Analyzing DACO Administrative Order 2011-006: Understanding the Legal Basis for Commercial Discrimination Enforcement in Puerto Rico

For businesses dealing with Puerto Rican consumers, a clear understanding of local regulations governing commercial practices is essential. A pivotal legal instrument in this area is Department of Consumer Affairs (DACO) Administrative Order 2011-006 (AO 2011-006), which defines and prohibits commercial discrimination against Puerto Rican consumers. Recent enforcement actions by DACO underscore the renewed importance for companies to review their practices against the specific provisions of this Order.

The Foundation: Key Provisions of DACO Administrative Order 2011-006

Promulgated by DACO in 2011, AO 2011-006 serves as the primary legal basis for DACO's efforts to combat commercial discrimination on the island. The Order established the Office Against Discrimination in Commerce (OADC) and outlines its mission, which includes educating both businesses and consumers regarding practices in the Puerto Rico market compared to other jurisdictions, particularly the United States.

The core of AO 2011-006 for businesses is its detailed definition of what constitutes prohibited commercial discrimination. According to the Order, this occurs when there is any significant difference in access, sale, products, goods, services, warranties, or delivery affecting the Puerto Rico market as compared to other markets, and that difference lacks a real justification.

Crucially, AO 2011-006 strictly limits what qualifies as a "real justification." The Order states that a justification must be based only on factors directly or indirectly beyond the control of the business, providing a restrictive list of examples: shipping costs, taxes, requirements imposed by federal or state governments, or limitations based on valid licenses, contracts, permits, patents, or copyrights.

A key legal implication of AO 2011-006 is the burden of proof. If a company implements any difference or limitation affecting the Puerto Rico market, the Order places the onus squarely on the company to demonstrate that such restrictions have a genuine justification strictly adhering to the limited criteria outlined in the Order.

Furthermore, AO 2011-006 grants specific authority to the DACO Secretary to represent consumers in matters of commercial discrimination and appear on their behalf in any forum. The Order also establishes that violations are subject to the penalties and fines stipulated in the DACO Organic Law, which include fines of up to $10,000 per violation.

Enforcement of AO 2011-006 in Action: Recent DACO Activity

While AO 2011-006 has been in effect for over a decade, DACO has recently signaled a significant intensification of its enforcement. The reactivation of the OADC in September 2024 marked a clear step towards actively implementing the Order's provisions.

Recent actions underscore this renewed enforcement. DACO has issued over 80 requests for information (RFIs) to multinational companies across various sectors, utilizing the investigative authority derived from AO 2011-006 to examine potential discriminatory practices. These RFIs serve as a formal step under the Order to gather information necessary to determine compliance with its definition of commercial discrimination and the requirements for justification.

According to statements by Interim Secretary of DACO, Francisco González de la Matta, these enforcement efforts are yielding results, prompting companies to reconsider policies that may violate AO 2011-006 to ensure Puerto Rican consumers receive the same treatment and benefits available in other United States jurisdictions. Examples of companies contacted under this enforcement push include Microsoft, Apple, TikTok, Sony, H&M, Nike, PayPal, JBL, Mastercard, and Yeti. The agency has noted that responses have been received, and instances of delayed responses have led to the imposition of fines as permitted under the DACO Organic Law referenced by AO 2011-006.

These recent enforcement actions, as described by Secretary González de la Matta, aim to drive systemic change, ensuring the inclusion of Puerto Rico in offers and promotions as required by the principles of fair commerce and the specific mandates of AO 2011-006.

Compliance Implications and Recommendations for Businesses:

The active enforcement of DACO Administrative Order 2011-006 means that businesses operating in or selling to Puerto Rico must be proactive in reviewing their practices. Potential commercial discrimination is not merely a consumer complaint issue but a matter of regulatory non-compliance with specific legal requirements and definitions outlined in the Order.

To ensure compliance with AO 2011-006:

• Analyze Offerings vs. AO Definition: Conduct a detailed review of your product availability, pricing, warranties, service access, and delivery policies in Puerto Rico, comparing them to other markets. Evaluate any differences strictly against the definition of commercial discrimination in AO 2011-006.

• Document Justifications Meticulously: For any differences identified, gather and maintain robust documentation proving the justification is based only on the narrow factors allowed by the Order. The burden to demonstrate this justification falls on your company.

• Align Practices with Order's Goal: Where possible and justifiable under AO 2011-006, standardize commercial practices to minimize differences impacting Puerto Rican consumers, aligning with DACO's stated goal of equitable treatment.

• Treat DACO Inquiries Seriously: If you receive an RFI or other communication from the OADC related to AO 2011-006 enforcement, engage promptly and provide comprehensive information clearly articulating your compliance and justifications, referencing the Order's requirements. Be aware of potential daily fines for delayed responses.

Navigating the specific legal requirements of DACO Administrative Order 2011-006, understanding its definition of commercial discrimination, and responding effectively to enforcement actions requires specific legal expertise in Puerto Rico consumer affairs and regulatory compliance.

Seeking Legal Guidance on DACO Administrative Order 2011-006 Compliance?

The intensified enforcement of AO 2011-006 by DACO's OADC highlights the need for businesses to ensure their commercial practices in Puerto Rico fully comply with this key regulation.

Our team has experience advising companies on DACO Administrative Order 2011-006, consumer affairs laws, and broader regulatory compliance issues in Puerto Rico. We assist businesses in reviewing their practices, assessing justifications for any market differences, and responding to agency inquiries.

Schedule a Consultation with MZLS today to discuss your obligations under AO 2011-006, address potential commercial discrimination concerns, or seek assistance with DACO interactions in San Juan or throughout Puerto Rico.

Disclaimer: This blog article provides general legal information and analysis based on DACO Administrative Order 2011-006 and reported statements and actions by the agency. Consumer affairs laws, regulations, and their enforcement in Puerto Rico are complex and subject to specific rules and updates. This information should not be considered legal advice. Businesses should consult with qualified legal counsel for advice specific to their situation and commercial practices. MZLS provides comprehensive legal counsel for doing business in Puerto Rico, including regulatory compliance and matters involving consumer affairs and DACO, and represents clients in complex litigation, including cases involving government agencies.

About MZLS LLC:

Established in 2019, MZLS LLC is a full-service law firm with offices in San Juan, Puerto Rico and Washington D.C. We provide comprehensive legal counsel for doing business in Puerto Rico, assisting clients with market entry, regulatory compliance, corporate and commercial law matters, and navigating interactions with government agencies like DACO. Our firm serves a diverse clientele, helping businesses understand and comply with the unique legal and regulatory environment in Puerto Rico.