier has delivered goods that the consumer did not have an opportunity to examine before delivery, and the consumer has rejected delivery of the goods within a reasonable time after delivery to the consumer for the reason that the goods do not correspond with description, or sample or that they are not of the type and quality reasonably contemplated in the sales agreement or transactions. Hence, the right to return unsatisfactory goods and right to a refund can be raised where a consumer or customer has not had the opportunity to inspect goods before its delivery. In the instance where the goods do not match a sample or description given, the consumer or customer has the legal right to return the goods and get a full refund.

Any vendor who indicates and adopts a no refund policy at the time of sale or during the course of business with a consumer or customer is likely to be held liable and in breach of section 122 of the FCCPA including any other consumer protection regulatory framework or laws.

Based on the principles established by section 122 of the FCCPA, section 127 of the FCCPA further provides an extension of the right of a consumer against unfair, unjust, and unreasonable contract terms, in which a no refund policy will qualify under the FCCPA.

Section 127 (1) (c) of the FCCPA states that

“An undertaking or vendor shall not require a consumer, or other person to whom any goods or services are supplied at the direction of the consumer, to waive any rights, assume any obligation or waive any liability of the undertaking, on terms that are unfair, unreasonable, or unjust or impose any term as a condition of entering into a transaction.”

A policy that expressly or impliedly states that refunds cannot be given are unconscionable against a dissatisfied consumer and qualifies as an unfair condition of entry into a commercial transaction.

Section 127 (2) (a) and (b) of the FCCPA provide for the instances where a transaction or agreement, a term or condition of a transaction or agreement, or a notice to which a term or condition is purportedly subject, will be considered as unfair, unreasonable, or unjust. Such instances are as follows:

(a) if it is excessively one-sided in favour of any person other than the consumer or other person to whom goods or services are to be supplied;

(b) if the terms of the transaction or agreement are so adverse to the consumer as to be inequitable.

A no refund policy is designed to unduly favour only the vendor at the expense of the consumer and obstruct an unsatisfied consumer’s right to request a refund upon return of defective product which makes such policy adverse and prejudicial to the consumer on the equitable scale of business between the parties.

Section 129 of the FCCPA proceeds to prohibit certain agreements, terms and conditions which are inconsistent and defeats the purpose of the FCCPA. One of which are agreements, terms and conditions which directly or indirectly purports to waive or deprive a consumer of a right to return defective goods, or any right set out in the FCCPA.[20]

  1. Recommendation and Conclusion

Despite the above-cited legal provisions prohibiting no refund policies, many online vendors continue to flout the law by prominently displaying these policies on their social media platforms. Section 146 of the FCCPA makes available dispute resolution options to the consumer where such consumer may seek to enforce any right under the FCCPA which includes:

  • referring or addressing the matter directly with the undertaking or vendor that supplied the goods or services; or
  • refer the matter to the applicable industry sector regulator with jurisdiction where the undertaking or vendor is subject to the jurisdiction of the regulator; or
  • file a complaint directly with the Federal Competition and Consumer Protection Commission (the Commission).[21]

Also, an aggrieved consumer can directly approach a court with the appropriate jurisdiction to seek redress.[22]

If any online or digital vendor continues to violate the provisions of the FCCPA and other related laws against posting ‘no refund policy’ on their social media pages, they are likely to face legal consequences and sanctions where an aggrieved consumer lodges a report with either applicable industry sector regulator or the Commission or institutes an action in a court of competent jurisdiction. The following consequences or penalties may be administered on such violating online vendor: (i) fines, (ii) award of damages resulting from the violation, (iii) closure of the vendor’s business by the authorities, (iv) damage to the vendor’s reputation and result in negative reviews and reduced sales, (v) online vendors risk losing the trust of their customers by refusing to provide refunds, who may be less likely to do business with them in the future.

In conclusion, the legality of ‘no refund policies’ adopted by online vendors in Nigeria depends on various factors, such as the nature of the commercial transaction, the terms of the agreement between the parties, and the relevant laws and regulations. While some online businesses may choose to adopt a strict no refund policy to protect themselves from fraud and losses, they should also be aware of their legal obligations to their customers.

Considerations may however be given in certain circumstances where a no refund policy may be justified, they include:

  • where a product or service has been customized or personalized to meet the specific needs or preferences of the customer, it may be difficult to resell it to another customer. In such cases, a no-refund policy may be justified;
  • where the product or service is a digital product, such as software or a downloadable file, it may be difficult to verify whether the product has been used or copied. In such cases, a no-refund policy may be justified;
  • where the customer has used the product or service in an unauthorized manner or has abused it, then the seller or vendor may have grounds to refuse a refund upon return of such product;
  • where the product or service is perishable or time sensitive. In this instance, the product or service may be said to be already utilised by the customer, making it difficult to return the product in its original form and as purchased.

Therefore, it is advisable for online businesses to be transparent in their policies and communicate clearly with their customers about their refund policy. They should also seek legal advice to ensure that their policies comply with applicable laws and regulations in Nigeria. Ultimately, a fair and reasonable refund policy can help to build trust and loyalty with customers, which can be invaluable for the success of any business in Nigeria.

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For further information on this article and area of law, please contact Franklin Okoro at S.P. A. Ajibade & Co., Lagos by

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[1]     S. Dixon, (2023), “Number of global social network users 2017-2027”. Available at https://www.statista.com/statistics/278414/number-of-worldwide-social-network-users/#:~:text=How%20many%20people%20use%20social,almost%20six%20billion%20in%202027. accessed 19th March 2023.

[2]     Forward Al (2021), ‘The Many Advantages of Doing Online Business’ available at https://www.forwardai.com/knowledge-center/blog/forwardai-predict/the-many-advantages-of-doing-online-business/>, accessed 19th March 2023.

[3]     Federal Republic of Nigeria, Official Gazette, Lagos, 1st February 2019, No. 18, Vol. 16.

[4]   Suhail Nathani, (2017), “The interplay between consumer protection and competition law in India”  https://www.researchgate.net/publication/320125723_The_interplay_between_consumer_protecton_and_competition_law_in_India accessed 19th March 2023.

[5]     Bryan A. Garner, Black’s Law Dictionary (2009) (Thomson Reuters, 9th ed.).

[6]    Section 114 of the Federal Competition and Consumer Protection Act, 2018.

[7]    Section 115 of the Federal Competition and Consumer Protection Act, 2018.

[8]    Section 116 of the Federal Competition and Consumer Protection Act, 2018.

[9]   Section 117 of the Federal Competition and Consumer Protection Act, 2018.

[10]   Section 118 of the Federal Competition and Consumer Protection Act, 2018.

[11]   Section 119 of the Federal Competition and Consumer Protection Act, 2018.

[12]   Section 120 of the Federal Competition and Consumer Protection Act, 2018.

[13]   Section 121 of the Federal Competition and Consumer Protection Act, 2018.

[14]   Section 122 of the Federal Competition and Consumer Protection Act, 2018.

[15]   Section 124 of the Federal Competition and Consumer Protection Act, 2018.

[16]   Section 125 of the Federal Competition and Consumer Protection Act, 2018.

[17]   Section 127 of the Federal Competition and Consumer Protection Act, 2018.

[18]    Section 130 of the Federal Competition and Consumer Protection Act, 2018.

[19]   Section 131 of the Federal Competition and Consumer Protection Act, 2018.

[20]   Section 129(1)(b)(i) of the Federal Competition and Consumer Protection Act, 2018.

[21]   Section 146(1)(a)(b)(c) of the Federal Competition and Consumer Protection Act, 2018.

[22]   Section 146(2) of the Federal Competition and Consumer Protection Act, 2018.

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