Manufacturers and suppliers of consumer goods need to have a clear understanding about how to best manage a product recall if a product safety issue comes to light.
Issues surrounding product safety have never been more important for manufacturers and suppliers, in an era where the ACCC is serious about protecting Australian consumers from unsafe products and class actions are on the rise. In a recent speech by the new ACCC Chair at the National Consumer Congress1, the ACCC launched its seven new product safety priorities for 2022-23. The priorities include a focus on safety issues relating to lithium-ion batteries as well as high risk issues affecting young children and strengthening product safety online2.
Recalls are stressful, expensive, eat up precious management time and can have enormous effects on reputation. Invest in developing a recall action plan now so you are ready in a crisis.
Addisons’ top ten recall tips
1. Have a recall plan in place now
The plan should be tailored to your business. It should set out the steps you need to take if a product safety issue arises and identify the team from across your business and trusted external advisors who will help you manage the issue.
Create a plan today to help save you time, stress and money at the time of a recall.
2. Take out recall insurance
A recall is expensive and can take some time to resolve, so make sure you are protected. Do this now!
3. Notify your insurer
If a product safety issue arises, notify your insurer immediately.
4. If death, illness or injury has occurred notify the ACCC
If the consumer good which you’ve supplied has resulted in death, illness or serious injury, notify the ACCC within 2 days of becoming aware of the situation. Failure to provide the notice is an offence and a pecuniary penalty may apply.
5. Always conduct a speedy but comprehensive risk assessment so you can make an informed decision about the need for a recall
You may need to undertake technical tests to determine the root cause of the fault. You should check customer call logs and determine whether there are any reports of injuries, issues or complaints with this or any product you sell that is similar to it. Under the Australian Consumer Law (ACL), where a “consumer good” has been identified as posing a safety risk to consumers, the supplier of that product must initiate a recall of that product. A product will be considered likely to pose a safety risk to consumers include instances where:
- the product will or may cause injury to a person; and/or
- a reasonably foreseeable use (including a misuse) of the product will or may cause injury to a person.
6. Develop a comprehensive corrective and preventative action plan (CAPA)
Develop a CAPA once you have determined that there is an issue with the consumer good you sell so the issue does not occur again. This will be a very important document to determine the effectiveness of your recall.
7. Quarantine the recalled goods and communicate to customers and consumers
Once you make the decision that you need to commence a recall, you will need to do the following asap:
- Stop your product going to market by quarantining the product in your distribution centres.
- Advise your trade customers/resellers about the recall and get them to quarantine any product on hand.
- Get a PR agent on board to help you navigate the reputational aspects of a recall.
- Prepare a consumer communications strategy to effectively publicise the recall to those consumers who are likely to have purchased your product and are affected by the recall. Traditional print ads in State and Territory newspapers are still generally required by the ACCC, although publicity by way of website banner ads, pages or microsites and your socials are also very common these days.
- Think about any specific disposal or destruction requirements that may apply to your product to ensure environmental and other laws are complied with.
- Set up a process for verifying claims for refunds and the processing of refunds to consumers within a reasonable period of time.
If the consumer good you sell is a type of good governed by specific legislation (e.g. food, therapeutic goods, electrical goods), you will need to take account the special requirements of those laws too.
8. Notify the ACCC of the recall
Within two days of commencing the recall, notify the ACCC by submitting an online recall form. There is a penalty for failing to do so.
If a product is a specific type of good governed by specific laws, and not just a general merchandise or a “consumer good”, your regulator may not be the ACCC – i.e. the Therapeutic Goods Administration governs therapeutic goods and Food Standards Australia New Zealand governs food. Check the appropriate regulator before starting any recall as their requirements and processes may differ.
9. Notify your export customers about the recall
If you have exported your product outside Australia, provide a copy of this notice to the Commonwealth Minister/ACCC within ten days.
10. Keep good records of your recall
Such as how many trade customers and consumers have responded, what has happened to the products you have onsite, in storage, with any reseller etc, the root cause of the safety issue, your proposed CAPA etc. This information will be needed for the regular progress reports that you must give the ACCC to allow them to monitor the effectiveness of your recall.
The ACCC will generally only close-out a recall if it’s satisfied your recall has been effective – usually when the numbers of people returning your product stabilises and the ACCC considers those numbers reflect a good response/return rate given the risks involved. You’ll then be told that you no longer need to file reports.
If you need assistance with a recall plan, please contact Addisons’ Competition, Consumer & Antitrust team.
1 ACCC product safety priorities announced at National Consumer Congress l ACCC
2 See 2022-23 Product Safety Priorities (accc.gov.au)