Product safety:law and trendsLynne AthertonLeonia Chesterfield

5 September 2006

2

3

• Traces of salmonella in chocolate bars

• Detected salmonella in January 2006

• Levels too low for health risk

• Problem corrected March 2006

• Salmonella infections

• Chocolate bars recalled

• Estimated costs £20 million

• Possible claims against Cadbury

4

European general product safety regime

• Standardise levels of protection

• General Product Safety Directive 2001

• UK General Product Safety Regulations 2005

5

General safety regime and sectoraldirectives

• General product safety regime complements existing sectoralregulations

6

2001 General Product Safety Directive

• Aim: to ensure that all products placed on the market are safe

• Obligations on producers and distributors:

– Identifiable and traceable

– Monitor safety

– Take appropriate action

• Greater power to enforcement authorities: mandatory recall

7

Exchange of information within the EC: RAPEX system

• RAPEX system for exchange of information in EC

• For all non-food products (except pharmaceutical and medical)

8

RAPEX system: objectives

• To ensure rapid exchange of information about:

– Dangerous consumer products

– Measures taken to prevent harm to consumers

9

RAPEX system: operation

• Dangerous product identified on market of Member State

• Member State notifies European Commission

• European Commission examines notification

• European Commission disseminates information to all Member States

10

RAPEX system: statistics

• Useful source of data

• Caution required

11

Trends in product safetyNumber of notifications made by EC countries to the EC RAPEX system

2002 - 2005

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005

Number of Notifications

12

UK notifications to the RAPEX system

0

10

20

30

40

50

60

Number of notifications

2004 2005 2006 (to 31 July)Year

13

Reasons for increase in notifications to the RAPEX system

• Enlargement of the EC

• Increased awareness and ease of usage

• Implementation of the General Product Safety Directive 2001

14

UK General Product Safety Regulations 2005

• Came into force on 1 October 2005

• Increase in notifications to RAPEX because of:

– Wider scope of products falling within the regime

– Increased duties and responsibilities on producers and distributors

15

Safe products

• An offence for a producer to place a product on the market unless it is safe

• “Safe” means any product which under normal or reasonably foreseeable conditions of use does not present any risk or only the minimum risks considered to be acceptable and consistent with a high level of consumer protection

16

Scope of products within the regime

• All products intended for consumer use

• 2005 Regulations expand the definition of products covered to:

– Products supplied in the course of a service

– Products originally designed for use by professionals but which have “migrated” into use by consumers

– Antiques and products supplied for reconditioning and repair

17

Duties on producers and distributors

• Product markings and traceability

• Post market surveillance

• Notification

18

Duties on producers and distributors: notification obligations

Issues for producers:

• Whether to notify

• When to notify

• To whom to notify

19

Enforcement authorities

• Precautionary principle

• Mandatory recall

20

Enforcement authorities

• Appeals

• Compensation

21

Impact of the UK General Product Safety Regulations 2005

• Mandatory recall provisions caused concern during consultation process

• EC RAPEX statistics provide insight into impact of the 2005 Regulations

22

Product withdrawal and recall

05

10152025303540

Voluntarywithdrawal

Obligatorywithdrawal

Voluntaryrecall

Obligatoryrecall

Measures adopted following UK notifications to the EC RAPEX system2004-2006 (projected forward)

200420052006

23

Recent recalls: Johnson & Johnson

A well managed recall:

• Poisoning of drug, Tylenol, by terrorists in the 1980s

• Took immediate action

• Openness built trust

• Rebuilt brand and reputation

24

Recent recalls: Perrier

A badly managed recall:

• Traces of benzene found in bottled water

• Claimed contamination resulted from isolated incident

• Benzene in bottles in Europe

• World-wide recall

• Criticism for disregarding public safety

25

Product bans and warnings

0

0.5

1

1.5

2

2.5

3

Voluntaryban

Obligatoryban

Voluntarypublic

warning

Obligatorypublic

warning

Measures adopted following UK notifications to the EC RAPEX system 2004-2006 (projected forward)

200420052006

26

Trends in product safety

• Categories of products

• Nature of risk

• Origin of products

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Categories of products notified by UK to RAPEX – 1st January to 31st July 2006

Lighting equipment

19%

Hobbies/sports appliances

8%

Clothes4%

Motor vehicles20%

Cigarette lighters

8%

Children's equipment

2%

Cosmetics2%

Household appliances

4%

Electrical appliances

4%

Other8%

Toys21%

28

Risk arising from products notified by UK to RAPEX

0

5

10

15

20

25

30

35

40

45

Chemicalrisk

Choking Fire/burns Risk ofinjury

Electricshock

Healthrisk

2004-2006 (projected forward)

200420052006 (projected)

29

Exploding laptops: Dell

Risk of serious injury publicised by the internet prompted speedy recall

30

Country of origin of products notified by UK to RAPEX – 1st January to 31st July 2006

China59%

Italy2%

France2%

Germany2%

USA2%

Thailand2%

South Korea4%

Unknown4%

Poland2%

Netherlands4%

UK15%

Australia2%

31

Product recall insurance: UK recall insurance market

• Increased number of recalls has led to increased demand for product recall insurance

• Product recall insurance market responding to increasing demand

32

Product recall insurance: relationship between insurance policy coverage and trends in product recall in the UK

• Voluntary recall

• Obligatory recall

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Conclusions

• Increased notifications

• Implementation of the General Product Safety Directive 2001

• “Voluntary” action to prevent harm to consumers

• Well managed and early product recalls

• Increased number of product recalls led to an increased demand for insurance cover

• Trends in product safety provide important information for insurers