News Alerts

Carey News Alert Law: Law 20,146 (“SMB Statute”) and its impacts on consumer protection
June 6, 2010

A new law that sets special norms for small and medium-size businesses entered into force last Febrary 3rd 2010 in Chile. Law N° 20.416 protects SMBs with provisions of the Consumer Protection Law, including the possibi­lity of filing class actions.

Executive Summary

On February 3, 2010, Law 20,416 (“SMB Statute”) was publis­hed in the Official Gazette, which establishes special rules forSmall Size Businesses (“SSBs”).

The new law defines, for the first time ever, what are micro,small and medium-sized businesses, on the basis of the salesrevenues:

a) Micro business: Annual sales and service revenues (netof VAT and excise tax) of up to 2,400 UF.

b) Small business: Annual sales of 2,401-25,000 UF.

c) Medium-sized business: Annual sales of 25,001 – 100,000 UF.

This new law makes most of the provisions under the Consu­mer Protection Law extensive to SSBs with regard to supplierrelations. In other words, SSBs are “consumers” in their rela­tions vis-à-vis their suppliers.

Consequently, in their relations with customers that qualify asMSBs, companies must implement the principles recognizedin this Law and which fall back on the Consumer Protection Law, which will require businesses to review practices andprocesses such as mass contracting, remote contracting,warranties, advertising and information to SSBs.

Moreover, SSBs may file class action suits against theirsuppliers, either directly or through the trade associations towhich they belong.

I.-Modifications in relation to Consumer Protection:

The most relevant innovation introduced by the new law in thissphere was to provide that micro and small-sized companies(“MSBs”) generally have the same rights as any consumer does when they purchase from their suppliers, and theserights cannot be subject to ex-ante waivers.

Consequently, some provisions under the Consumer Protec­tion Law are applicable to consumer relations between smalland micro businesses. Following are the matters consideredmost relevant.

a) Consumer rights and duties: the right to retract isapplicable to relations between SSBs and their suppliers,and the most general principles that regulate consumerrelations: i) right to receive true, timely information, ii) non­discrimination; iii) free choice of goods and services; and iv)total safety and repair.

Suppliers must therefore adhere to the aforementioned princi­ples in their relations with SSBs.

b) Supplier obligations: suppliers are required to comply withthe terms, conditions and modalities on which it offers oragrees to provide a service.

Likewise, electronic contracting of goods and services between SSBs and suppliers must adhere to the provisionsunder the Consumer Protection Law in all matters relating tothe creation of consent, confirmation of contracting, completeand clear access to contractual terms, among other things.

AUTHORS: Guillermo Carey, José Ignacio Mercado.

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