Volume 6, Number 5, Page 1

New Consumer Protection Law in Paraguay

By Diego Zavala

In September of 1998 the Paraguayan Congress approved a new "Protection of the Consumer" reform, which establishes rules for the protection and defense of consumers in the Paraguayan market. All actions taking place between providers and consumers relating to the distribution, sale, purchase of goods or services occurring in Paraguay will be subject to the provisions of this law, effective at the end of May 1999.

The law engenders a new understanding of contractual rights with the objective of protecting end consumers of goods and services. It moves away from the traditional concept (Free Will) of the Civil Code, and moves towards protecting the end consumer. The rules of the Consumer Protection Law apply to those contracts in which the end user finds himself at an obvious disadvantage, lacking the ability to negotiate the contents of the contract, as a consequence of the dominant position of one of the contracting parties. For this reason, the Executive Branch introduced innovations which favor consumers and users of public services, who at present find themselves at a disadvantage when dealing with services provided by state companies (e.g. - electric, water and telephone service).

The basic definitions of the new Law (No. 1334/98) include:

• Consumer or User: any person, physical or legal, national or foreign, who acquires, uses or enjoys as the final user goods or services of any nature.

• Provider: any person, physical or legal, national or foreign, public or private who develops activities of production, manufacture, importation, distri-bution, commercialization, sale or leasing of goods or provision of services to consumers or users, respectively, who pay a price or tariff.

• Products: anything that is consumed by its employment or use and things or devices for personal or family use which are not consumed by their use.

• Services: any service provided in the marketplace including those of a banking, financial, credit or insurance nature, with the exception of those resulting from employer-employee relations. Not covered by this law are professional services requiring for their practice a university degree and a license granted by an authority empowered to give it. Advertising of such services is, however, covered by the law.

The law defines consumer relations as the legal relationship established between a product or service and whoever, as the end user, acquires or uses it.

The law states the basic rights of the consumer, some of which are as follows:

• The protection of life, health and safety from risks arising from the provision of products and services considered harmful or dangerous.

• The disclosure of the characteristics of goods and services offered in the market, guaranteeing to consumers freedom of choice and an equal footing in the contract.

• Clear information about products and services with corresponding specifications on the composition, quality, price as well as any danger they may eventually present.

• Adequate protection from: deceptive advertising, coercive or unfair commercial practices, abusive contractual clauses in the provision of products and the providing of services.

• The effective reparation of compensatory and punitive damages to consumers, whether they be individual or collective.

• To receive the product or service offered in the time, quantity, and quality and at the price promised.

Law 1334/98 includes a chapter intended to regulate the information that must be provided in order to market goods and services in the Paraguayan market. Within this chapter, it is important to mention that whoever produces, imports, distributes or markets goods or provides services in the country must provide to consumers or users adequate information about the essential characteristics of the same. The offering and presentation of goods and services must include clear, correct, precise and visible information written in Spanish on the characteristics, qualities, quantity, composition, price, guarantees, length of warranty, origin, address for claims, and the risks to the safety of the consumer.

Guarantees must be written clearly and legibly in Spanish and apply to all identical products, containing as a minimum the following information:

• Identification of who offers the guarantee.

• Identification of the manufacturer or importer of the product or provider of the respective service.

• Precise identification of the product or service, with its technical specifications.

• Terms of validity of the guarantee, its term and coverage, specifying the parts of the product or the service which are covered by the guarantee.

• The address of whoever is contractually obligated to honor the guarantee.

• Costs to be paid by the consumer, if any.

Additionally, the law requires that when products are offered with defects, or are used or rebuilt, such conditions must be precisely and clearly indicated.

The law requires that manufacturers or importers of goods provide a regular supply of components, spare parts and technical service during the period in which goods are manufactured, assembled, imported or distributed and thereafter for a reasonable period relative to the durability of the goods in question (unless the offer makes it clear that the seller is not obligated to provide same).

With regard to the offering of public services, this legislation also brings into being significant advances in the protection of the consumer of public services provided by State companies. Such advances include:

• The obligation of the companies to provide written proof of the terms for providing services, and the rights and obligations of both parties.

• The obligation to give users equal treatment, especially relating to refunds or returns, applying the same criteria established for late payment penalties.

• A claims registry is to be setup. Such claims must be satisfied under the terms established by law.

• Users must be informed of safety conditions regarding the devices by which a service is provided.

The law authorizes the Ministry of Industry and Commerce to verify the proper functioning of instruments of measurement for energy, fuel, communications, drinking water or any other service when doubt exists about the accuracy of readings carried out by service providers.

In addition a legal presumption aimed at eliminating the inequality between service providers and the consumer. When service is interrupted or undergoes changes, it will be presumed that it is due to causes attributed to the providing entity.

One of the most important chapters is that related to the contractual protection of the consumer. In this chapter are regulated adhesion contracts and the conditions of validity of the same in offering products and services.

The law defines adhesion contracts as those whose clauses have been approved by the competent authority or unilaterally established by the provider of goods and services, without the end consumer's being able to discuss or substantially modify its content at the moment of signing.

The law considers as abusive and will nullify to the full extent of the law clauses or stipulations contained in adhesion contracts which:

Misrepresent obligations or which eliminate or restrict responsibility due to injury.

• Imply renunciation or restriction of the rights of the consumer.

• Impose the mandatory use of arbitration.

• Allow the provider to unilaterally vary the price or other terms of the contract.

• Violate or infringe upon environmental laws.

• Impose unfair conditions in the contract, excessive cost for the consumer, or cause him to be defenseless.

The limitations set out in the Consumer Defense Law which affect adhesion contracts, must be analyzed together with the limitations set out by the Civil Code (article 691) which also affect adhesion contracts. Among the clauses in the Civil Code which refer to adhesion contracts, we specifically mention the following:

• Those which exclude or limit the responsibility of the party who imposes them.

• Those which grant the power to dissolve the contract or change its conditions, or in any way deprive the signing party of any right inherent in this.

• Those, which impose upon the signing party, set means of proof, or the burden of proof.

• Those which subject to a time limit or conditions the rights of signing party to avail him or herself of legal action, or limit the legal processes of which the signing party could make use.

• Those which permit the unilateral selection of a competent judge to resolve a disagreement between parties.

In the matter of protection of health and safety, the law provides that all goods and services whose use could occasion a normal and predictable risk to the life, safety and health of consumers must be marketed in compliance with the means, instructions and rules necessary to guarantee their reliability.

Providers of goods or services who have knowledge of their products danger, must communicate immediately such circumstances to the proper authorities and to consumers by means of public announcements, under penalty of sanction.

If it is discovered that a product suffers from a serious defect or constitutes a considerable danger, even if used properly, the authority contained within the present law will obligate manufacturers or distributors to remove and replace or to modify the product or substitute another product.

The law also regulates advertising of goods and services, by prescribing that all misleading advertising shall be prohibited. Construed as such includes any form of information, distribution or communication related to advertising which is entirely or partly false, or which in any way, including by omission, may be capable of misleading the consumer.

Comparative advertising is not permitted under the law when, through deceitful actions or general or indiscriminate statements, the consumer is induced to conclude that one product or service is superior to another. Also prohibited is abusive advertising, understood to be that of a discriminatory nature, or that which incites violence, exploits fear, takes advantage of children, threatens environmental quality or is capable of inducing the consumer to behave in a way harmful or injurious to their health or safety. Concerning the advertising of tobacco and alcohol, this remains controlled by special laws.

As for the defense in court of the rights of consumers, the law states that it can be done individually or collectively. It will be done collectively when complex interests or widespread or collective rights occur. The consumer or user, consumer groups, the Ministry of Industry and Commerce, municipalities or the Public Prosecutor will have the right to take action. Actions that lead to compensation for injury or damages can only be brought about by consumers or affected users.

As for penalties, Law 1334/98 orders that judgments may:

• Prohibit the exhibition, circulation, distribution, transport or marketing of products which infringe upon the provisions of the law.

• Order the seizure of products that infringe upon the provisions of this law when they are dangerous or harmful to health.

• Order the cessation of activities of persons or entities carrying out operations or actions prohibited by law.

• Order the temporary closure of an establishment, business or installation through a prior and proper hearing.

• Apply warning fines meant to comply with what is ordered in specific sentences or precautionary measures.

In addition to progress in Paraguay, Considerable advances have been made in developing standards of protection for consumer rights in MERCOSUR (Mercado Común del Sur), of which Paraguay is a member.

Editor's note: For a list of specific decisions approved by Mercosur and cited by Diego Zavala, contact the Inter-American Trade Report at amurphy@natlaw.com

Diego Zavala is an attorney with Estudio Mersan of Paraguay.

Translated from the Spanish by Doug Kasian.