AWARE

Keoghs Insight

Author

David Grey

Product recall: faulty products

AWARE15/11/2013
Property Insurance Aware 1

The number of fires caused by faulty domestic appliances has attracted publicity recently and encouraged some to question the suitability of the current product recall system. Research by experts at Which? (an independent organisation which conducts research and campaigns on behalf of consumers) found that faulty domestic appliances cause some 3,700 fires every year leading to severe damage to property and occasionally personal injury or death. Faulty washing machines are responsible for the highest proportion of fires, followed by tumble dryers, dishwashers, ovens and fridge-freezers.

Duty of manufacturers

The General Product Safety Regulations 2005 (GPSR) prohibit manufacturers from placing unsafe products on the market. The legislation also prohibits manufacturers from supplying such products to retailers. Manufacturers are consequentially obliged to take seriously any report or claim by a consumer in relation to the safety of their products. A one-off fault with a product that causes a fire may be addressed individually. However, where a fault is proven to be systematic, manufacturers run the risk of falling foul of the GPSR if they do not take appropriate steps to address the issue.

There are a number of steps manufacturers / suppliers can take to ensure their products do not present a safety risk, however, in the most serious cases they may have to resort to a product recall. A product recall is a formal request to consumers who have bought the product and retailers who stock it to return the product to the manufacturer, in the interests of safety.

Recent high profile examples of product recalls of this nature include the Hotpoint and Bosch dishwasher recalls and Beko’s recall of its fridge freezer products. The cost to a manufacturer of carrying out a full recall can be substantial. BSH, the Bosch-Siemens joint venture which was responsible for the dishwasher recall, is currently in the process of trying to track down and repair millions of dishwashers produced between 1999 and 2005 which are considered to pose a risk.

Keoghs continues to see a steady flow of claims where consumer goods, in particular kitchen appliances, are identified as the cause of fires in the home. In many cases the appliances in question have been recalled yet the owners are unaware of this until it is too late. Questions have been raised over the effectiveness of the recall system.

Current recall system

Under the GPSR a manufacturer may be obliged to:

  • contact consumers who have purchased the product in order to inform them of the recall, where, and to the extent, it is practicable to do so;
  • publish a notice in such form and such manner as is likely to bring to the attention of purchasers of the product the risk the product poses and the fact of the recall; or
  • make arrangements for the collection or return of the product from consumers who have purchased it or for its disposal.

The issue for manufacturers, however, is that they often do not know who their customers are. Records are rarely kept by retailers or manufacturers when a customer purchases a fridge freezer for example. Instead of contacting customers directly therefore, manufacturers must broadcast details of the product recall in some way, in the hope that customers see the information, realise they have the product and make contact. Currently firms often notify Trading Standards who keep a list of all recalled products in the UK, and release a statement to the press.

These measures are still unlikely to reach all customers, however. The Electrical Safety Council (ESC) believes that millions of dangerous appliances are still in households across the UK due to inadequate recall systems. In addition, the Chief Fire Officers Association says that the average success rate for recalling products is between 10 and 20 percent.

New system needed?

The GPSR provide for recall as a last resort where other measures are not sufficient to ensure safety. Safety campaigners would like to see the current recall system improved to ensure customers are more effectively noticed. They also suggest that the status quo, under which the maximum penalty for delaying action to recall faulty products is £5,000 should be overhauled.

The ESC argues that it should be possible to fine manufacturers a percentage of their profits if they are slow to initiate the recall of affected products. Of course, particularly given prevailing economic conditions, manufacturers cannot afford to issue full-scale recalls on the basis of incomplete information. Establishing a common root cause among what appears on the face of it to be random incidents takes time and a certain amount of data which may be difficult to collect when evidence is routinely destroyed in the course of a fire. The GPSR impose a requirement on manufacturers to collect details and investigate complaints about unsafe products and to act where it is determined that a product presents a risk.

The ESC has also said it wants to work with Trading Standards to set new guidelines on exactly what a manufacturer should do if it has made a product that is subject to a recall. Whilst clarity for the manufacturer would be welcomed, notice that may be deemed sufficient in one instance may not be adequate in another. Keeping records of purchasers would make contacting affected consumers much easier, and would drastically improve the system if used in conjunction with notices. This is clearly seen in the motor industry, which has a high success rate for recall products likely due to the fact the DVLA keeps records of car ownership.

It is clear that the current system could be improved. Any action to improve the situation is in the interests of consumers and safety groups and will also help to provide greater clarity to manufacturers and their insurers.