We discuss how to handle product recalls, the key factors to bear in mind and the potential criminal consequences.
The recent product recall by Mothercare of two particular types of luxury cot mattresses highlights the reality that any company, however established and reputable, could be forced to recall their products. Mothercare became aware that their supplier’s production methods had changed and as such, the fire retardant performance and compliance of these mattresses may have been affected. Consequently the decision was made to recall the two mattresses, which were sold between 5 June and 23 June 2014.
Product recalls can result in a number of negative consequences for a company including financial loss, loss of market share, damage to reputation and loss of customer confidence.
Toyota has suffered from a series of product recalls. At the beginning of April 2014 it was reported that the car manufacturer have recalled around 20 million vehicles since early 2012, whilst sales are at 18.7 million. They have also agreed a substantial penalty of $1.2 billion with the US Justice Department for misleading statements made about Toyota and Lexus vehicle safety issues.
Whilst product recalls have the potential to harm companies; if they are executed properly the risk of harm can be minimised substantially. It is therefore imperative that product recalls are handled sensitively. As such, companies are wise to develop a contingency plan should they need to ever execute a product recall.
Preparing for a product recall
Some of the key factors to bear in mind when devising a product recall are:
- The safety of your customers
Time is of the essence and it is important to act as quickly as possible. As soon as a potential issue comes to light seek legal advice about what to do next. Within the plan you can include details of your legal contact.
Generally it will be appropriate for an announcement to be made to the public as soon as it becomes apparent that there may be a risk to public safety. Consideration must be given to the information to be included within this and the tone of the announcement. Whilst transparency is important, causing panic and aggravating the public is also unhelpful.
The means of distributing the information should also be considered. Not everyone who has purchased the product will see the announcement and the average success rate for electrical product recall in the UK is just 10-20%. Consequently, it is important to find different ways of reaching consumers to try and ensure that they are aware.
The production and distribution of a deficient product can have severe criminal consequences. In addition, a failure to notify of the potential need for a product recall could result in criminal liability, for example under the General Product Safety Regulations 2005. These Regulations place a duty on both producers and distributors to notify their enforcement authority regarding any product that poses risks to the consumer, which is incompatible with the general safety requirement. This further emphasises the importance of seeking legal advice as soon as possible once you become aware of a potential problem.
Author: Laura WilmshurstThis information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.