The Secretariat of Domestic Trade of the Ministry of Production Development is the enforcement authority, among other regulations, of decree N° 274/2019, of Fair Commercial Practices.
This decree provides that deceit acts, as long as they may lead to a mistake on the existence or nature, manufacturing or distribution process, main features, purity, mix, fitness for use, quality, quantity, price, purchase and sale conditions, availability, results that may be expected on their use and, in general, on the attributes, benefits or conditions corresponding to goods and services shall be considered unfair competition acts.
Likewise, the acts of confusion are contrary to fair commercial practices, provided that they lead to a mistake with respect to the business origin of the activity, the establishment, the own goods or services in such a way as to consider that they have a different origin than the one corresponding to them.
It forbids also the acts of unfair imitation, when they generate confusion on the origin of the goods or services or entails an improper use of the good standing or effort of a third party.
In line with the foregoing, Act 24,240, of Consumer’s Defense – of which the Secretariat of Domestic Trade is also the national enforcement authority – sets forth in its section 4th that the supplier is obligated to supply to consumer in a certain, clear and detailed manner everything related to the essential features of the goods and services it supplies and the conditions of its commercialization.
In its capacity as enforcement authority the Secretariat of Domestic Trade has, for several decades now, the powers to supervise the tags and labels of – among others – food, perfumery, grooming and cleaning products to ensure that said tags and labels comply with the regulations mentioned above and the provisions that regulate or supplement them.[1]
In view of an alleged non-compliance with any of said regulations, the Secretariat may charge, even ex-officio, alleged infringements and order through precautionary measures the immediate suspension of the labeling and commercialization of the products that have tags or labels that it considers are allegedly in infringement.
Both, decree 274/2019 and Act 24,240 provide, in addition, tough fines for those who infringe their precepts.
This tags and labels control system by the Secretariat, carried out after the launch of the products into the market, worked properly in our country, without problems, as we have already said, for decades.
However, Resolution 283/2021 issued by the Secretariat of Domestic Trade (published in the Official Gazette on March 31, 2021), argued the following in its whereas clauses:
“That in recent times a marked increase has been observed in the launch into the market of products with different presentations that, in many cases, differ minimally from products already approved for their commercialization, generating multiplicity of consumption options that may generate error or confusion in consumers.”
“Those who offer the same goods with different commercial presentations, in which consumers may be led to error or confusion at the sight of a hampered or distorted comparison of the features that make-up said goods, their weights or measures and prices shall specify, in an outstanding and easily visible place, the difference of the relevant product with respect to the reference product already existing in the market.”
“Hence, it is intended to avoid information gaps in tags and labels or, otherwise, the inclusion of messages with ambiguous or incomplete expressions that give rise to error, deceit or confusion, leading consumers to a wrong consumption decision.”
And
“That a complete information of the goods subject matter of the consumption relation eases the election by consumers of a product at the time of deciding a purchase, avoiding confusion with respect to the nature, origin, quality, purity or mix, price or production method thereof.”
It created, by means of said Resolution 283/2021, the so-called “Tags and Labels Control System” (Sistema de Fiscalización de Rótulos y Etiquetas -SiFIRE-) for food, beverages, perfumery, grooming and cleaning products, fit for human consumption, that obligates manufacturers and importers of said products to apply for the approval of their tags and labels prior to their commercialization in the country.
In other words, the Resolution added to the already existing subsequent control system for tags and labels, for food, beverages, perfumery, grooming and cleaning products, a previous control system.
And said previous control system is not limited, despite the statements contained in the whereas clauses of Resolution 283/2021, to the tags and labels of the products:
(i) with different presentations which, in many cases, differ minimally from products already approved for their commercialization; and
(ii) in those cases, in which the different presentations explicitly mention qualities or outstanding features of the product, as well as economic advantages that are usually determinant factors for the consumer’s election.
But the Resolution extended it to all the products belonging to the category of food, beverages, perfumery, grooming and cleaning products, fit for human consumption and handling to be commercialized in the territory of the Argentine Republic without any distinction whatsoever (Resolution, section 3rd), that are approved for their commercialization thirty (30) running days after its effectiveness (in short, for the products to be approved as from April 30, 2021).
It is no longer about preventing certain specific situations, as stated in the whereas clauses of the regulation, – for which, in my opinion, it was not necessary either -since the obligation to obtain the previous authorization of labels and tags extends to all the products included in the categories reached.
Even those which do not have different presentations that differ minimally from products already approved for their commercialization or that in their different presentations explicitly mention outstanding qualities or features of the product, as well as economic advantages that usually are determinant factors for the consumer’s election.
In short, the Resolution imposes upon manufacturers and importers of all the products of the categories reached by it, with no exception whatsoever, the obligation to subject the tags and labels of the new products to a supervisory procedure obtained at the Undersecretariat of Actions for the Defense of Consumers (Subsecretaría de Acciones para la Defensa de las y los Consumidores) (the “Undersecretariat”), prior to its commercialization in Argentina.
This exceeds largely, the alleged malfunctioning that the system intended to fix and that, as I have already said, might as well be solved with subsequent control, in force up to the issuance of Resolution 283 and likewise existing now.
The previous proceeding applying for the authorization of tags and labels must be carried out through the platform “Remote Proceedings” (Trámites a Distancia -TAD-) of the Electronic Document Management System (Sistema de Gestión Documental Electrónica -GDE-), attaching documentation on tags and labels, the importer’s or manufacturer’s data, the products composition and country of origin, information on their components, raw materials, additives, manufacturing and fractioning or packaging methods, together with their properties and instructions for consumption (Resolution, section 5th[2]).
The Resolution grants to the Undersecretariat a term of ten (10) administrative working days as from the filing date of all the documentation or the date on which any defect was cured -depending on the Undersecretariat’s particular criteria, in each case, to issue a decision. If it fails to issue a decision within said term of ten (10) working days, the Resolution sets forth that the agreement with the tag or label filed is assumed (Resolution, section 6th).
In the event that the Undersecretariat observes that the tag or label of a product existing in Argentina, may cause a serious or irreparable damage in the consumers’ rights, in their consumption ratio – within the framework of its subsequent control, of course – it could order to place in the container a sticker, decal or any other thing fit to cure the nonperformance observed, until after the tag or label in infringement is completely removed from the market. The expenses incurred shall be undertaken by the supplier or importer (Resolution, section 7th[3]).
Non-compliance with the obligations set forth in Resolution 283/2021 shall be punished with very tough penalties as provided for in Act 24,240, of Consumer’s Defense and in decree 274/2019, of Fair Commercial Practices (Resolution, section 10[4]).
The Resolution, in its whereas clauses, tries to justify the previous control of labels and tags and also that the information that appears in tags and labels of the products is the direct and immediate mean whereby the consumers are informed in order to take their consumption decisions.
Likewise, that the information related to qualities, weights or measures and features of the products contained in tags and labels is usually related to decisions where the relevant legal rights, subject to the highest level of protection, like economic interests and the consumers’ rights are at stake.
I believe, instead, as a result of the context in which Resolution 283 was issued, that the purpose of the Resolution was (is) to try to support the control of the prices of the products reached by it, trying to reduce – with proven inefficient means – the sustained increase of the prices of said products, which, in the past year, more or less in line with the increase of the prices of other goods and services, have increased on average more than fifty percent (50%).[5]
The foregoing ignores that the costs arising from the compliance with the Resolution shall be – in one way or another – transferred to consumers, intended beneficiaries of the measure.
And ignores also that the control of tags and labels after the launch of the products into the market, as I said above, has worked effectively in Argentina – and of course in many other countries – with a cost substantially lower for society as a whole.
At this stage, I find it proper to remember the so-called “parable of the broken window”.[6]
The parable tells how a child breaks the window of a shop. At first everyone empathizes with the shopkeeper that has suffered the damage; but soon they begin to suggest that the broken window benefits the glass maker, who will buy bread with said benefit, favoring the baker, who will buy shoes, benefiting the shoemaker, etc. Finally, the people comes to the conclusion that the child is not guilty of vandalism; but he has done society a favor, creating also a benefit for the whole industry.
The fallacy in this reasoning, as Bastiat explains it very clearly, consists in the fact that the benefits of the broken window are considered, but its costs are ignored.
The shopkeeper is forced to buy a new window, when maybe with said money he could have bought bread thus benefiting the baker, or clothes, favoring the clothing salesman. But, the shopkeeper will not buy said things or invest in same, because he was forced to use his money to repair the window. The damage to the window gave rise to an unfavorable distribution of funds. The shopkeeper was impoverished; instead of having a window, bread and some new clothes, now he just has a repaired window.
In other words, looking society as a whole, the value of the window has been lost and this, clearly, does not benefit society as a whole.
In case I have not been clear, the funds that both, individuals and the National Government should use to comply with and implement, respectively, the unnecessary system for the previous control of tags and labels – that do not replace but is added to the subsequent control system – imply a misallocation of resources that are detracted – though taxes or inflation – from the citizens’ consumption or investment.
In detriment of society as a whole.
Buenos Aires, September 2, 2021.
[1] Notwithstanding the health authorities’ powers that have exclusive jurisdiction to determine the legality of tags and labels in health and bromatological matters.
[2] Section 5th of the Resolution reads as follows: “In order to obtain the approval of the tags and labels of the products reached by Section 3rd hereof, the interested parties shall enclose the following documentation through the Platform of “Remote Proceedings” (Trámites a Distancia -TAD-) of the Electronic Document Management System (Sistema de Gestión Documental Electrónica -GDE-);
a) A colored graphic of the tag and label for each of its presentations.
b) Data of importer/manufacturer: Name or corporate name, Taxpayer Identification Number (CUIT) and legal domicile.
c) Trademark or model, article or name of the product, country of origin, description and composition of the manufactured and/or imported products.
d) Complete information on its components, raw materials, additives, manufacturing and fractioning or packaging methods, together with their properties or consumption instructions.”
[3] SECTION 7th. When the UNDERSECRETARIAT OF ACTIONS FOR THE DEFENSE OF CONSUMERS observes, ex-officio, or as a result of a report, that the tag or label of a product existing in the market, within the territory of the ARGENTINE REPUBLIC, may cause a serious or irreparable damage in the rights of consumers in their consumption ratio, may order to place in the container a sticker, decal or any other thing fit to cure the nonperformance observed, until after the tag or label in infringement is completely removed from the market.
[4] SECTION 10.- If this resolution is not complied with, the penalties provided for in Act N°24,240 and Decree N° 274/19 shall be imposed upon the obligated subjects.
[5] The persistence of some of the governments of our country in the imposition of price controls more or less strict, and – which have failed – a method used to try to lower inflation, reminds me of the phrase attributed to Albert Einstein and which our government officials seem to ignore: “If you look for different results, do not always do the same thing.”
[6] The parable of the broken glass – also known as the “parable of the broken window” was proposed by Frédéric Bastiat, in his essay entitled “Ce qu’on voit et ce qu’on ne voit pas” (“What we see and do not see”), published in 1850, to explain the idea of hidden costs.