News & Updates

Product Recalls - What Every Company Needs to Know - The Commission May 18, 2012

Let’s be honest: ignorance is bliss and the temptation to ignore reports of hazards or harm caused by your company’s product can be great.  The expenses involved in a product recall, from engaging legal counsel to the loss of sales, may be high.  But you can be sure of one thing – the U.S. Consumer Product Safety Commission will make your failure to recall a product much more expensive than doing so.  In this continuing series, we will provide you with a step-by-step reference for reporting and, if necessary, recalling a product.

The Commission

The U.S. Consumer Product Safety Commission (Commission) is an independent regulatory agency responsible for protecting the public from unreasonable risks of injury and death associated with consumer products. The Commission was established by Congress in 1972 pursuant to the Consumer Product Safety Act (CPSA), 15 U.S.C. §§ 2051-2089.  The Act authorized jurisdiction over approximately 15,000 different types of products used in and around the home, in schools, in recreation, and in daily life.  The Commission’s responsibilities have expanded to include enforcement of a wide variety of statutes, including the Child Safety Protection Act, Federal Hazardous Substances Act, Flammable Fabrics Act, and Poison Prevention Packaging Act, among others.  Over the past forty years, the Commission has issued thousands of regulations pertaining to individual products, requiring strict compliance with manufacturing, packaging, labeling, and distribution guidelines.

It is critical that companies learn how to recognize non-compliance with these guidelines and identify potentially hazardous consumer products very early on.  Upon obtaining information that your company may have manufactured, distributed or retailed such products, the Commission requires that you provide “immediate notification” of the issue to them.  “Immediate” has been defined as “within twenty-four (24) hours.”  The Commission may then require that your company develop and implement a “Corrective Action Plan" (“Plan”) to address the hazard.  These Plans involve many types of remedial actions, including providing for the return of a product for a cash refund or a replacement product; the repair of a product; and/or for public notice of the hazard. Plans may include several of these steps, as the Commission deems necessary, to protect consumers. 

The process of recognizing non-compliance with a mandatory rule, or a hazardous product, and taking the appropriate action can be a daunting task.  With the right guidance, however, your company can save hundreds of thousands of dollars in litigation costs and penalties potentially imposed by the Commission.

Please return to this continuing series next Friday for “Enforcement: The Commission’s Remedy when a Company Fails to Take Action.”

For more information, please contact any member of Goldberg Segalla's Global Insurance Services Practice Group.