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Litigation & Dispute Resolution

Focus: ACCC releases draft recall and mandatory reporting guidelines

22 September 2010

In brief: In anticipation of the commencement of the Australian Consumer Law in January 2011, the Australian Competition and Consumer Commission has released draft guidelines on product safety recalls and mandatory reporting for public comment. Partner Ross Drinnan (view CV), Special Counsel Nicola Nygh (view CV) and Lawyer Jonathan Adamopoulos report.

This is the fourth article in a series of Focus articles examining the new Australian Consumer Law and its effect on product liability in Australia. Further articles in the series will address guarantees and the new compulsory reporting requirements for product risks and their interaction with similar overseas systems.

How does it affect you?

  • Although the guidelines are not legally binding, they provide suppliers of consumer goods and services with a useful guide on compliance with the Australian Consumer Law.
  • The guidelines, when in final form, will assist suppliers understand the ACCC's expectations in relation to product safety recalls and when to report a serious injury or illness.

Background

As reported in our previous Focus articles1, the second part of the Australian Consumer Law, Trade Practices Amendment (Australian Consumer Law) No 2 Act 2010 (Cth) (the ACL2) was passed by Parliament on 24 June 2010. The ACL2 is due to commence on 1 January 2011. Two of the areas of key reform under the ACL2 are:

  • product safety recalls; and
  • mandatory reporting obligations.

To assist businesses involved in the supply of consumer goods and services (suppliers) to comply with these obligations, the ACCC has released draft guidelines.

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Consumer product safety recall guidelines

The legal requirements of the new product safety recall regime under ACL2 are discussed in our August 2010 Focus article Product safety and recall regime and the liability for defective products. The draft guidelines recommend that a supplier notify the ACCC when it takes any one of a range of actions to mitigate a product safety hazard, including arranging for the repair or modification of products. This clarifies how the ACCC intends to interpret 'recall' and is in line with the approach taken in Australia currently (but is broader than the understanding of 'recall' in some overseas jurisdictions). The guidelines will include a requirement that suppliers notify the ACCC of the recall strategy that will be adopted and that the strategy is negotiated with the ACCC before it is submitted. The draft guidelines2 provide that a recall strategy should include (among other things):3

  • an explanation of the problem with the product (including the risks to health posed);
  • the number of units in circulation and who is involved in the supply chain;
  • any information regarding known injuries; and
  • how consumers of the product will be contacted.

The draft guidelines also contain information on how suppliers can establish a communication plan to reach consumers who have purchased products that are the subject of a recall. These include how to reach certain demographics and the content and layout of a recall notice. The draft guidelines provide that the recall notice must not include the words 'voluntary recall.'

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Mandatory reporting guidelines

Under the ACL2, a supplier will be required to report to the relevant Minister incidents involving the death, serious injury or illness of a person (an incident) that are associated with a supplier's consumer good or service. (The details of the legal requirements are the subject of a Focus article to be published later.) Importantly, however, the reporting requirement is triggered when the supplier becomes aware (either directly or indirectly) of an incident – whether the incident occurs in Australia or overseas.

The Mandatory Reporting Guidelines Consultation Draft4 outline what the ACCC considers to be the key features of the regime, including:

  • when the mandatory reporting obligations are triggered and when reporting is not required;
  • when a supplier is taken to be 'aware' of an incident;
  • what information must be included in a notice to the ACCC; and
  • the consequences of not complying with the regime.

The guidelines also include a case study in which a supplier receives a complaint and the mandatory reporting requirements are triggered. The case study emphasises the importance of suppliers having appropriate procedures for receiving customer feedback and for assessing whether the mandatory reporting requirements are triggered.

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Legal effect and public consultation

The final versions of the guidelines will only be a guide to the obligations under the Australian Consumer Law. Accordingly, suppliers will not be required to comply with them nor will compliance with the guidelines absolve suppliers from liability under the Australian Consumer Law. However, the guidelines provide practical assistance to suppliers wanting to establish product recall and mandatory reporting strategies that are likely to be acceptable to the ACCC.

Both guidelines are in draft form and have been released for public consultation with the public consultation period ending on 20 September. We understand that the ACCC is now considering the comments which have been received and will issue final versions of the guidelines before the commencement of the ACL2 on 1 January 2011.

Footnotes
  1. See Focus: Product safety recall reforms in the Australian Consumer Law, Focus: Product safety recall reforms and the liability for defective products, Focus: Standards, bans and notices.
  2. Go to the Guidelines.
  3. Consumer Product Safety Recall Guidelines (Draft), p7.
  4. A guide to the mandatory reporting law in relation to consumer goods, or product related services, associated with death or serious injury or illness is available at www.productsafety.gov.au/mandatoryreporting.

For further information, please contact:

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