Bill C-36, the Canada Consumer Product Safety Act (the Act) waspassed by Parliament on December 14, 2010 and will become law upon receiving Royal Assent. The Act repeals Part 1 and Schedule 1 of the Hazardous Products Act (HPA) and will regulate the sale, import, labelling and advertising of most consumer products and their components, parts or accessories, including packaging, by introducing strict safety, reporting and record-keeping requirements. Enforcement of the Act is supported by steep penalties, broad ministerial safety testing, recall, reporting and investigative powers.

Consumer Products Subject to Tougher Safety Standards

Most consumer products, including their packaging, are subject to the Act. Certain products currently regulated under separate legislation, such as food, drugs, cosmetics, vehicles, pest control products and controlled substances, are excluded.

Those products currently prohibited or restricted in Canada under Part I and Schedule I of the Hazardous Products Act will be transitioned under the Act, which will similarly prohibit and restrict their sale and import into Canada unless certain prescribed requirements are met. For example, prohibited products currently in Schedule I of the HPA (e.g., baby walkers, spectacle frames containing cellulose nitrate) will continue to be prohibited in Canada under the Act. Restricted products currently under Schedule II of the HPA will continue to be subject to prescribed safety standards in order to be advertised or sold in Canada.

New Broad Prohibitions

In addition to the prohibitions and restrictions that existed under the HPA, the Act goes further in prohibiting any consumer products that are a “danger to human health or safety,” are the subject of a recall order or other pending order, or a voluntary recall because the product is a danger to human health or safety. This new broad prohibition applies to manufacturers and importers, but also to any person who advertises or sells a product that they know falls under one of the prohibited categories.

The Act also prohibits false, misleading or deceptive statements on packaging or in advertisements, and any statements reasonably likely to create an erroneous impression regarding a product’s safety, certification or compliance with safety standards.

Increased Ministerial Powers

Under the Act, the Minister is granted broad new powers relating to safety testing and reporting, recalls and disclosure.

  • Safety Records and Incident Reporting

If any defect, recall, label error or other occurrence results or could reasonably result in serious injury, adverse effect or death to a person, whether such incident occurred within Canada or elsewhere, all related information within the control of the person is required to be reported to the Minister within two days and, if applicable, the person from whom the product was received. Within 10 days of the incident, a written report setting out certain prescribed information must be provided to the Minister.

In addition to the new incident reporting obligations, manufactures, importers, advertisers, sellers and testers of consumer products are required to prepare and maintain certain prescribed documentation, including evidence of where the product was obtained and to whom the product was sold or, in the case of retailers, the location where and the period during which they sold the product. At the request of the Minister, manufacturers and importers may also be required to provide the results of product safety tests to verify compliance with the Act and prescribed safety standards.

  • Recalls

Where there is a reasonable belief that a consumer product poses a danger to human health or safety, the Minister may order a mandatory recall of the product which will be subject to review by designated review officers. In addition, the Minister may order a manufacturer, importer, advertiser or seller to undertake any measure the Minister deems necessary to remedy non-compliance with the Act, including an order to cease the manufacture, importation, advertising or sale of the consumer product at issue. The Act does provide for a limited review process of any recall and other orders.

  • Disclosures to the Public

The Minister also has the power to disclose information to the public regarding a consumer product that threatens human health of safety and may also disclose confidential business information without prior consent or notice if the product poses a serious and imminent danger to human health or safety or the environment if disclosure of the information is essential to address the danger.

Enforcement and Administration

Contraventions of the Act carry stiff penalties, including fines up to $5 million upon conviction on indictment and/or up to two years imprisonment. For more serious offences resulting from wilful or reckless contraventions of the Act, fines are in the discretion of the court and may also include imprisonment for a term up to five years. If an offence continues for more than one day, each subsequent day constitutes a new offence.

The Act also creates violations for non-compliance with orders, including recall orders, from inspectors or the Minister. Administrative monetary penalties are limited to $25,000 generally and $5,000 when the guilty party is a non-profit organization or a person who contravened the Act in a non-commercial context.

Inspectors are given broad powers under the Act including entering into a place (excluding dwelling-houses) without the consent of the owner or without a warrant and relating to testing, seizure and detainment of products.

Other enforcement options include compliance agreements, interim orders and injunctions.

What Should Franchisors Do to Be Prepared when the Act Comes into Force?

Franchise systems that involve the import or sale of consumer products will be affected when the Act comes into force. Prior to the Act coming into force, franchisors of such systems will need to ensure their products continue to meet the prescribed safety standards. In addition, franchisors will need to pay careful attention to the documentation and reporting requirements in the Act and should ensure that any franchise policies and standards are modified to facilitate compliance with these requirements.

Finally, franchisors should consider amending their franchise agreements or operations manuals to include provisions that:

  • require franchisees to report to the franchisor any safety issues that are subject to the Act in order to provide the franchisor with the opportunity to manage and control a system-wide recall if necessary;
  • indemnify the franchisor for failures by the franchisee to comply with laws;
  • disclaim or limit liability for consumer products;
  • enable the franchisor access to and copies of any reports or records that a franchisee is required to keep or provide to the Minister pursuant to the Act; and
  • require franchisees to immediately notify the franchisor of any request by the Minister to provide information, safety testing or other reports, or of any inspection.