News & Insights

A recent undertaking accepted by the ACCC has put a spotlight on what action can be a recall. In this case, remote software updates constituted recall action. The undertaking emphasises the importance for manufacturers to consider legal compliance requirements when updating software or firmware that addresses safety issues. Any voluntary recall action must be notified to the ACCC.

Death, illness and serious injuries caused by a product also need to be reported.

The ACCC has accepted a court-enforceable undertaking from e-scooter rental company Lime Network Pty Ltd (Lime). The undertaking relates to Lime’s misrepresentation about the safety of its Generation 2 e-scooters (Gen 2) and its failure to comply with product safety reporting obligations.

background

Lime became aware that, in certain circumstances, excessive brake force or locking in the front wheel of the Gen 2 e-scooters caused the e-scooter to stop suddenly. This resulted in serious injuries to users including broken bones, damaged teeth, cuts and abrasions, and placed others at risk of serious injury.

On at least 50 occasions since 16 November 2018, Lime had become aware of the Gen 2 e-scooter’s problems and that it had caused, or was likely to cause, serious injury to customers. The ACCC considered that Lime misrepresented its product safety and failed to comply with mandatory injury reporting obligations, which requires written notice to the Commonwealth Minister within two days of becoming aware of the good causing, or potentially causing, serious injury or death.

On three occasions in early 2019, Lime applied remote firmware updates to its Gen 2 e-scooters in Australia to address those safety issues. The ACCC considered the application of each update constituted a voluntary recall within the meaning of section 128 of the Australian Consumer Law (ACL). Lime’s failure to provide written notice to the Commonwealth Minister within two days of applying the firmware update was a breach of its obligations under the ACL.

lime’s undertaking

Lime has addressed the ACCC’s concerns by undertaking to:

• publish a statement about their undertaking on its website and in an email to LimeApp users;
• supply only Generation 3 or later model e-scooters to consumers if Lime recommences operations in Australia;
• take timely action to rectify any safety issues affecting its e-scooters, including complying with reporting obligations; and
• implement and maintain a comprehensive Consumer Compliance Program in Australia.

key takeaways

Lime’s example brings to light key requirements of which Australian manufacturers, importers or suppliers of electronic or connected equipment need to be aware. More and more products become connected or controlled by apps and other means of remote access, but existing laws still apply to new technologies.

Most relevant for manufacturers is that any action to fix a product’s safety defect or hazard, even if rectified remotely such as through software updates, will constitute a voluntary recall under the ACL. For example, a voluntary recall will occur where there is a software update to remedy a fault in an autonomous machine or vehicle that may cause safety issues. This is the case irrespective of whether the update involved end-consumer action.

It is also important to note that these obligations exist for foreign companies operating mainly outside Australia but who engage in conduct in Australia or carry on business in Australia, as per the Full Federal Court decision in Valve Corporation v ACCC. In Lime’s case, it is a foreign entity but provides goods and services in Australia. Likewise, manufacturers who sell online into Australia are subject to the ACL, including any recalls they may conduct via a software update even if the remote update is instigated or undertaken overseas.

Consumer Compliance Programs, and the systems and procedures that sit within them, are a good way for suppliers to track their obligations under the ACL and prevent any breaches in the course of their business activities. In light of this recent undertaking, Consumer Compliance Programs should be reviewed to ensure they capture technological and not just physical actions.

If you would like any further information about your obligations for recalls (remote or otherwise), or assistance with a Consumer Compliance Program, please contact our Commercial team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.