The Brazilian Framework for Consumer Law and Recent Innovations in Consumer Legislation

This commentary provides an overview of the Brazilian framework on consumer law and the enforcement of such legislation in Brazil, as well as presenting insights that may be relevant for foreign investors and agents interested in the Brazilian consumer market.

It will also present examples of recent and very relevant innovation in consumer legislation, including changes enacted to reflect advances in the field of technology. In this sense, it will cover recent legal standards such as the E-Commerce Act, the Over-Indebtedness Act and new guidelines for digital influencers and how some of these measures seek to address and reflect technological advances, as well as briefly addressing current trends such as cryptocurrencies, the metaverse and ESG from a consumer protection perspective.

The legal framework and main stakeholders in the consumer market

Brazil became a democracy in 1988 and, two years later, Congress had already approved the most important piece of legislation concerning consumer affairs: Federal Law No 8,078/1990, commonly referred to as the Consumer Code, which is the main legal standard regulating consumer relationships in Brazil.

Although it has been more than 30 years since its enactment, the Consumer Code remains up to date. As it is a very comprehensive law, it allows players in the legal community – including lawyers, judges and consumer administrative entities such as the Consumer Protection and Defence Foundation (Procon) – to extract the relevant general principles that govern consumer relationships from the Code and adapt them to the current reality and needs of Brazilian consumers.

For instance, the Consumer Code – reflecting and expanding on constitutional provisions – sets out the fundamental rights of consumers, such as the rights to (i) life, health and safety; (ii) be educated on the adequate consumption of goods and services; (iii) receive clear and adequate information; (iv) be protected from abusive and misleading advertisements; (v) the revision/adaptation of abusive contractual clauses; (vi) compensation for individual and/or collective damages; (vii) broad access to the justice system; (viii) the simplification of the means to uphold and defend their rights; (ix) adequate public services; (x) responsible credit practices; (xi) the preservation of minimum economic conditions to ensure their survival; and (xii) information about the amounts (eg, weight and volume) of goods purchased. Such rights guide all consumer relationships and are usually broad enough to be applied in every type of relationship.

Nevertheless, the Consumer Code has not remained unchanged while society evolved. It has been updated and improved over the years and constantly adapted to suit the needs of modern society.

For instance, in 2008, the Code was amended to provide that suppliers are not allowed to advertise over the phone while consumers were on hold waiting for technical support. This amendment was a reaction to a problem that consumers were frequently facing at the time and sought to reinforce the need for respect for consumers and loyalty in consumer relations, by barring suppliers from implementing abusive and undesired advertising practices.

Moreover, in 2009 and 2012, the Code was amended to determine an increase in the amount of information that should be made available to consumers, as a means to ensure their right to make informed decisions, which is also an essential right set out in Brazilian law.

In 2021, through the enactment of Federal Law No 14,871 (referred to as the Over-Indebtedness Act), Congress revised the Code to regulate the conditions under which lines of credit are offered to consumers, seeking to address and reduce the problem of over-indebtedness, which increasingly afflicts Brazilian consumers and families and which was aggravated by the COVID-19 pandemic.

In addition, it is worth mentioning that, over the years, the effectiveness of the provisions set out in the Code have also increased, since the Brazilian government has created a set of agencies tasked with the defence of consumer rights. This initiative was implemented by a network of laws and decrees that created entities in charge of overseeing the market and compliance with consumer law, thereby contributing to the enforcement of the Consumer Code and the rights recognised therein.

One of the most important of these agencies is the National Consumer Bureau (the “Secretaria Nacional do Consumidor”, also known as Senacon). Senacon is an entity within the Ministry of Justice (a branch of the Federal Government) and, since its creation, the agency has focused on the planning, drafting, co-ordination and execution of a National Policy on Consumer Relations, with the objectives of:

• guaranteeing the protection and exercise of consumer rights;
• promoting harmony in consumer relationships;
• encouraging the integration and joint action of the members of the National Consumer System – which encompasses Procon offices, the Public Prosecutor’s Offices for Consumer Protection, the Public Defender’s Offices, the Consumer Protection Precincts and civil organisations for consumer protection – who operate in an integrated and co-ordinated way with Senacon; and
• participating in national and international bodies, forums, commissions or committees dealing with consumer protection and defence or matters of consumer interest, among other such objectives.

Therefore, it can be said that Senacon is the public organisation responsible for the co-ordination of the whole network of government entities that are tasked with promoting and enforcing the provisions of the Consumer Code. Together with Senacon, there many other entities that assist in the enforcement of the Consumer Code in Brazil, as will be shown herein.

Procon offices are administrative bodies that operate at the state and municipal levels and whose main task is promoting the education, protection and defence of consumers by preparing and executing public policies that regulate the relationships between consumers and suppliers. Procons – which are present in several cities – can also act to combat the violation of consumers’ individual and collective rights and, as a result, are usually the first entities that Brazilian consumers who believe their rights have been violated reach out to.

On the other hand, the Public Prosecutor’s Offices for Consumer Protection act mostly in defence of collective consumer rights (with social relevance). Therefore, in general, they are not involved in the protection of strictly individual interests. These entities, in short, are responsible for representing consumers before the judiciary system collectively.

The Public Defender’s Offices are responsible for the representation of individual consumers. For example, if a consumer wishes to seek a judicial remedy for a violation of their rights and cannot afford a lawyer, a Public Defender may be appointed to represent them.

The Consumer Protection Precincts, in turn, are specialised in and tasked with investigating crimes related to consumer relationships.

Finally, civil organisations are made up of individuals and/or suppliers that defend and represent the interests of certain groups within the wider consumer market. For instance, there are associations related to different industry sectors, the civil construction sector, start-ups, etc, and such entities understand the interests of their respective members and seek to represent them (in and out of court) in a consistent and effective manner.

From the summary above, it is clear that Brazil is well equipped to make sure that the Consumer Code and the principles and provisions it enshrines are enforced and that suppliers and consumers can interact in harmony. As a result, foreign investors and other interested parties can assess risks associated with the consumer market with considerable predictability and feel secure when bringing their activities to Brazil.

The 2013 E-Commerce Act

In addition to the changes to the Consumer Code outlined in the previous section, another amendment worth mentioning was made to the Code in 2013. Given the increasing importance of the internet in consumer relationships, Congress enacted Federal Decree No 7,962/2013, which sets out rules to be observed in the context of e-commerce agreements.

This new law is known as the E-Commerce Act and seeks to apply principles of consumer law to the virtual world, including the duty to properly inform consumers, the duty to facilitate communication between suppliers and consumers, and consumer’s right to buyer’s remorse.

In short, the E-Commerce Act establishes standards that must be observed by suppliers in the internet age, so that online purchases can be carried out more efficiently and with more security for both consumers and suppliers, since the Consumer Code, without a doubt, also applies to online transactions.

These provisions are beneficial both for the consumer and the supplier. For example, by requiring that suppliers clearly and properly inform consumers, the law reduces the risk that a consumer will decide to invoke their right of regret (embodied in the possibility of cancelling a deal within seven days of the delivery of the product). On the other hand, the right of regret protects the consumer against false or incorrect information provided by the supplier.

In any case, it is worth noting that, due to the speed at which technology advances, there is already a draft bill (the House of Representatives’ draft bill No 3,514) being studied by the Brazilian Congress to supplement and expand the current legal framework for e-commerce in Brazil.

Frequent amendments to existing consumer laws suggest that the Brazilian legal framework is constantly adapting and evolving in accordance with society’s needs and the development of new technologies. In fact, the E-Commerce Act is a clear example of this evolution: once the government realised that online transactions were becoming a central part of consumer relationships, the Decree was enacted to reinforce that the provisions of the Consumer Code also applied to those transactions, as well as to clarify how they may apply in certain situations that are specific to online transactions.

However, it should not be forgotten that legislation is always at least a step behind the latest tendencies and that legislators must work continuously to catch up on reality. An example of this is that, while the E-Commerce Act establishes rules for transactions that are concluded on suppliers’ websites, there is still no specific regulation of transactions carried out through intermediaries on marketplaces, even though the number of such transactions is consistently increasing.

In any case, while transactions carried out in online marketplaces are not expressly regulated, the principles and general rules established in the Consumer Code can be applied to such transactions and adapted to address their specific characteristics.

Ground-breaking initiatives: the Over-Indebtedness Act and CONAR’s guidelines for digital influencers

Other recent ground-breaking legislative and civilian initiatives in Brazil also further evidence policymakers’ intent to constantly update and renovate the consumer law framework, so that it is up to date with the latest trends and technological innovation. Such initiatives may also spark the interest of investors and other interested parties, as they draw attention to these trends.

As mentioned above, the Over-Indebtedness Act was enacted in 2021 and aimed to regulate how lines of credit are offered to consumers. For example, the Consumer Code was altered to establish the need for credit providers to properly inform consumers of the total costs involved in such agreements, as well as to reinforce credit providers’ duties to respect consumers’ right of regret and to avoid any kind of coercion leading consumers to consent to the terms of credit agreements, among other changes.

Moreover, the Over-Indebtedness Act also sets out measures that may be adopted by both suppliers and consumers in cases of consumer over-indebtedness – such as methods that may be adopted to resolve disputes – and even expressly provides that the judiciary may review the credit agreements and alter (or void) clauses that are abusive.

According to the reasons provided by Congress to justify the enactment of the Over-Indebtedness Act, this new legal standard aims to reduce the number of over-indebted consumers – ie, consumers who are in so much debt that they are virtually insolvent and, if they are made to pay their debts, will lack the resources to meet the minimum requirements for their subsistence – and protect those consumers who are most vulnerable and most likely to become over-indebted (usually, less educated and/or elderly consumers).

By providing such protection, Brazil is enforcing the general principles set out in the Consumer Code, as well as contributing to the economic recovery of its over-indebted population, especially those individuals who experienced sharp economic losses during the COVID-19 pandemic.

In short, the Over-Indebtedness Act is another example of Brazilian legislators consistently pursuing innovative measures to solve everyday and current problems and protect rights that are actively being threatened.

Similarly, another commendable recent initiative was the guide for digital influencers drafted by the National Advertising Self-Regulation Council (Conselho Nacional da Auto Regulamentação Publicitária, popularly known as CONAR). CONAR is a civil organisation that is widely known and respected by advertising professionals in Brazil. CONAR’s members include some of the most relevant players in the Brazilian consumer market, which is why its central publication (the Brazilian Advertising Self-Regulation Code, also known as CBAP) is respected not only by suppliers in general but also by the courts of law.

It is worth highlighting that the CBAP sets out the rules for advertising in Brazil, basically restating the principles and rights established in the Consumer Code and applying them to the field of advertisements; which is ultimately the means of communication between suppliers and the consumer market.

In this scenario, CONAR recently decided that it was time to issue guidelines for digital influencers, mostly because such professionals are increasingly involved in the production of advertising content (through social media), but do not always observe the rules that govern the advertising sector and the consumer market.

Thus, in its new guide (issued in 2021), CONAR encourages digital influencers to become familiar with the CBAP and the rules and principles set out therein, as well as those provided in the Consumer Code, and advises influencers to, for instance, identify advertising content as such, consider child and adolescent viewers when posting ad content, and properly inform potential consumers of the features of the products or services advertised.

CONAR’s guidelines for digital influencers also illustrate the ability of players in the Brazilian consumer market to swiftly adapt to current demands and the reality of that ever-evolving market, as well as the real efforts made in Brazil to ensure compliance with the applicable rules, such as the CBAP and, indirectly, the Consumer Code.

Other trends in the consumer market

So far, we have shown that the competent Brazilian authorities and relevant stakeholders are paying close attention to the latest developments in technology and consumer demand, always seeking to ensure that the applicable legislation and directives adequately address current practices, so that consumer relationships can be safer in a quickly changing world.

By analysing the latest developments in other legal systems in contrast with Brazilian law, we can also identify other legal initiatives that may be effective in Brazil.

ESG

A good example of this is environmental, social, and corporate governance (ESG) practices. As the world promotes initiatives related to ESG, the Brazilian market is no different. As a result, the Brazilian Securities and Exchange Commission (CVM) recently began asking the companies subject to its regulation to provide information about ESG initiatives they implement, so that investors can have access to information on measures adopted by regulated companies related to the subject. Similar actions are expected in the context of consumer relationships, in line with the principle of transparency that governs the consumer market, especially given that suppliers are increasingly using ESG content to draw consumers’ attention and gain preference.

Brazil currently lacks specific laws requiring sustainable practices of production, logistics and consumption from a consumer perspective. Except for regulation of specific products, environmental legislation related to sustainable production is still insufficient and lacks enforcement. To solve this, legislative bills on the matter have been presented in the House of Representatives.

In any case, despite the absence of general and broad legislation related to sustainable consumer practices, governmental authorities, competitors, associations, and consumers in general still seek to ensure compliance with sustainable consumer practices by applying the principles set out in the Consumer Code and consumer regulation to those practices.

Cryptocurrencies, NFTs and the metaverse

Another topic that is expected to be addressed soon by Brazilian law is the negotiation of cryptocurrencies, as the Brazilian Senate is currently studying how domestic financial laws can be adapted/amended to regulate transactions using this new form of currency, which is being used increasingly worldwide.

The crypto market is especially popular in Brazil and, as such, it is expected to be regulated at the domestic level soon, despite its transnational nature. Such regulation will surely address consumer matters, such as the possibility of ordinary investors carrying out transactions to purchase and sell these currencies.

In fact, Brazilian authorities have recognised that providers are liable for service defects that cause damage to customers, including those arising from the loss, theft, or misplacement of crypto-assets.

In this sense, Brazilian courts have issued decisions recognising the applicability of the Consumer Code to transactions carried out by brokers dealing in cryptocurrencies. The Appellate Court of the State of São Paulo, for example, recently delivered a decision stating that an agent providing intermediation and custody services related to crypto-assets meets the definition of a “supplier” provided in the Consumer Code. Thus, agents must compensate damages incurred by consumers as a result of defects related to the provision of such services.

In line with the aforementioned precedent, draft Bill No 4,401, which is currently being studied by Congress, also determines that the Consumer Code will apply to consumer transactions involving the commercialisation of virtual assets, which leads us to believe that there will soon be additional legal certainty on the matter.

Similarly, NFTs are also expected to the subject of new legislation soon, since the matter is drawing significant attention because of the amounts involved in transactions and the fact that NFTs are becoming increasingly popular in the sports/gaming industry, including in sports/games that are very popular among the younger population in Brazil, such as MIR4, Cryptoplanes and Cryptocars. Therefore, it is likely that Brazilian authorities will try to swiftly take measures to ensure that consumers’ rights (and young adults’ civil rights) are being respected in such games and transactions.

Lastly, it is fair to say that Brazilian authorities are also closely monitoring the newest trend in technology: the metaverse. It is still too soon to assess what regulation could arise in relation to this matter, but it is somewhat safe to predict that, in the future, authorities will take action to enforce the law in this new world.

In light of this scenario, it seems clear that the law is catching up with technology and some new, hi-tech issues are already being addressed by authorities and stakeholders within the consumer market – but it is important to stress that such measures must be taken swiftly, so that new challenges can also be equally addressed and resolved as they arise.

Conclusions and perspectives for the future

It is clear that the Consumer Code is crucial to Brazil’s consumer market, especially given its evolution over time, which shows the great concern of government authorities with the applicability of its rules and principles in modern times and a serious commitment to foreseeability and legal certainty in the field.

More than that, the Consumer Code is also fundamental due to its comprehensive nature, which provides most of the necessary guidelines for the legal community to understand and construe the principles provided by the Consumer Code in accordance with the current demands of society, even if there are no specific provisions for some of those demands yet.

Nonetheless, it is undeniable that technological innovations arise faster than the law can predict and/or than it can be adapted, which is why, in addition to the application of general legal principles, self-regulation is also a very good strategy to address the needs of the ever-changing tech field.

Such a solution, together with the consistent application of the general provisions of the Brazilian legal framework, would put Brazil in a very comfortable situation to deal with demands arising from technological innovation, at least for the next 30 years.