Product Liability & Safety 2019

The Product Liability & Safety guide provides expert legal commentary on rules, requirements practices adopted by businesses. The guide covers the important developments in the most significant jurisdictions.

Last Updated: June 24, 2019

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Cooley (UK) LLP has over a thousand lawyers, with 14 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.


The New 'Product Liability' in a Changing World

What is 'product liability'? The legal textbooks describe it in terms of civil liability to pay damages for losses and injury caused by defective products. That is certainly part of it. But for product manufacturers and suppliers in today’s world, the reality of 'product liability' is much broader. A company’s liability for products it manufactures or sells goes way beyond the civil liability risk. In fact, the main risks for companies that sell products internationally often have much less to do with civil liability for injuries, and are much more focused on regulatory risks and related obligations. This is how companies need to think about 'product liability' in practice.

This evolution in products law internationally arguably has its roots in the European regime for product regulation that first emerged in the 1970s known as the 'new approach'. This model for product regulation placed much more responsibility on the manufacturer, and others in the supply chain, to ensure the safety of the products they marketed. Rather than relying on prescriptive design, construction and testing regulations imposed by government, the emphasis was on meeting 'general requirements' of safety, with manufacturers allowed flexibility in how they met those requirements (albeit with non-mandatory standards providing valuable guidance and protection).

Both regulatory and civil liability regimes have developed significantly around the world since that time. The changes are ongoing and are increasing in pace.

This guide is an important resource to help companies manage the international risks that arise from this changing liability and regulatory landscape. It highlights the current state of liability laws and applicable procedures, and gives insights into what the future might hold. Similarly, it explains the key features of the product safety regulatory landscape in individual jurisdictions, highlighting the areas of greatest risk and, again, giving insight into the changes that might be on the horizon.

As you work through the chapters, you will start to discern certain trends and patterns in the laws. You will also see marked differences. Companies need to navigate the increasingly complex world of product law, to find practical solutions to manage risks whilst meeting business demands to simplify product specifications, consolidate supply chains and get products to market quickly. In order to do so effectively, it can be important to take a step back and become aware of some of the global trends that can be observed, and to understand why these trends exist.

New Regimes, Stricter Regimes

The last decade has witnessed two parallel trends in the development of international product law.

First, we have seen the introduction of new regimes for product safety and product liability in some countries for the first time. Countries that have not traditionally had strict rules have implemented new systems of law, very often modelled upon the systems that exist in Europe or the United States. As an illustration of this, the number of countries that have mandatory reporting requirements for unsafe consumer products has expanded rapidly over the past decade. Such rules now exist, and are often strictly enforced, in more than 80 countries around the world, with this number continuing to increase. 

In parallel to this development, we have seen a wave of product law reforms in countries that already have had well-developed regimes. Significant reforms in Europe, the United States and Australia over recent years are indicative of this.

All of this combines to create additional levels of risk for companies to navigate. 

Adding to the challenge is the sheer pace of change. Especially as regulation becomes more complex and more onerous around the world, companies are struggling to find practical ways to stay abreast of requirements and effectively manage risk. There is no 'magic wand' solution to this current dilemma, although solutions are being developed to help companies manage it in a sustainable way.

New Technologies, New Risks

There is much focus amongst policy-makers and regulators around the world on whether existing liability and regulatory regimes are fit for purpose when it comes to new technologies. In some areas, such as autonomous vehicles, it is clear that at least some regulatory reform is required in order to accommodate the technology and enable societies to take advantage of the potential benefits. In other areas, the need for change is much less clear.

Regulators and policy-makers are concerned that technologies such as artificial intelligence and machine learning, the 'internet of things' and connected products, autonomous machines and robotics, and 3D printing might give rise to risks that existing rules cannot accommodate.

These issues are being actively grappled with in various forums around the world, including within the European Commission, the OECD and the United Nations, as well as by national governments all around the world.

This uncertainty itself creates risks for companies that are developing and deploying the technologies. There is an opportunity for businesses to take the lead and develop principles that can help to ensure that the need for overly restrictive regulation is avoided. However, there are currently concerns that there is not yet sufficient international collaboration and consensus on the right way forward. This is an area for companies to watch closely.

More Talk, More to Talk About

The increasing globalisation of markets presents tremendous opportunities for product manufacturers and sellers. The development of a more accessible global market has also meant that there are greater opportunities for communication between stakeholders.

Regulators around the world are more joined up than ever, increasingly developing new systems for sharing information. Efficient and effective information-sharing mechanisms have long existed between the member states of the EU, through the RAPEX systems (now known as 'Safety Gate'). We are also seeing high levels of information sharing and collaboration through agencies such as the OECD, including the development of the OECD Global Products Recall Portal. 

Increasingly regulators are engaging with each other, sharing best practices and experiences as well as information about specific product risks.

Similarly, consumers around the world are now in constant contact with each other, sharing information and opinions about their product experiences. Through social media, online reviews and general access to news media internationally, information about product risks travels very quickly around the world, especially when major brand names are involved.

All of this means that companies need to take a new approach to managing their product risks. It is no longer acceptable to try to manage risks on a local, national or regional basis. Product risks that may affect the reputation of a company and its products need to be managed at a global level.

Companies are recognising this and, to the same extent that they have traditionally managed product compliance and product liability at a regional level, they are now tending to bring responsibility more and more back to HQ level. This trend is expected to continue as the challenges and the risks continue to increase.

Online, On Point

New marketing techniques and distribution models are themselves giving rise to issues of product liability and product compliance.

The rapid emergence of e-commerce across almost all product sectors has also caught the attention of policy-makers and regulators. 

Again, there is much discussion internationally about whether these new marketing models are appropriately dealt with under existing regimes. Certainly, in most major markets around the world, we have seen the development of consumer protection laws that specifically relate to e-commerce. This will continue as markets and marketing models continue to evolve.

New marketing models also give rise to new opportunities for companies to connect with their consumers. This means that there are new opportunities to manage risks, but also new risks of liability if those opportunities are not used.

Safe and Safer

Basic concepts of 'safety' are changing around the world. Product liability regimes and especially product safety regimes have traditionally focused on risk of physical injury and, to a lesser extent, risks of property damage. However, the concept of 'safety' is expanding and companies are having to adapt their own compliance and risk management systems accordingly.

Increasingly, the concept of a 'safe' product in various contexts takes into account concepts of environmental protection, data privacy and even, albeit tangentially, energy efficiency. It also, more and more, needs to take into account both 'end-of-life' safety and concepts of 'foreseeable misuse' as well as intended use. These are all challenging issues for product manufacturers.

The Enforcers are Coming

Whilst many countries around the world have had robust laws and regulations in place to help ensure product safety, it has been a common feature in most parts of the world that enforcement has been sporadic or ineffective. This is well recognised in many countries, where concerns are raised about the lack of funding allocated by governments to product safety enforcement. 

This issue has been raised more prominently in the eyes of the public in recent years through some high-profile international regulatory scandals that have caused some to question trust in the regulators as well as in companies.

We are now in a world where we are seeing greater emphasis amongst policy-makers and regulators on finding more effective ways to enforce laws and regulations. In some cases, this involves empowering consumers and other claimants to more effectively bring claims against companies; in others, ensuring enforcement agencies have better resources not only in terms of funding, but also in terms of powers and information.

This is an important factor that is set to significantly alter the risks being managed by international product manufacturers and suppliers moving forward.

Exposure or Protection?

The increasing complexity and risks of the product law world are a significant source of new challenges for product manufacturers and suppliers who seek to take advantage of global markets. The costs of failing to understand, anticipate and manage the risks can be high, as many high-profile brand names have experienced over past years.

On the other hand, these developments also create opportunities. 

The development of rules and regulations, together with the emergence of more active enforcement agencies, can help to ensure a level playing field and stable markets for companies that have an interest in ensuring they comply with the rules. Companies with valuable brand names and reputations to protect can be especially exposed when marketing their products in markets that have few controls. Proportionate laws, fairly and effectively enforced, can help companies to fully realise the benefits of their investments and manage their risks.

The key is for companies to find those practical ways to keep abreast of the changes, understand their implications and develop systems that are fit for the future.

This guide, authored by experts in their field around the world, is part of the toolkit that companies can use to help them on that path.

Authors



Cooley (UK) LLP has over a thousand lawyers, with 14 offices across Europe, the US and Asia. Its international product liability and safety team has market-leading experience in managing regulatory investigations, litigation, product recalls, risk assessments and international compliance in complex, fast-moving and highly regulated industries including life sciences, cosmetics and consumer products.