Considering a Product Recall or Retrofit? Some Important Considerations
Has your company discovered a problem with one of its products already on the market that could result in some type of harm or damage? Are you trying to determine your company’s responsibilities to the product users, as well as its regulatory compliance obligations? If so, timing is likely critical, and you need to make decisions and act quickly.
Making a Product Recall Decision
Speed and diligence are required for making product recall and reporting decisions. If a recall is in order, or regulatory notice of a product issue is required, both require the company to act reasonably and without delay. First, once a company learns of a potential problem that could potentially result in a recall or retrofit, it must analyze its options and act in a reasonable manner, which includes acting with sufficient speed. Failing to do so could potentially result in liability if the product issue causes injury or damage prior to recall or retrofit. Second, if the company is subject to statutory or regulatory duties to notify government agencies about a potential harm, then the regulations generally give the company a very limited period of time to give formal notice of the problem or potentially face stiff penalties. Therefore, if a company learns of facts that could lead to a potential recall or retrofit, or if it might need to give regulatory notice, speed is king.
A company should make sure it knows in advance where its products are distributed and which industry or local regulatory standards or notice requirements apply to such products. This will help the company comply with standards in the design and manufacture of the product in the first place (which will help it to avoid liability or regulatory fines), and will prepare it to know which regulatory reporting standards might apply in advance of a problem. If a company distributes or sells products in several states or countries, it must track and confirm compliance with each applicable law or regulation and be ready to comply with each applicable notice requirement. Once an issue with the product arises, it can be difficult and time-consuming to do this work after the fact. This advance work is particularly important for cross-border distribution. If the company has not done that work, it must act quickly to determine and comply with its responsibilities.
Consumer Product Safety Commission Regulations
To provide an example of regulations applicable to some products in the U.S., the Consumer Product Safety Commission “CPSC” regulates the design of certain consumer products and requires expedient notice of product dangers under certain circumstances. For example,
Section 15(b) of the Consumer Product Safety Act establishes reporting requirements for manufacturers, importers, distributors and retailers of consumer products, or other product or substances distributed in commerce over which the Commission has jurisdiction. Each must notify the Commission immediately if it obtains information which reasonably supports the conclusion that a product distributed in commerce (1) fails to comply with an applicable consumer product safety rule or with a voluntary consumer product safety standard upon which the Commission has relied under section 9, (2) fails to comply with any other rule, regulation, standard or ban under the CPSA or any other Act enforced by the Commission, including the Flammable Fabrics Act, 15 U.S.C. §1193-1204; the Federal Hazardous Substances Act, 15 U.S.C. § 1261-1278; the Children’s Gasoline Burn Prevention Act, 110 Public Law 278 (July 17, 2008), the Virginia Graeme Baker Pool and Spa Safety Act, 110 Public Law 140 (with amendments), the Poison Prevention Packaging Act, 15 U.S.C. § 1471-1476, and the Refrigerator Safety Act; 15 U.S.C. § 1211-1214; (3) contains a defect which could create a substantial product hazard, or (4) creates an unreasonable risk of serious injury or death.
CPSC Recall Handbook, p.6. (emphasis added). Generally, companies “must report to the Commission within 24 hours of obtaining reportable information.” See id. at p. 8. Under some limited circumstances, a company might be justified in conducting some reasonable investigation during a limited period. See id. at p. 8-9. However, relying on exceptions has its perils should the CPSC deem the report late and pursue sanctions. Although the CPSC has a lot of power to control a process and has a lot of leverage at its disposal, working with the CPSC can be beneficial. The Commission’s primary mission is to ensure the safety of products under its jurisdiction and has procedures to work with companies to achieve that objective.
Evaluating a Post-Sale Duty
Evaluating a product post-sale duty to warn, recall, or retrofit can be a difficult, time-sensitive analysis that requires the evaluation of many variables. Advance work to know your company’s products and the associated regulations and reporting requirements can help prevent claims and fines, and to mitigate and quickly resolve problems occurring after a product hits the market. Once an issue of concern arises, your company must act quickly to gather its information and resources, comply with applicable regulatory requirements, determine a strategy, and, if necessary, develop and implement a corrective action plan. Please note that, although the subject of a post-sale duty to warn is closely related to the topic discussed above, the topic discussed here was focused on recalls and retrofits.