The ins and outs of product liability in Brazilian pharma. Prepared in association with Trench, Rossi e Watanabe one of Brazil’s most prestigious law firms, this is an extract from The Pharma Legal Handbook: Brazil, which can be purchased for USD 99, here.
1. What types of liability are recognized in your jurisdiction?
The scope of liability for suppliers and the standards for consumer protection in Brazil are, in some cases, more severe than the consumer rules applicable in other countries.
The Brazilian Consumer Defense Code – CDC establishes a strict liability regime, which means that under the CDC, the consumer will not have to prove the agent’s fault, but only the connection between the damage and the action of the agent. As a general rule, if the offense was caused by more than one responsible party, all the suppliers may be held jointly liable.
Violation of legal provisions of the consumer protection legislation may also subject the supplier to administrative and criminal penalties, in addition to the need to indemnify damages or harm caused to consumer (civil liability).
2. How do these types of liabilities apply to the manufacturers of medicines and devices?
The strict liability will be applied to the manufactures of medicine and devices for the redress of damages caused to consumers by defects from design, manufacture, construction, assembly, formula, handling, presentation or packaging of products, as well as for the improper or incomplete information about their use and risks.
In addition, non-compliance with the CDC, such as publishing misleading advertisement or not conducting the recall of hazardous products, may bring about administrative and criminal sanctions.
3. Does potential liability extend to the manufacturer only or could claims extend to corporate executives, employees, and representatives?
Article 12 of the CDC states that national or foreign manufacturers, producers, constructors, and importers are liable, regardless of the existence of culpability, for the redress of damages caused to consumers by defects from design, manufacture, construction, assembly, formula, handling, presentation or packaging of products, as well as for the improper or incomplete information about their use and risks.
The seller shall equally be held responsible in the terms of the preceding article when:
- the manufacturer, constructor, producer or importer cannot be identified;
- the product is offered without a clear identification of its manufacturer, producer, constructor or importer;
- improper handling of perishable goods.
On the other hand, the personal responsibility of independent professionals shall be determined upon verification of the fault.
In addition, article 28 of the CDC states that the judge may disregard the legal identity of a company when, to consumers’ disadvantage, there is abuse of rights, excessive power, breach of the law, illicit act or fact, or violation of the bylaws or social contract. It shall be also exercised in the event of bankruptcy, insolvency, closing down, or inactivity of the body corporate resulting from mismanagement.
Also, the CDC considers certain practices as crimes against consumer relations, providing penalties such as imprisonment from three months to two years and/or payment of fines. Misleading and abusive advertisements are considered crimes against consumer relations. In the same way, not performing a recall campaign is understood by the CDC as a crime.
Federal Law No. 8,137/90, which defines crimes against the tax and economic systems, also provides for crimes against consumer relations, establishing penalties such as imprisonment from two to five years and/or fines. Some examples given by this law are: (i) selling or exposing for sale goods that are not in compliance with legal requirements or that do not fit their official classification and (ii) selling or storing product with improper conditions for consumption.
Please note that article 75 of the CDC states that those who anyway contribute to the crimes referred to in this Code shall incur in the applicable penalties according to the extent of their culpability. Likewise, the director, administrator, manager of the corporate body that promotes, allows or anyway approves the supply, offer, exhibition to sale or maintenance in store of the products or the rendering of services in the conditions hereby forbidden.
4. How can a liability claim be brought?
Federal and state district attorneys as well as Brazilian nongovernmental organizations (NGOs) registered with public record offices have standing orders to sue suppliers for damages caused to consumers individually and/or collectively, in view of non-compliance with the consumer protection legislation, in public civil actions regulated by Federal Laws No. 7,347/85 and No. 8,078/90.
Consumer protection agencies at the state and federal levels have concurrent jurisdiction to implement the consumer protection policy, as well as to sanction companies, in the administrative sphere, in case of non-compliance with consumer protection rules.
Generally, administrative penalties against suppliers include fines, product seizure, destruction of the product, cancellation of product registration with the competent authorities, prohibition to manufacture
the product, suspension of product or service supply, temporary suspension of the activity, revocation of concession or permission to use, cancellation of license for the establishment or activity, total or partial closing down of the establishment, work or activity; administrative intervention and imposition of counter-advertising. Please note that such penalties may be applied cumulatively.
The penalty most commonly applied is the fine. Such penalty is graduated according to the seriousness of the infraction and the advantage obtained, and ranges from BRL 646.33 to BRL 9,691,976.50. Please note that this amount is updated on a quarterly basis.
Most of the public civil actions filed in Brazil were and are initiated by federal or state district attorneys’ offices. In these cases, district attorneys initiate civil inquiries prior to filing public civil actions, in order to evaluate whether the supplier has caused damage to consumers or not. In the civil inquiry procedure, companies usually have the opportunity to present the appropriate information regarding the investigation.
It is also possible to reach an agreement during the civil inquiry procedure. Such agreement, known as “Consent Decrees” normally establishes corrective practices to be adopted by the suppliers, which, in case of non-compliance will be subject to fines. Consent Decrees also usually have a clause that provides for the payment of an indemnification for the damage caused to the consumers, collectively.
As to individual civil liability lawsuits against suppliers, the CDC provides procedural tools to be used for the protection of consumers. In this scenario, the lawsuit may be filed in the consumers’ residence jurisdiction, once it facilitates the access to the judiciary.
Also, according to the CDC, consumers have as one of their basic right the facilitation for the defense of their rights, including the inversion of the burden of proof in their favor.
Please note that a criminal action could be promoted by the Attorney General Office as well, independent of the manifestation of the victim, in the crimes indicated in the article 61 to 74 of CDC and in the Federal Law No. 8,137/90.
Governmental entities and agencies specifically designed for the defense of the consumers interests and associations that have been legally constituted for at least one year whose institutional purposes include the defense of the interests of the consumers, may intervene as assistants to the Attorney General Office and are also empowered to propose a subsidiary penal action in case the charge is not brought forth within the legal term.
5. What defenses are available?
Article 12 of the Consumer Defense Code list three basic defenses that the manufactures could present:
- they did not introduce the product into the market;
- the alleged defect does not exist; or
- the damage was caused solely by the consumer or third parties.
This list of defenses has been the subject of many legal discussions, including whether it is exhaustive or not. For example, another accepted defense is external force majeure, which is any event beyond the producer’s control that occurs after the product has been put on the market.
From the administrative perspective, depending on the circumstances and the sanctions applied against the suppliers, the annulment of the procedure can be requested. Relevant regulations establish formal and material elements that must be included in the infraction notices issued by the Agencies. The analysis of these rules is essential when constructing the claim of the annulment of an infraction notice or process.