Product Liability & Safety 2020

Last Updated June 24, 2020

Brazil

Law and Practice

Authors



Pinheiro Neto Advogados was one of the first full-service Brazilian law firms to have a consumer relations practice in the 1980s. With a specialised team dedicated exclusively to the subject, it advises on sophisticated multidisciplinary litigation cases, and offers preventive counselling on matters of strategic interest or high financial impact for clients, including the negotiation of settlements. The consumer relations practice is actively involved in high-profile, complex cases, for a wide-ranging client base, including automobile manufacturing, pharmaceuticals, insurance and the food industry. It offers legal counselling and assistance in administrative proceedings before the consumer protection bodies. As a traditional and well-respected practice, the team counsels in matters of product liability litigation and is constantly involved in cross-border discussions and litigation involving product liability (eg, tobacco litigation, Vioxx litigation and PIP breast implants litigation).

General Product Safety Legislation

In Brazil, the main laws and regulations of the product safety legal regime are the following.

  • The Brazilian Consumer Protection Code, enacted in 1990, which governs all legal aspects of consumer relations, including the safety requirements with which products must comply, and which establishes rules:
    1. to respect the dignity, health and safety of consumers;
    2. to safeguard their economic interests;
    3. to improve the quality of their lives; and
    4. to transfer and harmonise consumer relations..
  • Decree No 2181/1997 establishing arrangements for the organisation of the National System of Consumer Protection (SNDC) and establishing general rules for application of administrative sanctions related to the Brazilian Consumer Protection Code.
  • Ministry of Justice Ordinance No 618/2019, which regulates the procedure for recall of all kinds of products.
  • Law 8,137/1990, which establishes crimes against consumer relations and respective sanctions.

Sector-Specific Product Safety Legislation

  • The Brazilian Consumer Protection Code and Ordinance No 618/2019 apply to all consumer relations. Apart from these, there are some specific safety regulations according to the kind of product involved. Some examples are:
  • Board Resolution No 55/2005, of the Brazilian Health Surveillance Agency (ANVISA), applicable to medicines;
  • Board Resolution No 23/2012, of ANVISA, applicable to medical products/devices (other than medicines);
  • Board Resolution No 24/2015, also of ANVISA, which regulates the collection of food and packaging or any other materials in contact with food, among others; and
  • General Telecommunications Law (Law No 9,472/1997), which prohibits the use of radiofrequency emitting equipment without the certification of the Brazilian Telecommunications Agency (ANATEL).

Existence of double regulation sometimes leads to a legal antinomy. For example, currently Ordinance No 619/2019 provides that the supplier must send the recall notice to Brazil's main product safety authority, the Department of Consumer Protection and Defence (DPDC) and include the information on the model of the consumer risk warning. ANVISA's RDC No 55/2005, on the other hand, provides that the consumer warning message must be submitted to prior approval by ANVISA.

General Regulators

The main regulator for product safety in Brazil is the Department of Consumer Protection and Defence (DPDC), responsible for (i) examining claims involving relevant general and national interests, (ii) applying administrative penalties, and (iii) undertaking preliminary investigations and administrative proceedings, among other measures.

The federal government, states and/or Federal District and cities, may also have a Consumer Protection Office (PROCON), which has the power to carry out administrative proceedings and apply administrative penalties to suppliers within the scope of their jurisdiction.

Sector-Specific Regulators

In addition, there are various rule-making and regulatory authorities with the power to establish standards to be complied with by suppliers. Each sector has its own regulatory authorities, and we list some examples below.

  • The Brazilian Health Surveillance Agency (ANVISA), responsible for promoting the health of the population by means of sanitary control of several products, such as medicines, food, and cosmetics – it has the power to (i) establish rules and standards on the limits of contaminants, intoxicants, disinfectants, heavy metals and other substances that may cause damage to health; and also (ii) prohibit the manufacture, distribution and storage of products that may cause health damage.
  • The Brazilian Telecommunications Agency (ANATEL), responsible for supervising the provision of telecommunication services, applying penalties, and issuing rules to be complied with by the suppliers.
  • The Brazilian Civil Aviation Agency (ANAC), responsible for supervising civil aviation activities in Brazil, specifically the economic aspects and technical safety of the sector.
  • The Brazilian Agency of Oil, Natural Gas and Biofuels (ANP), responsible for supervising activities that involve oil, natural gas and biofuel.
  • The Brazilian Electric Power Agency (ANEEL), which aims to regulate the production, transmission and marketing of electric power, in accordance with the policies and guidelines of the federal government.
  • The Brazilian Agency of Supplementary Health (ANS), which regulates the market for private health plans.
  • The National Institute of Metrology, Quality and Technology (INMETRO), responsible for implementing national metrology and quality policies and for assessing and supervising compliance with technical and legal standards as regards measurement units, measurement methods, materialised measures, measuring instruments and pre-measured products.
  • The Brazilian Association of Technical Standards (ABNT), responsible for drafting technical standards for the production, marketing and use of goods and services in a competitive and sustainable way on domestic and foreign markets, contributing to scientific and technological development, environmental protection, and consumer protection.

Note that compliance with normative standards established by the referred bodies is mandatory by law, pursuant to Article 39, VIII of the Brazilian Consumer Protection Code.

According to the Brazilian Consumer Protection Code, products and services placed on the consumer market cannot pose a health or safety hazard to consumers.

If a supplier only acknowledges the harmful and/or hazardous nature of the product or service after it has been placed on the consumer market, it will be responsible for a recall campaign immediately after the defect is discovered in order to correct the defect or replace the product.

The Brazilian Consumer Protection Code and Ministry of Justice Ordinance No 618/2019 establish several formal requirements that suppliers must observe during a recall procedure. The main formal requirements are immediate notice to (i) the DPDC; and (ii) the pertinent rule-making or regulatory body. Besides, that supplier is responsible for the advertising campaign and the follow-up reports.

With regard to the advertising campaign, the law establishes that, besides informing the relevant authorities, suppliers should immediately make consumers aware of the hazardous nature of the product by means of an “advertising” campaign broadcast through radio, television, print media or the internet (YouTube, podcasts or others), including the supplier's website, at the supplier's expenses.

The advertisements must contain very specific information about the product, its defect, and its possible effects, among other requirements. The size of the advertising campaign should be based on the number of consumers affected by the recall and the supplier may choose the means of communication in accordance with the consumers’ profile, justifying this to the DPDC and aiming to reach consumers and running an effective recall campaign.

In turn, the follow-up reports must be sent once every four months to the DPDC. The reports must contain information on the number of products collected from the market so the authority may analyse the effectiveness of the procedure.

Current regulation does not specify a risk level for applicable corrective actions to be taken. Even if there is a remote risk to consumer health, the supplier will be responsible for commencing corrective actions and running mandatory advertising.

The above-mentioned regulation is applicable to all products, but ANVISA also has specific rules on recall of medicines and food (Board Resolutions No 55/2005 and No 24/2015). In this regard, it is also mandatory to notify ANVISA if the supplier acknowledges the harmful and/or hazardous nature of medicines or food.

In Brazil, the obligation to notify the authorities in respect of product safety issues is risk-based. Thus, should a defective product pose any health or safety hazard to consumers, the reporting obligation will be triggered, regardless of the level of the risk in question.

Under Brazilian law, the word "supplier" means any individual or legal entity (including unincorporated entities), public or private, Brazilian or foreign, engaged in the production, assembly, creation, construction, transformation, import, export, distribution or marketing of goods, or in the provision of services. Any such individual or entity that participated in the placement of the product or service on the market must perform a recall upon becoming aware of the danger of products or services placed on the market.

It is worth noting that should a supplier suspect the existence of products or services placed on the consumer market that may be harmful or hazardous to consumers' health or safety, the supplier must inform the DPDC, within 24 hours, and start an internal investigation in order to verify if the suspected defect actually exists. This investigation must be completed within ten days, but the supplier can request an additional term if it proves to be necessary. The authority must be informed of the outcome of the investigation (ie, either the reasons why the recall is not necessary or that the recall will be performed).

If the supplier decides to not perform the recall, it is important to present documents and technical subsidies to justify the absence of a risk to consumers' health and safety.

It is important to note that, regardless of the time taken to conduct an investigation, if the supplier already has knowledge of the defective product or concludes the investigation before the final term acknowledging a defect, the supplier must immediately inform the consumer protection authorities and the consumers. In other words, the warning to consumers and to the public authorities must be provided promptly and immediately after the supplier becomes aware of the defect. Of course it is always tricky to establish exactly when the supplier became aware of the defect, but when informing the relevant authorities about the recall campaign, the supplier must inform them of when it became aware of the defect and can argue that it had to conduct a proper investigation, retaining technical analysis and expert opinions, when it was first informed of the potential defect.

Recall Notification

If the supplier decides to perform the recall, the notification to the DPDC must be written in Portuguese and include detailed information, such as the:

  • company’s name;
  • defective product;
  • defect identified;
  • risks and implications for consumers;
  • number of defective products on the Brazilian market;
  • number of consumers affected;
  • geographic distribution of the defective products in Brazil and the countries to which the products were exported;
  • measures already adopted and those proposed for correcting the defect and mitigating the risk;
  • description of accidents related to the defective product;
  • media plan;
  • consumer support plan; and
  • form of risk warning notice to consumers.

The notification to the authorities may be signed by the company’s legal representative, whose powers must arise from the company by-laws or from a power of attorney attached to the records of the administrative procedure.

Brazilian law also does not establish that the local entity must be involved in the recall procedure. Thus, a foreign entity may issue the notification to the authorities and to consumers. Nevertheless, it is possible – and quite common – that authorities issue notifications requesting information about the recall specifically from the local entity, in cases where there is one.

Besides, it is worth mentioning that there is a recommendation in place from the Group of Permanent Studies of Accidents of Consumption (Gepac) (not mandatory, merely informative) asking that the subsidiaries or importers of suppliers of products and services subject to recall abroad inform the Brazilian authorities about these recalls, even if such products have not been distributed in the Brazilian market.

Failure to comply with the reporting obligations mentioned in 1.4 Obligations to Notify Regulatory Authorities may carry administrative, criminal and civil penalties.

Administrative Penalties

In the administrative sphere, should the authorities hold that the supplier violated the provisions of the Brazilian Consumer Protection Code, such as the obligation to commence a recall or the obligation to market safe and adequate products, an administrative proceeding can be initiated. If the violation is confirmed after such administrative proceeding, the supplier is subject to penalties that can be imposed separately or together. The penalties that may be imposed are the following:

  • fines;
  • seizure of the defective products;
  • destruction of the defective products;
  • cancellation of product registration at the competent authorities;
  • prohibition from product manufacturing;
  • suspension of product or service supply;
  • temporary suspension of the activity;
  • revocation of authorisation or permission for use;
  • cancellation of permit for the establishment or activity;
  • total or partial shutdown of the establishment, work or activity;
  • administrative intervention; and
  • counter-advertising.

Criminal Penalties

Suppliers are also subject to criminal investigations in cases of lack of communication, late communication or insufficient communication of a recall campaign. Failure to inform the competent authorities or to withdraw harmful or hazardous products from the market is a crime carrying a prison sentence of six months to two years, and a fine.

Civil Penalties

Regardless of the administrative and criminal proceedings, consumers, public bodies and associations may also file civil and class actions seeking compensation for property and/or moral damage caused by the defective product.

For illustrative purposes, on 1 September 2010, the São Paulo State Consumer Protection Agency imposed a fine of BRL232,000 (approximately USD60,000) on two companies due to the late reporting of a safety issue involving some models of vehicles. The companies filed a lawsuit to discuss the validity of the fine so imposed and, on 17 February 2016, the State Court of Appeals of São Paulo maintained the Lower Civil Court decision that held the penalty valid (Case No 0022095-11.2013.8.26.0053).

In 2011, another automaker was fined BRL1.351 million (approximately USD350,000) for a 60-day delay in reporting a safety issue involving its vehicles.

A food company was fined over BRL980,000 (approximately USD255,000) for failure to inform that an ice cream contained gluten.

In 2018, authorities also initiated investigations, still ongoing, to inquire into the cause of accidents involving cars subject to a previous recall campaign. If the investigations conclude that the automaker did not take all the measures to correct the defect, the above-mentioned penalties may be applicable.

Penalties Imposed by Sector-Specific Regulators

In addition to those penalties contemplated in the Brazilian Consumer Protection Code, depending on the product, each sector has its own regulators with the power to impose penalties.

As an example, in relation to medicines, failure to run recall campaigns in accordance with ANVISA Board Resolutions No 55/2005 and No 24/2015 can subject the company to the penalties set forth in Law No 6,437/77, these comprise:

  • warning;
  • fine;
  • seizure of defective products;
  • destruction of defective products;
  • interdiction of defective products;
  • suspension of sale and/or manufacture of the defective product;
  • cancellation of product registration;
  • partial or total shutdown of the establishment;
  • prohibition from advertising;
  • cancellation of authorisation for business operation;
  • cancellation of the establishment permit and intervention in the establishment receiving public funds from any source;
  • imposition of rectifying message; and
  • suspension of advertising and publicity.

It is worth noting that the majority of the case precedents involve suppliers taking all the measures established by the law in order to conduct recall campaigns, yet remaining liable for individual lawsuits related to the defective product even if the consumer did not comply with the recall campaign and did not take the product for repair or replacement (Case No1010392 / RJ).

In Brazil, the Consumer Protection Code governs all consumer relations. According to the law, consumer relations refer to the processes for production and placement of goods and services on the market, and their subsequent acquisition and use by the public. Consumer relations occur between purchasers and/or end users, and suppliers.

The law defines a "consumer" as any individual or legal entity that acquires or uses products or services as an end user.

In turn, “supplier" means any individual or legal entity (including unincorporated entities), public or private, Brazilian or foreign, engaged in the production, assembly, creation, construction, transformation, import, export, distribution or marketing of goods, or in the provision of services.

There are two types of liability under the Brazilian Consumer Protection Code:

  • liability as regards the product itself (personal injury product liability), which arises when a product or service causes harm to the consumer; and
  • liability for a flaw in the product (property damage product liability), which arises from a defect that makes the product improper or inadequate for consumption, or reduces its value or quantity, but does not pose any risk to consumer health and safety.

In relation to product liability claims, the law attributes strict liability to Brazilian and foreign manufacturers, producers, builders, and importers. In other words, they are liable regardless of fault, for redress of damage caused to consumers by defects resulting from the design, manufacture, construction, assembly, formulas, handling, presentation or packing of their products, as well as by insufficient or inadequate information as to the use and risks thereof (Article 12 of the Brazilian Consumer Protection Code).

In relation to liability for a flaw in the product, all suppliers of durable or non-durable consumer products are held jointly and severally liable for defects in quality or quantity that render the products unfit or inadequate for the consumption for which they are designed, or that decrease their value, and for defects resulting from any disparity with the information provided on the container, packaging, labels or advertising message, with due regard for variations ensuing from the nature of the products (Article 18 of the Brazilian Consumer Protection Code).

Any consumer suffering property and/or moral damage due to a defective product may bring an individual lawsuit against the supplier.

In addition, court precedents have also established that relatives or persons maintaining strong affective ties with the victim may also file a lawsuit and seek compensation if they prove to have been personally affected. In fact, the case precedents from the Superior Court of Justice are in favour of the préjudice d'affection doctrine, which allows close family members of a consumption accident victim to pursue indemnification for moral damages against suppliers (Case No 876448 / RJ).

Moreover, there is also the possibility to file class actions to defend consumers rights. Class actions may be filed by:

  • the Public Prosecutor’s Office;
  • the Public Defender’s Office;
  • the federal government, states, municipalities and the Federal District;
  • the entities and bodies of the direct or indirect public administration, even if with no separate legal identity, when specifically intended to protect diffuse and collective interests and rights; and
  • associations legally organised for at least one year, and whose institutional purposes include the protection of diffuse, collective and/or homogeneous individual rights.

According to the Brazilian Consumer Protection Code, the right to claim indemnification for damage caused by the defective product or service becomes time barred within five years from the date the damage and its perpetrator becoming known (Article 27 of the Consumer Protection Code).

It is also worth noting that in Brazil there are circumstances that can suspend or interrupt the statute of limitation. In general, the statute of limitation is suspended when:

  • the interested person is absent from Brazil on public duty;
  • there is a suspensive condition to the obligation; and
  • the claim arises from a fact that must be entertained by the criminal courts (Article 197 and following of the Civil Code).

Also, in general, the statute of limitation is interrupted by:

  • the judge, even if incompetent, when he or she orders the service of process on the defendant;
  • a protest claim;
  • any judicial act that declares a debtor in default; and
  • any act that unequivocally entails recognition of a right by the debtor (Article 202 of the Civil Code).

According to Decree No 4,657/1942, Brazilian courts will have jurisdiction over product liability claims if the consumer is domiciled in Brazil or the contracted obligation has to be fulfilled in Brazil. Lawsuits are usually filed in Brazil to obtain redress on behalf of Brazilian citizens – but in theory they could also include foreign plaintiffs.

Nevertheless, unlike the situation in other jurisdictions, Brazilian law does not offer particularly favourable options for foreign plaintiffs, so cross-border actions, though possible, are rare in practice.

Pursuant to Article 83 of the Brazilian Civil Procedure Code, foreign plaintiffs may be required to post bond when bringing suits in Brazil.

According to the Brazilian Federal Constitution, the law shall not exclude any injury or threat to a right from the assessment of the Judiciary Branch. Thus, there are no mandatory steps to be taken before the consumer files an indemnification action related to product liability.

However, there are growing calls in Brazil for consumers to commence conciliatory proceedings at administrative level before bringing lawsuits, as a way to diminish the number of ongoing proceedings and efficiently reach solutions to cases.

We note that Brazil is increasingly stimulating online dispute resolution (ODR) methods. The Brazilian National Consumer Authority (SENACON) is responsible for a website (www.consumidor.gov.br) where which suppliers can choose to join and address consumer complaints.

Also, the Brazilian Civil Procedure Code – in force since 2016 – establishes that conciliation, mediation and other consensual dispute resolution mechanisms must be encouraged by judges, lawyers, public defenders and members of the Public Prosecutor’s Office, even during the course of a judicial proceeding.

In product liability claims, the supplier usually bears the burden of proving that the product complies with technical standards and is not defective. The consumer will only have the burden of proving the damage and the chain of causation.

There is no specific rule on preservation of evidence, but non-preservation places a direct burden of counterproof on whoever had a duty to safeguard that evidence. In this regard, if a consumer brings a product liability claim, the consumer has the duty to preserve the alleged defective product. If the consumer does not take the necessary measures and the defective product is lost, it will be upon the consumer the burden to produce counterproof.

Despite the lack of a specific remedy in such situations, any party is entitled to file a motion for anticipated discovery where:

  • there are grounded reasons to believe that it will become impossible or very difficult to ascertain certain facts while the lawsuit is pending;
  • the proof to be produced is capable of enabling consensual dispute resolution or other suitable dispute resolution methods; and
  • previous knowledge of the facts can justify or avoid filing of a lawsuit.

As a general rule, the parties are responsible for providing and producing their own evidence, according to their position in the case. Under the Brazilian Civil Procedure Code, the burden of proof rests (i) with the plaintiff, with respect to facts supporting its alleged right; and (ii) with the defendant, with respect to facts impairing, modifying or extinguishing the plaintiff’s alleged right. In relation to product liability claims, the supplier has the burden of proving that the product is not defective while the consumer has the burden of proving the damage and chain of causation.

However, should a request for disclosure of evidence be filed by a party, the judge may command the adverse party to disclose documents or things in its possession. Such request must contain:

  • a detailed description, as complete as possible, of the document or thing to be disclosed;
  • the purpose of the evidence, with a statement of the facts related to the document or thing; and
  • the circumstances supporting the requesting party’s claim that the document or thing does exist and is in possession of the adverse party.

The adverse party will have five business days to answer this request. The adverse party may either disclose the document or thing or refuse to do so.

According to law, the judge should not accept such refusal if:

  • the adverse party is legally required to disclose the document or thing;
  • the adverse party has referred to the document or thing in the proceedings with a view to bringing evidence into the records; or
  • the document, by its content, is inherently common to the parties.

Should the adverse party remain silent during the relevant period or fail to disclose the document after a court decision commanding its disclosure, the judge will hold as true the facts which the adverse party sought to prove by means of the document or thing.

The lack of an acceptable reason to refuse to comply with the disclosure order may give cause to a search and seizure warrant.

The Brazilian Consumer Protection Code, which governs consumer relations, does not have particular rules on expert evidence. Thus, the applicable rules are those established by the Brazilian Civil Procedure Code.

Whenever a case involves technical aspects, the court may be assisted by an expert with forensic knowledge. For example, it is very common to have accounting, engineering, graphical and medical evidence in product liability claims.

In such situation, the court appoints its own expert, and the parties are entitled to designate experts to assist in the production of evidence.

The court-appointed expert has the duty to issue a technical and impartial opinion on the matter. After that, the parties may present their own expert opinions and commentaries on the opinion of the court-appointed expert.

As a rule, each party is responsible for paying the costs of its experts and the party that requested expert evidence is responsible for paying the court expert fees. If the expert evidence was requested by the judge or by both parties, the expenses will be shared between the parties. The judge, however, can determine that the supplier should pay the cost of expert examination when the burden of proof is shifted.

After the final decision, the losing party will refund the other party the corresponding amount.

In product liability cases, consumers usually qualify for legal aid, which means that suppliers will be responsible for paying the costs of expert evidence, or a publicly funded institution will be appointed to perform the expert examination where the supplier did not ask the evidence.

Pursuant to the Brazilian Civil Procedure Code, in general the burden of proof rests with the plaintiff to prove the facts supporting its alleged right. In turn, it rests with the defendant to prove facts impairing, modifying or extinguishing the plaintiff’s alleged right.

In cases involving consumer relations (as product liability cases), the consumer (usually, the plaintiff) must prove the damage caused by the product and the chain of causation. The supplier, on the other hand, must prove that:

  • it did not place the product on the market;
  • although it did place the product on the market, the product is not defective; or
  • the sole fault for the damage falls on the consumer or a third party.

According to the Brazilian Consumer Protection Code, the judge may shift the burden of proof to the supplier. Shifting of the burden of proof can occur if:

  • the claim brought by the consumer is found to be plausible; or
  • the supplier is found to hold a dominant position in its relationship with the consumer.

In Brazil, there are summary and ordinary proceedings.

Summary proceedings are aimed at affording a specific treatment to certain cases which, by their nature, call for simplified and informal procedures, backed by oral arguments and procedural economy. Such cases run before the Small Claims Court, in which cases are resolved in a timely and speedy fashion.

By contrast, ordinary proceedings are generally more complex cases, in which issues of fact can only be properly analysed through production of evidence, and the amount in controversy is higher.

Regardless of the type of case, a consumer can file a lawsuit before a first-instance court (either summary or ordinary proceeding, specifically before a federal or state court, depending on the defendants involved in the case). Initially, a single judge will review and decide the case.

If an appeal is filed by any of the parties, the case is sent to the respective second-instance court and a panel of judges will review the case. After that, in some cases, it is possible to file special appeals to the Superior Court of Justice and/or an extraordinary appeal to the Federal Supreme Court. After the second-instance court decision, cases filed before a Small Claims Court are only subject to an appeal to the Federal Supreme Court.

In Brazil, only specific criminal cases are subject to a jury trial.

In addition, the law does not provide for a specific threshold in awards of damages for product liability cases. Thus, the awards are calculated on a case-by-case basis and the courts usually take into consideration the amounts stated in court precedents issued in similar previous cases.

The Brazilian legal system provides for summary and ordinary proceedings.

Ordinary Proceedings

In ordinary proceedings, the following types of appeals are available in product liability claims.

  • Motion for clarification – filed before the court in which the case is ongoing, applicable when the court decision contains any omission, obscurity, contradiction or material error; the timeframe to file a motion for clarification is five business days after the decision is published in the official gazette.
  • Interlocutory appeal – filed before the second-instance court against an interlocutory decision in some specific situations, such as a decision related to the shifting of the burden of proof; the timeframe to file an interlocutory appeal is 15 business days after the decision is published in the official gazette.
  • Appeal – filed to challenge the lower court final decision within 15 business days after the final decision is published in the official gazette.
  • Special appeal – filed to challenge a second-instance decision that is contrary to a treaty or a federal law; the timeframe to file a special appeal is 15 business days after the second-instance decision is published in the official gazette (should the special appeal be accepted for judgment, the case will be reviewed by the Superior Court of Justice).
  • Extraordinary appeal – filed to challenge a second-instance decision that is contrary to a provision of the Federal Constitution; the timeframe to file an extraordinary appeal is 15 business days after the second-instance decision is published in the official gazette (should the extraordinary appeal be accepted for judgment, the case will be reviewed by the Supreme Court).

Summary Proceedings

With regard to summary proceedings, it is possible to file the following appeals.

  • Motion for clarification – to be filed within five business days after the decision is published in the official gazette.
  • Appeal – filed to challenge the lower court final decision within ten business days after the final decision is published in the official gazette.
  • Extraordinary appeal – to be filed within 15 business days after the second-instance decision is published in the official gazette.

Statutory Defences

The Brazilian Consumer Protection Code provides for two types of liability, namely: liability as regards the product itself (personal injury product liability); and liability for a flaw in the product (property damage product liability).

The first type concerns an accident caused by the product resulting in damage to the consumer. In this case, the supplier will only be exempted from liability if it proves:

  • that the product was not placed on the market by the supplier;
  • that although the product was placed on the market, it was not defective; or
  • that any damages are the sole fault of the consumer or a third party.

By contrast, the liability for a flaw in the product does not arise from any damage caused to the consumer. In this case, liability arises from the flaw itself, which renders the product improper or inadequate for consumption, or from a reduction in its value or quantity.

The above-mentioned defences are expressly stated in the Brazilian Consumer Protection Code and shall be applicable to every consumer relation.

Act of God and Force Majeure

Moreover, after the Consumer Protection Code was enacted, part of the doctrine also allowed for other circumstances that, by virtue of the general principle of civil liability, could exclude supplier’s liability. According to such doctrine, despite not being among the referred defences established by the Consumer Protection Code, in the events of an "act of God" or of force majeure, the supplier would be exempted from liability in case of an accident caused by the product. These are well-recognised defences established in the Brazilian Civil Code – applicable to private law relations – to exempt one of the contracting parties from liability due to contractual breach.

At first, this was not a widely accepted theory and only the defences expressly established by the Brazilian Consumer Protection Code were applicable. Today, however, the majority of scholars and the case precedents support the view that a supplier will not be liable in the case of force majeure or an act of God, due to the absence of the chain of causation between a supplier’s conduct and the damage suffered by the consumer.

In fact, the Superior Court of Justice has already stated that although an act of God and force majeure are not explicitly provided by the Consumer Protection Code, such defences can be invoked as exclusionary causes of responsibility of the service providers (Case No 985888/SP).

State of the Art

It is also worth mentioning that the "state of the art" does not represent a liability exclusion provision expressly contemplated in the Consumer Protection Code, and it was withdrawn from the first drafts before sending the bill to the Congressional houses in the 1990s. 

Nevertheless, in some cases we understand that it is possible to construct a no-liability stand substantiated on the limit of knowledge demanded by law. To the extent that the level of understanding that the law demands from the supplier to delimit product safety and the information that will be transmitted to consumers is on the level of what is known, or should be known, rather than what could be known, it is possible to argue that the law does not expect that the supplier have unlimited knowledge of the product, but rather reasonable knowledge that is precisely established by the rules imposed by regulatory agencies or inspection bodies. This is an argument that has not yet been extensively tested and hinges on more extensive debate and acceptance by the academic community.

In Brazil, compliance with regulatory requirements is mandatory. A product that does not meet the applicable regulatory requirements cannot be placed on the market. In fact, placing on the market any product or service that does not comply with the rules issued by the competent regulators constitutes an abusive practice under Article 39, VIII of the Brazilian Consumer Protection Code. Moreover, Article 7, II of Law No 8,137/1990 establishes that selling or displaying for sale a product whose packaging, type, specification, weight or composition is not consistent with legal requirements or does not correspond to its official classification is a crime against consumer relations.

However, compliance with applicable rules, in and of itself, might not suffice to release the supplier from liability.

Pursuant to the Brazilian Consumer Protection Code, a product cannot be deemed defective when another product of better quality has been placed on the market.

The Consumer Protection Code does not expressly address this matter, but some legal scholars contend that suppliers should not be held liable if a product defect was not discoverable within the limitations of science available at the time of the development and distribution of said product on the market. Conversely, other legal scholars argue that if the law does not expressly exclude the liability of suppliers due to the development of the product and the state of the art, such liability cannot be excluded. The main argument is that the Consumer Protection Code adopts objective liability and the supplier holds the risk created by its economic activity, while consumers do not have the means to know the risks that a product poses.

In conclusion, compliance with regulatory requirements must be proven by the supplier in order to avoid the presumption that the product had a manufacturing or design defect. The supplier must also prove that the defect could not be identified when the product was developed, due to the state of the art and the scientific resources available. Those arguments, however, might not be accepted by the courts as sufficient to dismiss a product liability case since courts and most legal scholars hold that suppliers are liable for the risk involved in developing products.

As a rule, each party is responsible for paying its own expenses during the development of the case. After the final decision, the losing party will be obliged to fully reimburse the other party for all the expenses incurred, such as court fees and legal costs.

In the sphere of consumer relations, plaintiffs (consumers) usually qualify for legal aid. In Brazil, legal aid may be requested on the grounds of a personal statement of inability to pay court fees and legal costs.

Legal aid beneficiaries are not required to immediately reimburse the other party when they lose the case. If the beneficiary is defeated, enforceability of the obligations arising out of his or her defeat will be stayed and such obligations may only be enforced if, within five years, the insufficient income condition no longer exists.

Apart from public funding (legal aid), there is no regulation of other forms of litigation funding in Brazil.

Class actions in Brazil are regulated by Law No 7,347/1985 and by the Brazilian Consumer Protection Code, which is commonly used in Brazil to discuss, among other things, product liability cases and environmental damage.

With regard to product liability cases, class actions can be filed to protect homogeneous individual rights, these have consisted of landmark initiatives geared toward representing consumers collectively and expediting resolution of recurrent lawsuits involving the common interests of a class. Under Law No 7,347/1985 (Article 5) and the Consumer Protection Code (Article 82), the parties with standing to bring a class action to defend the rights of citizens in court are:

  • the Public Prosecutor’s Office;
  • the Public Defender’s Office;
  • the federal government, states, municipalities and the Federal District;
  • the entities and bodies of the direct or indirect public administration, even if with no separate legal identity, when specifically intended to protect diffuse and collective interests and rights; and
  • associations legally organised for at least one year, and whose institutional purposes include the protection of diffuse, collective and/or homogeneous individual rights.

Further, the Public Prosecutor’s Office must also intervene in class actions as a law oversight authority (when it is not a plaintiff in the class action). In Brazil, there is generally no requirement for class-representative adequacy as to the parties with standing to file class actions.

Examples of Class Action

For illustrative purposes, we note a class action filed by the Public Prosecutor’s Office with the purpose of seeking compensation for property and/or moral damages caused by a milk producer. The Rio Grande do Sul Court of Appeals upheld the Lower Court decision, recognising the company’s liability for placing in the market nutritive deficient milk, with the addition of substances harmful to the consumer’s health. Due to that act, the company was sentenced to pay indemnification for collective moral damages of BRL500,000 (approximately USD129,500) and also to publish the full content of the decision in newspapers (Case No 70077499531).

It is also worth noting the public civil action filed by the Commission of Consumers Defence of the Rio de Janeiro Legislative Assembly, against a washing machine manufacturer, pleading for a recall campaign involving the safety lock system of the washing machines manufactured by the company (Case No 0095226-78.2010.8.19.0001).

The public civil action was grounded on a motion for anticipated discovery and an indemnification lawsuit filed by a single consumer, due to an accident involving one of the company's washing machines, in which a child lost an arm after managing to open the washing machine door while it was operating.

In spite of the accident, the Rio de Janeiro Court of Appeals ruled the public civil action groundless, recognising that the existence of a single report of a consumer regarding eventual defects in the safety lock system could not motivate a recall campaign. The Court of Appeals also stated that according to the expert report the original characteristics of the product were modified by the consumer after the placing of the product in the market. Therefore, the decision acknowledged that the original product, presented in the consumer’s market, did not have any defects. Lastly, the Court of Appeals registered that the product was manufactured more than ten years before the indemnification lawsuit was filed, and that neither the plaintiff nor the expert examination proved the existence of a defect.

Other Co-ordinated Proceedings

In addition to class actions, the Brazilian Civil Procedure Code sets out specific rules on incidental proceedings for resolution of same subject-matter lawsuits. Such proceedings were introduced in Brazil in 2016 to:

  • expedite administration of justice and access to court relief;
  • reduce court caseloads; and
  • set uniform standards in court decisions.

In general, they can be brought in cases of repeated disputes involving the same matters in controversy (matters of law only) and where there is a risk of violation against equal treatment and legal certainty. As a rule, all lawsuits (including class actions) are stayed until this proceeding is adjudicated upon, and all subsequent judgments must follow the decision on the incidental proceeding for resolution of same subject-matter lawsuits. Nevertheless, the Brazilian court precedents system is not meant to grant court relief directly to plaintiffs, but rather to define legal principles to be followed in all individual and class actions. Consequently, individual lawsuits or class actions will still be necessary to address threats or injuries to rights and interests.

Since the Brazilian Consumer Protection Code was enacted in the 1990s, we have seen many product liability cases (some are still ongoing) such as tobacco litigation and many car product liability issues. Case precedents have also been continuously developing in relation to product liability issues.

In a noteworthy product liability decision, the Superior Court of Justice recognised that a supplier could not be held liable for adverse reactions caused to a consumer by a specific medicine if such adverse reaction was specifically and expressly referred to in a warning in the product leaflet (1599405/SP).

However, in a recent decision a drug manufacturer was held liable for an alleged adverse reaction caused to a consumer. The consumer alleged that the use of the medicine caused her “a gambling compulsion” and the Superior Court of Justice considered the claim to have grounds since there was not a clear and sufficient warning on the product (REsp 1.774.372/RS).

In another recent but worrying decision the Superior Court of Justice stated that a Brazilian company could be held liable for a defective product sold by an affiliate company based abroad and that was purchased by a consumer in a foreign country. Invoking the apparent supplier doctrine, the Superior Court of Justice considered that a company that uses a renowned worldwide brand to market its products should be considered as an apparent supplier, and thus be held liable for the defective product manufactured abroad (REsp 1.580.432/SP). This is not a consolidated and binding decision of the Superior Court of Justice so far and we expect a lot of movement and discussion on this issue in the next few years.

With regard to recent product liability cases, it is worth mentioning that an investigation conducted by Federal Authorities discovered that Backer, a Brazilian company, was allegedly using hazardous ingredients when manufacturing beer (diethylene glycol). Multiple cases of consumer intoxication were identified and three supposed deaths were associated with the defective beer. The company was temporally closed and a recall campaign took place to recover beers from the market.

Recently, the Ministry of Justice passed Ordinance No 618/2019, which regulates the procedures that suppliers must fulfil to launch a recall campaign. This amendment of the former Ordinance (No 487/2012) seeks to conform the recall procedure to the current reality of new technologies, making it more agile and consistent with the necessities of the digital age.

Other than this, data protection and the internet of things (IoT) have been receiving growing and significant attention from regulators.

With regard to data protection, for many years, Brazil has operated without a personal data protection law or a clear rule on the duties of the supplier after detecting data breaches. On 10 July 2018, that scenario changed with the approval by the Brazilian Congress of Bill No 53/2018, which turned into Law No 13,709/2018, called the Brazilian General Data Protection Act.

Nevertheless, it is worth noting that despite being expected for August 2020, the Brazilian General Data Protection Act is not yet in force. The enforcement of this law was postponed due to the COVID-19 pandemic and it is expected to actually enter into force in January 2021.

In turn, there is no regulation of the IoT in Brazil. The only law that mentions the IoT is Decree No 9,319/2018, which establishes the national system of digital transformation. The referred decree only mentions that "in recognising the transformative potential of the Internet of Things, actions and incentives should be established for the continuous evolution and dissemination of associated devices and technologies."

There is currently a trend for cities and states to try to enact specific state or city consumer protection legislation (for example, the state of Pernambuco and the municipality of São Paulo have enacted their own Consumer Protection Codes).

Contrary to the Federal Law (the Consumer Defence Code enacted in 1990), these state or city Consumer Protection Codes are being drafted in order to try to regulate specific sectors, such as supermarkets, transport, cinemas, the gas industry, pharmacies, hotels and hostels, health plans, the internet and auto insurance.

These state or city Consumer Protection Codes are supplementary to the Brazilian Consumer Protection Code, which has a national character. It is worth recording, however, a possible discussion on the constitutionality of these local Consumer Protection Code. The Federal Supreme Court (STF) has already analysed at least two direct actions of unconstitutionality regarding the possibility of states and cities enacting supplementary rules regarding consumer law.

In the judgment of ADI 5745 / RJ, by majority vote, the STF considered that, in the case of issues of competing jurisdiction (CF, Article 24, Item V), the legislative activity of the member states, by extending consumer guarantees, would be valid. However, in the judgment of ADI No 5158 / PE, also by majority vote, the STF considered that "from the systematic interpretation of Articles 1º, IV, 5º, 24, V e VIII, 170, IV e 174, all of the Federal Constitution, impediments to the state legislature can be extracted when elaborating on consumer norms”, thus “extrapolations of competing competence and violations of the principles of isonomy, free initiative and free competition, especially with regard to the creation of a state burden on suppliers, are forbidden”.

As has happened in several countries, the COVID-19 pandemic has severely affected the entire Brazilian legal system and that includes the product safety and liability regime.

One example of this impact, with regard to product safety law, relates to the recall proceedings. According to the National Consumer Office, each case must be assessed individually but there is a general understanding that:

  • for defects verified before 10 March 2020, a two-step recall campaign should preferably be adopted (notice and then corrective/recall measures); and
  • for those verified after 10 March 2020, the deadlines for submitting the risk assessment report and recall campaign are suspended.

Moreover, with regard to the cancellation of a product or service, on 24 March 2020, the Executive Office of PROCON-SP issued a technical note in which consumers were recommended to convert contracted services into credit for future use, without incurring any break-up fees, fines or other penalties.

So far, state authorities and the government have been targeting specific areas of the economy, aiming to reduce the negative effects on those that are deemed to be most impacted by the social isolation, such as education, tourism and the airline industry.

Pinheiro Neto Advogados

Rua Hungria, 1100
01455-906
Brazil

+55 (11) 3247-8400

+55 (11) 3247-8600

pna@pinheironeto.com.br www.pinheironeto.com.br
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Trends and Developments


Author



Demarest Advogados was founded in 1948, is one of the most reputable law firms in Brazil and is among the largest in Latin America. Operating in the most diverse areas of law, and with offices in the major cities of Brazil, as well as in New York, Demarest is involved in domestic and international transactions and ensures efficient service to more than 2,000 clients from all continents. For more than 20 years, Demarest’s specialised and independent product liability department has been serving clients in high-value lawsuits and recalls involving crisis management, particularly in relation to the media, as well as all types of matters before all federal and state consumer protection agencies. The firm’s multidisciplinary product liability team focuses on handling strategic contentious mandates, but also manages high-value portfolios for key clients, which are often renowned companies in their sectors, providing full support in matters related to administrative procedure, litigation and also prevention in consumer matters.

Recall Procedure in Brazil

General overview

The Brazilian Constitution protects consumer rights as fundamental rights, which are established in Article 5, Item XXXII.

With respect to protecting health, Article 196 of the Constitution establishes that the State has the duty to promote public policies seeking to reduce harm to citizens as well as to ensure equal access to actions to protect them.

Along these lines, the Consumer Defence Code (Law No 8.078/90 or the CDC) establishes in its Article 6, Item I, that the consumer’s basic rights include protection for their lives, health and safety.

It logically follows that products and services made available for consumption on the market must not pose risks to consumer health or safety, beyond those that are normal and predictable, as a result of the characteristics inherent to the product or service, and in relation to which the suppliers are bound to supply all information.

That is why if the supplier, after making a specific product or service available on the market, finds that the said product or service presents a potential risk to either health or security – a risk, please note, that is unrelated to its core essence – should immediately take every possible step to inform the consumer and correct the noncompliance. This is what is set forth in paragraph 1 of Article 10 of the CDC.

A recall is how the supplier informs the consumer about the existence of a defect in a product or service that has the potential to cause harm or damage health or safety. The supplier must undertake to rectify such nonconformity.

Recall

Legislation

In Brazil, the recall procedure is established in the CDC and Directive 618, dated 1 July 2019 and issued by the Ministry of Justice (the MJ Directive). Therefore, these are the key normatives on this subject.

We say “key normatives” since there are norms and certain specific rules for the recall of certain specific products, namely: food, drugs and automobiles.

However, given that the goal of this article is to provide the background concepts and a general guide to developments in the subject, we will focus our analysis on the key rules of the subject contained in the CDC and MJ Directive, and to the extent possible, we will include specific information on certain norms.

Who has the obligation to adopt and implement recall measures?

Based upon Brazilian legislation, every participant in the consumer chain – be they involved in production, assembly, creation, construction, transformation, import, export, distribution or sale of products or rendering of services – is considered to be a supplier. That is, in fact, what is established in the introduction of Article 3 of the CDC.

Specifically with respect to recalls, both Article 10 of the CDC, as well as the MJ Directive, expressly establish that the supplier, lato sensu, has the obligation to perform the recall, in such a way that there can be no doubt that every participant in the supply chain has a responsibility before the consumers as well consumer defence agencies and bodies to adopt measures related to the recall and, as such, will be subject to civil, administrative and criminal sanctions should they fail to act in accordance with the law.

It is enough that only one participant in the supply chain takes steps to implement the recall for the obligation to be deemed fulfilled. In other words, there is no need for multiple requests for a recall for the same defect, just because there are various participants in the supply chain.

From a practical point of view, it is of great importance that the participants of a specific supply chain establish among themselves, in advance, clearly (and preferably in a written document), who will assume responsibility to initiate a recall if it becomes necessary to do so, and further, to discuss the rules regarding terms and financial disbursements, doing away with any potential discussions that could subsequently arise around the matter.

Obviously, this “agreement”, specifically owing to the solidarity involved, may not be invoked against consumers or consumer defence agencies, but it will assure a right of redress from one company toward another.

Launching a recall campaign

I – Communicating to authorities

Once the harmful or hazardous nature of a certain product is discovered, the supplier shall, within two business days, communicate that fact, in writing, to the National Consumer Office (SENACON), a body of the Ministry of Justice, as well as to other competent authorities (this is if, for example, the product is subject to health department regulation or any other type of governmental control and oversight, such as those pertaining to pharmaceutical and food products).

This communication must contain the following main pieces of information:

  • complete identification information of the supplier of the product or service subject to recall, including:
    1. company name, business name and line of work (both primary and secondary);
    2. company taxpayer or individual taxpayer identification (CNPJ/CPF) and state enrolment number; and
    3. address, telephone number, email addresses and names of responsible administrators, along with their respective qualifications;
  • detailed description of the product or service, accompanied by information about the brand, model, lot, series, chassis, manufacturing start and end date and photo;
  • detailed description of the defect, accompanied by the technical information necessary to clarify the facts, as well as other information, specifying the date, month and year, as well as how the harm or hazard was discovered;
  • detailed description of the risk and its implications;
  • quantity of products or services suffering the defect and number of consumers impacted;
  • details about the geographic distribution of products and services suffering the defect, placed on the market, by Brazilian state, and countries from which the products were exported, or services rendered;
  • indication of measures already taken, and measures proposed to resolve the defect and correct the risk;
  • description of any accidents related to the defective product or service, where applicable, containing the following information:
    1. location and date of the accident, identification of victims and material damages and physical harm caused; and
    2. information on court cases related to the accident, specifying the lawsuits filed, name of plaintiffs and defendants, judicial districts and courts where each one of the cases is taking places as well as identifying numbers of those cases, and measures taken with respect to the victims;
  • media plan;
  • consumer response plan; and
  • model document for notifying the consumer of the risk.

Specifically, with respect to vehicle recalls, in addition to the measures mentioned above, the relevant company has the legal obligation to send to the National Transportation Department (DENATRAN) information about the recall as well the list of the chassis numbers of all models involved. This measure will allow recall-related information to be tied to the vehicle document, which in the event of a sale will allow the new owner to be made aware of the recall and respond to it, in the event the prior owner had not.

For food recalls, there is a provision about the need for a plan to withdraw the products, and that plan must be made available to health department employees and agencies, in addition to the need for an effective tracking mechanism.

II – Deadline to launch the recall campaign as well to publish the safety alert

Since the main goals of a recall are to preserve the life, health, safety and physical integrity of consumers, as well as to avoid/minimise any sort of loss, either material damages or pain and suffering, a supplier should act as quickly as possible to mitigate consumer exposure to any potential risk situation.

In this context, Article 3 of the MJ Directive establishes that, within two business days counted from the first knowledge of the harmful or hazardous nature of a certain product, the supplier should communicate that fact to the authorities and publish the campaigns notifying the recall.

If the supplier does not, within this time limit, have all the information required to comply with the legal determinations and to structure the recall, it may request an extension from the authorities, in order to conclude the communication. The MJ Directive authorises the SENACON to grant an additional term that shall not exceed 15 days.

If the supplier faces certain logistical issues that may make it impossible to initiate a recall immediately, such as, for example, importing replacement parts and training staff to make the repairs, it shall issue an advance statement (safety alert) to inform consumers about the defect in the product/service, which may include recommending interruption of its use.

Following this, and as soon as the recall is ready to be implemented, it shall deploy the full campaign, referred to in "IV – Publicity campaign" below.

III – Investigation phase

The MJ Directive provides, in its Article 2, that if a supplier becomes aware of the possibility of introduction into the Brazilian consumer market of products or services that present hazards or danger to consumers, that supplier shall, within 24 hours, communicate the start of its investigations into that possibility to the authorities.

The Directive also establishes that the term for the investigations shall be ten business days, unless the supplier proves that an extension of the term is required.

Upon conclusion of the investigation, the supplier shall submit the communication mentioned in "II – Deadline to launch" or, alternatively, explain the reasons why a recall procedure will not be necessary.

IV – Publicity campaign/media plan

On the question of a publicity campaign (or media plan), please note that an announcement about the recall needs to be made in print media, as well as on the radio and television, at the expense of the supplier of the product or service.

Likewise, the campaign should be designed to reach all of the consumers who have acquired the product or service that is the subject of the recall, and it is worth noting that the agency to be hired for this purpose should study the best means and adequate time period for that announcement, to ensure that the targeted population for the recall is reached by the advertisements, allowing them to respond to the campaign.

The advertisements should report the defect that the product or service presents, as well as the resulting risks and its implications, preventative and corrective measures that the consumer should take, and all other information that seeks to safeguard consumer safety.

The supplier can and should make use of other means to inform consumers about the recall, such as letters, internet advertisements and direct telephone contact.

The MJ Directive and some internal guidelines of the SENACON currently allow greater flexibility in the communication to consumers. That is, depending on the nature of the products in question, as well as the quantities involved and its geographical distribution, the supplier may, upon structuring the media plan, exclude some traditional means of communication (such as radio, TV or newspapers).

This analysis shall be made on a case-by-case basis, and it is always important to consult with an attorney with expertise in the matter to make sure that the structured media plan meets legal requirements.

V – Customer service plan

With respect to any customer service plan that is put in place, the company must supply detailed plans of how they will respond to consumers, how the nonconformity will be rectified, the locations and times, and the average service duration (notably for when parts need to be repaired or replaced).

Ideally, a toll-free number will be set up (0800), and the supplier will make recall information available on its website.

All information must be made available in Portuguese and the recall should be free of charge, which is to say, no onus of any sort can be placed upon the consumer.

The MJ Directive also determines that the consumer shall receive a certificate of attendance to the recall, which shall specify the date, time, and duration of service, as well as the measures taken.

VI – Methods for correcting the defect

With respect to correcting the defect, the law does not pre-establish any format – nor could it – and the supplier will be responsible for deciding the best way of doing so. To this end, a recall can be implemented through (i) a product exchange; (ii) repair of the defect; or further, (iii) a product buy-back.

We would like to make a parenthetical aside to note that Brazilian authorities prohibit and punish a double standard. To explain, when certain recalls affect more than one country, the supplier must guarantee equal treatment of consumers, which is to say, it must define and implement a means for correcting the defect which is then applied homogenously.

VII – Reports and request for close of the recall.

The supplier shall submit campaign monitoring reports to the SENACON, at least every four months, on the consumers served up to that point and how they are distributed throughout Brazilian states.

The SENACON may request the submission of monitoring reports more frequently than every four months. Likewise, it may determine that other supplementary measures be adopted so as to meet effectiveness rates.

At the end of a period of five years, the supplier may request the dismissal or extension of the term for the submission of the periodic reports. Its authorisation shall be subject to the analysis of, and assessment by, the SENACON, which will consider the peculiarities of the recall, the number of consumers who have been made aware of the campaign, the attendance rate, in addition to any other factors it may deem relevant to the case.

If the request is granted, the supplier shall submit a final report, which shall contain the number of consumers served, in total and as a percentage of the number of those who were affected by the defect; a justification for the percentage of consumers that were ultimately not served; the measures that will be adopted in relation to the percentage of products that were not retrieved or repaired; and an identification of how consumers became aware of the recall.

Consequences of failing to perform the recall

The failure to enact a recall, or to do so within the deadline or in the proper manner, may leave the supplier liable to both administrative sanctions and criminal prosecution.

Administrative sanctions are established in Articles 57 and the subsequent of the CDC and Decree No 2.181/97 (the Decree).

The following practices are considered to infringe consumer rights in accordance with Item IX, "b", of Article 12 of the Decree: to place on the consumer market any product or service that can cause harm to consumer health or safety, without providing clear explanatory and adequate information.

Furthermore, in accordance with Items II and III of Article 13 of the Decree, the following are also considered violations:

  • failing to communicate the hazard posed by the product or service to the proper authorities, when it was released on the consumer market or upon verification at a later date that a risk existed; and
  • failing to communicate to consumers, through advertising campaigns, the hazard posed by the product or service, when it was released on the consumer market or upon verification at a later date that a risk existed.

The aforementioned infringements will subject suppliers to the following penalties, in accordance with Article 18 of the Decree, which may be applied individually or combined with one another:

  • fine;
  • product seizure;
  • product destruction;
  • suspension of the product’s registration with the proper authority;
  • ban on manufacturing the product;
  • suspension of the supply of products or services;
  • temporary suspension of the relevant activity;
  • revocation of use concession or permission;
  • suspension of the establishment’s or activity’s licence;
  • total or partial ban against the establishment, work or activity;
  • administrative intervention; and
  • imposition of counter-advertising.

Without limitation of the civil and administrative aspects, a failure to perform a recall also subjects the supplier to criminal sanctions, including but not limited to those set forth in Article 64 of the CDC.

Specifically with respect to the aforementioned legal provision, in order for a supplier’s conduct to be considered a crime, it first needs to meet certain requirements.

The first concerns malice, which is to ascertain the agent’s free and conscious desire to fail to communicate facts to the authorities and consumers or to withdraw the harmful or damaging products from the market. The level of culpability for a crime, typified in Article 64 of the CDC, was not established.

Another requirement necessary for qualifying as a crime, established in Article 64 of the CDC, concerns the supplier’s knowledge that the products, after having been placed on the market, contain defects that may potentially make them harmful or hazardous to the consumer. If the supplier did not have such knowledge, then no crime was committed.

The penalties applied to whomever commits this crime include imprisonment for between six months and two years, plus fines (cumulative penalties).

Conclusions

Appropriately carrying out a recall is more than a legal duty, it speaks to the supplier’s commitment to protect the life, health and safety of its consumers. These are values that clearly should be prioritised.

Likewise, in order to ensure a successful outcome to the campaign, we recommend that the procedure established by law is strictly followed. The supplier, acting within the legal limits, should be in close contact with the consumer defence agencies, which includes absorbing and implementing any suggestions they may present.

And of course, in the case of a worldwide recall, it is always recommended to consult local attorneys, in order to ensure that the laws of a particular jurisdiction are faithfully observed, avoiding penalties.

Demarest Advogados

Avenida Pedroso de Moraes, 1201
Centro Cultural Ohtake
São Paulo - SP
Sao Paulo
Brazil
05419-001

+55 11 3356 2158

+55 11 3356 1700

mbragaglia@demarest.com.br www.demarest.com.br
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Law and Practice

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Pinheiro Neto Advogados was one of the first full-service Brazilian law firms to have a consumer relations practice in the 1980s. With a specialised team dedicated exclusively to the subject, it advises on sophisticated multidisciplinary litigation cases, and offers preventive counselling on matters of strategic interest or high financial impact for clients, including the negotiation of settlements. The consumer relations practice is actively involved in high-profile, complex cases, for a wide-ranging client base, including automobile manufacturing, pharmaceuticals, insurance and the food industry. It offers legal counselling and assistance in administrative proceedings before the consumer protection bodies. As a traditional and well-respected practice, the team counsels in matters of product liability litigation and is constantly involved in cross-border discussions and litigation involving product liability (eg, tobacco litigation, Vioxx litigation and PIP breast implants litigation).

Trends and Development

Author



Demarest Advogados was founded in 1948, is one of the most reputable law firms in Brazil and is among the largest in Latin America. Operating in the most diverse areas of law, and with offices in the major cities of Brazil, as well as in New York, Demarest is involved in domestic and international transactions and ensures efficient service to more than 2,000 clients from all continents. For more than 20 years, Demarest’s specialised and independent product liability department has been serving clients in high-value lawsuits and recalls involving crisis management, particularly in relation to the media, as well as all types of matters before all federal and state consumer protection agencies. The firm’s multidisciplinary product liability team focuses on handling strategic contentious mandates, but also manages high-value portfolios for key clients, which are often renowned companies in their sectors, providing full support in matters related to administrative procedure, litigation and also prevention in consumer matters.

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