Consumer product safety: understanding your obligations in the supply chain and meeting the compliance challenge

Posted: 15/03/2019

Defective products pose a serious safety risk to their consumers and the public generally, as was so tragically illustrated by the Grenfell fire, supposedly caused by a single defective fridge-freezer. In addition, however, they pose a significant financial and reputational risk to all those involved in the process of their production and supply to consumers, ie the entire supply chain. Lest there be any doubt, unsafe products which may cause injury to people or damage to property are not just a matter of concern for their manufacturers / producers. Others in the supply chain may become liable too, including wholesalers and retailers, for regulatory (including criminal) sanctions and civil compensation claims, depending on their response to any known safety issues.

Responding to a defective product report, in an era of complex and multi-party global supply chains, it is often difficult to assess:

• who is responsible for a variety of corrective action steps; and
• precisely what their obligations are.

As such, to help you navigate the compliance challenge, we offer some brief guidance below.

Are you a producer or a distributor?

In the UK, the General Product Safety Regulations 2005 (GPSR) impose a series of compliance obligations on ‘producers’ and ‘distributors’ of consumer products. Both terms are arguably intentionally vague, in an effort to be as all-encompassing as possible (in the interests of consumer safety). For example, the definition of:

• ‘producer’ includes ‘…other professionals in the supply chain, insofar as their activities may affect the safety properties of a product’; and
• ‘distributor’ includes ‘…professionals in the supply chain whose activity does not affect the safety properties of a product’.

No further guidance is provided within the GPSR to clarify the meaning of ‘professional’ or ‘in the supply chain’. However, recent case law suggests the term ‘professional’ includes anyone employed in the supply chain or distributing products for gain. Accordingly, all who sell or facilitate the sale of products are intended to be deemed ‘professionals in the supply chain’ under the GPSR and thus fall within the definition of ‘distributors’.

In relation to liability for damages / financial compensation, the Consumer Protection Act 1987 (CPA) may impose strict liability on your business if its brand name or mark feature on a product, even if it was made by someone else on behalf of your business. All others in the supply chain are vulnerable to damages claims too. For example, a supplier may be held liable to a consumer for:

• any damage or loss arising from the supply of a defective / unsafe product; or
• damage or loss arising from the supplier’s failure to provide adequate information relating to the risks associated with the use of a product.

Importantly, liability is joint and several, so a potential claimant would be able to sue two or more parties in the supply chain for the same damage, to improve their chance of recovery.

Who is obliged to ‘notify’ the relevant authorities and take corrective action?

Unsurprisingly, producers are obliged to notify and take appropriate action, consistent with their primary obligation to ensure that all products placed on the market are ‘safe’ (as broadly defined). In addition, however, if your business is deemed a ‘distributor’ for the purposes of GPSR, it too will be obliged to comply with the requirements laid down in the GPSR, including:

• a requirement not to supply, or undertake activities that facilitate the supply of, dangerous (unsafe) products (according to the relevant standards for that product and / or the reasonable expectations of consumers); and, importantly,
• a duty to notify the appropriate authority ‘forthwith’ once it realises that a product it has placed on the market or supplied is unsafe (as soon as reportable information is available, and in any case within 10 days – or sooner if the risk is serious).

Accordingly, if your business operates at some mid-point in the supply chain, it will have its own separate distributor’s duties under GPSR, including the duty to notify the appropriate authorit(y)(ies) if it believes that the product is unsafe. In practice, this may pose difficulties if the producer (manufacturer) of the product believes it is safe and therefore does not warrant notification. However, if your business does not comply with its own obligations under the GPSR, it may face civil and / or criminal liability. In certain circumstances, any individual director or manager whose ‘consent, connivance or neglect’ has jeopardised public safety could face prosecution personally. Specific offences under the GPSR are punishable by a fine of up to £20,000, or up to 12 months’ imprisonment, or both.

With an increasing proportion of goods now manufactured remotely, the number of recalls is steadily rising and product liability claims are becoming a progressively more expensive experience for businesses. As such, an appropriate degree of vigilance in relation to product liability risks is required by each business participating in the supply chain. The regulatory and liability regimes cannot be ignored in a global products market, where authorities are increasingly coordinated in their approach to compliance / enforcement of product safety laws. With consumers and claimant lawyers similarly aligned and alert to product safety concerns, all businesses must be aware of their liability risks and respond appropriately, through effective corrective action, comprehensive product recall procedures and the appropriate insurance to protect them from the significant financial and reputational exposure entailed.

This article has been co-written with Sabrina Bernard, a trainee solicitor in the commercial dispute resolution team.

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