Contributed By Sepúlveda y Díaz Noriega S.C. (Seplaw)
In Mexico, general product safety regulation is contained mainly in the following laws:
Specific product regulation can be found in special rules, for example, product safety regarding drugs or medicines is contained in the General Health Law and its rules, and for telecom related products, in the Federal Broadcasting and Telecommunications Act (FBTA).
The main regulator for product safety is the Federal Consumer Protection Agency (PROFECO). Other regulators include the Federal Commission for the Protection against Sanitary Risks (COFEPRIS), which regulates drug safety and related matters, and the Federal Institute of Telecommunications (IFT), which regulates telecom services and compliance with NOM of telecom equipment and products.
There is an obligation to immediately notify the regulator regarding any defective products and to commence corrective actions as soon as possible.
Corrective actions include recalling the product or abstaining from selling or distributing of the product.
However, there is no statute that provides specific corrective actions that must be taken by the supplier.
Any supplier, retailer, or manufacturer that knows of a defective product must notify the regulator immediately.
No specific timeframe is provided by Mexican regulation. This translates, in practice, into an obligation to notify as soon as possible.
Mexican regulation implies that the notification to the regulator has to comply with the formal requirements set forth in the FCPL, including evidence of legal representation or authority to act on behalf of the supplier.
Notwithstanding the above, if there is a matter of urgency, the filing can be done without a proper power of attorney (POA), and PROFECO may require such evidence at a later date.
The specific information for a defective product notice is not provided by a Mexican statute and will be determined by the regulator. Usually, the information required is the following:
For breach of product safety rules, PROFECO or the relevant regulator can impose the following penalties:
When determining the penalty to be imposed, the authorities must consider:
Administrative penalties are independent of civil liability and do not exclude the ability to file a claim from an affected consumer.
Criminal liability of a company for breach of product safety regulation is not considered in the Federal Criminal Code, unless the company was used as the vehicle for the commission of a fraud, for example, knowingly providing defective products to Mexican consumers to obtain profits. Personal criminal liability for executive officers can only be prosecuted if the involved officer knowingly initiated or continued with the provision of defective products that caused personal injury to a consumer.
Civil liability will occur if the breach of the product safety regulation, or of the Mexican Technical Standards, caused damages or lost profits to a consumer, and the breach was the direct cause of those damages or lost profits.
The main cause for action for product liability will be the breach of product safety regulation and damages caused by that breach; an action will generally be filed against the manufacturer, or the distributor/retailer, that knowingly marketed a defective product or failed to take corrective action.
The four main causes for an action regarding defective products and product liability are set out below.
This administrative proceeding can be filed before PROFECO for breach of consumer rights by an affected consumer.
This action will initiate a two-stage proceeding. First, a bona-fide conciliatory proceeding with PROFECO acting as a mediator. Both parties will be summoned to a conciliatory hearing, the supplier is required to produce a report on the alleged breach, to which it can attach documentary evidence for its defence. PROFECO is also entitled to request specific evidence for the hearing.
If no agreement is reached, then PROFECO will invite the parties for an optional arbitration proceeding. If either party declines, then the administrative proceeding will be closed. If the arbitration is accepted, then the second stage of the proceeding will be opened, in which PROFECO will act as an arbitrator. The rules for this arbitration are contained in the FCPL.
At the request of the consumer, PROFECO may issue a technical opinion regarding the breach of the consumers rights, which can be used as evidence of the wrongdoing at a Civil Court.
This administrative proceeding is optional for the consumer, who can file their claim directly before a civil court. If the administrative complaint is filed, then the statute of limitations for the civil action is stayed for the duration of this proceeding.
Defective Products Claim
The object of this claim is to obtain a reimbursement, or a price discount, derived from latent defects of a product before a civil or commercial court. This type of claim is seldom used due to its low economic return (reimbursement of legal costs are limited), opportunity costs (a Mexican proceeding will take about two years for a final resolution) and short statute of limitations, which is six months for a civil claim and 30 days for a commercial claim.
Civil Liability Claim
An affected consumer is entitled to file a civil liability claim derived from defective products, provided that they have suffered damages and/or lost profits, and that the defective products were the direct cause for those damages and/or lost profits. The plaintiff has the burden of proof for the wrongdoing of the defendant, for the damages and for the direct causal relation between them. The defendant will have the burden of proof for his or her defences, which can include adherence to the regulation, and gross negligence of the victim. Only actual damages can be claimed, so no risk or hypothetical damages can be demanded.
Class Action Litigation
A class-action can be initiated by a group of 30 or more affected consumers, by authorised regulators (PROFECO, COFEPRIS, IFT) or registered NGOs. Nevertheless, the plaintiff will still require evidencing of the relevant elements of each action (breach of product safety regulation or consumer laws or that the product was defective, and the damages being caused directly by the wrongdoing).
For individual claims, any affected consumer has legal standing to claim product liability but it will need to evidence, during the proceeding, that any damages were caused by a breach, as discussed in 2.1 Product Liability Causes of Action and Sources of Law.
For the administrative complaint, any affected consumer can file the complaint, but he or she must evidence that it purchased the product.
Finally, the following groups or entities have legal standing for class actions:
Class action certification is required before proper admission of the claim. This certification will evaluate if the claim has merits, the legal standing of the plaintiff, and the efficiency of the class action.
An administrative complaint must be filed within a year of the purchase of the product.
A defective products claim must be filed within six months of the reception of the product, or 30 days if the product is considered merchandise in a commercial claim.
A civil liability claim must be filed within two years following the date when the damage was caused; or ten years from the date of execution of an agreement if the damages and defective product were related to it.
The class actions must be filed within 36 months following the date when the damage was caused.
Mexican courts will have jurisdiction provided that the damage caused by the defective product happened in Mexico, if the product was acquired in Mexico, or if the parties agreed to Mexican jurisdiction in a related contract.
No pre-action procedures are required in Mexico.
The administrative complaint before PROFECO, for further discussion of which please refer to 2.1 Product Liability Causes of Action and Sources of Law, is an optional proceeding that does not preclude the right of the parties to file a civil or class action claim.
However, there are pre-trial proceedings for civil and commercial claims that are optional for the plaintiff, in which preliminary remedies can be obtained and/or preservation of evidence requested.
The courts, and any other authority, shall take all necessary measures and precautions to preserve and protect any information considered relevant, but this obligation is difficult to enforce as there are no specific rules for the preservation of documents.
A claimant can request pre-trial or preliminary (at the beginning of the proceeding) measures to secure the preservation of documents, but granting this request is at the discretion of the court.
Discovery does not exist in Mexico, evidence must be produced during the trial. Individuals or entities must comply with an order from the court to produce evidence – even confidential documentation or information – before the courts during the proceeding provided that such information is considered relevant for the court’s decision.
Expert evidence must be produced during the trial via a written report executed by the expert. Each party is entitled to an expert and if the expert reports conflict, then the court will appoint a third expert to settle the matter.
In civil claims, the burden of proof for breach of the safety rules and/or consumer laws, and for the damages is borne by the plaintiff. Nevertheless, this burden of proof is now less formal than in the past, and the court can request evidence from both parties to settle the matter, especially in class actions.
As discussed in 2.1 Product Liability Causes of Action and Sources of Law, the three main actions for product liability are the administrative complaint filed before the regulator (PROFECO); civil complaints filed before the civil courts, which can be state or federal depending on the case; and class actions, which must be filed before a Federal Civil Court.
In the administrative complaint, the administrative proceeding consists in two phases, the first is a conciliatory process in which PROFECO acts as a mediator (a supplier must appear at this process), and the second is an arbitration but for this phase to be opened, both parties must agree upon it. If one of the parties does not want to submit to the arbitration phase, then PROFECO can end the conciliatory phase and issue a technical opinion on the breach of the consumer rights, which needs to be enforced by a civil court.
PROFECO is also entitled to open an investigation against the supplier to impose fines and other administrative remedies and/or file a class action against the supplier.
Civil proceedings are decided by a federal or state judge, who can impose indemnification awards, as a rule, to compensate for damages produced by the defective product. There is only one case of a punitive damages sentence in Mexico, but it derived from a general tort claim and not from a specific product liability claim.
There is no appeal in the administrative complaint proceeding, however, the technical opinion issued by PROFECO can be challenged in an administrative annulment proceeding. Such an annulment proceeding can take up to two years to reach a final resolution.
Civil claims are subject to appeal, whose resolution takes from four to eight months. The resolution by the court of appeals can also be challenged in an Amparo proceeding (constitutional review), which will take an average of four to eight months to be resolved.
Minor product liability claims are not subject to appeal, they are, however, subject to a constitutional review of the claim through the Amparo proceeding.
In the administrative proceeding, the supplier can simply deny the product defects; however, PROFECO can open an investigation to review if the product complied with the Mexican Technical Standards. In any case, since the enforcement of civil liability will be before the civil courts, the supplier has the right to submit its defences and evidence before those courts.
In a civil claim, the main defences to oppose to a product liability claim are:
If there is compliance with the regulatory requirements then the product liability claim will be resolved in favour of the supplier/manufacturer, since it is required that the breach of consumer laws or product regulation is evidenced (evidence of the wrongdoing or breach of legal obligations).
Legal costs can be awarded to the successful party, but such costs are limited to a percentage of the amount claimed (4 – 8%), or to a legal tariff for undetermined amount claims.
Third-party funding is not prohibited and can be agreed freely by each party. Since reimbursement of legal costs is limited, the defeated party will not pay contingency fees or similar arrangements.
As explained in 2.1 Product Liability Causes of Action and Sources of Law and 2.2 Standing to Bring Product Liability Claims, class actions are available in Mexico, and they have been a growing trend for product liability since 2013 when they were properly regulated in the Federal Civil Proceedings Code.
The main product liability cases in Mexico are related to the automotive industry, for example, regarding recalls, chassis rust, or defective airbags.
However, these are ongoing proceedings that have not yet been resolved in the federal courts.
Class action litigation has been growing in recent years since its inclusion in the Federal Civil Proceedings Code.
In addition, civil litigation has been growing since 2011, when a change in the procedural laws gave greater freedom to the courts to award more substantial quantities as indemnification; this has been reflected in more judicial precedents where the award was not limited to determined and plaintiff-evidenced damages, but also including moral damages as a just indemnification.
There is pending reform as a new national code for civil procedure was ordered in 2017, but it is yet to be enacted. This will have a great impact on general litigation, and product liability, since a change in procedural rules in, for example, the burden of proof may drastically change the litigation scenario in Mexico.
Mexico, like many countries, has been struck hard by the COVID-19 pandemic. This has resulted in scenarios where all justice-related matters, including product liability matters, have been delayed since the courts are closed and are only receiving urgent matters. PROFECO has remained open but with limited capacity.
Mexican authorities have been unco-ordinated at best, and have not provided any sort of tax incentives or measures to mitigate the effects of COVID-19. Economic supply chains have also been hit hard, but businesses are now slowly reopening. As such, hard times ahead are expected, many businesses have closed, and it is not yet clear which ones will be able to reopen.
Furthermore, a surge in dispute resolution matters is anticipated, because many agreements have been breached due to the pandemic; nevertheless, Mexican business and entrepreneurs have experience in handling crises, and sooner or later, Mexico’s economy will be fully functional again.