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AQ Feature

Technology: E-Commerce Regulation in Brazil

Brazil is a major participant in the global growth in e-commerce. In 2011, 32 million Brazilians made an online purchase—a 39-percent jump from a year earlier, accounting for approximately $19 billion in online sales and elevating it to seventh place in worldwide online sales.

By 2015, Brazil is projected to rise to fourth place, following only China, the U.S. and Japan.

The demographics of Brazil’s online purchasers explain why this is not surprising. Internet access is on the rise, with 77.8 million Brazilians online in the second quarter of 2011—a 20-percent jump in just two years. Among those who are active online and over 15 years old, 86 percent access shopping websites on their home or business computer. The global average is 72 percent.

But these figures tell only part of the story. As in many sectors across Brazil, much of the consumption growth is fueled by a larger middle class. In the first half of 2011, middle-class customers accounted for 61 percent of new online shoppers.

The rise also stems from Brazil’s credit boom. Middle-class consumers can now use credit cards to make online purchases.

The rapid growth in e-commerce, particularly among first-time, middle-class consumers is also leading to a rise in complaints against online retailers, which spiked by nearly 200 percent from 2010 to 2011 in the state of Rio de Janeiro alone. The most common grievance is that the product either does not arrive or is delivered with defects.

This raises regulatory issues around how to protect consumers against abusive practices. One of the top concerns is ensuring that only the person engaging in a transaction and the seller of the product or service have access to information shared during the purchase.

The Brazilian congress is trying to keep pace with the rise in e-commerce. Bills pending in congress would provide greater certainty for e-commerce and update the landmark Consumer Protection Code (CDC) established in 1991. They include: establishing mechanisms for consumer e-commerce protection; regulating electronic sales of products and services; establishing criteria for the operation of web operating companies; and requiring businesses to display their corporate name, address and taxpayer identification number online.

Beyond pending legislation, the Brazilian Ministry of Justice in July 2010 established guidelines for e-commerce transactions. Among them is a requirement to ensure transparency in e-commerce by guaranteeing the same level of protection as would be found in a traditional transaction. This includes prohibiting misleading or unclear advertisements and ensuring consumer access to the general terms of a contract prior to the transaction.

Still, the top priority is updating the CDC, which was developed before the age of e-commerce.

One issue that must be resolved is the gap in technological knowledge between the consumer and supplier. This is often significant, with the consumer being more vulnerable to fraud in an online transaction than an in-person purchase.

A Commission of Jurists established in 2010 to update the CDC is helping to cut through this thicket of regulation and law to create new e-standards. There are over 500 bills addressing consumer issues pending in congress, with 214 of these bills proposing revisions to the CDC. One of the Commission’s charges is to establish regulatory changes that will allow consumers to legally cancel transactions.

Now that e-commerce has propelled it to the top ranks of the global industry, Brazil is focusing on the next step: becoming a world leader in e-commerce protection.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.