sign in sign up
<<
Home , Brazil, Mercosur

Chapter 11 Convergence on e-commerce: the case of , and Vera Thorstensen and Valentina Delich* Researchers: Fernanda Mascarenhas Marques, Giulia de Paola and Julian Rotenberg Abstract

E-commerce is growing rapidly in Argentina and Brazil, and in both the share of the population participating in e-commerce transactions exceeds the Latin average. Both countries have established a legal framework for data protection, of the internet, , taxation of e-commerce, and contracts and e-signatures. Argentina and Brazil also have submitted proposals for negotiations over the treatment of e-commerce transactions in WTO Agreements, and included e-commerce provisions in agreements (FTAs). However, different approaches to internal regulation of e-commerce and differences in positions in international negotiations indicate diverging regulatory approaches that will increase legal uncertainty and thus constrain investments and market expansion in the sector. An exception is the regulation of data protection, where both countries are following principles laid out in the ’s General Data Protection Regulation (GDPR). Further negotiations between the two countries over regulatory convergence for e-commerce could best be undertaken through the Southern Common Market (MERCOSUR).

* The contents of this chapter are the sole responsibility of the authors and are not meant to represent the position or opinions of the WTO or its members. 234 CHAPTER 11

Introduction ones, such as MERCOSUR-European Union, and reinforcing the by The Trade Organization (WTO) converging with the Pacific . estimates that, in 2016, global e-commerce sales equalled around This chapter reviews the Argentinean US$ 27.7 billion a year (WTO, 2018a, and Brazilian e-commerce regulatory p. 21). e-commerce is around frameworks both separately and as part 10 per cent of global retail and is of MERCOSUR. WTO initiatives on expected to continue growing at e-commerce negotiations are also double digit rates (SWS Consulting, discussed in order examine the 2018). Although there is already a set countries’ positions and contributions of agreed definitions of what at the multilateral level. However, the constitutes e-commerce, including main concern here is to introduce the its types, main characteristics and challenges to enhance policy regulatory problems, and prospects of its coherence between the two countries. measurement, many different approaches are being taken towards In order to those issues, this its regulation. In fact, e-commerce chapter examines: (i) the B2C retail challenges both domestic and market for Argentina and Brazil; (ii) both international rules, and it touches countries’ main regulatory frameworks different legal dimensions such as data for e-commerce; (iii) both countries’ protection, taxation and intellectual proposals at the multilateral , property, among others. more specifically, internally in the WTO space; (iv) an overview of At the multilateral level, key issues MERCOSUR’s approach towards under negotiation include e-signatures, ongoing FTA negotiations; and, finally, (free) flow of data across , (v) the prospects and challenges source code disclosure and the destiny Argentina and Brazil share in improving of the moratorium on e-commerce the regulatory environment in order to customs duties. Different questions strengthen e-commerce. have emerged and challenged policymakers: should countries have Characterizing the retail the flexibility to restrict cross- e-markets in Argentina and Brazil data flows? Should the protection of E-commerce transactions can occur national security and privacy justify either as business-to-business (B2B), exceptions to the free flow of data? business-to-consumer (B2C), To what extent could a consumer-to-consumer (C2C) command or interfere in services or consumer-to-business (C2B). provided by local servers? Examples of B2C companies include Amazon, Dell, Intel and Mercado In , Argentina and Brazil Libre. Benefits of B2C e-commerce are in a process of intense transactions include better customer socioeconomic policy transformation and pricing flexibility, the both at the domestic and international removal of intermediaries, the levels. Accordingly, MERCOSUR is enhancement of companies’ reputation being reconfigured so as to open itself and the broader reach of the products. to negotiate new FTAs, such as Moreover, among the several modes MERCOSUR-, revitalizing old used for e-commerce transactions,1 CHAPTER 11 235 it is relevant to distinguish between 35.2 million, or almost 80 per cent electronic transactions that occur of the population (Statista, 2019). completely through digital means By now, 54 per cent of all Brazilian and those that only rely on internet users have at least once bought digital intermediation. goods via online B2C platforms, while in Argentina, due to a higher internet Although Argentina and dissemination among Brazil have shown its population, this investments in different “E-commerce rate is 90 per cent modes of e-commerce (ABCOMM, 2018). transactions, B2C is still challenges both the most representative domestic and Both countries also category in both international have firms that are major countries’ markets. rules, and it players in the B2C In 2017, Brazil’s touches different e-commerce market. e-commerce sales The Argentina-based reached US$ 17.4 billion legal dimensions digital with 10 per cent annual such as data Mercado Libre is Latin growth while Argentina protection, America’s most popular achieved US$ 7.3 billion taxation and platform – with 56.3 with 35 per cent annual intellectual million unique desktop growth, amounting to visitors during May a gross domestic property, 2018. Amazon sites product (GDP) share among others.” took a distant second of 0.92 per cent and 1.1 place with 22.4 million per cent, respectively. visitors, followed by sites owned by Brazil-based Increases in internet penetration have Digital (16.1 million) and Alibaba supported the strong growth of (11.8 million). eBay rounded out the top e-commerce in the two countries. five retail sites in Latin America, with Argentina has the highest rate of 9.5 million visitors (Ceurvels, 2018). constant internet users in Latin America (around 71 per cent of its Many e-commerce experts argue that population) and Brazil’s internet Mercado Libre’s success in Latin penetration is around 61 per cent, America relates to its know-how of compared to 59 per cent on average regional culture in a wide sense – in the region. In addition, both including business culture. Among Argentina and Brazil lead the table of possible explanations, Mercado Libre active paying customers or accounts “offers technological and commercial (Argentina, 38 per cent; Brazil 37, per solutions that address the distinctive cent) (Ecommerce Foundation, 2018).2 cultural and geographic challenges of operating an online-commerce In addition, the number of digital platform in Latin America” (Mercado buyers of goods and services in Brazil Libre, 2018) and also that it “knows was estimated at around 80 million in the idiosyncrasies of the culture, 2019, which represents 74 per cent of for now at least, this offers it a the Brazilian population. For Argentina, clear advantage over Amazon” the number for 2019 will be around (Duberstein, 2018). 236 CHAPTER 11

In turn, the Brazilian giant B2W group segments by order in Brazil for 2017 is the largest online retailer in Brazil were fashion and accessories (14.2 per and the sixth largest retailer in the cent), followed by health and cosmetics country. Operating in several (12 per cent) and household appliances different fields of e-commerce, the (10.8 per cent). However, the top- companies under its umbrella include selling segments by financial volume Americanas.com, Submarino and were telephones (21.2 per cent), . In 2016, B2W increased its followed by household appliances gross merchandise value (GMV) by (19.3 per cent) and electronic devices 10.6 per cent to US$ 4.04 billion, an (10 per cent) (SBVC, 2018). increase of almost US$ 386,000 in absolute terms. Alone, B2W accounts In Argentina, CACE estimates that in for 26.2 per cent (B2W, 2017) of the 2018 the leading segments were entire Brazilian e-commerce market tickets and (28 per cent) and (UNIDO, 2017). electronics (18 per cent). Measured by billing, the top five leading products It is important to highlight that, due were international air tickets, , to emerging e-commerce markets in domestic air tickets, TV and tourism countries where a significant share of packages (CACE, 2018). the population does not own a credit card or a account, Regulatory framework companies have developed alternative Functioning infrastructure services payment types. In Argentina and and an appropriate regulatory structure , some online retailers offer are important for the development of cash on delivery (COD) as an option, e-commerce. Relevant infrastructure while in Brazil, the boleto bancário (a services would encompass a structure printable, bar-coded invoice that can guaranteeing access to internet, be paid online or offline) plays a similar broadband quality, logistics (including role (UNIDO, 2017). customs and postal services) and payment systems. The regulatory The main payment method chosen by structure should include a framework Brazilian consumers in 2018 was credit of rules on e-contracts, taxation, and card, because they can take advantage consumer and data protection, among of instalment payments (Ebit, 2019). In other areas. This section explores Argentina, 77 per cent of payments are those topics that are relevant to made through credit cards, 18 per cent regulatory concerns. in cash, 1 per cent by debit cards and 4 per cent by other methods such as Contracts and e-signatures bank transfers and digital wallets. Provisional Measure no. 2,200-2/2001 Payment in multiple instalments is also created the Brazilian Public Key common in Argentina: 70 per cent of Infrastructure (ICP-) with the shoppers used an instalment plan in plan of ensuring legal recognition their last e-commerce purchase, of the authenticity, integrity and according to a 2018 CACE Report validity of electronic documents, as (Worldline, 2019). well as the performance of secure electronic commercial transactions. As for consumer tastes and habits in This is known as , B2C e-commerce, the top-selling once the authentication procedure CHAPTER 11 237 is done under ICP-Brasil accreditation sufficient when handwritten signatures chain and is based on ICP-Brasil are required by law, as long as they are method of certification. accompanied by a digital certificate permitted by a state-approved The Management Committee of certifying authority. ICP-Brasil is responsible for setting out the rules on the offering of At the MERCOSUR level, Resolution electronic certification services. GMC no. 22/2004 created a digital Documents issued using certificates signature for certifying copies of approved by ICP-Brasil are presumed documents issued by MERCOSUR’s authentic and true, unless proved secretariat. MERCOSUR Resolution otherwise. However, documents GMC no. 34/2006 established certified by other means, or not guidelines for mutual recognition certified, are still valid, but they are agreements on digital signature among not presumed authentic. members. In addition, MERCOSUR Resolution GMC no. 37/2006 provides In Argentina, the Civil and Commercial that electronic documents, electronic Code (CCC) regulates contracts and signatures and advanced electronic acknowledges the possibility of using signatures in MERCOSUR documents digital means to create and sign them. are admitted with the same effect as Both electronic and digital signatures signed hard copies. Finally, according are regulated through the Digital to Decision 11/19, MERCOSUR Signature Law (DSL), Law no. members will have mutual recognition 25,506/2001. of digital certificates, including , customs and contract documents. The Law defines two forms of However, Decision 11/19 has not signatures. First, there are entered into force since it requires at e-signatures, understood as a set of least two National Parliaments to ratify data linked with other electronic data it, which has not happened yet. used by signatories to prove their identity. However, an e-signature Taxation does not have the enforceability of In Argentina, importers of goods and a signed document, as it lacks the services must pay the same local requirements to be recognized as a that are levied on nationals. Such digital signature. Therefore, anyone payment is due at the time of the goods who is questioned about the validity and services’ “entry into the country for of an electronically signed document consumption”, where the value added bears the burden of proving its tax (VAT) must be paid, which does not authenticity. Second, the Law defines amount to a customs duty. digital signatures as the result of the application of a mathematical Accordingly, Argentinean Law procedure that requires information 27,430/2017 establishes the application known only to the signatory. A digital of VAT on digital services when they signature must be verified by a third are used or exploited in the territory party, including administrative of Argentina, which is proved by the authorities, and has a stricter legal existence of: (i) the IP address of the framework under the DSL. Unlike with device used by the customer or SIM e-signatures, digital signatures are card country code; (ii) the billing 238 CHAPTER 11

address of the customer; or (iii) the Services (ICMS)), while services are bank account used for the payment taxed at the municipal level (Tax on and the billing address of the customer Services (ISS)). provided by the bank or by the financial institution that issues the credit or debit There is also an Integrated System for card with which the payment is done. Payment of Taxes and Contributions of Micro and Small Companies (Simples It is noteworthy that, between 2004 Nacional), which is an optional tax and 2019, the software industry in system that collects simultaneously Argentina had a special tax regime for municipal, state and federal taxes. It is national direct taxes: it allowed a simpler and lower tax rate system companies to apply a percentage of calculated on gross revenues. the employers’ legal contributions to the payment of national taxes and also According to the to reduce the due every Industrial Development Organization up to 60 per cent (Law (UNIDO), taxes are among the most 25,922/2004). At a national level, complex and challenging issues to however, fiscal incentives for resolve in Brazil: they are high and e-commerce, which also include numerous, significantly increasing incentives for software but are not firms’ overall costs. Duties, taxes and limited to it, are modest; they equal fees can double the original price of a only 0.0021 per cent of Argentina’s product, and can vary considerably GDP and remain much smaller than depending on product category. other fiscal incentives, for instance, It is estimated that when opening those for small and medium-sized a , entrepreneurs pay enterprises (SMEs) (0.026 per cent of 67 per cent of their profit in tax the GDP) (CESSI Argentina, 2018, p. (EOS Intelligence, 2013). 6). In respect to tax services’ exports, in 2019 and for two years, a Consumer protection general tax at 12 per cent on services’ exports. As for SMEs, they are Argentina and Brazil have an exempted if their exports are less than extensive patchwork regulation system US$ 600,000 per year (and if they protecting consumers’ rights. Both export more than US$ 600,000 a year countries have a they pay 12 per cent over only what addressing consumers’ rights: the exceeds US$ 600,000). The norm Code of Consumer Defense (BCCD) considers services exports any service in Brazil and the Law of Consumer done in Argentina and onerous that is Defense (LDC) in Argentina. These used and/or consumed abroad laws mainly regulate consumer (Decree 1201/18, article 3). protection, standards of conduct, fair practices of information disclosure, In Brazil, the tax on e-commerce goods penalties and liabilities. differs from the tax on e-commerce services. For goods, it is a state-level Under both Argentinean and tax (Tax on Operations related to the Brazilian laws, the relationship Circulation of Goods and Services between supplier and consumer of Interstate and Inter-Municipal is considered uneven due to the Transportation and Communication asymmetry of the product or service CHAPTER 11 239 provided, which places the consumer damage caused and the action or in a disadvantaged position in omission of the supplier. And if the comparison with the supplier. damage was caused by several suppliers, all of them are considered It is important to highlight that, although liable. A strict liability regime both countries have extensive laws rebalances the legal relationship protecting consumers, these laws do between consumers and suppliers. not have specific rules for e-commerce. Rather, the rules Finally, the regime of consumer governing e-commerce are framed in protection was harmonized through the same way as the rules governing MERCOSUR after its members door-to-door sales. In Brazil, this can adopted: (i) Resolution no. 21/04 cause insecurity for entrepreneurs, addressing consumers’ rights to since legal discomfort may arise from information in commercial transactions BCCD rules in case of made through the bad faith of consumers internet; (ii) Resolution and regarding the right “Functioning no. 104/05 providing of return within seven infrastructure that infringements days of receipt. In occurring in internet- Argentina, “in theory, services and derived transactions the same protections an appropriate will be addressed in apply to consumers on regulatory accordance with the the electronic market; structure are Consumer Protection however, in practice, important for Law; (iii) Resolution the protections can no. 45/06 addressing be difficult to enforce. the development consumer protection In e-commerce, of e-commerce.” and deceptive transactions are often advertising; and (iv) fast-paced, increasing Resolution no. 10/96 the possibility of deception. Issues on the international jurisdiction in also arise in regard to the formulation cases involving consumer relations. of contracts and what constitutes a legally enforceable agreement” (Stile Internet regulatory and Fernandez, 2016). framework

In terms of liability, Argentina and Both Argentina and Brazil have Brazil apply strict liability when the enacted on civil rights on buyer is the end-user or consumer. the internet. The Brazilian Civil Rights Argentina’s LDC establishes that, Framework for the Internet (Marco when damages arise from a risk or a Civil da Internet, in Portuguese), defect of products or services, strict Federal Law no. 12,965/2016, sets and joint liability of the whole supply the main rules governing neutrality, chain – including anyone using a privacy, freedom of expression and brand or trademark of the product or providers’ civil liability. service – shall apply. Similarly, Brazilian law establishes that the Argentina’s Digital Law, Federal Law consumer shall demonstrate only the no. 27,078/2014 (Ley Argentina Digital, cause-effect relation between the in Spanish), regulates mostly net 240 CHAPTER 11

neutrality and privacy. In Argentina, measures restricting net neutrality in freedom of expression is defined in the cases of emergency services can as “to publish ideas in the occur to guarantee communication press, without prior censorship” with among and with emergency service the status of a fundamental right. providers, and when necessary to However, Decree no. 1,279/1997 communicate to the population in case extended the meaning of “press” of a disaster, emergency or public to the internet as well. calamity. In these scenarios, communication must be free of charge. The Digital Law guarantees each user the right to access, use, send, Both in Argentina and Brazil a receive or offer any content, provider may be held responsible application, service or protocol through and may have to take down specific the web without any restriction, content if, after receiving a specific discrimination, blockage or court order, it does not remove the interference. Information and content (within its technical capabilities) communications technology (ICT) by a set deadline. In such cases, the service providers cannot block or provider will be liable for damages. restrict the use, sending or reception In Brazil, in the case of unauthorized of any content in the transmission of content containing or sex of a information ( shaping), except in private , the content is subject the event of judicial order. Internet only to a notice and takedown service providers (ISPs) cannot set procedure, not necessarily requiring prices on internet access based on the judicial order. content or services to be used or restrict, by their own will, the user’s Data protection right to use any software or hardware Argentina and Brazil are taking steps to access the internet. Jurisprudence to adapt their regulations to a data has built case law with respect to protection framework inspired by the cases in which the intermediary service European Union’s GDPR. While Brazil providers must retire uploaded content has only recently created a framework without judiciary intervention, e.g. for data protection, Argentina launched removing child pornography. its first law for processing personal data in 2000 (Law no. 25,326/2000, In Brazil, there are only two legal Personal Data Protection Law (PDPL)). exceptions in which ISPs are authorized to treat data packets In Brazil, “Lei Geral de Proteção de differently over the internet: (i) where Dados” (LGPD), the country’s general technical requirements are essential to data protection law, establishes rules the adequate provision of services and on: (i) the legal bases for processing applications; and (ii) for emergency personal data, sensitive personal data services. Technical requirements are and children and teens’ personal data; understood as measures seeking to (ii) termination of data subjects; (iii) address internet security issues, such data subject rights; (iv) processing of as restricting sending massive amounts personal data by public authorities; (v) of messages (spam), stopping denial of accountability; (vi) international transfer service attacks and addressing of data; (vii) security and secrecy of network congestion. Possible data; (viii) good practice and CHAPTER 11 241 governance; (ix) administrative use of the data or for non-compliance sanctions; and (x) other more specific with the law. In this regard, the clear rules regulating these topics. The Law definition of the roles played by the has a multi-sectoral application for the controller and the processor under private and public sectors. contractual terms is paramount to set the limits of liability. In addition, when LGPD and PDPL reflect a broad no violations of LGPD are found, the concept of personal data, comprising liability of the processor may be limited the information related to an identified to its contractual and information or identifiable individual. Moreover, the security obligations. concept of sensitive personal data is defined in both countries as a specific The role of the Brazilian Data individual’s data about racial or ethnic Protection Authority (ANPD), created origin, religious belief, public opinion, by Provisional Measure no. 869/2018, union affiliation, philosophical or is to ensure the protection of personal political organizations, and health or data, by monitoring and applying sex life, as well as an individual’s sanctions when facing a violation of genetic or biometric data. LGPD, and requesting information, whenever necessary, from the Accordingly, both countries controllers and processors who carry established basic rights that provide: out personal data-processing (i) the right to access and rectify operations. To the same extent, personal data; (ii) the right to amend, Argentina’s Agency of Access to delete or cancel provided personal Public Information, created by Decree data; (iii) the right to oppose data no. 746/2017, functions with autonomy processing; and (iv) the right to under the President’s Chief of Staff information and explanation about Office. If data is obtained or a particular use of personal data. transferred inconsistently with PDPL, The LGPD, as well as the bill in database controllers and processors discussion in the Argentinean may face sanctions, including , goes further by specifying warnings, suspensions, fines, or the right to data portability, which closure or cancellation of the file, allows not only the right to request a register or database, without prejudice copy of one’s data, but also to have to any applicable civil or criminal the data provided in an interoperable liability. Moreover, the bill in discussion format, which aims to facilitate the in the Argentinean Congress includes transfer of that data to other services, requirements for notification of even to competitors’ services. mandatory non-compliance.

With regard to the liability regime in Argentina’s Congress is considering Brazil, the “controller” (legal person legislation to: (i) limit the concept of responsible for the decisions on how “data subject” to natural persons only data should be processed) and the by excluding legal entities, and revise “processor” (legal or natural person and refine the concepts of “database”, responsible for processing data under “personal data” and “sensitive data”; the controller’s instructions) can be (ii) include accountability obligations jointly liable for information security and remove the database registration incidents, improper and unauthorized requirement; (iii) acknowledge the right 242 CHAPTER 11

to be forgotten and of data portability; transfer of data, e-signatures, (iv) develop rules for sensitive data, consumer protection, unsolicited background checks and minors’ commercial messages, ISPs and consent, which are more extensive platforms’ liabilities. The main areas than for other data; (v) establish a duty of disagreement concern market of notification of data breaches and access (Canada, the European Union, require an impact analysis in cases and the would where the data processor intends to like to widen the extent of the WTO treat data differently from its original Information Technology Agreement purpose; and (vi) determine the duty to (ITA) and deepen commitments on appoint a data protection officer in the services, telecom and financial case of sensitive data being processed services) and the moratorium issue as a principal activity, for public (, the European Union and the agencies or when big data activities United States would like to make it (such as data mining and data analytics permanent while and processes) are involved. Africa are concerned about the fiscal effect of such a moratorium). Argentina and Brazil at the multilateral debate Argentina and Brazil have engaged in the debate by submitting proposals to The discussions on e-commerce at the General Council and by participating the WTO started as early as 1998, in two collective proposals.6 with the creation of the Work Programme on Electronic Commerce In the Communication from Argentina, to examine all e-commerce-related Brazil and (JOB/GC/115), issues. Although the Work Programme the three countries proposed rules on contributed to the consideration of e-signatures based on MERCOSUR e-commerce within the Organization, Resolution GMC 37/06. In a second discussions did not lead to the creation Joint Proposal, Argentina and Brazil of a WTO Agreement. As a result, (only) sought to enhance the e-commerce chapters were negotiated effectiveness of copyright rules in in some FTAs.3 the digital environment, focusing on: (i) transparency; (ii) jurisdiction; In 2017, at the 11th WTO Ministerial and (iii) the balance of rights and Conference, a group of WTO obligations. One main goal is to members agreed to initiate an improve transparency in order to exploratory work committee on reduce asymmetries of information negotiating an e-commerce between intermediaries and artists, agreement.4 In 2019, at the World bringing to light the rules used for Economic Forum, a Joint Statement calculation of royalties, notably as concluded by 76 members confirmed regards modes of exploitation, their intent to start negotiations with revenues generated and remuneration the participation of as many WTO due. To the practice of members as possible.5 international forum shopping to find the most favourable jurisdiction, the Most of the proposals are concerned countries proposed that jurisdiction be with custom duties, data protection determined based on the applicable and server localization, international legislation from where the content is CHAPTER 11 243 accessed. On the balance of rights Regarding electronic contracts, and obligations, it was proposed that electronic signatures and digital Article 13 (Limitations and Exceptions) certification, Brazil suggests that of the Agreement on Trade-Related these instruments should have their Aspects of Intellectual Property Rights legal effect founded on objective (TRIPS Agreement) should be methods of validation (which could extended to the digital environment. be done based on performance standards certified by authorities), Argentina was part of a collective thus preventing their legal effect from communication (with and being questioned solely due to their Rica) that highlighted the electronic form. following topics: (i) regulatory issues, including the right to implement In terms of consumer protection, measures for the protection of the focus is on rules addressing individuals’ privacy and for the security the protection of consumers from and confidentiality of information; deceiving commercial practices, (ii) specific commitments in for which Brazil encourages the e-commerce-enabling use of alternative infrastructure sectors; dispute resolution and (iii) progress “The discussions mechanisms. In regarding the interests addition, consumers of developing countries on e-commerce should be able to avoid and LDCs in relation to at the WTO receiving unsolicited promoting connectivity started as early commercial messages, and bridging the digital as 1998, with the which means that divide (WTO, 2018b). creation of the electronic commercial messages should only Brazil, in turn, has Work Programme be sent upon consent. submitted four on Electronic documents covering Commerce.” Brazil also proposes more specific issues that relevant international related to digital trade.7 principles and First, Brazil proposed a definition guidelines should be the basis for of digital trade as “the production, a legal framework on data protection, distribution, marketing, sale or especially to guarantee that individuals delivery of goods and services are able to pursue remedies in case by electronic means”. On specific of violation of their personal data. issues, Brazil proposed the following topics: (i) electronic contracts, With respect to the cross-border electronic signatures and digital transfer of information through certification; (ii) unsolicited commercial electronic means, restrictions or communications; (iii) taxation; conditions on such transfer could be (iv) competition; (v) consumer adopted only when pursuing a protection; (vi) cross-border transfer legitimate policy objective. Although of information by electronic means; the definition of legitimate policy (vii) personal data protection; objective remains open, Brazil (viii) cybersecurity; (ix) copyrights; suggests a comprehensive list of and (x) jurisdiction. categories, such as measures 244 CHAPTER 11

involving: (i) protection of public morals e-signatures were adopted. Although or public order; (ii) prevention of the frequency of meetings has deceptive or fraudulent practices, or diminished over time, in 2017, SGT treatment regarding effects of a default 13 resumed proposing negotiations on online contracts; (iii) protection of for a future protocol, which would citizens’, consumers’ and medical encompass not only e-signatures patients’ privacy in relation to the and electronic authentication processing and dissemination of methods (previously regulated), but personal data and protection of also data localization, unsolicited confidentiality of individual records and electronic messages, data protection, accounts; (iv) ensuring safety; (v) transfer of data for commercial cybersecurity; and (vi) counteraction purposes and consumer protection. and prevention of terrorism and SGT 13 has not yet adopted such violations of criminal law. a Protocol.

Brazil also suggests that, in order to MERCOSUR has created the Group enforce national law, access to for the Digital Agenda to advance the information and data shall not be discussions on the digital economy denied based on the “lack of national and e-commerce that were initiated jurisdiction”. Finally, Brazil clarifies that by SGT 13. E-commerce needs to no customs duties shall be applied to be considered as a cross-cutting electronic transactions, but no issue, as it requires the constant limitations shall be adopted on the intervention and contribution of implementation of internal charges different ministries. The group also and fees by WTO members. recognizes the great interest of the private sector, setting an open MERCOSUR space for companies to contribute to the discussion. Although MERCOSUR does not have a common regulation on digital trade, In addition, in the dialogue between Resolution GMC no. 24/2001 created MERCOSUR and the , the Working Subgroup on Electronic a Joint Action Plan was signed. It Commerce (SGT 13). SGT 13 includes a Digital Agenda between determines priority issues to consider the two blocs, promoting the exchange for intraregional relations and for of information and good practices in external relations, particularly with, order to develop e-commerce within but not limited to, the European Union the region. and the WTO. Furthermore, MERCOSUR is SGT 13 met every year from its advocating an e-commerce chapter creation until 2010. It resumed in all its FTA negotiations, some meetings in 2017 and 2018. of which include clauses already Members achieved noteworthy included in the Pacific Alliance and results when they met three or four in the CPTPP. times a year. For instance, between 2004 and 2006, Resolutions on The MERCOSUR-EU Agreement, consumer access to information, which was concluded in 2019 but is efficacy of electronic contracts and not yet in force, includes a subsection CHAPTER 11 245 on e-commerce (Articles 42–51) with Finally, in terms of consumer definitions and some principles. protection, parties commit to adopt For instance, and taking into account or maintain measures that contribute that the moratorium is still being to consumer trust, including measures discussed at the multilateral level, that proscribe fraudulent and the Agreement establishes that neither deceptive commercial practices. party shall impose custom duties on Such measure shall, inter alia, electronic transmissions between a provide for: (i) the right of consumers person of one party and a person of to have clear and thorough information the other party (however, it does not regarding the service and its provider; preclude a party from imposing internal (ii) the obligation of traders to act taxes, fees or other charges on in good faith and abide by honest electronic transmissions, provided market practices, including in response that such taxes, fees or charges are to questions by consumers; (iii) a imposed in a manner consistent prohibition of charging consumers with this Agreement). for services not requested or for a period of time not authorized by the In addition, although it establishes consumer; and (iv) access to redress the principle of non-prior authorizations, for consumers to claim their rights, the Agreement provides that nothing including as regards their right to shall prevent a party from adopting or remedies for services paid and not maintaining measures inconsistent provided as agreed. with paragraph 1 to achieve a legitimate public policy objective in Conclusion accordance with: (i) its right to regulate (Article 1.4); (ii) general exception Argentina and Brazil have embarked (Article 48); (iii) security exceptions on a reform process of both domestic (Article 49); and (iv) prudential and international regulatory policies. carve-outs (Article 36). As already mentioned, e-commerce Furthermore the Agreement foresees has been subject of discussion in the obligation to ensure that contracts MERCOSUR SGT 13. However, the can be concluded by electronic results are disappointing in terms of means, that no party could deny regulatory practices or regulatory the legal effect and admissibility as convergence in this sector, confined evidence in legal proceedings of an to a few initiatives and documents electronic signature and electronic on e-signatures and consumer authentication service solely on the protection. In order to promote and basis that the service is in electronic enhance regulatory convergence form, that all parties shall endeavour among its MERCOSUR members, to protect end-users effectively parties initially should recognize against unsolicited direct marketing that MERCOSUR can offer the communications (but firms are allowed structure necessary to expand to send direct marketing communications digital trade regulations in the if they have consumer’s contact region to issues such as data details in the context of the sale protection, data transfer, ISP of a product or service for their liabilities, intellectual property own similar products or services). and domain name disputes. 246 CHAPTER 11

In addition, Argentina and Brazil have have made joint efforts to achieve this presented separated contributions to regulatory outcome. the debate at the WTO, which reveals a lack of regional coordination on The build-up of individual practices and e-commerce regulatory initiatives, regulations for e-commerce by the two hindering regional businesses countries reveals a lack of cooperation development and limiting foreign in this field, which will constrain and domestic investment in a sector investments and market expansion. that has kept growing. Companies (and small companies particularly) require legal certainty, Furthermore, Argentina and Brazil for example, on what happens with have adopted different approaches intellectual property on the internet, internally, which creates a gap in terms intermediaries’ responsibility, taxes of regulatory convergence between the and data protection. In the end, two. For example, Brazil has already however, convergence may occur included specific rules related to thanks to FTAs, such as the freedom of expression and the internet MERCOSUR-EU Agreement that service provider’s civil liability in its obligated MERCOSUR members to regulation, while Argentina is still determine their common legal “floor” moving towards that. On net neutrality, and take new regulatory commitments. Argentina and Brazil allow different types of exceptions: while in Brazil The voluntary and purposeful discrimination is possible when some integration of Brazilian and Argentinean condition previously predicted is regulatory norms would send a found, in Argentina it can only occur signal to investors across the globe. with a judicial order. E-commerce is not only about physical infrastructure (internet connection and On data protection, Brazil recently the like) but also about legal passed a data protection law similar infrastructure, which is critical for both to the European Union’s GDPR, while companies and consumers. Reaching Argentina passed a data protection law a cooperation agreement to regulate in 2000 and currently has a draft bill e-commerce activities and related submitted to Congress, also inspired services between the two countries by the EU law. It appears that steps would also reduce costs faced by towards convergence on this topic is companies and consumers. due to the influence of the GDPR, and MERCOSUR still seems to be the best not necessarily because both countries institutional option to put this forward. CHAPTER 11 247

Endnotes Electronic Commerce, Communication from Brazil, dated 30 2018, INF/ 1 The “5-Modes” classification is explored ECOM/17, first circulated as JOB/GC/203; in Ciurak and Ptashkina (2018). Work Programme on Electronic Commerce, Non-Paper from Brazil, dated 20 July 2016, 2 These percentages are about constant JOB/GC/98. internet users compared to the general population and the percentage of active References paying consumers. ABCOMM (2018), Interview for Ecommerce 3 These include bilateral agreements signed Foundation, CACE, “Estudio Anual de by the United States with other countries Comercio Electrónico”. and regional agreements such as TPP, CPTPP and USMCA. Cámara Argentina de Comercio Electrónico (CACE) (2018), “Durante el Primer semester 4 Document circulated as Work Programme el e-commerce en Argentina creció um 66% on Electronic Commerce, Draft Ministerial más que el mismo período del año anterior”. Decision of 13 December 2017, WT/ https://www.cace.org.ar/noticias-durante-el- MIN(17)/W/6. primer-semestre-el-ecommerce-en-argentina- crecio-un-66-mas-que-el-mismo-periodo-del- 5 Document circulated as Joint Statement on ano-anterior Electronic Commerce, dated 25 January 2019, WT/L/1056. Cessi Argentina (2018), La economía de la industria Argentina del Software. http:// 6 The Communication of Brazil and www.cessi.org.ar/comunicados/docs/ Argentina was first submitted by Brazil Reporte-ECONOMICO-Fundacion-FIEL- as JOB/IP/19. In the revision submission CESSI.pdf (namely, INF/ECOM/16/Rev.1, first circulated as Joint Statement on Electronic Ceurvels, M. (2018), Latin America Commerce: Electronic Commerce and Ecommerce 2018 Digital Buyer Trends for Copyright, Communication from Brazil Argentina, Brazil and Mexico. https://www. and Argentina, dated 24 September 2018, emarketer.com/content/latin-america- JOB/GC/200/Rev.1), Argentina joined as ecommerce-2018 co-sponsor. The Communication from Argentina, Brazil and Paraguay was Ciurak, D. and Ptashkina, M. (2018), The circulated as WTO Work Programme Digital Transformation and the Transformation on Electronic Commerce: Electronic of , RTA Exchange, Signatures, Communication from Geneva: ICTSD and IDB. Argentina, Brazil and Paraguay, dated 21 December 2016, JOB/GC/115. Duberstein, B. (2018), “Better e-commerce buy: JD.com or MercadoLibre?”, The Motley 7 Those documents include: Joint Statement Fool. https://www.fool.com/ on Electronic Commerce, Communication investing/2018/02/06/better-e-commerce- from Brazil, dated 30 April 2019, INF/ buy-jdcom-vs-.aspx ECOM/27; Exploratory Work on Electronic Commerce, Non-Paper from Brazil, dated Ebit (2019), Webshoppers Report, 37th 11 April 2018, INF/ECOM/3, first circulated Edition. http://abcasa.org.br/webshoppers/ as JOB/GC/176; Joint Statement on Webshoppers_37.pdf 248 CHAPTER 11

Ecommerce Foundation (2018), LATAM millions), March 2019. https://www.statista. E-commerce Report 2018. com/statistics/251660/ e-commerce-users- in-argentina/ EOS Intelligence (2013), E-commerce in Brazil – Marred by Political and Social Stile, E. and Fernandez, D. (2016), Influences. https://www.eos-intelligence. “Argentina”, in The Internet: Laws and com/perspectives/consumer-goods-retail/ Regulatory Regimes (2nd Edition). https:// e-commerce-in-brazil-marred-by-political- www.marval.com/archive/a_newsletters/ and-social influences/ doc/stile.pdf

Mercado Libre (2018), Report. SWS Consulting (2018), E-commerce http://investor.mercadolibre.com/static-files/ Handbook 2018: LATAM Focus. https:// b4f4df6f-2daa-40a6-8502-ef37308b260b www.slideshare.net/AriDavidoff/ ecommerce-handbook-2018 Sociedade Brasileira de Varejo e Consumo (SBVC) (2018), Ranking E-Commerce United Nations Industrial Development 2018 Report. Organization (UNIDO) (2017), “Inclusive and Sustainable Industrial Development”, Working Statista (2019), Number of e-commerce Paper Series WP 14 | 2017, National Report users in Argentina from 2017 to 2023 (in on E-commerce Development in Brazil. CHAPTER 11 249

World Trade Organization (WTO) Joint Statement on Electronic Commerce, (2018a), Examen Estadístico del Comercio Communication from Argentina, Colombia Mundial, 2018. and , dated 5 April 2018, INF/ECOM/1. (WTO) (2018b), WTO Negotiations on Trade-Related Aspects Worldline (2019), Argentina: Economy and of E-commerce: Elements of a Potential e-Commerce. https://onlinepayment Approach Under the Framework of the acceptance.worldline.com/market/argentina/

250 CHAPTER 11: COMMENTS

Comments

MARK WU*

In recent years, Latin America has calls to protect individual data, privacy become one of the fastest growing and . Neither has markets in the world for e-commerce. engaged in crude forms of digital Argentina and Brazil, both members of to effectively close the Southern Common Market off their markets and build up national (MERCOSUR), are two of the region’s champions. Yet, while they have major engines driving the development championed openness, neither has of the regional digital economy. In fallen squarely in line with the liberal 2019, the two countries collectively digital trade initiatives advanced by accounted for more than half of the , Japan, the United States region’s business-to-consumer and others. Nor have they ceded their (B2C) e-commerce.1 Even as their markets to American or Chinese change and their platforms. In short, both countries economies experience periodic have sought to engage digital trade slowdowns, both countries continue on their own terms. to march forward digitally. One recent ranking of the top global start-up At first glance, this gambit may hubs crowned , Brazil, appear to be paying off. Mercado as the top city in Latin America, with Libre, based in Argentina, is the , Argentina, featuring as region’s most popular e-commerce the only other Latin American city to site. In Brazil, homegrown B2W is rank among the top 50 worldwide.2 another leading e-commerce marketplace. Whereas e-commerce in But it is not just the remarkable much of the rest of the world is e-commerce revenue growth that dominated by the likes of Alibaba, has garnered the envy of other Amazon, eBay or one of their locally emerging economies. After all, as this backed companies, Argentina and volume highlights, e-commerce and Brazil have both proven that it is digital trade are expanding rapidly possible for governments to cultivate throughout the developing world. the right conditions for domestic Rather, it is the manner through which technology start-ups to acquire these two countries have managed to competitiveness in cross-border develop digital competitiveness that e-commerce and digital trade. has attracted the attention of others. Given their recent histories of In their chapter, Professors authoritarian rule, both countries have Thorstensen and Delich make three remained sensitive to civil society’s important contributions towards

* The contents of this commentary are the sole responsibility of the author and are not meant to represent the position or opinions of the WTO or its members.

CHAPTER 11: COMMENTS 251 helping us understand the development benefited from knowledge derived of e-commerce in Argentina and Brazil. through engagement with their They are worth highlighting, especially counterparts in advanced economies. for other developing countries. Third, although MERCOSUR First, they emphasize the importance constitutes a vital component of of robust regulatory reform. Both Argentina’s and Brazil’s trade and countries implemented a series of economic policies, neither turned to laws and regulatory frameworks to MERCOSUR as the key forum for facilitate online transactions. In so developing their policies. Instead, doing, they provided reassurances they pushed domestic regulatory to companies and consumers alike. reforms on their own terms, without What both sides of a transaction necessarily seeking regional require are certainty over rules harmonization. While this may have concerning nuts and bolts issues allowed officials to operate such as taxation, digital signatures, more in accord with Silicon Valley’s use of personal data, mantra to “move fast returns, etc. Simply and break things”, investing in physical Professors Thorstensen infrastructure by laying “Argentina and and Delich express a cables and building Brazil have both valid concern that this cellular networks to proven that it lack of regional support e-commerce, is possible for coordination may hurt while a necessary both countries in the precondition, is governments longer run. In their insufficient. Governments to cultivate the closing paragraph, they must also invest in right conditions speculate that the lack adapting their laws and for domestic of a single digital market institutions to fit the technology start- in MERCOSUR will digital era. prevent regional firms ups to acquire from acquiring the Second, Professors competitiveness scale economies Thorstensen and Delich in cross-border necessary to become highlight the role of e-commerce and competitive globally. participation in external digital trade.” processes in influencing This raises the question internal developments. of whether Argentina Argentine and Brazilian and Brazil are bound policies are shaped through to continue as success stories. policymakers’ involvement in Certainly, unlike many other parts of in international organizations as Latin America, they have succeeded in well as through their negotiations creating e-commerce platforms and of free trade agreements (FTAs), technology ecosystems. Mercado most notably with the European Union. Libre and B2W are rightly celebrated As was true of their experiences in as examples of how homegrown firms other domains of global governance can beat out global giants by better (e.g. anti-, WTO dispute catering to local needs. Despite settlement), Argentina and Brazil both these successes, however, are these 252 CHAPTER 11: COMMENTS

countries nevertheless teetering on Of course, the digital competition is the edge of the digital version of a just beginning. The vital lesson to be “middle income” trap? drawn from MERCOSUR, however, may well be the same one the region Indeed, there are worrying signs taught us in the late 20th century for that both countries may be losing industrial goods. In the end, investing in ground relative to other parts of the legal reform and active participation in developing world. Between 2014 and multilateral institutions can only get a 2019, Brazil dropped 26 spots in the so far. In order to UNCTAD B2C E-commerce Index compete against advanced economies rankings to 74th place. Argentina and emerging Asian giants, developing declined even more, falling 36 spots countries elsewhere will need to invest to 85th place. Not only has China heavily in human capital, stabilize overtaken both countries, but so too macroeconomic conditions and achieve have India, and Viet Nam.3 regional scale economies. Whether Just as the industrial goods and Argentina, Brazil or MERCOSUR has electronics value chains eventually learned the lessons of its past remains gravitated towards Asia, the same to be seen. But the region must step up phenomenon may be also happening quickly if it is to remain competitive in a for digital. rapidly digitizing world. CHAPTER 11: COMMENTS 253

Endnotes 3 Compare UNCTAD, UNCTAD B2C E-commerce Index 2019, UNCTAD 1 The other major engine of e-commerce Technical Notes on ICT for Development growth is Mexico. For more details, see No. 14, pp. 7–10, available at: https:// Caroline Zepeda, The Thriving Brazilian unctad.org/en/PublicationsLibrary/tn_ E-Commerce Market, Contxto, available at: unctad_ict4d14_en.pdf with UNCTAD, https://www.contxto.com/en/technology/ Information Economy Report 2015, pp. the-thriving-brazilian-e-commerce-market/ 100-103, available at: https://unctad.org/ en/PublicationsLibrary/ier2015_en.pdf 2 See StartUp Blink Ecosystem Ranking Report 2019, available at: https://report. startupblink.com/