Product Recalls: Fixing a Problem That Doesn’t Exist?
Just back from the Promotional Products industry’s largest trade show, PPAI Expo, which is reporting the best attendance since 2009, and reflecting that there were two frequent points of conversation. First, the continuing positive direction of the industry: larger budgets and more end-users interested in ramping up projects. Second, product safety is becoming a part of more and more conversations. In an effort to bring that discussion even more into the industry mainstream, we applaud the launch of the PPAI Product Safety Awareness Initiative.
One of the ongoing discussions at the show with members of the QCA Distributor Advocacy Council was the methodology of a recall. The reality of product failure for a supplier is not “if,” but “when,” so the ability to demonstrate the protocol for the process of a recall is just one of many components of the QCA accreditation process. But now, companies considering a product recall may be facing a legal minefield following a recent rule change proposal from the Consumer Product Safety Commission (CPSC). The proposed changes, which will require companies commencing a voluntary recall to implement a compliance program as a part of a legally binding corrective action, mark a radical change in direction by the commission. But are they trying to fix a problem that doesn’t exist?
The system of voluntary recalls has been operating for over 30 years under the auspices of the CPSC, during which time a climate of trust has grown with many common practices being incorporated into the recall rules. Informal cooperation has led to most firms agreeing to recall and address potential product hazards with little recourse to law. Indeed, the CPSC’s Fast Track program, which incentivized companies to cooperate with the government without fear of an adverse determination regarding the safety of their product, has won an innovation in government award.
Now though, we are seeing a change in the approach of the commission that substantially modifies the established practices. Rather than the current regime where corrective action plans are not legally binding, the commission plans to move to a position where, "once a firm voluntarily agrees to undertake a corrective action plan, the firm is legally bound to fulfill the terms of the agreement.” This says the commission addresses concerns about “recalcitrant firms” that have “deliberately and unnecessarily delayed the timely implementation of the provisions of their corrective action plans.” Former CPSC Commissioner Nancy Nord is also critical of a change that might inadvertently disclose details of information submitted to the commission that were previously exempt from disclosure.
The issue with the proposed changes, that has drawn so much criticism, is that the existing rules already contain measures that allow the commission to take legal action in certain circumstances. The CPSC currently has the authority under the relevant act to either enter into a non-binding voluntary agreement with a company, or to seek a legally binding consent order if they have no confidence that the company concerned will actually comply with a corrective action plan from their previous experience of them.
The whole thrust of the non-binding corrective action plan process was to create a means to quickly notify the public about product hazards. The proposed changes, perhaps intended to strengthen consumer protection, could have the opposite effect due to some unintended consequences:
- Regulated companies may be more reluctant to enter into a voluntary recall knowing that their recall terms and conditions are contractual and enforceable in nature.
- The recall process could be significantly delayed while terms are negotiated, vetted and finalized with the CPSC, removing the streamlining benefits of the Fast Track system.
- Limited CPSC resources could be shifted from getting unsafe products off the shelves towards negotiating and enforcing agreements.
- The focus on compliance programs, with the potential for litigation, adds more complexity to already difficult decisions about product recalls. Even the best compliance program, while being a good safeguard, cannot guarantee product safety.
Whatever your view on the proposed changes, there seems to be little doubt that companies without someone in a compliance position are facing potentially huge risks with recalls in the future. The issue is the change to making the corrective action for voluntary recalls legally binding. For those companies without true professionals in their compliance officer post, this could be a very scary situation.
Comments to the proposed rule must be submitted by Feb. 4, 2014. What is your view on the situation? We would love to hear your opinion on this vital issue for the promotional products industry.