Product Liability & Safety 2023

Policies Collide in Global Product Liability Landscape

The legal and regulatory risks for product manufacturers are changing rapidly across the world.

The wave of change sweeping across the world of product liability and product regulation is entirely unprecedented, both in terms of its scope, affecting all product sectors, and the sheer scale of change. This is the culmination of many years of discussion and debate at policy level, as regulators and policymakers have grappled with the perceived challenges of new technologies, the rise of new marketing models based on e-commerce, and growing prioritisation of the circular economy.

This is what has become known as “Modern Product Liability”. This concept recognises that the risks, responsibilities and liabilities of companies involved in the manufacture and distribution of products go way beyond what has been traditionally seen as “product liability”, and the regulations that need to be taken into account when designing products now goes beyond considerations of “product safety”.

Much of the changes have their origins in a general consensus that regulation has struggled to keep pace with technology change, and that traditional regulatory structures, at least to some degree, are not fit for new challenges raised by those technologies. A clear example of this is found in the ongoing policy debates and discussions around the regulation of AI, with those discussions now turning into substantive regulatory measures, led by the European Commission with its proposed regulation for Artificial Intelligence, and a parallel proposed AI Liability Directive.

Importantly, many of the policy discussions around product liability and product safety policy are now being held in international and multinational forums, most notably the OECD, the United Nations, ASEAN, and the International Consumer Products Health and Safety Organization (ICPHSO).

This gives rise to very practical challenges for all companies. Companies are beginning to realise, sometimes the hard way, that the procedures and practices that their existing procedures and practices for managing product liability risks worldwide may not be adequate for confronting the challenges that lie ahead.

As regulation becomes more complex and more onerous around the world, and changes occur more rapidly, companies are struggling to find practical ways to stay abreast of requirements and effectively manage risk. There is still no “magic wand” solution to this current dilemma, although solutions are being developed to help companies manage it in a sustainable way.

This guide is an invaluable 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, explains the key features of the product safety regulatory landscape in individual jurisdictions, highlighting the areas of greatest risk, and provides insight into what the future might hold and what changes might be on the horizon. Given the significant impact that future changes can have, necessitating months or even years of planning, it is becoming increasingly important for those managing modern product liability issues to understand and get to grips with any changes on the horizon.

As you work through the chapters, you will start to spot certain trends and patterns in the laws. You will also see marked differences. Companies need to navigate this increasingly complex world of product law, and 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 look for the global trends, and to try to understand why these trends exist.

New technologies continuing to drive legal reform

As highlighted above, the changes we are seeing now reflect a strong focus amongst policy makers and regulators around the world on the impact and implications of new technologies. The prevailing view is that existing regimes are not entirely future-proof, and change is needed. Regulators and policymakers have been 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. However, there has not been a strong consensus on the nature and extent of change needed. Nevertheless, after many years of discussion, concrete reforms are starting to emerge with increasing frequency.

These changes, coupled with uncertainties about future regulation and liability regimes, creates risks for the companies developing and deploying these technologies. Nevertheless, businesses still have the opportunity to take the initiative and help formulate guidelines that can preclude the necessity for excessively stringent regulation and liability exposure.

Enforcement levels increase

While the enforcement of product safety rules continues to be sporadic and inconsistent around the world, a discernible upward trend in enforcement levels is evident.

We has seen over recent years greater emphasis amongst policymakers and regulators on finding more effective ways to enforce laws and regulations. In some cases, this involves empowering consumers and other claimants to bring claims more effectively against companies; in others, this involves ensuring enforcement agencies have better resources, not only in terms of funding but also in terms of powers and information. This factor is well reflected in the various chapters of this publication.

Internationalisation of risks

The 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.

Consumers and other stakeholders around the world are 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.

Moreover, regulators around the world are more connected than ever to these information sources, as well as benefiting from the development of systems that facilitate the sharing of information between authorities, such as those that exist within the European space, within the Organization of American States, and within the OECD.

All of this means that companies need to take a more global approach to managing their product risks. Companies are recognising, sometimes through bitter experience, that 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 increasingly aware of this. As a result, 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 global HQ level. This trend will certainly continue as the challenges and the risks involved continue to increase.

E-commerce under scrutiny

New marketing techniques and distribution models are giving rise to issues of product liability and product compliance, and are driving a focus on the need to reform product regulations and liability structures.

Again, there continues to be much discussion internationally about whether these new marketing models are appropriately dealt with under existing regimes, and many jurisdictions have seen legal reforms implemented or proposed specifically addressing the perceived risks here. 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.

We are also seeing the continued emergence of voluntary initiatives to help address the specific issues presented by online sales, for example through the “Product Safety Pledge” initiated by the European Commission, subsequently replicated in some other countries, and now promoted by the OECD. On the other hand, some policymakers and stakeholders say that these voluntary measures do not go far enough, or that they are not sufficiently robust to ensure an adequate level of consumer protection. They say that something else is needed.

Modern Product Liability in the circular economy

As considerations of sustainability become an increasing political and societal priority, it is no surprise that measures designed to promote the circular economy, and sustainable production generally, are becoming a prominent feature of regulatory reform affecting product manufactures. This increasing regulation leads to greater liability exposure for companies, as failure to meet new expectations can lead to regulatory action and consumer claims. The emergence of rules relating to “right to repair”, recyclability, built-in obsolescence, and expanded responsibilities through the product life cycle, alongside more general product safety reforms, is a feature of the current wave of reforms that manufacturers and distributors need to grapple with.

The expanding concept of safety

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 growing, and companies are having to adapt their own compliance and risk management systems accordingly.

For example, there is a new focus on the extent to which safety regulations and producer responsibilities should extend to mental health considerations.

Furthermore, the concept of a “safe” product in various contexts is also taking into account concepts of environmental protection, data privacy and even (albeit tangentially) energy efficiency. It also, more and more, needs to account for both “end-of-life” safety and concepts of “foreseeable misuse” as well as intended use. These are all challenging issues for product manufacturers and distributors.

Resources for managing changing risks

The increasing complexity and risks of the product law world, and the rapid pace of change now upon us, are a significant source of new challenges for product manufacturers and suppliers seeking to take advantage of global markets. The costs of failing to understand, anticipate and manage the risks can be high, as many high-profile brands have discovered in recent 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, and who pride themselves on delivering good customer experience, can be especially exposed when marketing their products in markets that have few controls and where players take advantage of the lack of regulation. 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 practical ways to keep abreast of the changes, understand their implications and develop future-proof systems.

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.