madeleine kearney - gadens - orderly recall or all-out brawl? the management of product recalls
TRANSCRIPT
MANAGEMENT OF PRODUCT RECALLS
MADELEINE KEARNEY, DIRECTOR, GADENS LAWYERS
Orderly recall or all-out
brawl
Introduction
• Legal framework.
• When to engage with regulators.
• Features that increase the risk of a product recall
being the subject of media and/or regulator scrutiny.
• Cost recovery.
• Crisis preparation and planning.
Legal framework
• Why recall?
‒ Fulfil legal obligations?
‒ Reduce risk of legal liability for personal injuries?
• Directly – conducting a recall will help discharge
suppliers duty of care to consumers?
• Indirectly – by removing dangerous products from the
market consumers are less likely to be injured?
‒ The right/moral thing to do?
‒ PR/corporate reputation reasons?
‒ The regulator made me do it?
Legal framework
• Food Standards Code:
‒ food business involved in the wholesale supply,
manufacture or importation of food are required to have
in place a documented food recall system (clause 12 of
standard 3.2.2);
‒ disposal requirements (clause 11 of standard 3.2.2 of the
Food Standards Code);
‒ traceability requirements:
• receipting (clause 5(2) of Standard 3.2.2);
• labelling (clause 2 of standard 1.2.2);
• traceability systems for businesses engaged in primary
production and processing (chapter 4).
Legal framework
• Australian Consumer Law
‒ Recall notification requirements (section 128)
‒ Compulsory recall powers (section 122)
‒ Injury notification requirements (section 131)
‒ Civil liability provisions:
• Part 3.5 - liability for goods having a safety defect
• Part 3-2, Division 1 “consumer guarantees” – including
guarantee of “acceptable quality”
Legal framework
• State Food Acts:
‒ criminal offences regarding food safety, eg:
• sale of unsafe foods (see section 14 Food Act 2003 (NSW));
• compliance with Food Standards Code (see section 14 Food
Act 2003 (NSW));
‒ compulsory recall powers (Part 3 Food Act 2003
(NSW));
‒ Queensland requirements regarding the suspected
intentional contamination of food.
• Common law – negligence.
Legal framework
• Guidelines:
‒ Food Industry Recall Protocol published by FSANZ;
‒ Consumer Product Safety Recall Guidelines
published by ACCC.
Legal framework
• Things to note:
‒ No legal obligation to notify FSANZ/State and
Territory Food Regulators.
‒ No legal obligation to notify any regulator in advance
of the recall.
‒ No legal requirements regarding the form or content
of recall advertisements and means of publicising
recalls.
‒ No legal requirement to provide regular progress
reports to regulators (although note general powers
to require information).
Legal framework
• Things to note (cont.)
‒ No legal provision that notification of a recall to
FSANZ/State and Territory Food Regulators
discharges notification obligations under the
Australian Consumer Law.
‒ Term “recall” is not defined in any legislation –
difference between a “recall” and a “withdrawal”?
‒ From a liability perspective main benefit of a recall is
to remove potentially unsafe products from the
marketplace – effective communication is key.
When to engage with regulators?
• Food Industry Recall Protocol:
Food businesses need to contact government as soon as they
consider a food recall is, or may be, needed. Relevant
government officers to be notified include:
• the home state—by telephone (food enforcement agency in
the state/territory where the food business’s head office is
located)
• FSANZ—by telephone
• ACCC—FSANZ will notify the ACCC but the sponsor may do
this on their own behalf.
• This does not reflect legal obligations (although this
does not mean that businesses should ignore the
guidelines).
When to engage with regulators?
• A number of factors relevant to decision of when to
engage including:
‒ expertise/resources of supplier conducting the recall;
‒ whether a business needs the regulator’s assistance;
‒ regulator's awareness of the issue;
‒ seriousness of issue;
‒ whether the issue is confined to Australia or whether
other jurisdictions are impacted.
• Food Industry Recall Protocol and Consumer Product
Safety Recall Guidelines are a useful blueprint, even if
they are not legally binding.
Common features of high profile recalls
• Is it a bad thing if a recall attracts a lot of attention?
• Examples:
‒ frozen berry recall;
‒ Jindi Cheese;
‒ raw milk “bath milk”;
‒ melamine contaminated milk products;
‒ Garabaldi smallgoods;
‒ Top Taste/Lion Christmas cake recall; and
‒ Kraft peanut butter recall.
Common features of high profile recalls
• Microbial contamination.
• Vulnerable populations.
• Deliberate acts.
• Large number of victims.
• Death and/or serious injuries.
• Supplier losing control over events/message.
• Imported foods?
Cost recovery
• Two avenues:
‒ Insurance;
‒ responsible third parties (eg, supplier, co-
manufacturers).
• Insurance
‒ product recall costs not covered by standard
public/products liability policies;
‒ right of indemnity will only exist where defined policy
triggers are met;
‒ discuss insurance needs with your broker.
Cost recovery
• Other third parties:
‒ possible bases of recovery:
• contract:
› express terms;
› implied terms – statutory warranties (eg Sale of Goods
Acts) may apply however these are able to be excluded;
• misleading and deceptive conduct (eg, representations
made in PIFs);
• negligence.
‒ Recovery is potentially more complicated where
dealing with foreign supplier.
Cost recovery
• Where there is a (or may be) a right of recovery
against a third party it is best if process of gathering
evidence supporting claim begins early (including
documentation of all costs).
• Common areas of disagreement include:
‒ root cause of contamination;
‒ scope of corrective action taken;
‒ extent to which consequential losses are attributable
to contamination incident.
• Commercial considerations regarding pursuing
claim.
Crisis preparation/planning
• The majority of recalls are (relatively) routine events!
• Preparation and planning key.
• Manufacturing/supply chain controls:
‒ prevention better than cure;
‒ isolation of problem.
• Product contamination/recall plan:
‒ establish incident management team;
‒ training;
‒ regularly review and update.
Crisis preparation/planning
• Specialist advice/services:
‒ scientific/technical;
‒ PR/media;
‒ legal;
‒ logistics (eg GS1 Recallnet).
• Insurance.
• Relationships with suppliers/co-manufacturers:
‒ contractual documentation;
‒ contacts/protocols to be followed.
• Post incident review/debrief.
In conclusion – do’s and don’ts
DO
• DO be prepared.
• DO review insurance and
contractual arrangements with
suppliers .
• DO have an effective
communications strategy.
• DO understand and comply with
legal obligations.
• DO notify your insurer of incidents
(where applicable).
• DO consider cost recovery at an
early stage.
• DO respond proactively to
possible safety issues.
DON’T
• DON’T think that “this will never
happen to me”.
• DON’T leave it until after an
incident occurs to consider
adequacy of insurance and
contractual arrangements with
suppliers.
• DON’T treat a recall as a box-
ticking exercise.
• DON’T ignore early warning signs
of a potential product safety
incident.
• DON’T “set and forget” - ensure
incident plan/training up to date.
