Know your dangers

The regulations require manufacturers, suppliers and retailers of consumer products to (i) only place safe products on the market and (ii) notify local authorities in writing of the existence of dangerous products they have marketed. The regulations will require manufacturers, suppliers and retailers to take all necessary preventative action, both in terms of reducing the risk of placing dangerous products on the market, monitoring products already placed on the market as well as taking steps to eliminate the risk posed by a dangerous product in the event such a risk is discovered.

The regulations have been implemented as a result of the EU General Product Safety Directive, which required all EU member states to enact its provisions by no later than 15 January 2004. Similar regulations have now been introduced in most EU states.

My company already has product safety procedures in place. What has changed?

The regulations mark a significant shift in the European Union's outlook on product safety and are a step forwards from the previous product safety legislation. The most noteworthy changes are the requirement for manufacturers:

• to conduct market surveillance and monitor risks in their products; and
• to notify local authorities of the existence of a dangerous product.

There are criminal sanctions (including imprisonment and/or a fine) in the event of a breach of the regulations.

Are semiconductors covered by the regulations?
In simple terms, the regulations cover all products made available to consumers, such as electrical equipment, clothes and toys. They cover new, used and reconditioned products. The term "products made available to consumers" covers not only products sold to consumers but also products used by consumers whilst receiving a service, such as hairdryers in a hairdressing salon.

A component, such as a semiconductor, is also considered to be a product for the purposes of the regulations. Manufacturers of components are subject to the same, stringent requirements as manufacturers of the products in which the components are placed.

When is a product a dangerous product?
A dangerous product is any product which is not a safe product. In other words, a product is deemed unsafe unless it can be shown it is safe.

A safe product is one which, under normal or reasonably foreseeable conditions of use, presents no risk or the minimum acceptable risk to consumers. The instructions and warnings given with the product, its intended use and the category of people at risk (especially children and the elderly) should all be taken into account. For example, taking into account its intended use and the likely user, society is likely to accept a proportionally lower degree of safety in a kitchen knife than it would in a child's toy or a motor vehicle.

A product which has a fault, or which may develop a fault, is not necessarily a dangerous product. For example, a DVD player which is liable to short circuit if used continuously for several hours is not a dangerous product unless the short circuit risks or may risk harming a consumer, for example by causing a fire.

Products which comply with specific laws on product safety (such as electrical equipment which is CE marked in accordance with the Low Voltage Directive) will be presumed to be safe products.

Who is obliged to take action under the regulations?
The regulations place similar obligations on manufacturers, as well as suppliers and retailers. A manufacturer of a product includes the manufacturer of a component. Component manufacturers are potentially as responsible as the manufacturer to take appropriate steps to ensure that a product it sells is safe and, if it is found not to be safe, to notify the authorities and take appropriate steps to eliminate the risk. This might include taking steps to recall the product, even if the product is only a component in a larger product, but only if the component is the cause (or a possible cause) of the danger.

Distributors in a supply chain are also affected by the regulations, in particular by the requirement to notify any unsafe products to the relevant authorities.

What must I do to ensure my products are safe?
The regulations require manufacturers to assess the risks inherent in a product during normal or foreseeable use and to take precautions against those risks. They also require manufacturers to keep themselves informed of risks which a product already supplied might pose and if necessary to take appropriate preventative action, including where necessary withdrawing the product and, as a last resort, recalling it.

In practice, manufacturers should test their products against all reasonably foreseeable risks and maintain records of such tests. Once a product has been marketed, manufacturers should consider carrying out post-market surveillance and product testing and keep a record of any complaints or defects reported. In the case of a component, any defects should be reported to manufacturers and distributors up the supply chain in the event that the defect may affect the safety of the product in which a component is used.

When does a notification need to be made to the authorities?
In the UK, a manufacturer must notify local trading standards if it knows, or ought to know, that a product it has marketed poses a risk to the consumer which is incompatible with the safety standards set out in the regulations. In practice, this requires retailers (as well as producers) to notify the existence of a dangerous product except in an isolated case. The notification should be made as soon as possible within 10 days but within 3 days in the case of a serious risk, or immediately in an emergency. A component manufacturer must notify the authorities if it becomes aware of a defect in one of its products, even if that product is only a small part of a larger product produced by a different manufacturer. However, duplicate notifications are not encouraged. In practice therefore, the manufacturer of the larger product should notify the authorities and copy the component manufacturer, so that the component manufacturer can satisfy itself that all relevant information has been passed to the authorities.

What penalties are there for a failure to notify a dangerous product or for the placement of a dangerous product on the market?
Failure to notify the authorities of a dangerous product may result in imprisonment of up to 3 months and/or a fine of up to £5,000. The placing of a dangerous product on the market where a retailer knew or ought to have known that it was dangerous could result in a fine of up to £20,000 as well as up to 12 months imprisonment. Company directors can be liable for a company's breach of the regulations if the breach is attributable to their neglect.

I have sold my product in more than one EU country. Do I have to make multiple notifications?
The short answer is yes. The obligation to notify is a separate obligation. If a manufacturer has placed its product in more than one EU state, it must notify each national authority. Local legal advice should be taken in each country. The safest approach, to ensure consistency of information and to prevent one national authority finding out first from another, is to make a simultaneous notification.

The EU has set up the RAPEX system to ensure the rapid exchange of information in the event of a product safety crisis. It is likely that once one national authority knows of product safety risk that all other national authorities will also be aware of it. Indeed, in order to simplify matters, the EU has proposed a system whereby a notification need only be made where the manufacturer has its principal place of business. However, this proposal has not yet been implemented so best practice dictates that, for the time being at least, you should make multiple notifications.

What can manufacturers do to minimise their exposure?
In practice, other than the obligation to notify, the regulations are unlikely to significantly affect manufacturers who already have product safety procedures in place. However, experience has shown that a product safety issue can cause serious and often irremediable reputational damage and affect consumer confidence. Some of the steps component manufacturers are likely to have taken already include:

• monitoring the safety of the products they supply, making them comply with industry standards, ensuring their traceability (so the product can be tested and if necessary recalled) and where appropriate providing adequate warnings and instructions with them;
• ensuring that supply agreements specify the uses to which the component may be put and require the purchaser to satisfy itself as to the component's suitability and compatibility;
• requiring purchasers in supply agreements to notify the component manufacturer of any product safety concerns;
• keeping records of and regularly reviewing customer complaints in order to identify possible product safety risks;
• fostering a good relationship with local trading standards authorities;
• having a response team ready in the event of a product safety crisis. This is likely to include marketing, technical, legal and PR experts;
• preparing a template notification pack so that a notification can be made quickly and effectively in the event of a product safety crisis;
• taking out product liability insurance.