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Client Update: It's that time of year again – is your product safety house in order? 

21 November 2018

In brief: Product safety has been high on the ACCC's agenda in 2018 and, with the holiday retail frenzy about to begin, it should also be high on the agenda of all retailers and suppliers. Following on from International Product Safety Week last week, it is a good time for businesses to review their processes and procedures to ensure they comply with the Australian Consumer Law's product safety regime. Partner Miriam Stiel (view CV) and Senior Associate Julia Taylor set out some important considerations.

ACCC focus

In March 2018, the ACCC released its product safety priorities for the year. This list included ensuring better product safety outcomes for consumers in the online marketplace, and progressing reforms to the product safety provisions in the Australian Consumer Law (ACL). Since then, the ACCC has been following its priority list, and, according to a recent media release, is working to reduce online sales of unsafe consumer products, in a joint effort with the European Commission and 24 other countries. Throughout International Product Safety Week, the ACCC was getting the word out on social media, using the hashtag #SafeProductsOnline to draw consumers' attention to this issue. The ACCC has also urged consumers to report unsafe products they have purchased online, and to check whether products being advertised online comply with Australian mandatory standards or have been the subject of a recall in Australia. A raft of useful information can be found on the Product Safety website.

Product recalls

All retailers, whether bricks-and-mortar or online stores, should be aware of the ACL requirements relating to product recalls. In particular, online retailers without a physical presence in Australia must be cautious, as all suppliers of products to Australia must comply with the ACL, regardless of where they are located. The increase in online purchases by consumers should not result in a decline in product safety.

There are three broad types of recalls – compulsory recalls, negotiated recalls and voluntary recalls. Most suppliers agree that it is preferable for any recall to be conducted voluntarily. This triggers the reporting obligations in section 128(2) of the ACL, requiring a supplier to notify the Commonwealth Minister (usually through the ACCC) that it has taken voluntary action to recall consumer goods within two days of taking action. With the clock ticking, it is important to have a plan in place.

The ACL does not presently contain a definition of what constitutes a 'recall', but a recommendation to include a definition was made in the final report of Consumer Affairs Australia and New Zealand, which the Consumer Affairs Ministers accepted. Although an exposure draft of the recent Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 included a proposed definition of 'recall', this was abandoned before the Bill was passed. However, the general approach under existing ACCC guidance is that a recall broadly includes any actions a supplier takes to remove goods from distribution, sale or consumption.

What retailers should consider, as we head towards the busiest time of the year for purchases of consumer goods, is whether they have a proper process in place for dealing with recalls. Good crisis management depends on good planning. The steps for managing a recall include:

  • Information gathering – working out what has happened, to whom, and how many people or products are affected.
  • Verifying information – this could include verifying the customer claims and testing products to determine the cause of the problem.
  • Preliminary action – it may be prudent to place an immediate hold on stock of the product while the supplier determines the seriousness of the issue and what actions are necessary.
  • Assessing options and decision making – this will involve consulting with internal and external experts (legal, scientific, business and insurance) as to the risks the product poses, and the law. If a recall is deemed appropriate, the supplier will also need to decide the scope: ie whether it should be a trade-level recall or a consumer-level recall. This will depend on the degree of risk of harm to consumers and the effectiveness of recovery action.
  • Implementing the recall – the supplier will need to identify the products and batches affected, and where they were distributed. Once recall action is commenced, the supplier will have to identify and notify distributors, suppliers and, if necessary, consumers. Most importantly, the supplier must submit a recall notification to the ACCC within two days of commencing recall action!
  • Follow-up – keeping track of the success of the recall, while continuing to communicate with all relevant parties, is important. The supplier may also need to consider sourcing an alternative supply for the recalled product, and any permanent changes to product design or manufacture that must be made to overcome the identified problem.

Mandatory reporting

Another important aspect of the ACL product safety regime is mandatory reporting. Section 131 of the ACL requires a supplier of consumer goods who becomes aware of a death or serious injury or illness that was caused, or may have been caused, by the use or foreseeable misuse of the goods, to notify the Commonwealth Minister within two days of becoming aware of the incident. Again, timing is critical. However, assessing whether an incident is a 'serious injury or illness', or was 'caused or may have been caused by the use or foreseeable misuse' of consumer goods, is far from straightforward.

The definition of a 'serious injury or illness' under the ACL includes that the injury or illness is both 'acute' and requires 'medical or surgical treatment'. While it can be hard for a retailer without medical experts on staff to determine whether an illness or injury is acute, or whether it requires medical treatment, within the prescribed two-day period, many suppliers choose to report any injury or illness where a nurse or doctor has administered treatment.

Given the very short timeframe for determining whether a mandatory report must be lodged, a key consideration for suppliers of goods is whether they have appropriate and clearly defined channels for escalating a consumer complaint. Customer service teams and call centre staff should be trained as to what information they should be gathering and how to respond to a report of an injury or illness, and will need to know who in the business team is responsible for assessing the action to be taken. Seeking advice from medical and legal experts may be necessary, and needs to be done promptly.

Failure to report can result in heavy penalties and reputational damage. Companies must be vigilant in their quality-management procedures, and have effective procedures in place for recalling or withdrawing products, and for notifying the ACCC.

For further information, please contact:

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