THE current political shift to a "more market-friendly approach" is encouraging an increasing number of companies to invest in Latin America. Inflation and fiscal deficits are falling and currencies' depreciation -which used to erode profits in dollar terms and generated an incentive for multinational firms to move to other markets in the past- is now stabilizing. This shift leaves the region fertile for business development in a reduced players' market.
For those businesses involved in the manufacturing and supply of consumer products, a proper understanding of product liability issues has a direct impact on profit. More often than not, product defects present complex crossborder situations that require a product liability risk management team with knowledge of the relevant laws across the jurisdictions at play. Failing this, the rising number of product liability cases -including class actions and punitive damages regulations in the region- may reduce profits, not only because of litigation expense, but also due to the company's potential tarnished reputation. All in all, product liability risk management should be embraced as an achievable way of increasing firm value.
While the countries in the region seem to be following each other's lead in the political shift, product liability issues still vary greatly, despite the fact that their approaches are often meant to be coordinated, as intended by the Organization of American States. These divergences reinforce both in-house and external counsel's need to understand cross-border issues where their clients' products or components are marketed.
In this article, we set out a general overview of the product liability regimes across five countries in the region. We also encourage developing close connections with Latin-American firms who have the ability and expertise to provide advice and manage the practical application of product liability issues.
We are particularly grateful to every Latin-American IADC colleague who invested their time and effort in drafting the responses to the proposed questions. Without their assistance, this article would not have been possible.
Product liability is regulated by the general regime for damages in Argentina, which has its legal origin in the Civil & Commercial Code, Law No. 26,994 ("CCC") and the Consumer Protection Law No. 24,240 ("CPL"), as amended. Criminal liability may also arise in specific cases where products intentionally, or by means of serious negligence, do not comply with applicable regulations or if the sale or marketing of the product involves fraud. Consumers are further protected by fair trade laws, which establish rules for labelling and advertisement of products.
Definition of a "product defect"?
Neither Argentine law nor the Consumer Protection Agency provides a definition of product "defect". Frequently, the terminology found in Article 1757 of the CCC will be used, which addresses: the damages caused by virtue of the risk or defect inherent in their goods. Under this rule, the traditional three types of defect apply: manufacturing defect; design defect; and warning defect. The applicable standard is that products must provide safety against risks that are reasonably foreseeable.
Argentine scholars' opinions also refer to the European Council Directive 85/374/EEC of July 25, 1985 which states that
A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including: (i) the presentation of the product; (ii) the use to which it couldreasonably be expected that the product would be put; (iii) the time when the product was put into circulation' and that 'A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation. In fact, the European Directive arguably does not contain a "defect" definition, but points to when a product may be defective. In this respect, the law seeks to avoid the analysis of the causes or origins of the defect that produce damage and emphasize in the circumstances when a product does not fulfil the security conditions. These circumstances ultimately will be judged by courts in each case.
Relevant product liability regulatory authority and their powers
The Secretary of Commerce (SC, an agency of the Ministry of Production) through the Consumer Protection Agency (CPA--Direccion Nacional de Defensa del Consumidor) is the federal enforcing authority for the CPL. The provinces and the City of Buenos Aires have their own local enforcing authorities.
The CPL empowers the SC as the control agency to:
(i) develop policies of consumer advocacy for sustainable consumption and environmental protection;
(ii) maintain a national register of associations of consumers and users;
(iii) receive and act on the concerns and complaints of consumers or users;
(iv) arrange for inspections related to the application of the CPL;
(v) request reports and reviews to public and private entities regarding the matters of the CPL; and
(vi) punish sua sponte or by request from hearings involving complainants' victims, suspected offenders, witnesses and experts.
On a lower administrative level, the CPA shall comply with the following directives:
(i) understanding on the implementation of policies and regulatory frameworks needed to protect consumer rights;
(ii) advice, orientation and broadcasting of information to consumers and suppliers;
(iii) processing consumer complaints, monitoring, and establishing sanctions if deemed applicable;
(iv) monitoring and control over suppliers' illegal or harmful behaviors;
(v) providing support to teachers, education entities as well as provincial and/or municipal agencies and
civil, social, community, professional and/or business organizations agencies; and
(vi) organizing, maintaining and promoting the national register of associations of consumers and users.
Additionally, those authorities that have approved the commercialization of the product shall monitor product's compliance with specific regulations, including safety matters.
Product recalls or other corrective action
There is an obligation to recall a product if it is considered "potentially harmful" or "dangerous" after having introduced it into the market. In this regard, recently enacted Resolution No. 808-E/2017 of the Ministry of Production regulates this procedure, including providing: (i) the requirements for the notice to the regulator and consumers; (ii) the presentation of a dissemination plan; and (iii) reporting obligations. There is an obligation to provide progress reports in periods that should not exceed 60 days and a final report should be filed after the corrective actions is terminated. The regulator may require further measures subject to the consumer response to the corrective action conducted.
Resolution 808-E/2017 of the Ministry of Production provides that mandatory notification to the Ministry must contain the following requirements:
(i) identification of the product or service provider including: legal status or corporate name; name or commercial business name; principal and secondary economic activities; tax ID number; address of the establishment; phone, fax and email; name and title of the responsible representatives; and existence of supplier representation from the MERCOSUR States parties, and where applicable, indicating the identification and contact details;
(ii) detailed description of the product or service, including the necessary information for its identification, especially: company name; brand; model; number or code (batch, series, chassis, barcode, etc.); initial and final date of manufacturing; manufacturing country; image in digital format of the product; quantity and date of commercial sale; stock products without sale; and when applicable, to which countries the product or service has been exported;
(iii) detailed description of the defect, supplying the necessary technical information and identifying the date and manner in which it was detected;
(iv) detailed description of the risks and their consequences;
(v) geographic location of products and services which present the defect;
(vi) indication of measures already adopted, and of proposals to correct the defect and eliminate the risk;
(vii) if any have occurred, description of accidents related to the defect of the product or service, including the following information: place and date of the accident; victims' identification; material and physical damage caused; if applicable, information from any legal action related to the accident, specifying the cause of action, the names of the parties, judicial districts and the courts where it was filed and the case number; and provisions adopted in relation to victims;
(viii) media plan; and
(ix) consumer response plan.
The national authorities referred to above may request from the provider the additional or complementary information that they deem necessary.
The local regulation states that the notification should be made "immediately"; i.e. it should be made as soon as possible. There is no specific form.
Penalties or sanctions for failing to comply with reporting obligations
The CPA imposes administrative penalties to the supplier for breaching its obligation to notify consumers and relevant authorities or conducting the recall, with fines up to ARS 5,000,000 (approx. USD $290,000). Other sanctions that may be imposed by these authorities are the following: warning; seizure of goods and products that are the subject matter of the infringement; closure of premises; suspension of registration in the registers of suppliers required to contract with the government for up to 5 years; forfeiture of concessions, privileges and special tax or credit systems granted in favor of suppliers. Please note that these sanctions may be applied even if there is no damage suffered by any person...