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Focus: ACCC reviews product safety recall system

7 June 2010

In brief: The Australian Competition and Consumer Commission has released its review of the product safety recalls system. The review makes a number of findings about the effectiveness of the system, and recommends some practical changes to the way companies implement product recalls. Partner Annette Hughes , Special Counsel Nicola Nygh (view CV) and Lawyer Alexandra Mason report.

How does it affect you?

  • The Australian Competition and Consumer Commission (the ACCC) plans to implement new guidelines for conducting a product recall and to make consequential modifications to its publication Product safety recall: A guide for suppliers (the Recall Guidelines). Those planned changes include:
    • development of supplier reporting schedules at the outset of a recall to enable ongoing assessment of the effectiveness of a recall; and 
    • requiring suppliers to provide a final report demonstrating that all risks have been mitigated before a product recall can be closed.
  • The ACCC plans to monitor the response of suppliers to the new measures for the first year following the changes and will consider whether further legislative reform is required.

Background

The ACCC conducted its review in response to recommendations by the Productivity Commission and the Council of Australian Governments. The review analysed the effectiveness of existing consumer product recall systems and sought to determine how regulators and suppliers can more effectively address the risks associated with unsafe products.

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Actions and recommendations

In reporting its findings, the ACCC has recommended a number of practical changes to the way product recall processes are managed by suppliers. The ACCC's recommendations will form the basis of consultation with interested stakeholders, including state and territory regulators and industry representatives, in order to finalise the new Recall Guidelines. The recommendations focus on the following four key areas.

Notifying regulators and other entities in the supply chain

The current requirements for suppliers to notify multiple regulators both at state and federal level is burdensome. Under the proposed Australian Consumer Law (ACL) reforms, suppliers will be required to notify the ACCC but not state consumer protection agencies. However, they still may need to notify specialist agencies for recalls of products such as motor vehicles, therapeutic goods, food products, electrical goods, and animal medicines and agricultural products. The ACCC will discuss ways of easing this compliance burden with other regulators. 

Suppliers are currently required to notify international recipients of recalled goods. The ACCC is considering extending this requirement to all entities in the domestic supply chain.

The ACCC proposes to modify the Recall Guidelines to indicate that suppliers should notify the Federal Minister of all actions taken to address the risk of an unsafe product, including issuing safety notices, trade-level recalls and consumer-level recalls. This has always been best practice. The ACCC will evaluate how suppliers respond to this request over the next 12 months and will consider whether legislative reform is required.

Communicating with consumers

The ACCC has recommended that product suppliers be required to match the method of communicating the recall with the target audience – this has always been best practice, but not required in any formal way. The report summarises market research about the preferred communication methods for different consumer groups.

Suppliers should use a variety of communication tools, both direct and indirect, to alert consumers to product recalls. This includes web-based communications such as websites, blogs, and social networking sites like Twitter or Facebook. In the press release accompanying the review, ACCC Deputy Chair Peter Kell said, 'the days of relying just on newspaper advertisements are past'.

The ACCC proposes to modify the Recall Guidelines to provide that all recall notices meet certain practical guidelines, including requirements that recall notices:

  • do not describe a recall as 'voluntary';
  • use words in the title that will have the greatest impact on consumers;
  • have a red border;
  • include a photo of the product;
  • contain a hazard symbol;
  • clearly describe the product;
  • describe the risk of injury;
  • explain what consumers must do;
  • include the supplier's contact details; and
  • include information on refunds, product replacements or repair options.

Again, several of these are currently required, but others have been added. We suspect that there may be some room for disagreement about what words will 'have the greatest impact on consumers'.

Retrieving the product

The ACCC plans to develop a reporting schedule at the beginning of a recall to allow it to conduct an ongoing assessment of the effectiveness of the recall.

To assist in retrieving recalled products, the ACCC plans to encourage suppliers to:

  • include distinguishing marks on products to make tracing products easier;
  • for low-value goods, offer incentives for consumers to return products;
  • retain records to allow products to be traced;
  • maintain records about the origin of specific product components; and
  • use online product registration and warranty cards.

The ACCC will consider whether the Federal Minister should have power to direct a supplier to offer a particular remedy when ordering a recall.

The ACCC will also consider whether it should be an offence to supply goods that are subject to a voluntary recall. Currently, it is only an offence to supply goods that are subject to compulsory recall.

Closing product recalls

Prior to closure of a recall, the ACCC plans to require that suppliers provide to it and any other relevant regulator:

  • information about the cause of the defects and the steps taken to remedy them;
  • evidence of the rectification or destruction of the defective product; and
  • a final report evidencing effective mitigation of any risks.

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Conclusion

The ACCC intends to take a more active role in advising suppliers about how best to conduct consumer recalls and in monitoring the effectiveness of recalls. It plans to monitor the conduct of recalls over the next year to assess whether further steps should be taken to improve the recall system, including whether changes to the Trade Practices Act 1974 (Cth) (or ACL) are required.

For further information, please contact:

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