Product Liability 2009 - Arnold & Porter LLP

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Lovells LLP The EU General Product Safety Regime
the safety of a product, as can the nature of any advertising material
or marketing tactics.
Documents
The management of documents is vital to controlling product liability
risks. Claims cannot be properly defended without good records to
show that the company acted responsibly. Companies also need to be
able to provide the authorities with relevant information in order to
discharge their obligations under the Directive and other regulations.
It is crucial to have accurate records showing who did what, when
they did it, and how problems were identified and dealt with. Written
procedures should be drawn up to cover all aspects of the company’s
functions that relate to product safety. These need regular reviewing
and updating. It is important to keep a record of outdated procedures
and also of the reason for any change in procedures.
A retention policy to ensure that documents are kept for an
appropriate period is equally important. Retention of documents
may enable companies to defend product liability claims
effectively, but documents that show the company in a bad light can
be devastating. It should be assumed that any document created
may be discovered in product liability proceedings. Staff should
therefore think carefully about the words they choose when creating
documents, so as to avoid exaggeration or speculation and to limit
scope for misinterpretation. This is particularly true of e-mail
correspondence as, all too often, ideas and comments are set down
in e-mails that would never be recorded in more formal documents.
Insurance
A company will require insurance cover for product liability risks.
The scope and terms of insurance policies must be carefully
examined. Insurance can be obtained to cover the cost of a recall,
but it is not usually included in a standard product liability policy.
The definition of “products” should also be reviewed to make sure
it is wide enough to cover instructions, labels and warnings.
Investigation capabilities
If a problem is suspected, it will usually be necessary to carry out
further testing and other technical investigations on the product.
Such investigations will enable a manufacturer to assess whether:
A replicable defect exists in the product, or whether the
problem was a one-off.
Injury or damage to other consumers is foreseeable.
Any particular consumers are at risk.
The information collected will help inform a decision on what
action to take and, in particular, on whether to recall the product
(see the section on “Product recalls” below). It may be necessary
to use external testing houses: it is useful to have established
contacts with these in advance of any problem arising.
Risk audits
An excellent way of monitoring and assessing the effectiveness of a
risk management system is by undertaking a thorough product liability
audit. The systems in place should be checked regularly to ensure that
they continue to cover all potential problems with the product and any
new requirements imposed by the regulators or authorities. Written
records should be kept of all audits that can then be used if necessary
in the future to show that the company acted responsibly.
Dealing with the media
Product safety problems are invariably of great interest to the
media. It is rare that they are reported in an objective and balanced
way: the desire to get a story out as quickly as possible, the inherent
difficulties of accurately reporting on the nature and magnitude of
risks, and the inclination of journalists to over-dramatise a story, all
contribute to inaccurate and misleading reporting. This can lead to
consumers being unnecessarily alarmed and can cause damage to
the reputation of a company.
It is always useful to have established relationships with key media
outlets so that if the company needs to get certain messages across,
it can use these outlets to do so. However, above all it is important
to be in a position to brief the media at the earliest opportunity and,
for this purpose, to have a briefing pack with the essential details
about the nature of the problem and how the company proposes to
deal with it. There also needs to be a group of experienced staff
who can deal with any follow-up questions from the media.
Product Recalls
The Directive has changed the way in which product recalls and
other corrective actions must be approached by producers and
distributors in the EU. Perhaps most importantly, there are the
practical issues related to the need to notify and work with the
authorities in all Member States where the product has been
marketed (see the section on “Notification obligation” above). The
following are some practical tips that may be useful to consider:
Plan effectively
The first indication of a potential risk usually occurs well before all
facts are available. Any decision on what action to take should
ideally be made following a proper and thorough investigation into
the true nature and extent of the risk. Due to the strict nature of the
notification obligation, and the tight timeframe in which it is
intended to operate, this may not always be possible. However, a
producer or supplier will be better able to control the management
of the risk (and avoid having to undertake what might ultimately
prove to be overly cautious corrective action) if it can quickly
marshal its internal team and external advisers to start dealing with
the issue promptly (see the section on “Risk management” above).
Co-ordinate notification action
In view of the comments made above in respect of the single
notification procedure, prudent businesses will want to ensure that
they make direct contact at a local level in each country in which
notification is required (see the sections on “Pan-European
notification” and “Guidance for Pan-European Notification”
above). The notifications should take place simultaneously in each
affected Member State. Information about product risks can be
communicated swiftly among national authorities through the
RAPEX system. It could be embarrassing for a producer or
distributor, and lead to unnecessary conflict with the authorities, if
some national authorities first learn of a risk affecting products in
the markets for which they are responsible from another source,
particularly where it becomes apparent that authorities in other
Member States have been notified earlier.
It is also important that consistent information be communicated to
the authorities in all the relevant countries to avoid any suggestion
that the same risk is being handled differently in different markets.
In some cases, different steps may be justified, due to differing
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