Managing a product recall – five things you need to know
Each year hundreds of products are recalled.
Each product recall is different and depends on the nature and scale of the issue and which regulators need to be involved.
Certain goods require specific regulators to be involved in the different States and Territories (e.g. Energy Safe Victoria for electrical goods) or different countries (e.g. MBIE in New Zealand).
What is critical is that a recall strategy is developed carefully, considering what the problem is and the appropriate way to respond.
Whilst action must necessarily be swift, it shouldn’t be reckless, nor should it adopt a scattergun approach.
The communication with affected consumers should match this sound and considered strategy.
A balance needs to be struck between needing fast action to minimise injury and the need to properly understand the recall issue and deal with it commercially and responsibly.
When is a recall required?
A product recall is required if use (or sometimes even misuse) of a product, does or may result in an injury, illness or death. Recalls may be voluntary, mandatory or in very rare occasion (eg. Takata airbags), compulsory.
A recall is defined to be more than getting defective goods back from customers. An action required to remedy defective goods is likely to be a recall.
This could be telling distributors to quarantine goods or retailers to remove them from shelves, sending a consumer a new part, warning label or instructions, or undertaking rectification works as part of a routine service.
Five things you need to know about recalls
The success of any recall and impact it has on both your business and end consumers will be affected by the way and speed in which a recall is handled.
Here are five things you need to know for a successful recall strategy.
- Identify the issue
Taking time to identify the cause of the problem and the extent of distribution is important. Whilst rolling out the recall strategy is critical, it is just as important to understand the cause and extent of the issue, to determine if a recall is in fact required, if the issue is systemic or a ‘one-off’ and what the fix is. There may be ways to quarantine or limit the scope of the recall, for example if only one or two batches of goods are defective and those goods are identifiable.
- Advise the regulators
Recalls inevitably involve working with regulators, and depending on the nature of the recall, sometimes more than one regulator. Advising early and working with regulators through the process and presenting a clearly defined strategy, actually assists the recall process. A sound and justified strategy helps give regulators the assurances they need that a recall is being well managed, that products can be returned or remedied. This allows the business to have great autonomy in, and control over, the recall process itself. In advising regulators there are strict mandatory timeframes which must be met.
- Communication strategy
If a recall is required, a sound communication strategy is key. This should ensure any customers and end consumers are contacted and are well informed of the issue. Depending on where the products have been sold and if end customer details are available, a communication strategy may include a range of communication methods. Advertising and communications are expensive, so selecting the right channels that work is critical.
- Record keeping
Once a recall is initiated, keeping accurate records of steps taken is important. This will involve methods of communication, responses, follow ups, complaints, products returned etc. This information will be used in reporting back to regulators and in their assessment as to the reasonableness of steps taken to recall the product.
Once a recall is submitted to the regulators, they will set a reporting schedule. This must be complied with and will involve providing updates on the status of the recall, number of goods remedied, number of goods outstanding, changes to the recall strategy and notifications of any illness, injuries or deaths since the recall commenced.
Recalls are commonplace but must still be treated seriously and lawfully. If there are concerns about faulty products, or potential risks or injuries that may be caused by goods or services, obligations and liabilities under the Australian Consumer Law do exist.
Macpherson Kelley advises on approximately 15 recalls each year for products across a range of industries, some across multiple jurisdictions. Our significant experience in recall action means we know the process and can support you through it.
This article was written by Georgia Davies-Jackson, Lawyer – Commercial.