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Covid-19 Fighting on all fronts

Guide – Covid-19 – Consumer Law

30/03/2020

By Renata Amaral and Caroline Gonçalves, partner and associate of the Consumer Law, Environment and Climate Change groups of Trench Rossi Watanabe, respectively

There is much discussion about the impact and legal consequences of Covid-19, mainly when it comes to consumer relations that are directly affected by the pandemic at this moment. In this moment of great uncertainty, consumers and suppliers need to act together, guided by good-faith, prudence, reasonability, cautiousness, and flexibility, always respecting the limits established by Brazilian law.

Keeping that in mind, this chapter aims at presenting the guidelines from the consumer law authorities towards the current difficulties, as well as reinforcing what Brazilian law disposes on the right to inform, suppliers’ liability, cancellations and rescheduling, abusive and good practices, besides other guidelines that have been applying to specific industrial sectors.

Please note that the below-mentioned information is subject to changes as the Covid-19 pandemic develops. We have been monitoring the issue on a daily basis in order to keep this chapter duly up to date.

1. Information Duty

The consequences of Covid-19 on consumer relations need to be based on the information duty. Suppliers need to provide clear and precise information to consumers regarding the measures being taken towards their activities, considering changes both to product supply or service delivery, in order to help decision-making during this moment of uncertainty and to properly address how to proceed with the contracts currently in force.

Besides being a principle already established by the Brazilian Consumer Defense Code (“CDC”) as a basic consumer right, the information duty is also recommended by the Consumer National Secretariat (“SENACON”), which through Interministerial Technical Notice No. 2/2020, published on March 6, 2020, expressed it is “a duty of the suppliers, in this kind of legal relation, to keep consumers properly and permanently informed about all of its aspects”, thus guaranteeing that consumers make conscious choices.

2. Suppliers’ Liability

According to the CDC, suppliers’ liability has an objective nature, being also jointly shared among all participants in the supply chain. That means suppliers will be liable regardless of consumers demonstrating any fault.

Note, however, that Brazilian courts may characterize Covid-19 as either a fortuitous event or force majeure and, in such a scenario, will not hold suppliers liable for eventual losses that consumers might suffer due to the Covid -19 crisis. In any case, the courts will of course look positively at suppliers’ adoption of proactive, mitigating, and preventive measures.

It is worth highlighting, however, that the current scenario is unprecedented. Even upon the analysis of former decisions, it is not possible to ascertain what position courts will take, considering the gravity and abnormality of the situation.

3. Abusive Practices

The CDC establishes that the sharp rise in prices of products and services with no just cause will be considered as an abusive practice. In this context, a lot of discussion has been raised as to what extent raising the prices of products considered essential to fighting Covid-19 can constitute an abusive practice, besides competition law aspects.

In this context, several consumer defense authorities are carrying out inspection operations and proceeding with the imposition of fines on commercial establishments for alleged violations of the CDC regarding abusive price increases.

The Brazilian Electronic Commerce Chamber (“Câmara-e.net) and SENACON launched a campaign named “Together against abusive offers”, which is a reporting channel for consumers to point out abusive price increases of products considered essential for the prevention of Covid-19. Moreover, electronic commerce companies have been adopting good practices aimed at fighting those problems — specifically by removing users that violate the electronic platform’s rules, as well as their awareness campaigns.

In addition, SENACON published a new Technical Note oriented toward consumer defense authorities’ analysis regarding eventual abusiveness in the rise of prices of several products and services that can be affected due to the Covid-19 pandemic. The Note touches on both rules from the CDC regarding the rise in prices with no just cause and suppliers’ autonomy to alter the prices they charge for their products and services, guided by the free enterprise principle. The authority sets out that the agencies observe the below-mentioned requirements when analyzing eventual abusiveness in the rise of products’ prices:

I.    Identification of the products for which abusiveness check is intended;

II.  of the companies that compete in the same market;

III  and of the production chain, including the product’s raw material;

IV  Requirement of bills of sales for both purchase and sale with a reliable historical series, being recommended a 3-month (90-day) series at the minimum.

4. Cancellations and Rescheduling

4.1 General Orientation

In terms of cancellations and rescheduling, the contract’s provisions still apply, even those regarding the suspension of activities and the possibility of rescheduling services for the future. It is important that consumers and suppliers seek the negotiation of alternatives that match both their realities, such as the compensation of classes in the future or the renegotiation of deadlines for a product’s delivery, with a view to maintaining the contractual relation.

4.2 Tourism Sector

Federal and state authorities have already published certain guidelines specific to the tourism sector.

On the federal level, the Consent Decree (“TAC”) celebrated on March 20, 2020 among the Ministry of Justice and Public Security, the Public Prosecutor’s Office, District Attorney’s Office of the Federal District, Brazilian Airlines Association and the airlines that signed the TAC sets out that those companies will reschedule national and international tickets already purchased for the period from March 1 to June 30, 2020 with no fees or fare differences for one time only, in respect of the origin and destination. Among others, this measure aims to address issues that consumers who purchased plane tickets for the above-mentioned period are currently facing.

If the consumer prefers to cancel the ticket, the TAC establishes that the full paid amount will be converted into credits valid for 12 (twelve) months counting from the flight date, with the possibility of charging eventual fare differences, but with no rescheduling fees or fines. However, if the consumer chooses a refund, contractual fares and fines will apply, with the refund of the remaining amount in up to 12 months.

The TAC’s signatory airlines will need to make available phone and online service channels for free in order to clarify doubts and/or resolve complaints within 45 (forty-five) days. Airlines also agreed to be active on the consumidor.gov.br platform.

Besides the above-mentioned Agreement, according to the Interministerial Technical Note issued for this sector, consumers and suppliers will need negotiate the rescheduling of new deadlines or new dates for the execution of the contract after this crisis has passed, with refunds being the last option, once it can impose medium and long-term impacts on society as a whole.

Federal Provisional Measure No. 925/2020, which establishes emergency measures for civil aviation in view of the COVID-19 pandemic, took effect on March 19, 2020. According to this new rule, refunds for purchased tickets will be carried out within 12 (twelve) months, and consumers will be free from contractual penalties through the acceptance of credits to be used within the period of twelve months counting from the flight date. These rules apply to all airline transportation contracts until December 31, 2020.

State level authorities also issued some guidelines towards the sector. The Consumer Protection Foundation of the State of São Paulo (“Procon-SP”), for instance, adopts the following measures: “Consumers are not obliged to expose their health to risks by traveling to destinations where they can be infected by coronavirus, therefor being able to choose one of these possible alternatives: postpone the trip to a future date; travel to another destination with the same price; or even a refund of the paid amount. Other possibilities can be negotiated with the company, if it is not harmful to the consumer and to which they agree with. In case the consumer feels damaged in reason of the company’s attitude, they can search for Procon-SP, which will mediate the negotiation with a view to reaching an agreement with the company.

The PROCON of the State of Minas Gerais, the interagency body of the State District Attorney’s Office, establishes that “airlines and tourism agencies have to reschedule or cancel tickets and travel packages of all consumers with scheduled trips to countries where coronavirus (Covid-19) is present, without charging fines or fees. The provision is valid for destinations with confirmed cases of Covid-19, according to data disseminated by the World Health Organization (WHO). For reschedulings, the fare may only be updated to reflect current prices. If it is impossible to postpone the trip, the consumer will need to receive a full refund on the amounts already paid“.

Other stakeholders’ guidelines follow the same track, i.e., PROCONBRASIL. In a note published on February 27, the association recommends that “in those cases in which the trip has already been purchased and whose postponement is possible, the consumer needs to request so to the supplier, with no application of rescheduling fines or fees, by reason of justified public health, being allowed the charge of a fare difference, except in cases of economic power abuse and without any mandatory customer retention imposed.

In addition, the Public Prosecutor’s Office (“MPF”) recommended that the National Civil Aviation Agency (“ANAC”) publish a normative act that assures consumers about the possibility to cancel, free of cost, national and international plane tickets to destinations affected by Covid-19. According to the MPF service, charging fees and fines in the midst of world health emergencies constitutes an abusive practice and is forbidden by the Consumer Defense Code.

5. Article 399 of the Civil Code

According to Article 399 of the Brazilian Civil Code, “the debtor in delay is liable for the impossibility of delivery, even though such impossibility results from a fortuitous event of force majeure, if it occurs during the delay; except if the exemption of guilt is proved, or the damage would still prevail even with the due performance of the obligation“.

Firstly, it is important to clarify that, even though consumer relations are mostly regulated by the CDC, there are situations to which the Civil Code rules also apply, as may be the case in the above-mentioned situation.

The general rule is that all risks must be borne by the debtor whose obligations are delayed, even in cases of a fortuitous event of force majeure. The above-mentioned Article 399 aims at attenuating this rule, accepting that there will be exemption from liability only in cases where the debtor proves (i) the non-existence of guilt regarding the delay in delivering the obligation or (ii) that an eventual damage would have occurred even if the obligation had been promptly fulfilled.

6. Demands Resolution

Several authorities have advised that, in case of difficulties in solving problems with suppliers, consumers search for official and adequate channels for the registry of claims, such as the public platform consumidor.gov.br, besides the PROCONs. It is recommended that the Judiciary Power be used only as a last resort and alternative.

PROCON/SP issued a Technical Notice on the resolution of conflict in consumer relations due to the world Covid-19 pandemic. In summary, the state authority reinforces the need for negotiations between parties in consumer relations in the face of an unprecedented scenario, thus suggesting as a preferential option to consumers the conversion of services into credits for future use, at the consumer’s discretion, without fees, fines or any other penalties, including the retention of part of the price. For those services that can continue being provided at a distance, the suggestion is to have no interruption.

In fact, the number of demands consumers registered due to Covid-19 only is substantial. According to a news article published by PROCON/SP, 3,411 calls regarding Covid-19-related problems had been registered until March 18 (such as event and trip cancellations, in addition to claims of price abusiveness and lack of products), out of which 2,208 were complaints and 1,203 were consultations. Out of the 2,208 registered complaints, 1,162 were against travel agencies and 862 against airlines. Consumers have also complained about cruise ships (46 cases), rewards programs (55 complaints) and problems with tickets and events (40 complaints).

For the sake of comparison, according to the figures disclosed by PROCON/SP for the 2019 Black Friday period, 394 complaints and 349 consultations were registered, adding up to 743 calls in total. In other words, Covid-19-related account for five times as many complaints in relation to the 2019 Black Friday period.

7. Best Practices

It is also necessary to point out that besides cancellations and rescheduling of services, several players in the private sector are adopting good practices in view of the Covid-19 scenario. Guided by the good faith principle, some measures have been adopted in order to preserve good relations between suppliers and consumers, aiming at maintaining these relations and also offering “conveniences” to consumers.

We highlight some examples below:

a. The Marketplace platform removed commission fees on “first need” products.

b. Several industries have been using their manufacturing units to produce alcohol gel, which will be distributed to municipal public hospitals in several Brazilian cities.

c. TV providers have made available the transmission of pay TV channels for consumers under social isolation.

d. Several private banks will extend the due date of debts of private individuals and micro/small companies for the period of 60 (sixty) days.

8. Recall Campaigns

In view of Covid-19, challenges in the case of recall campaigns already in progress or that may be necessary during the quarantine period for the collection of defective products are under discussion.

Like most private service calls and service executions in the private sector, companies may suspend customer service operations.

SENACON advised¹ suppliers not to stop reporting on their ongoing recall campaigns, under the terms of Ordinance No. 618/2019. In relation to complying with the campaign itself, the authority recommends that suppliers evaluate the possibility of presenting the campaign in two phases, to prevent consumers from leaving home during the epidemic scenario. Finally, SENACON recommends that suppliers reassess the need to adjust ongoing campaigns.  

In any case, before adopting any measure, it is recommended that suppliers discuss with SENACON the strategy they will adopt in each separate case, specifically in this time of crisis. SENACON has been presenting itself as an available agency to promote remote meetings (over the phone or through videoconference) for the discussion of cases in general.

In fact, according to Service Order No. 02/2020, SENACON determined that, except for the initial notifications in preliminary investigations and administrative sanctioning proceedings, subpoenas will be made, as a rule, by the publication of the act in the Federal Official Gazette and which, as far as is feasibly possible, will be made available to interested parties to require subpoenas via WhatsApp. In the latter case, the supplier must assume the express commitment that the subpoena will be presumed to occur on the business day following its sending to the provided phone number, regardless of confirmation of reading or receipt.

9. Deadline suspension and Public Bodies workhours

The following bodies have issued declarations regarding this subject:

a. PROCON/SP: Administrative procedures and complaints deadlines are suspended for 15 days from March 18, 2020 unless the case is related to COVID-19. The suspension does not apply to issued bank slips. It is forbidden to issue new bank slips during the suspension period.

b. PROCON/AL: On March 18, the PROCON of the State of Alagoas determined the suspension of conciliation hearings for 15 days. There is no word yet about processual deadlines.

c. PROCON/RJ: The body has suspended, for 30 days from March 16, conciliation hearings, mediation sessions, and procedural acts, unless they are found urgent by the competent authorities. The same applies to in-person service at PROCON’s desk.

d. PROCON/MG: On March 16, the body communicated the suspension of in-person service indefinitely. There is no word yet about the deadline for proceedings.

e. PROCON/RS: On March 18, the body of the State of Rio Grande do Sul suspended in-person service indefinitely. There is no word yet about proceedings deadlines.

f. PROCON/PR: Administrative Guidance No. 01/2020 has suspended appeal and defense deadlines, as well as the scheduling of hearings at the Conflict Resolution Centre. Public service to consumers and suppliers is also suspended indefinitely.

g. PROCON/PE: Ordinance No. 21/2020 has determined the suspension of processual deadlines and hearings until March 31. Exceptions are Preliminary Investigation Letters (“CIP”) and fines due dates. Processes that would start, or finish, between March 18, 2020 and March 31, 2020, will be postponed to the first workday after March 31, 2020. There is an on-call regime to provide public service.

h. SENACON: SENACON is a secretariat attached to the Justice and Public Security Ministry (“MJSP”). It is not open to the public because an MJSP ordinance has authorized the remote work regime. It is still possible to reach the body by e-mail, or via its ombudsman online system. To date, there is no suspension of proceedings deadlines.

Our Strategic Consumer Law team is at your disposal to answer any further questions.


¹ https://www.novo.justica.gov.br/news/senacon-orienta-empresas-e-consumidores-sobre-a-realizacao-de-campanhas-de-recall-durante-o-periodo-de-calamidade-publica

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