Product Liability & Safety 2024

Modern Product Liability – Global Risks and Challenges

Product manufacturers have, over recent years, been facing an increasingly challenging liability and regulatory environment around the world. To a significant degree, those challenges have been exacerbated by the pace, and scale of change in legal regimes internationally. The wave of change has been unprecedented, both in terms of its scope, affecting all product sectors, and the volume of change. We are at an inflexion point at which we are moving from a long period of policy discussion, deliberation and consultation, into a period of active legislative and institutional reform.

A major driver for these changes has been a perceived need on the part of regulators and policymakers to address challenges raised by new technologies, by the rise of new marketing models based on e-commerce, and as a result of the growing prioritisation of the circular economy.

This is what we should consider to be “Modern Product Liability”. The risks, responsibilities and liabilities of companies involved in the manufacture and distribution of products are not what they used to be. They 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 go beyond considerations of “product safety”.

Over the last year there has been a dramatic shift in gears, with these debates and discussions culminating in concrete reforms. Companies are starting to feel the pinch – needing to stay on top of upcoming new requirements across multiple jurisdictions, understand what they mean and implement required changes to products, processes and procedures to comply. Reforms are also impacting multiple areas of a business, making it difficult to prioritise and allocate resources. The consequences of non-compliance are also increasing. This gives rise to very practical challenges for all companies and increases product liability and litigation risks stemming from non-compliance with regulatory measures.

Companies are beginning to realise, sometimes the hard way, 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 keep informed of requirements and effectively manage risk. These challenges are particularly acute when considering products currently under development, likely to launch in one or two years, and potentially remaining on the market for several years thereafter. If companies cannot anticipate the direction and shape of regulatory change on the horizon now, investments and opportunities could well be lost. There is still no “magic wand” solution to this current dilemma; however, there are steps companies can take to manage this in a sustainable way.

This guide is one example. It 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 see that there are 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 while 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 Front and Centre

Policy debates and discussions over recent years have focussed on the perceived risks and challenges posed by new technologies and whether current legal frameworks are future-proof. The prevalent view in many jurisdictions is that change is needed, and concrete reforms are now flowing through.

Basic concepts that have underpinned product safety and liability regimes for decades are changing. What is considered to be a “product” is expanding beyond physical products, with new requirements and liability being extended to software and certain digital services. The concept of “safety” is also changing around the world – beyond risks to physical health and certain property damage – to also include mental health. Liability is increasing for risks associated with cybersecurity, software updates (including lack of updates), connectivity and AI functionalities. Companies are having to adopt their own compliance and risk management processes accordingly.

Policy debates and discussions centred on new technologies look set to continue. Jurisdictions still deciding how best to future-proof their regimes will look at recent reforms made in other countries. Those jurisdictions that have recently made wide-ranging reforms, such as the EU, are starting to focus on other associated issues – such as digital addiction and its impact on children and other vulnerable groups.

E-commerce Remains in the Spotlight

Policy debates have also focussed on whether new marketing and distribution models – particularly online marketplaces – are appropriately dealt with under existing regimes.

We are seeing reforms in major markets looking to tackle these issues, including new product safety and compliance requirements imposed on online marketplaces, sitting alongside reforms to product liability laws. We expect this trend to continue as markets and marketing models continue to evolve, and other jurisdictions decide how best to tackle these issues.

Voluntary initiatives to help address the specific issues presented by online sales have continued to advance, for example the “Product Safety Pledge” initiated by the European Commission was expanded in 2023 to include a number of additional commitments by signatories. This initiative has had international influence – being replicated in some other countries, and promoted by the OECD. However, some policymakers and stakeholders still argue that such voluntary measures do not go far enough or are not sufficiently robust to ensure an adequate level of consumer protection.

The Circular Economy

Measures designed to promote the circular economy, and sustainable production generally, have become a prominent feature of regulatory reform, touching every aspect of the product life cycle, from design, through to manufacture, marketing, repair and end-of-life. Manufacturers and others in the supply chain are having to grapple with new rules relating to “right to repair”, recyclability, built-in obsolescence, and expanded responsibilities through the product life cycle, alongside reforms to product safety and liability laws attempting to deal with issues associated with circular economy activities.

This increasing regulation leads to greater liability exposure for companies, as failure to meet new expectations can lead to regulatory action and consumer claims.

Environmental Social Governance (ESG) Changing the Landscape

A number of new sustainability and ESG measures focus on themes of “transparency” and “traceability”, requiring companies to increase due diligence throughout their products’ life cycle – from inception and manufacture through to consumption and disposal. Companies also face a growing need to communicate the environmental and human rights impacts of their products and business models via public disclosures or privately to customs officials and regulators in certain jurisdictions.

Increasing regulation in this area is another factor impacting liability exposure. Companies may increasingly be held responsible for both the environmental and human rights impacts of their business models and how these are communicated – through regulatory action or claims brought by consumers, NGOs or other impacted stakeholders.

Continued Dive for Increased Enforcement

Enforcement of product safety rules continues to be sporadic and inconsistent across the world. However, there remains a clear overall trend towards increased enforcement.

Policymakers and regulators continue to look at more effective ways to enforce laws and regulations, taking a number of different approaches. Regulators in some mature markets have increased the use of the existing levers that they have available – such as the increased imposition of civil penalties and use of unilateral warnings by the US CPSC. In other markets, the focus has been on ensuring regulators have better resources – in terms of funding, powers and the information available.

Another approach is to empower third parties to participate in the enforcement of product safety regulation; for example, by enabling consumers to bring claims for breaches of product safety regulation more effectively against companies, as seen in the EU with the introduction of the Representative Actions Directive. Online marketplaces are also being given something of a quasi-regulatory role, with increasing obligations to report safety incidents and co-operate with regulators in certain jurisdictions.

Sitting alongside this, emerging regimes are increasingly benefitting from increased co-operation with more established regimes, significantly escalating the risk for companies operating in multiple jurisdictions.

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 succeed in 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, and continue to do so.

On the other hand, it is also important to recognise the opportunities and benefits. 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.