Product safety snapshots – year in review

In brief 7 min read

The last 18 months were a busy time for product safety. Consumers found redress via the courts (in the form of class actions) and the regulator (in the form of product recalls). With the announcement of its 2019 product safety priorities, the Australian Competition and Consumer Commission (the ACCC) has the implementation of a General Safety Provision firmly in its sights. In the coming year, we can also expect to see a greater regulatory emphasis on the safety of interconnected devices and consumer data protection.

Class actions

There were 32 class actions filed in the area of product safety between 2008 and 30 June 2019.¹

• There remain 19 class actions concerning product safety on foot in the Australian courts. The majority of these claims relate to automobiles, but there are also proceedings dealing with transvaginal mesh implants, combustible cladding, a horse vaccine and a contraceptive device. Of the claims relating to automobiles, all but one concern airbags or vehicle emissions data.
• Of the class actions that have settled in that time, three related to negligent medical treatment; thalidomide and injuries resulting from the consumption of soy milk.² The remainder related to an airline engine explosion, unsafe bodily implants and unsafe drugs.

A graphic breakdown of product safety class actions is below. Please note that it only considers proceedings currently on foot.

By product

Below is a breakdown of product safety class actions filed by year, including proceedings that have settled and proceedings that are currently on foot. The highest number of product safety class action filings by year was in 2018.

By year

The recent increase in filings in the product safety sector is consistent with what we are seeing more broadly across the class actions space – a trend that has been attributed to a rise in plaintiff law firms and litigation funders, among other things. (You can read more about this in our Class Action Risk Report 2018).

Product recalls

There were 675 product recalls undertaken in 2018³, and 324 product recalls undertaken to 30 June 2019. A graphic breakdown of product recalls by sector (since 2014) and total number by year (since 2010) is below.

By sector

By year

The number of product recalls in 2018 was the highest ever, reflecting an increasing concern around product safety. This year is also on track to have a high number of product recalls. Notable instances of product recalls over the past 18 months include:

• recalls in the food and beverage sector, mainly resulting from faulty packaging or seals, the presence of foreign matter in products, the presence of undeclared allergens or microbial contamination, and incorrect or misleading information as to use-by dates;
• recalls in the pharmacy sector, resulting from impurities in tablets and software failures in electronic insulin pumps, among other things; and
• issues prompting recalls in the automotive sector, encompassing airbags (ie inflators and passenger detection software); continuously variable transmission issues; latching and locking issues; and engine issues.

Regulator priorities

Product safety remains a priority for the ACCC, which is reflected in the 2018 mandatory recall of Takata airbags.⁴

On 14 March 2019, ACCC Chairman, Rod Sims, formally announced the 2019 Product Safety Priorities.⁵ Among these was progressing the development of a General Safety Provision (GSP) in conjunction with Consumer Affairs Australia New Zealand.⁶ (You can read more about the implementation of a GSP in our Key trends in the Australian products liability space – 2018 and a quick rundown of the product safety priorities in full in our Getting its priorities straight – ACCC's 2019 product safety priorities.

• Chairman Sims criticised the 'primarily reactive' Australian product safety laws, by comparison with their counterparts in the OECD. He said that, despite the ACCC's best efforts and 'countless regulatory initiatives', unsafe products continue to enter the market and harm consumers, at a cost of five billion dollars each year.⁷
• According to the ACCC, a GSP would give consumers greater confidence that the goods they buy are safe, while creating a 'level playing field' for business, so that those firms 'who deliberately supply cheap, unsafe products do not derive a financial benefit'.⁸

The ACCC is currently awaiting the Federal Government's Regulatory Impact Statement on the GSP.

Other product safety priorities the ACCC announced in 2019 include:

• protecting threats to consumers from interconnected and / or 'smart' devices (including smartphones, smart watches and connected home assistants) not functioning as intended because of third-party hacking, malware, lapses in internet connection or software updates. The ACCC aims to ensure that the regulatory framework is fit for purpose, and to increase public awareness of contemporary safety hazards: e.g. a rechargeable lithium battery inside a smart device causing a fire; a smart smoke detector failing, due to lost connectivity; and a car driving system being taken over by hackers;⁹ and
• targeting particular threats to infants and children, including unsafe sleeping products and button batteries.¹⁰ Button batteries were also a highlight of 2018's product safety priorities, which led to nine product recalls, following the announcement of those priorities. Button batteries result in the injury of around 20 children per week, with more than one child in Australia dying from their injuries.¹¹ In August 2019, the ACCC announced the establishment of a Button Battery Taskforce, which will investigate how to reduce the risk of button batteries in the community.¹² The ACCC released an issues paper, with consultation open until 30 September 2019. A draft recommendation will follow at the end of 2019, and a final recommendation in 2020.

The ACCC has indicated that it will also focus on:

• protecting disadvantaged and vulnerable consumers against what it terms the 'confusopoly' around pricing, particularly in the telecommunications and energy sectors. The ACCC will also ensure that product recall information reaches consumers in underprivileged communities. An inquiry into the National Electricity Market was announced in November 2018,¹³ with the ACCC tasked with monitoring and reporting on the supply of retail and wholesale electricity until 2025. The first Electricity Monitoring Report was released on 29 March 2019, identifying a range of reforms to address what the ACCC calls 'the dysfunctional state of energy retailing in Australia'.¹⁴ These reforms included limiting excessive standing offers and making advertising clearer, particularly around discounts and comparing offers.¹⁵ Future reporting is due 15 September 2019;
• considering the introduction of a general 'unfairness' prohibition in the ACL, to address misconduct falling short of statutory unconscionability;
• greater protection of consumers in the areas of privacy, data and online safety, including the introduction of a Consumer Data Right to allow consumers to access their own data and provide it to accredited third parties. The ACCC released its Consumer Data Right Rules Framework on 12 September 2018,¹⁶ with draft rules for the banking sector issued on 28 March 2019 that were open for consultation until 10 May 2019¹⁷; and
• greater scrutiny of digital platforms such as Google and Facebook, particularly in the media market. The ACCC released its final report of the Digital Platforms Inquiry in July 2019¹⁸. The ACCC has recommended that the Government address the bargaining imbalance that exists between digital platforms and media companies.

Looking ahead

The ACCC's continuing appetite for a GSP, as well as an increase in product safety class action filings and an ever-growing number of product recalls in the past year, indicates that the days of reactive product safety are gone. The regulator, as well as the consumer, is now expecting businesses to act proactively, with product safety at front of mind in the design, manufacturing and supply stages.

We can help you prepare for these challenges, including by:

• ensuring that your business has a sufficient product safety compliance program in place;
• helping you through the process for recalling or withdrawing products, including communicating effectively with the ACCC; and
• keeping you up to date with regulatory and legislative developments, and what they mean for your business, as and when they occur.

*The authors wish to acknowledge the assistance of Shmuel Loebenstein, Oliver Lloyd, Emily Fischer and Alexandra Theile with the preparation of this article.