A retailer, manufacturer or producer of a potentially defective product could face both civil and criminal liability if appropriate action is not taken. It is critical to take immediate expert advice upon acquiring knowledge of a potentially defective product because the consequences of a failure to do so can be severe.
Below is a summary of the main issues and guidelines to consider:
The relevant Legislation makes regular references to obligations being imposed upon ‘producers’ under The Consumer Protection Act 1987 “CPA”. Producers can include retailers, suppliers and manufacturers and for the purposes of this article I adopt the collective term unless stated otherwise.
1. General Product Safety Regulations 2005 (the GPSR): general notes
a. Introduction to GPSR 2005: the UK General Product Safety Regulations 2005 implemented the revised General Product Safety Directive (2001/95/EC) (GPSD). The GPSD has increased the regulation of product safety in the UK and therefore businesses must review their product safety systems to ensure compliance with the regime. The GSPD covers all products intended for use by consumers or likely to be used by consumers.
b. GPSR 2005, regulation 5: General safety requirement
Under regulation 5, there is a “general safety requirement” that producers will only place a product on the market if it is a “safe product”. A “safe product” is one which presents no risk or the minimum risk compatible with its use and which provides a high level of protection for consumers. If an unsafe product is placed on the market the manufacturer must notify the relevant enforcement authority (see regulation 9(3) on notification).
c. GPSR 2005, regulation 10(1): Enforcement
Under regulation 10(4), the relevant enforcement authorities in England are the local authorities, which are the county councils, district councils, London Borough Councils, the Common Council of the City of London and the Council of the Isles of Scilly.
a. GPSR 2005, regulation 9: Obligations of producers and distributors.
Where a product does not comply with the general safety requirement, both the producer and the distributor have a duty to notify the relevant enforcement authority (as defined in regulation 10(1)) of
i. information which will enable the product or batch in question to be identified; ii. the risks that the product poses to consumers; iii. details of action taken to prevent risk to the consumer.
b. This means that producers should monitor their products for potential risks. Such monitoring would give producers advance warning of product safety risks, so that they can take action before the authorities take the step of ordering a product recall. In addition, the GPSR 2005 require producers to keep a record of consumer complaints about the safety of their products (see regulation 7(4)(b)(ii)), and to notify the safety regulators if they find that the product is unsafe (see regulation 9 on notification).
c. This obligation to notify the relevant enforcement authority creates two questions for producers:
i. Issue 1: whether to notify. Producers must quickly assess the seriousness of the risk in order to decide whether the product is unsafe. The European Commission’s “Guidelines for the notification of dangerous consumer products to the competent authorities of the Member states by producers and distributors in accordance with article 5(3) of Directive 2001/95/EC” states that producers and distributors should take into account the severity of the possible damage and the factors which affect the level of the risk, such as the type of user and obviousness of the hazard, in deciding whether a product is unsafe and should be notified.¹
ii. Issue 2: when to notify. If the product is unsafe, then the European Commission’s Guidelines state that a company must inform the authorities: “without delay, as soon as the relevant information has become available, and in any case within 10 days since it has reportable information, even while investigations are continuing, indicating the existence of a dangerous product. When there is a serious risk, companies are required to inform the authority and in no case later than 3 days after they have obtained notifiable information. In an emergency situation, such as when immediate action is taken by a company, the company should inform the authorities immediately and by the fastest means”.
d. Once notified, the regulator will decide whether to send the information onto the European Commission and the other member states through the RAPEX system (the rapid alert system for non-food consumer products).
a. The GPSR 2005 place a positive duty on producers to recall dangerous products in certain circumstances.
i. Before the GPSR 2005 there was common law authority for a duty to recall unsafe products.
ii. Under GPSR 2005 producers now have a legal obligation to withdraw unsafe products from the distribution chain and/or recall them from consumers.
b. The GPSR 2005 regulation 15 gives national authorities the power to issue product recall notices. The authority can order the producer or distributor to take steps to protect consumers, including ordering a product recall.
i. Under regulation 10(5), while voluntary action on the part of producers and distributors is to be encouraged, an enforcement authority has the power take action “urgently and without first encouraging and promoting voluntary action if a product poses a serious risk”. The enforcement authorities must act proportionately to the seriousness of harm and take account of the precautionary principle. Acting on a precautionary basis means that regulators must take action even when they lack conclusive scientific evidence of the existence of the risk, as long as there is a likelihood of real harm.²
ii. Under regulation 15(4), an enforcement authority may only issue an recall notice if:
- other action which the authority may require would not suffice to prevent the risks
- the action being undertaken by the producer or distributor is unsatisfactory or insufficient; and
- the authority has given no less than seven days’ notice of intention to serve the recall notice and, where the person served has required the authority to seek advice from a person appointed by the Chartered Institute of Arbitrators (CIArb) to determine whether the product is dangerous or whether a recall notice is proportional to the seriousness of the risk, the authority has in fact sought and taken account of such advice.
Under regulation 15(5), the second and third requirements of regulation 15(4) do not apply for products which pose a serious risk and which require urgent action.
iii. Note that there is a right of appeal against recall notices. Under regulation 19(2)(d), a recall notice will be set aside if the product is not dangerous, or if the enforcement authority has not used recall as a last resort and the other requirements of regulation 15(4) have not been met.
4. Taking corrective action: when producers should make a recall. “Product Safety in Europe: A Guide to Corrective Action Including Recalls”
The Guide aims to give producers and distributors of consumer products general advice about what they should do if they have evidence that one of their products may be unsafe.
a. Plan ahead: preparing your collective action strategy before you have a problem
i. Establish a policy and procedure for corrective action. Details of such policies may vary, but should include a statement by the company management of its aims and commitment to speedy corrective action to restore product safety, and to inform consumers fully of the corrective action being taken.
ii. Set up a corrective action team. The team should have knowledge of design, production, product safety/ risk management, quality assurance, distribution, public and corporate relations, legal, and accounts.
iii. Monitor information about the safety of your products. You need to have systems to collect and analyse information on report of accidents involving your products, customer complaints, warranty claims, insurance claims, any evidence of consumer abuse or misuse of the product.
iv. Keep good records to help trace products and identify customers and end users.
v. Assemble documents about the product’s design and safety
b. Decide whether to take action: assess the risk
i. Identify the hazard and its cause
ii. Estimate how many products are affected iii. Identify who might be affected
iv. Consider what severity of injury could result
v. Assess the likelihood of such an injury vi. Evaluate acceptability of overall risk
c. Taking corrective action: deciding what action to take
i. Decide whether corrective action needs to involve:
- Products in the supply chain and possibly
- Products in the hands of consumers
ii. Decide what corrective action needs to be carried out
If the overall risk is judged to be serious, the producer should take immediate action to:
- Inform the market surveillance authorities
- Isolate affected products
- Set up a communications programme to contact consumers
If the overall level of risk is judged to be moderate, the corrective action may be limited to products in the distribution chain, and it may be enough to withdraw those and give the authorities details of what is begin done
If the overall level of risk is judged to be low, corrective action may be limited to consideration of changes affecting products in design and production.
iii. Possible corrective action:
- Changing the design of products
- Withdrawing products from distribution
- Modifying products at consumers’ premises
- Return of products by consumers for modification
- Recalling products from consumers for replacement or refund
iv. Agree responsibilities and actions with distributors
v. Inform the market surveillance authorities
5. The European Commission published its revised Guidelines for the operation of “RAPEX” in January 2010.
a. “RAPEX” is a European rapid alert system for dangerous consumer products. It allows information about dangerous products to be given to other national authorities and the European Commission, in order to prevent the sale of these products. All the EU countries participate in the system. Under Article 12 of the GPSD, national authorities have a duty to notify the Commission, via the RAPEX system, of action taken to prevent the marketing and use of dangerous consumer products.
b. Manufacturers of consumer products marketed in Europe should be aware of the importance of the new RAPEX Guidelines, which give guidance on how the risk posed by consumer products should be assessed. This risk assessment process is relevant when a manufacturer has marketed an unsafe product. Regulators will follow this risk assessment process to decide whether the producer or distributor needs to notify regulators about the problem; what corrective action, up to and including recall, needs to be taken; and whether the issue will be communicated across Europe. The Guidelines and the new risk assessment process are expected to significantly change the way in which national authorities handle product recalls, and therefore the producer needs to understand the process.
c. Preparing risk assessment under the new 2010 Guidelines:
i. Describe the product and its hazard. ii. Identify the type of customer to be included in the injury scenario. iii. Describe the injury scenario in which the hazard might affect the consumer. iv. Determine the severity of the possible injury to the consumer. v. Determine the probability of the injury arising. vi. Determine the risk level. vii. Check whether the risk level is plausible. viii. Repeat in order to identify other injury scenarios and the risk posed by the product. Classify the risk as “low”, “medium”, “high” or “serious”.
6. Advice on crisis management
a. The new GPSR regime means that producers must respond much more quickly to a product crisis. Producers should prepare a crisis plan beforehand in order to manage a potential product crisis. The producer should decide on an internal recall team, external advisors to deal with the risk assessment process, and detail procedures for employees.
b. There are differences between how the General Product Safety regime has been implemented in different member states, and how each member state approaches risk management. Producers should be aware of these differences and address both national and international issues in their crisis management plans.
c. Manufacturing companies may consider extending their existing product liability insurance to include product recall insurance which will cover some of the costs of a product recall.
B. The potential consequences of selling, producing or manufacturing a defective product that caused injury and/or damage to property
1. Criminal Proceedings by a prosecuting authority
Health & Safety at Work Act 1974
a. Action against the company
i. Section 3 of HSWA imposes a duty on an employer to ensure, so far as is reasonably practicable, the health safety and welfare of persons not in its employment (i.e. the public).
ii. A company is guilty of an offence if it fails to comply with the duty imposed by section 3.
iii. A company would be liable to an unlimited fine in the event of conviction.
b. Action against Individuals
i. Section 37 of HSWA states that where an offence has been committed by a company (see section 3 HSWA above) is proved to have been committed with the consent, connivance or neglect of an individual director, manager, secretary or other similar officer who was purporting to act in such capacity he too shall be guilty of an offence.
ii. Therefore in order for a director or other similar officer to be guilty of this offence:
a. The company must be guilty of an offence b. That director must have consented to that offence or wilfully ignored it or negligently allowed it to occur.
iii. A director guilty of such an offence faces up to 2 years in prison and an unlimited fine.
General Product Safety Regulations 2005
a. Action against a company or individual
i. Regulation 20(1) of GPSR creates an offence for a person to place an unsafe product on the market. A company faces a maximum fine of £20,000. An individual prosecuted for this offence can be imprisoned for up to 12 months and a fine.
ii. Regulation 20(2) of GPSR creates an offence if a person fails to notify an enforcing authority that a product it has placed on the market is not safe. A company faces a maximum fine of £5,000. An individual prosecuted for this offence can be imprisoned for up to 3 months and a fine.
iii. Regulation 20(3) of GPSR creates an offence if a producer does not give notice to an enforcing authority that its product is unsafe and it is proved that the producer ought to have known that the product was unsafe. A company faces a maximum fine is £5,000. An individual prosecuted for this offence can be imprisoned for up to 3 months and a fine.
iv. Regulation 24 creates offences where a person obstructs an officer of an enforcing authority. A company or person faces a maximum fine is £5,000.
2. Civil Proceedings by the Claimant
a. If a defective product has caused injury to a consumer or third party the injured persons will have a cause of action enabling them to bring a claim for damages against the retailers, producers or manufacturers. It will be easier for a consumer to establish liability against the retailer as that is the legal entity with whom the contract was made and as such the consumer will have the benefit of a breach of contract claim which would not be available if the consumer sued the producer or manufacturer of the product. In practice the claim is normally persued against the retailer and pleaded alternatively in negligence and possibly under the CPA. There would normally be a claim for damages for damages for pain, suffering and loss of amenity suffered, any loss of earnings, out of pocket expenses sustained by the individual and family sustained as a result of the injury and a claim for care and assistance provided by the family. Upon receipt of any claim (or knowledge of any circumstance which may give rise to a claim under their insurance policy) the retailer must immediately notify their insurers.
b. Further, if the product caused damage to property then the purchasers of the product, the Claimants, can claim damages either directly or more usually by way of a recovery action by their insurers, for the physical damage to property sustained and if a business then potentially of loss of net profits sustained.
C. The potential consequences of selling, producing or manufacturing a defective product that caused death.
1. Coroner’s Inquest. In the even of a fatality arising there is an additional type of legal proceeding that will ensue, namely the Coroner’s Inquest.
a. The Coroner must investigate any unnatural death.
b. The Coroner’s inquiry is limited in nature and is designed to answer the following questions:
i. Who was the deceased? ii. When and where did he die? iii. How did he die?
c. The final question is a narrow question which means “by what means did he die”?
d. The inquest must not appear to determine any question of criminal or civil liability.
e. The coroner will reach a “verdict”. There are various possible verdicts, the most common of which are: accidental death, unlawful killing and an open (i.e. inconclusive) verdict.
f. The inquest will happen: it cannot be settled.
2. Criminal proceedings. In addition to the consequences outlined under B, further serious criminal proceedings may ensue by virtue of the Corporate Manslaughter & Homicide Act 2007 (CMHA).
a. A company is guilty of an offence if the way in which its activities are managed or organised
i. causes a person’s death and ii. amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased.
b. The relevant duty includes a duty owed in connection with the supply of goods.
c. The company’s conduct must fall far below what can reasonably be expected of the organisation in the circumstances.
d. Only a company can be prosecuted for corporate manslaughter. On the basis of the present information, a prosecution under the CMHA appears unlikely, but cannot be ruled out.
e. If prosecuted and convicted of such an offence, a company faces an unlimited fine and might be subject to a remedial order (requiring the problem to be remedied in a particular manner) or a publicity order (requiring the company to publicise the fact of the conviction to the media).
3. Civil Proceedings on Behalf of the Estate
a. A claim for damages may be made on behalf of the Estate of a deceased person, the extent of which may be extensive as it may include a loss of dependency by the deceased’s family. The extent of the claim falls outside the scope of this brief article.
D. The powers of the Trading Standards officers
1. Trading Standards Officers: general information
a. Trading standards officers exist to enforce consumer protection legislation in order to create a safe trading environment. They carry out inspections on business premises to establish whether Trading Standards legislation has been complied with.
b. An inspection may take place as part of a routine inspection programme, or because the officer suspects that an offence has been committed.
2. Trading Standards Officers: powers
a. Power to enter premises and inspect goods: an officer may at all reasonable times enter any business premises and inspect any goods
b. Power to request or require books, documents or records: an officer can require the production of documents relating to the business and may make copies.
c. Powers of seizure: if an officer has reasonable cause to believe an offence has been committed, he may seize and detain any goods in order to ascertain whether an offence has been committed.
3. Trading Standards Officers: if there is a breach of Trading Standards legislation
a. If the Officer finds a contravention of safety legislation, he may issue a suspension notice prohibiting the movement of specified goods for a period of six months.
b. If the Officer finds more serious contraventions of safety legislation, he may consider legal proceedings.
These Guidelines are not intended to be fully comprehensive and each case depends on it’s own facts.