In 2016, it seems the news has been heavily reporting on product warnings and recalls. From hoverboards and washing machines catching fire and causing property damage to parents warned of the dangers of children using mermaid tails in swimming pools. So, what does a business need to know about their product safety requirements and their responsibilities if they sell a potentially harmful or unsafe product? We set out the five key takeaways you need to know if you provide goods or services.
1. Safety Standards
All products your business supplies to consumers must be safe, meaning they comply with mandatory safety standards specifying the following:
- How the product is made or processed?
- What it contains?
- How does it work? and
- What warnings or instructions must come with the product?
The safety standards cover everything from aquatics toys to vehicle support stands and are available at Product Safety Australia. If you manufacture, import or sell consumer products, you should check and see if there are any safety specific requirements uniquely related to your products.
2. Consumer Guarantees
Under the Australian Consumer Law (ACL), all products you supply to consumers must meet the consumer guarantees. The consumer guarantees require that all products must be safe, lasting and with no faults. If your products do not meet these guarantees, then your customers have a right to take action against you under the ACL. Even if you are not the product’s manufacturer, you are liable to your customers under the ACL for the following:
- Repair or replace the product,
- Refunding the cost of the product; and
- Compensating the customer for any damages or loss they suffer.
3. Mandatory Notifications
The ACL contains two mandatory notification requirements. A mandatory notification is triggered where there is a risk that a product may cause injury. This will result in recalling the product. Your product will also require a mandatory notification where you become aware of a death, serious injury or illness associated with the product. In this case, you must make a mandatory report to the appropriate authorities within two days. All participants in the supply chain are subject to this reporting requirement including:
- Retails; or
If a product fails to comply with the safety standards or is considered a potential safety risk, then you may need to recall your product. Recalls can be either voluntary or compulsory. As a supplier, you should voluntarily recall products you have supplied if you determine that they are:
- Non-compliant with the appropriate safety standard; or
- Can cause an injury (including through misuse).
The regulator can intervene and force a product recall if you fail to do so, or if they believe you haven’t taken sufficient action. In this instance, you will have little or no control as to how the regulator will conduct the recall. The Australian Competition and Consumer Commission (ACCC) which has responsibility for overseeing recalls, has published Consumer Product Safety Recall Guidelines, which provides guidance on how to conduct a product safety recall.
You must notify the Minister for Competition Policy and Consumer Affairs within two days of commencing a product safety recall. The ACCC will then monitor and audit the recall’s effectiveness for a general consumer product. You may also need to notify a specialist Commonwealth regulator if the product you are recalling falls into one of the below categories:
- Food products;
- Motor vehicles;
- Therapeutic goods;
- Agriculture or veterinary products;
- Electrical products; and
- Gas appliances.
So what will your business be liable for if you sell an unsafe product to consumers? Not only is there the recall costs that include advertisement, logistics and refund or replacement costs, but also there is the reputational damage. For example, Patties following its national recall of frozen berries linked to cases of hepatitis A estimated a $1.5 million loss in earnings. Your business will also be liable to compensate a customer if they suffer any damage or loss as a result of your product if the problem was reasonably foreseeable.
What Should You Do?
So, what can you do to reduce your business’ liability? Ensure that you conduct regular reviews of the products you sell. This should include both their design and production. You should also confirm that your products comply with the appropriate safety standards, especially as these change or are updated.
Are you appropriately marketing your products? Take steps to include the necessary warnings on the packaging, and provide clear and thorough user instructions.
Finally, maintain accurate records of all incidents related to the products. Report all incidences of death, serious injury or illness associated with the product to the authorities within the two-day time frame. If necessary, you should conduct an efficient and effective product safety recall of any product you believe to be defective or unsafe and discontinue sales either permanently or until such time that you can resolve the issue.
Questions about product safety or recalls? Get in touch with our consumer lawyers.