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COVID-19 | Consumer Law

March 27, 2020

COVID-19 | Consumer Law

Consumer Law - updated on Mar 27 at 12:20 pm

CONSUMER LAW

The spread of the coronavirus pandemic is also impacting consumer relations. At first, the crisis had a significant impact on the airline and hotel industries, but the far-reaching impacts of COVID-19 are becoming more evident throughout the entire consumer and supply chains in different sectors.

The declaration of a national state emergency in Brazil and the determinations for social isolation and quarantine require commercial establishments to close and services and product distribution to be suspended, except for those deemed essential by authorities.

Combating this crisis has brought challenges to suppliers in relation to the maintenance of the product and services distribution, to the performance of contracts previously entered into and to making available alternatives to consumers to mitigate losses.  

During the past weeks, consumer authorities have issued opinions on several matters aiming at securing balanced consumer relations in these exceptional circumstances.

Below are the matters that have been the scope of the opinions issued by authorities:

  • Recall campaigns

The National Consumer Agency (Secretaria Nacional do Consumidor) – SENACON, alerted companies to continue to report recall campaigns to the Department of Consumer Protection (Departamento de Proteção do Consumidor) – DPDC, in the terms set forth in the Resolution No. 618/2019 during the national state emergency.

The recommendation is for companies to assess the possibility of presenting campaigns in two phases to avoid enticing consumers to leave their homes. SENACON also recommends companies to assess the need for readjusting previous and ongoing campaigns.

  • Price gouging

Based on complaints of price gouging in products used to combat coronavirus (e.g. hand sanitizer and face masks), SENACON issued the Technical Note No. 8/2020/CGEMM/DPDC/SENACON/MJ, with guidelines on how to assess potential excess in pricing of several products and services that may be affected by the pandemic.

Although the authority recognizes the possibility of changes in value of products and services as an expression of free initiative and as a result of change in supply and demand, SENACON notes that the Consumer Protection Code (Código de Defesa do Consumidor) – CDC prohibits the excessive increase in prices of products without just cause. If a violation to the CDC is verified, which must be assessed on case-by-case basis, the company is subject to an administrative fine of up to BRL 10 million.

In the context of e-commerce, SENACON entered into a partnership with the Brazilian E-Commerce Chamber (Câmara Brasileira de Comércio Eletrônico) (“camara-e.net”) for the campaign “Juntos Contra Ofertas Abusivas” (Together Against Price Gouging). The Project has as scope that marketplaces, initially, interact with the companies that engaged in price gouging to convince these companies to adapt prices and cease the abuse. If this is not possible, the complaint will be sent to SENACON.

The Consumer Protection and Defense Program (PROCON)[1] in multiple locations has also been conducting frequent inspections on price gouging in commercial establishments and has been promoting the filing of complaints by consumers on its website.

  • Maintenance of essential services

In the context of the Legislative Branch, several bills of law have been proposed to regulate services deemed as essential to the consumer market, as is the case with telecommunication services. In this regard, state bills of law, such as those proposed by the States of Rio de Janeiro, Ceará and Santa Catarina, provide for rules to secure access to broadband Internet and mobile cellular line during national state emergency.   

Controlling agencies, including the National Agency for Civil Aviation (Agência Nacional de Aviação Civil) – ANAC, the National Agency of Supplemental Health (Agência Nacional de Saúde Suplementar)ANS and the National Agency for Telecommunications (Agência Nacional de Telecomunicações) – ANATEL, have also been monitoring, inspecting and proposing measures to companies from other sectors of the economy affected by the coronavirus pandemic. Frequent meetings have been held for discussions on joint solutions of issues, especially in relation to respectively cancelling of air tickets, extending the coverage of health insurance and guaranteeing Internet connection to consumers.

  • Airlines

SENACON issued the Technical Note No. 2/2020 providing guidelines on the cancellation, changes and refund of tickets. It also provided guidance for consumers to solve specific situations with Airlines through the platform http://www.consumidor.gov.br/.

The Federal Government issued the Provisional Measure No. 925 on March 18, 2020. According to section 3, the deadline for refunding tickets will be of 12 months, observing the rules of the contracted service. If opting for flight credit, which may be used within 12 months, consumers will be released of any contractual penalties. Both alternatives – refund and flight credit – are valid for all airline contracts entered into until December 31, 2020.

Following negotiations, SENACON and the Prosecution Office of the Federal District entered into a settlement agreement (Termo de Ajustamento de Conduta) with several Airlines and the Brazilian Association of Airlines (Associação Brasileira das Empresas Aéreas) on March 20, 2020. The agreement provides for:

  • flexibility on the rules for rescheduling, cancellation and refund of tickets, including the possibility of (i) rescheduling tickets without fees and (ii) cancellation of travels with the use of the corresponding flight credit within a year without fees or penalties. If the consumer opts (iii) for the cancellation of travel and refund of the price of the ticket, the airline may do it within 12 months of the request for refund and excluding fines and contractual fees set forth in tariff rules;
  • Waiver on the need for airlines to provide material assistance in the event of closed borders (Section III of the ANAC’s Resolution No. 400) because of force majeure event. But airlines should commit to engage efforts to assist the Ministry of Foreign Affairs in relation to these passengers;
  • Advertising of the platform “consumidor.gov” for conflict resolution;
  • Suspension of fines of any nature for a period of 180 days for the Airlines signatories of the settlement agreement.
  • Granting of 25% reduction for the payment of administrative fines

On March 23, 2020, SENACON issued the Resolution No. 14/2020 granting a reduction of 25% in administrative fines imposed by the agency if the airline opts for payment in 30 (thirty) days and waives to the right to appeal in both administrative and judicial courts, or waives any previous appeals that are pending.

The idea is to obtain resources and direct them faster to the Diffuse Rights Defense Fund (Fundo de Defesa de Direitos Difusos) – FDD, which will be able to use the resources in prevention and treatment for COVID-19, besides other projects.

On March 24, 2020, the Federal Managing Board of the FDD (CFDD) approved unanimously the use of BRL 18,600,000.00 (eighteen million six hundred thousand Brazilian reais) for the rental of rooms in intensive care units.

  • Interruption of consumer contracts

PROCON in the state of São Paulo (PROCON-SP) issued a Technical Note on the interruption of contracts between consumers and suppliers because of COVID-19. According to PROCON-SP, the current scenario would exclude fault and causation in relation to the supplier and would not be equivalent to a situation of business foreseeability (known as “risco do negócio”).

The recommendation from PROCON-SP in relation to conflicts arising from the crisis is that the parties are guided by a collaborative spirit, act in good faith, commit to discuss and find consensual alternatives that are reasonable.

PROCON-SP suggests consumers to preferably choose to have a credit to be used in the future, which, according to the Technical Note, would be a way to prevent completely disrupting all contracts previously entered into.

The agency reinforces the need for suppliers to act in good faith, with balance and reasoning because of the scenario faced by both parties. Abusive practice or practices in bad faith, according to the agency, will not be accepted and will give rise to the appropriate measures being taken.

Lastly, PROCON-SP noted that it will maximize efforts so that consumers may choose, during a period of 12 months after the national state emergency is terminated, among 1) reschedule the contracted service; 2) substitute the contracted product or service by an equivalent; and 3) use the credit to acquire products or services from the same supplier. All alternatives would be available without any cost to the consumer and, in relation to contracts for services that may be rendered remotely, the recommendation is for the maintenance of contract performance. The agency highlighted that it will engage efforts to seek for the right to the refund of amounts paid by consumers, which should happen, however, after the pandemic ends.

In the context of the Judiciary Branch, civil lawsuits filed by the Prosecution Office up to now aim at avoiding events and activities involving a significant audience.

Associations for consumer defense, such as the Institute for Consumer Defense (Instituto de Defesa do Consumidor) - IDEC, have actively and constantly positioned themselves for the protection of consumer interests, especially in sectors that are more relevant for the economy. The Association of the State of Bahia for Consumer Defense (Associação Baiana de Defesa do Consumidor) – ABDECON has filed civil lawsuits against an airline, an online platform for booking tickets and a water concessionaire aiming at combating abusive practices and secure the supply of services to the consumer.

In this regard, there is a bill of law recently presented by the President of Brazil to change the Act No. 13,979/2020 (the Coronavirus Act) to institute a committee to prevent and solve conflicts, including litigation in connection with the public health crisis.

Virtual tools for conflict resolution – known as “Online Dispute Resolution” - ODRs – add technology to the legal practice and assist in preventing excessive litigation, as well as in facilitating communication between the parties for the appropriate resolution and decision-making process – either by means of negotiation, conciliation and/or mediation.

As is the case with the incentive by certain governmental entities to use the platform “consumidor.gov.br”, consensual alternatives that do not require in-person attendance may be allies for managing and mitigating losses and impacts on this exceptional period of crisis and restrictions.

[1] Agency of consumer protection at the state and municipal level.

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