Product safety laws often don’t get the same level of attention as other parts of the Australian Consumer Law (ACL). Yet the risks of non-compliance are enormous. Non-compliance can lead to death, serious injury and property damage. For the businesses involved, non-compliance can mean serious reputational damage and substantial civil (and in some circumstances criminal) penalties.
Failure to comply with a product ban, recall or mandatory safety standard can result in civil or criminal fines the greater of:
- $50 million;
- if the Court can determine the “reasonably attributable” benefit obtained – 3x that value; or
- if the Court cannot determine the benefit – 30% of the corporation’s adjusted turnover during the breach period.
The nation’s lead product safety regulator, the Australian Competition and Consumer Commission (ACCC), has been ramping up its product safety market surveillance and enforcement capabilities, having established its stand-alone Product Safety division in 2021. Most recently, in June this year, the ACCC released its product safety priorities for the new financial year. This presents businesses with a good opportunity to brush up on their product safety obligations and ensure that they are not caught flat footed if faced with a product safety issue.
We highlight the ACCC’s priorities for the year ahead and provide a refresher on the key product safety obligations businesses should be across.
ACCC’s 2023-24 product safety priorities
On 15 June, the ACCC announced its 2023-24 product safety priorities. These priorities set out how the ACCC intends to devote its resources to compliance and enforcement in the upcoming year to raise awareness of, and minimise, the risks posed by unsafe goods. The key areas it identified are:
- Young children’s product safety – The ACCC will focus on high-risk product safety issues for young children such as sleep aids, toys for children under 3 (including wooden toys such as rattles and teethers), products containing button batteries and toppling furniture.
- Infant sleep – The ACCC will look at implementing strategies to prevent injuries and deaths associated with infant sleep products, including through developing a mandatory safety standard in relation to infant sleep products.
- Product safety online – The ACCC will monitor online marketplaces to detect and prevent unsafe product listings online and promote the use of best practices to reduce safety risks from second-hand goods sold online.
- Sustainability and maintaining product safety – The ACCC will seek to support Australia’s transition to a sustainable economy and ensure it does not perform its product safety functions in a way that creates unnecessary barriers to industry or government pursuing environmental sustainability objectives.
The ACCC has also noted it may also pursue other product safety risks which have the potential to cause serious harm to consumers.
Key product safety obligations to be aware about
There are broadly four key areas of product safety compliance that any business in the supply chain should be across. These include obligations on suppliers to comply with:
- any compulsory recall of consumer goods issued by the relevant Minister or the prescribed requirements for a voluntary recall;
- any mandatory safety standards that apply to consumer goods (or product related services);
- any interim or permanent bans on particular consumer goods or issued by the relevant Minister; and
- the mandatory obligation to report deaths or serious injuries or illnesses caused by consumer goods within two days.
Importantly, these obligations apply to all suppliers in the supply chain (including manufacturers, wholesalers, hirers and retailers).
The ACL provides for an overarching product recall regime for consumer goods (i.e. goods primarily used for personal or household use or consumption).
Industry-specific regimes also apply to food (Food Standards Australia New Zealand), road vehicles (Road Vehicle Standards Act), therapeutic goods (Therapeutic Goods Act) and agricultural and veterinary chemical products (Agricultural and Veterinary Chemicals Code).
This regime provides for compulsory recalls as well as imposing requirements on suppliers who decide to initiate a voluntary recall.
Businesses may conduct a voluntary recall (and in so doing may avoid a compulsory recall) if consumer goods supplied by them:
- will or may cause injury to any person (including through any reasonably foreseeable use or misuse of the goods);
- are subject to, and not compliant with, a safety standard; or
- are subject to an interim or permanent product ban.
If the relevant Minister considers that the relevant business has not taken satisfactory action to prevent the relevant product from causing injury, that Minister may issue a compulsory recall.
Complying with the requirements of a product recall is a significant undertaking. However, whilst it may be a substantial exercise designing, negotiating and administering a compliant recall (together with the loss arising from writing off the recalled products), what can be much costlier are the significant financial penalties that may be imposed on a company does not properly discharge its voluntary or compulsory recall obligations. The ACCC has notably sought, and the Court has imposed, significant financial penalties in relation to the Takata compulsory product recall. The ACCC has vowed to build on its work this year which, to date, has already seen 43 recalls of unsafe products.
Last September, the Federal Court penalised Mercedes-Benz $12.5 million for failing to sufficiently comply with the compulsory Takata airbag recall notice, which required vehicle manufacturers to implement a communication plan with customers and use appropriately urgent terms to maximise replacement rates.
The Court found that Mercedes staff had made statements to consumers to the effect that (a) the recall was being taken as a precaution and/or (b) affected airbags in other manufacturers’ vehicles had not caused any accidents or injuries. This was held not to amount to “attention-capturing, high-impact language” that Mercedes had agreed to use in its communications with consumers, and therefore Mercedes had not complied with the compulsory recall notice.
Safety and information standards
Mandatory safety standards specify minimum requirements that consumer goods or product related services must meet before they are supplied or offered for supply. Such criteria can relate to matters such as the performance, composition or design of the goods, or the manner in which product related services are supplied or skills or qualifications required of persons providing services. The relevant Minister can introduce a safety standard when considered reasonably necessary to prevent or reduce the risk of injury to any person.
Mandatory safety standards cover a wide range of common household items such as pool toys, exercise cycles, hot water bottles, children’s nightwear, and even sunglasses.
Mandatory information standards specify prescribed information that must be provided with specified goods or services and the manner or form in which the information must be provided. Examples include information standards covering ingredient labels for cosmetics, country of origin food labelling and care labelling for clothing and textile products.
It is both a civil contravention and a strict liability offence under the ACL to supply products that do not comply with mandatory safety or information standards.
On 22 June 2022, safety and information standards for products that are powered by button batteries were made mandatory, following an 18-month transition period. The standards are designed to ensure that button batteries are secured and cannot be easily swallowed by children. In May 2023, the Reject Shop paid a penalty of $133,000 and Dusk paid a penalty of $106,560 after the ACCC issued infringement notices for allegedly breaching the button battery safety standard. Dusk was also required to negotiate a voluntary recall of the products and agreed to a court-enforceable undertaking to implement a compliance program for three years.
The responsible Minister may issue an interim ban on a product being sold within Australia, or within a State or Territory (if issued by a State or Territory Minister), for 60 days, extendable twice up to a total of 120 days. If consumer goods or product related services will or may cause injury to any person (including through any reasonably foreseeable use or misuse of the goods):
- an interim ban may be imposed by any responsible Minister (as set out in the ACL); or
- a permanent ban may be imposed by the Commonwealth Minister.
Interim or permanent bans need not apply to a specific brand’s product, and the ACCC may investigate the adequacy of a business’ compliance many years after a permanent ban was put in place. For example, a permanent ban has been in place since 2012 for small, high-powered magnets meeting certain criteria. Eight years later, in 2020, the ACCC introduced a surveillance program to inspect the presence of banned magnets in toys and games, which resulted in recalls of several types of magnetic balls and toys.
Mandatory reporting requirements
Suppliers must submit a report to the relevant Commonwealth Minister (via the ACCC’s Product Safety portal) when they become aware that their product may have caused serious injury, serious illness, or death. The importance of being aware of this obligation is underscored by the fact that:
- it applies to all supply chain participants, including manufacturers, wholesalers, hirers and retailers;
- it applies even if the goods were misused by the consumer;
- the business is responsible for reporting regardless of who within the business becomes aware of the death, serious injury or serious illness. This includes any contractors or other representatives of the business;
- the report must be made within two days of becoming aware; and
- failure to submit a mandatory report is both a civil contravention and strict liability offence.