From new rules on jurisdiction to global supply chain management, we offer our international experts' predictions on the opportunities and challenges that the product safety, liability and recall market may face in the coming year and beyond.
1. Diacetyl and vaping - the new `tobacco'?
Alongside State Recoupment claims emanating from the US Opioid epidemic, the London Market is being hit by losses from the US Diacetyl litigation, which are now breaching local policy limits. Diacetyl may be found in processed foods that contain buttery flavouring, from dairy products and baked goods through to caramel, popcorn, wine and beer. At low levels, it is not said to present a risk to consumers. However, when heated and inhaled (eg during the popcorn and coffee manufacturing processes) it has been associated with serious and irreversible respiratory disease (known as popcorn lung) in food producers' employees, due to its volatility and irritant properties. Similar problems have been found with substitute flavourings which are structurally similar to diacetyl. Diacetyl is also found in many of the vape flavours used in e-cigarettes. Toxicological studies are ongoing, but there is no doubt that flavourings-related lung disease is on the increase.
2. Heightened obligations for UK importers may alter their risk profile
On 1 January 2021, UK distributors of products imported into the EU became "UK importers" under the strict liability regime of the Consumer Protection Act 1987 (as amended by The Product Safety and Metrology (EU Exit) Regulations 2019). This means they will have primary (rather than secondary) liability for defective products they place in the UK market, irrespective of fault. As UK importers they will also have regulatory compliance obligations, including ensuring the correct information is printed on the products and packaging in accordance with sector-specific regulations, and affixing the new UKCA marking on the products before the end of 2021. Such companies and their insurers should assess whether this will alter their risk profile based on increased exposure arising from product nonconformities or third party liabilities.
3. Will the new rules on jurisdiction bring more or less certainty?
From 31 December 2020, the EU regime will no longer apply to English proceedings. Instead, the choice is between applying English common law rules on jurisdiction; or, where it applies, the Hague Convention on Choice of Court Agreements. The Hague Convention only applies where the parties have made an exclusive choice of court agreement. In other cases, English common law rules will apply. This opens the door to defendants being able to argue that England is not the appropriate forum, which was outlawed under the EU regime. Expect certainty where parties have chosen to litigate in a Hague contracting state, greater uncertainty and satellite litigation where they have not.
4. The changing global product safety landscape new risks mean new liabilities
The General Product Safety Directive (GPSD) protects consumers by ensuring that only safe goods are sold in the EU. The Commission is currently reviewing the fitness for purpose of the current legislation in the light of new risks presented by artificial intelligence and connected technologies. It is likely that there will be a formal revision to the GPSD which will respond to issues related to new technologies and online sales channels; ensure more efficient market surveillance; and improve the effectiveness of product recalls. Fundamental concepts such as the burden of proof and the definitions of ‘safety’, ‘product’, and ‘defect’ are being challenged, and there could also be knockon effects such as revisions to the Machinery Directive which governs the safety of industrial machinery. While the revisions aim to address the risks stemming from new technologies while allowing for innovation, it remains to be seen where the balance will lie, at a time when it is essential that Europe is able to compete with the technological advances of China and the US. The global product safety landscape is changing – and new risks mean new liabilities
5. COVID-19 implications for the life sciences industry
The pandemic has brought the work of the life sciences sector to the public's attention as never before. First, the NHS required increased numbers of ventilators, with several innovative designs being developed. Next, PPE was needed to protect staff and patients received new and repurposed medicines to treat COVID-19 symptoms. Antigen tests determine who has the virus now and help hospitals, workplaces and universities to operate while several vaccine candidates become available. Public confidence is vital. Manufacturers must ensure now that they meet all regulatory standards developed to ensure safety, efficacy and quality. Otherwise, they may face litigation for unintended harm alleged to have been caused by their products.
6. Blockchain may be the solution for global supply chain management
As globalisation leads to unprecedented complexity, a recent report from the UK Government's Office for Product Safety and Standards may provide the key to how manufacturers and those through the supply chain might verify the provenance of consumer products. First used to support the Bitcoin cryptocurrency, distributed ledger technologies such as blockchain are now receiving much wider interest from industries such as food and agriculture, healthcare and pharmaceuticals. It promises trust and transparency, efficiency and real time tracking and solutions to issues such as disruptions, delays and even fraud. There may however be practical issues around implementation, data inputting costs and vulnerability to cyber attacks. At a time when certifying ethical sourcing and wider traceability is so important, this could be a real breakthrough. Although this is a nascent market, the report cites stakeholders expecting mass market reach in the next five years.
7. The EU directive on class actions will reshape the future of consumer litigation
The Directive on Representative Actions for the Protection of the Collective Interests of Consumers has been published by the European Commission. It will require all Member States to implement class action mechanisms, whereas currently only 19 (out of the 27) members offer collective action as a form of legal remedy to victims of mass harm. This Europe-wide harmonisation will shape the future of national and cross-border consumer litigation, and increase pan-European litigation risk. The Directive will also increase the ability of authorised bodies to take action on behalf of multiple claimants for breach of consumer protection legislation. Mass data breaches and trading practices detrimental to consumers potentially a ripe area in the wake of COVID-related disruption are key areas of focus for this. There is also express provision for the losing party to pay the costs of proceedings.
8. All change with the Medicines and Medical Devices Bill
The Medicines and Medical Devices Bill will create a modern and safe medical regulation regime in the UK. From January 2021, changes to legislation on these issues will no longer flow through from updates at EU level. The legislation creates the structure for the UK Government to legislate for updates or changes to our existing laws on human and veterinary medicines, clinical trials, and medical devices. The Bill aims to strengthen patient safety by strengthening the powers of the UK’s medicines and medical devices regulator, the Medicines and Healthcare Products Regulatory Agency. It also aims to facilitate the sharing of information to support public health and the creation of mechanisms to track the use of medical devices or medicines against a patient record. The Government considers the new legislation will support its goal to empower what were only recently unimaginable medical innovations in treatment and diagnostics in areas such as biotechnology, artificial intelligence and robotics, which have huge potential to extend the quality and length of patients’ lives.
9. A US perspective: regulating the cosmetics industry in 2025
California's Toxic-Free Cosmetics Act is aimed at 24 chemicals often linked to cancer, reproductive harm, birth defects and endocrine disruption. Effective from 1 January 2025, cosmetics and personal care products manufactured or sold in California may not contain these 24 toxic chemicals, all of which are currently banned by the European Union. Many of the chemicals are currently commonly employed in manufacturing and packaging or as processing aids or preservatives in cosmetic and personal care products. This law will significantly impact various aspects of the industry, including global supply chains, and will help to synchronize industry regulations.
10.A US perspective: FDA policies will change post-pandemic
In 2021, after the pandemic ends, the US Food and Drug Administration (FDA) will transition certain COVIDrelated Emergency Use Authorization (EUA) devices to more conventional review. Some reclassification of risks is possible. The FDA will also make some COVID-related temporary policies permanent, including regulations on the development of clinical tests. Outside COVID-19, site inspections and adverse event reporting will resume, both suspended during the pandemic, under a new risk assessment system. Manufacturers and distributors should closely monitor FDA publications and announcements for policy changes that may affect their products.
11.A US perspective: more US states will legalise marijuana but efforts to legalise on a federal level may stall
The individual state-regulated markets in marijuana are set to expand with new voter initiatives approved in New Jersey, Arizona, South Dakota, Montana and Mississippi. The number of medical marijuana states has increased to 35 and the number of adult-use states to 15, plus Washington DC. With two Senate seats in Georgia to be decided by a run-off in January, it is likely that Republicans will continue to control the Senate so broad federal legislation on legalisation is unlikely. It is somewhat more likely that we may see passage of limited banking protections.
12.A German perspective: the new market surveillance regulation will come into force
On 16 July 2021, the new Regulation on Market Surveillance will come into full force. It contains clearly extended powers in favour of the market surveillance authorities and co-operation obligations for the supervised market participants. The increased general level of product safety is meant to remove distortions in competition at the expense of companies that act in conformity with the law. In addition, the regulation will impact online trade and global supply chains.
13.A Canadian perspective: suppliers and distributors will shift legal costs and litigation expenses to manufacturers
2021 will see suppliers and distributors shifting legal costs and litigation expenses to manufacturers. Contribution and indemnity claims will increase as suppliers and distributors seek to claim against manufacturer’s risk insurance programs. This will lead to increased contracting and agreements for third party coverage by suppliers and distributors against manufacturer’s defect claims.