XML 30 R19.htm IDEA: XBRL DOCUMENT
v3.24.3

COMMITMENTS AND CONTINGENCIES | 9 Months Ended
--- | ---
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation and Other Legal Matters The Company is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues liabilities when it considers it to be probable that future costs will be incurred and such costs can be reasonably estimated. Proceeding-related liabilities are based on developments to date and historical information related to actions filed against the Company. As of September 30, 2024, the Company had accounted for estimated liabilities involving proceeding-related contingencies and other estimated contingencies of $157 million within other liabilities to cover legal actions against the Company for which Management has assessed the likelihood of a final adverse outcome as probable. Expected legal costs related to litigations are accrued when the legal service is actually provided. In addition, as of September 30, 2024, the Company and its subsidiaries are subject to certain legal actions considered by the Company’s Management and its legal counsels to be reasonably possible of resulting in a loss for an estimated aggregate amount up to $223 million. No loss amounts have been accrued for such reasonably possible legal actions. For further information related to contingent liabilities please refer to Note 15 to the consolidated financial statements in the Company’s 2023 10-K. Tax Claims Brazilian preliminary injunction against the Brazilian tax authorities (withholding income tax) The tax claim related to the Brazilian preliminary injunction against the Brazilian tax authorities is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. On April 3, 2024, the Superior Court of Justice decided to analyze whether the matter under consideration is capable of becoming a binding precedent. In April 2024, the Company submitted a petition claiming that the case is fully capable of being judged as a binding precedent and the civil association, Câmara Brasileira da Economia Digital, submitted a petition as amicus curiae with the same arguments. On October 14, 2024, the Superior Court of Justice decided the matter under consideration will be judged as a binding precedent. On September 17, 2024, Mercado Crédito Sociedade de Crédito, Financiamento e Investimento S.A. filed a writ of mandamus and requested a preliminary injunction to avoid the withholding income tax over payment being remitted to Argentina by applying the convention signed between Brazil and Argentina to prevent double taxation (the "Brazil-Argentina Treaty") which was granted to the aforementioned entity. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is probable based on the technical merits of the Company’s tax position and the existence of adverse decisions issued by the Superior Court of Justice. For that reason, the Company has recorded a provision for the disputed amounts, which was $360 million as of September 30, 2024, and which was recorded in non-current other liabilities in the consolidated balance sheets, net of the corresponding judicial deposits for $326 million (which includes $61 million of interest income). Considering that the Brazil-Argentina Treaty to prevent double taxation treaty was amended in 2017, the Company started a new tax claim for the period from Janua ry 2019 to September 30, 2024, and the court granted a preliminary injunction recognizing the right of collecting the withholding tax at a 10% rate was granted. As a result of this preliminary injunction, further judicial deposits of withholding tax will be based on a rate of 10%. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is possible based on the technical merits of the Company’s position;therefore the Company will maintain the provision considering a 15% rate. Interstate rate of ICMS-DIFAL on interstate sales Interstate rate of ICMS-DIFAL on interstate sales without Complementary Law The tax claim related to the interstate rate of ICMS-DIFAL (Imposto sobre Circulaçao de Mercadorias, Serviços de Transporte Interestadual, Intermunicipal e Comunicação on interstate sales at a differential rate) without the existence of a complementary law is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. In March 2024, one of the cases related to the State of Santa Catarina (where the risk of losing had been considered probable) received judgment in favor of the State and will no longer be reported. In June 2024, one of the cases related to the State of Rio de Janeiro (where the risk of losing had been considered remote) received judgment partially in favor of the Company. Therefore, the Company presented a motion of clarification which is now pending judgment. In September 2024, one of the cases related to the State of Paraná (where the risk of losing had been considered remote) had been received in the Superior Tribunal of Justice to the judgment of an Special Appeal filed by the State. In June 2024, one of the cases related to the State of Rio de Janeiro (where the risk of losing had been considered remote) received judgment partially in favor of the Company. Therefore, the Company presented a motion of clarification which is now pending judgment. In addition, a case related to the State do Goiás (where the risk of losing had been considered probable) received judgment in favor of the Company, as a result of which, in June 2024, the State filed an appeal that was rejected by the Court. The case has not become final and unappealable. The remaining cases pending as of December 31, 2023 had no updates during the nine-month period ended September 30, 2024. The Company maintains a $2 million provision as of September 30, 2024 for the disputed amounts related to the 3 ongoing cases where the risk of losing is considered by Management to be probable, based on the opinion of external legal counsel. Exclusion of ICMS tax benefits from federal taxes base The tax claim related to the exclusion of ICMS tax benefits from the tax base of the Corporate Income Tax (“IRPJ”) and of the Social Contribution on Net Profits (“CSLL”) is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. On April 17, 2024, the Federal Regional Court ruled in favor of the Company. Therefore, the Federal Government presented a motion of clarification, which was rejected in August 2024. In response, the Federal Government filed a special appeal, but it was rejected on October 10, 2024. The case has not yet become final and unappealable. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is not more likely than not based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any expense or liability for the disputed amounts. As of September 30, 2024, the total amount under dispute was $61 million. The tax claim related to the exclusion of ICMS tax benefits from tax base of the Social Contributions (PIS and COFINS) is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. On April 25, 2024, a ruling favorable to the Company was issued recognizing the Company’s right to exclude the amounts of credits arising from ICMS tax incentives from the PIS and COFINS calculation basis. On June 7, 2024, the Federal Government filed an appeal. The Company responded to the appeal and the case was referred to the Court for judgment on the request for an appeal. The first instance court’s decision has not yet become final and unappealable. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is reasonably possible but not probable based on the technical merits of the Company’s tax position. For that reason, the Company has not recorded any expense or liability for the disputed amounts. The Company had recorded $17 million of PIS and COFINS tax benefits arising from the ICMS tax incentives as of September 30, 2024. Administrative Tax Claims The tax assessment claiming corporate income taxes (IRPJ and CSLL), in relation to the 2016 taxable year, is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. On October 9, 2024, the administrative court of second instance issued a decision in order to return the case of Ebazar.com.br Ltda. back to the first instance in an evidentiary proceeding. The Company will be required to provide more additional evidence that the relevant services were necessary and actually hired and paid by the Brazilian subsidiaries. It is expected that the case has not yet become final and unappealable. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is not more likely than not. For that reason, the Company has not recorded any expense or liability for the disputed amounts. As of September 30, 2024, the total amount under dispute related to IRPJ and CSLL was $13 million. The tax assessment claiming corporate income taxes (IRPJ and CSLL), in relation to the 2017 taxable year, is described in Note 15 to the consolidated financial statements in the Company’s 2023 10-K. On July 24, 2024, the administrative body of first instance issued a decision in the case. The decision issued is partially favorable to the Company as it rejected the punitive fine of 150% over the tax charged and reduced it to 100%, but maintained the tax assessment and also the joint tax liability of the Senior Legal Director. The Company will present an appeal in the Federal Administrative Court. The case has not yet become final and unappealable. On August 28, 2024, after the administrative court of first instance issued an unfavorable decision and maintained the tax assessment, the Company filed an administrative appeal in the administrative court (CARF). The case has not yet become final and unappealable. Management’s opinion, based on the opinion of external legal counsel, is that the risk of losing the case is not more likely than not. For that reason, the Company has not recorded any expense or liability for the disputed amounts. As of September 30, 2024, the total amount under dispute related to IRPJ and CSLL was $72 million. Buyer protection program The buyer protection program (“BPP”) is designed to protect buyers in the Marketplace from losses due primarily to fraud or counterparty non-performance for all transactions completed through the Company’s online payment solution Mercado Pago (except for certain excluded categories). The Company’s BPP provides protection to consumers by reimbursing them for the total value of a purchased item and the value of any shipping service paid if it does not arrive, arrives incomplete or damaged, does not match the seller’s description or if the buyer regrets the purchase. The Company is entitled to recover from the third-party carrier companies performing the shipping service certain amounts paid under the BPP. Furthermore, in some specific circumstances, the Company enters into insurance contracts with third-party insurance companies in order to cover contingencies that may arise from the BPP. The maximum potential exposure under this program is estimated to be the volume of payments on the Marketplace, for which claims may be made under the terms and conditions of the Company’s BPP. Based on historical losses to date, the Company does not believe that the maximum potential exposure is representative of the actual potential exposure. The Company records a liability with respect to losses under this program when they are probable and the amount can be reasonably estimated. As of September 30, 2024 and December 31, 2023, Management’s estimate of the maximum potential exposure related to the Company’s buyer protection program is $5,155 million and $5,072 million, respectively, for which the Company recorded a provision of $10 million and $8 million, respectively. Commitments The Company committed to purchase cloud platform services based on the following terms: 1.for a total amount of $824 million, to be paid between October 1, 2021 and September 30, 2026. As of September 30, 2024, the Company had paid $601 million; 2.for a total amount of $200 million, to be paid between September 23, 2022 and September 23, 2025. As of September 30, 2024, the Company had paid $148 million in relation thereto. In August 2024, the Company amended this commitment whereby, effective as of August 20, 2024, the aggregate purchase commitment is $1,000 million, to be fully paid off between August 2024 and February 2030; and 3.for a total amount of $90 million, to be paid between November 2024 and June 30, 2030. On April 8, 2022, the Company signed a 10-year agreement with Gol Linhas Aereas S.A. under which the Company is committed to contract a minimum amount of air logistics services for a total annual cost of $43 million (total amount once all the dedicated aircraft are in operation). Pursuant to the agreement, Gol Linhas Aereas S.A. provides logistics services in Brazil to Mercado Envios through six dedicated aircraft, all of which have already started operations as of September 30, 2024. As of September 30, 2024, the Company has lease agreements for new warehouses in Brazil, Mexico and Argentina for a total amount of $1,497 million that has not yet commenced. Lease terms under the agreements are between 5 to 15 years. Since October 2023, the Company signed 3-year agreements with certain shipping companies in Brazil, under which the Company is committed to contract a minimum amount of logistics services. As of September 30, 2024, the remaining commitment amounted to $109 million. On January 10, 2024, the Company signed a 5-year agreement for the naming rights of the Complexo Pacaembu (municipal stadium of the city of São Paulo), for a total amount of $56 million. The agreement has the option to extend the term for 5 additional independent periods of 5 years each, for the same amount indexed by the Brazilian inflation rate index IPCA.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 405 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/405-30/tableOfContent Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 440 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482648/440-10-50-4 Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 450 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/450/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 954 -SubTopic 440 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478522/954-440-50-1 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 440 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482648/440-10-50-4 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 440 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/440/tableOfContent + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration