Product Recalls: Keeping on the right side of the ACCC
The Competition and Consumer Act requires recall of consumer goods which in themselves, or because of a reasonably foreseeable use or misuse of the goods, will or may cause injury to a person. A recall can be initiated by the ACCC itself, or as a voluntary recall by a manufacturer or supplier, in which case it is obligatory to inform the ACCC within 2 days of initiating the recall, and the ACCC will monitor the recall, and post it on its www.recalls.gov.au website.
Since dealing with the ACCC is an integral part of managing a recall, it is advisable to keep the relationship with the ACCC as positive as possible in the circumstances. The ACCC and its staff have a job to do, and making it harder for them to do that job is likely to make it harder to co-operate with the ACCC to manage the recall. In our experience (on recalls ranging from children’s furniture to malfunctioning awning supports to pig food), the ACCC and other specialist regulators are generally very helpful and willing to work with businesses who need to recall a product, provided that the identified safety issue is being addressed positively and comprehensively. Being open and proactive, supplying information promptly when requested, and acknowledging valid concerns are all likely to help. Working positively with the ACCC generates goodwill which markedly assists in managing the recall.
As an example of what can happen when things don’t work well, consider this recent example:
- the ACCC contacted a supplier of children’s furniture to ask about lab test results showing that a product presented a risk of strangling or injury by gaps between parts of the product enabling a child’s head or limbs to become trapped;
the supplier wanted to limit a recall by proposing fixes, but because of the range of possible defects, the fixes became too complex to ask customers to manage, so only a return-and-replace recall would fix the problems;
a second set of lab test results on a second sample product raised the same concerns and more, to which the supplier responded by disputing that the item was actually theirs, though a little further enquiry proved that it was;
when a question arose as to the period for which the allegedly defective goods had been on the market, the supplier was "too busy" to focus on providing any evidence to support a limitation to the most recent batch of products, so the ACCC required the website recall notice to nominate all goods supplied over a period of years, rather than a few months: eventually, supplying evidence of a change of manufacturer a few months previously fixed this, but …
the delays involved in negotiation over proposed fixes and the terms of the recall notice damaged the relationship with the ACCC, which took the view that the supplier was trying to game the process and avoid its obligations, so it became much more assertive in its requirements;
as delays continued, an article appeared in the press dealing with recalls generally and naming the supplier as involved in the recall process;
once the recall notice was finalised and placed on the recalls website, and the supplier had emailed affected customers, the ACCC received consumer complaints that the nominated phone number for contacting the supplier was not being answered, and so the ACCC insisted on the supplier implementing the recall in good faith and in accordance with its undertakings;
ultimately, the supplier company closed down, but its principal soon appeared under another company name supplying the same line of goods, which the ACCC felt presented the same safety risks;
the ACCC commenced proceedings against the new company and its principal, who both had to give court undertakings to withdraw the alleged unsafe products from the market;
the ACCC is seeking injunctions, penalties, costs and disqualification orders, and has issued further press releases about the matter, and the case continues.
The recall would have been a serious business issue in any event, but engaging positively and co-operatively with the process from the start, and focussing on it to manage it as best as was possible, would have had less drastic consequences.
The moral of this story: no-one wants to have to recall a product, but doing so by engaging constructively and co-operatively with the ACCC or other regulator is likely to have better long-run results, and reduce brand damage.
If you require any advice or representation in relation to a product recall, please contact:
Stephen Booth, Principal
Phone: +61 2 9895 9222
Peter Stewart, Principal
Phone: +61 2 9895 9258