Supplier liability of well-known brands acquired abroad

29 Nov 2017 , 2:29pm

Brazilian consumer law now gives protection to consumers when they buy a product abroad, says Fabio Ozi and Ligia Lima Godoy of Mattos Filho.

Buying products abroad

Consumer law operates within the national legal system as an important marker in commercial relations, which continue on the rise on the face of globalisation, in line with the breakdown of borders, the development of digital media and innovative technologies, which integrate consumers and suppliers. During its twenty-six years in effect, the Consumer Protection Code has earned the respect of the courts, which in most cases recognises the absolute vulnerability of the consumer in relation to suppliers of products and services in Brazil. When originally proposed, consumer laws were strictly limited to protect consumers on their purchases of products sold within the domestic market. That is to say, it did not encompass extraterritorial relations. However, in light of the phenomenon of the globalised economy, a series of questions were raised concerning the possibility of ensuring the rights of consumers who acquired a product abroad based on the reputation of a brand.

Compensation

Since one of the pillars of consumer laws is the principle of absolute compensation which, precisely for this reason, provides for joint and several liability in the consumption chain, Brazilian courts, in an effort to strike a balance between the globalised economy and the elimination of borders created by the classic legal system, have cleared the way for a contemporary law. To afford the average person the maximum protection in the consumer market, the courts have begun to disregard the territorial nature of the parties when entering into certain legal business.

Defective brand products

In mid-2005, the Superior Court of Justice, one of the highest courts in Brazil, ruled that a domestic company, Panasonic do Brasil Ltda, was liable for defective brand products acquired abroad. The case is a benchmark for the Brazilian jurisprudence concerning the possibility of holding liable a domestic supplier of products of a well-known brand which were acquired abroad and not covered by a worldwide guarantee. At the time, the interpretation that prevailed was that of Justice Sálvio de Figueiredo Teixeira, who argued that if the globalised economy has no fixed borders, encouraging and fostering free competition, “consumer protection laws must extend to the magnitude of their interpretation in the search for a balance that must govern legal relations and take into consideration the risk factor inherent to commercial competition, especially on an international scale and in the presence of powerful multinational companies with branches in different countries, not to mention the sales that take place today using the technological process of informatics and consumer market that our country represents."

Inadmissible

Therefore, it would be inadmissible to abandon consumers who, based on the international fame and respect of a brand, acquire a product, even if abroad. Especially because “the consumer market today undeniably finds itself ‘bombarded’ by intense and skillful advertising that induces the acquisition of products, taking into account a range of factors that include, it must be stressed, the reputation of a brand," he said. This interpretation has clearly and considerably expanded the situations of supplier liability established in consumer laws. This is because paragraph 3, section I of article 12 excluded liability of a “manufacturer, builder, producer or importer” that did not place the product in the market."

Transferring liability

Notwithstanding this precedent, many judges disagree with its unrestrained application, especially because it contradicts with the express language of the law  because it began transferring liability to suppliers which did not put the product into market, distorting the consumer market itself. In addition, concern was expressed that extending the interpretation of the law would encourage smuggled products, – especially electronic goods, which took unfair advantage of the guarantee of Brazilian companies relating to the same well-known brand here. 

Sony decision

In this respect, the 1st Appeals Panel of the TJ-DF denied application of the consumer law to a consumer who purchased a defective PlayStation 4 videogame manufactured by Sony while traveling abroad. The appellate decision touched precisely on the impossibility of applying a different interpretation to paragraph 3 of section 12 of the Consumer Protection Code, considering that  “it is a well-known fact that products acquired abroad directly by consumers and brought to Brazil carry no warranty in the Brazilian territory, unless the warranty purchased in the foreign country extends to Brazil." The 1st Appeals Panel of the TJ-PR, in turn, took a diametrically opposite position, asserting that “regardless of where the product is acquired, it is the understanding of the Appeals Panels that because it involves a company with global reach, it must provide warranty of its products in all countries where it is established since it takes advantage of a globalized market and, for this reason, it should bear such costs." 

Apple case

 A similar ruling was handed down by the Appeals Panel of the TJ-RS in a case of a consumer who acquired a defective mobile telephone from the US company, Apple Computer, ordering the Brazilian company to replace the device by a new one with the same technical specifications and pay compensation for moral damages  . 
Consumer protection authorities take a more modern and comprehensive approach, seeking to provide consumers with the maximum guarantee.

Consumer Protection opinion

The Consumer Protection Agency – PROCON/SP has expressly issued an opinion on this issue, which was released on its website , in response to frequent questions, that “the manufacturer of the product should fix it, provided that the brand is globally recognised since the domestic supplier benefits from extensive publicity and credibility of the brand”. According to this consumer protection body, a Brazilian supplier representing an international brand should repair the product acquired abroad, even in the absence of a global guarantee, within 30 calendar days as from the complaint. If repairs are not possible, paragraph 1 of section 18 of the Consumer Protection Code  prevails. Nevertheless, consumers should present proof of payment of the product and of import taxes upon the entrance of product in the country.

Trade without borders

The Brazilian Consumer Protection Institute IDEC has also taken up the issue, arguing that due to trade without borders, multinational companies have spread worldwide, which brought greater confidence among Brazilian consumers on the brands established in Brazil. As a result, for the institute, if the consumer detects a defect in the product not arising from natural wear and tear, or improper use, the company with a presence in Brazil must exchange it or fix it. Otherwise, there is no obligation in this respect and the consumer should complaint to the manufacturer in the country of acquisition of the product.  

Warranties

In our view, the above position is the most appropriate interpretation on this matter in the context of a globalised economy. The Consumer Protection Code defines the supplier as “an individual or entity, Brazilian or foreign” (section 3, main paragraph) and attributes liability to the supplier, which may be a “foreign  entity”. There is no provision excluding warranties on products acquired abroad and the law must be interpreted in a manner that best guarantees the rights of the consumer since it contains underlying principles of public order, also understood as being the driver of a micro legal system.

Foreign products in Brazil

One can not deny that in the face of globalisation, various manufacturers have sold millions of products, with leading world brands well represented through extensive media coverage. Therefore, it is legitimate to consumers, influenced by ostensive advertising of a given brand, to believe that the foreign product carries a warranty in Brazil.
Furthermore, subsection III of section 4 of the Consumer Protection Code, according to which the National Consumer Relations Policy,  must, among other things, strive to "align the interests of participants in consumer relations and strike a balance between protecting consumers and the need for economic and technological development in order to ensure that the principles on which the economic order is founded (art. 170, of the Federal Constitution) prevail, at all times, based on good faith and balanced relations between consumers and suppliers”.

Liability

Accordingly, to the extent that different interpretations still exist within the courts, bearing in mind the appearance theory and the extreme protection consumers enjoy within our legal system, it seems to us fair to assume that if a Brazilian company reaps benefits by presenting itself in the market similarly to a foreign company that markets the same brand, it must be liable for the risks of behaving in this manner. Furthermore, it is essential for the law to follow innovations which lead to a more modern view of the nuances of consumer relations, always observing specific situations of each case. The contemporary application of the law benefits the consumer, who, led by the reputation of a brand, acquires a product abroad.