Carey News Alert Law: Law 20,146 (“SMB Statute”) and its impacts on consumer protection
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.
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.
If you have any questions regarding the matters discussed in this memorandum, please contact the following attorneys or call your regular Carey contact.
This memorandum is provided by Carey y Cía. Ltda. for educational and informational purposes only and is not intended and should not be construed as legal advice.
Isidora Goyenechea 2800, 43rd Floor.
Las Condes, Santiago, Chile.