ACCC warns companies must be ready for mandatory reporting of unsafe product rules, but legal experts wary

The ACCC has warned companies that they have just over three months to prepare for new product safety laws that will require consumer goods suppliers to make a report to the ACCC within two days of becoming aware that their product has caused serious injury, illness or death.

Companies that fail to make a report face fines of up to $16,500, but legal experts have warned that the tight reporting timeframe means companies will have little opportunity to investigate a consumer claim and will simply have to report all claims, whether they are fraudulent or genuine.

The new reporting requirements, which come into effect on January 1, 2011, are part of a series of reforms to Australia’s consumer laws.

The new mandatory reporting regime will require suppliers of consumer goods to provide a written report to the ACCC within two days of “becoming aware” of illness, death or serious injury (defined as “an external physical injury, such as a serious burn, deep cut, broken bone, choking or serious fracture”).

The requirement to report applies regardless of the country the illness or injury occurs on and applies to all parts of the supply chain – from retailers and distributors to importers and manufacturers – and can be triggered by something as informal as an email or “anecdote” passed on from a consumer.

“The mandatory reporting requirement means businesses need processes to track and take action on consumer complaints promptly,” deputy chair Peter Kell said yesterday.

“The reporting requirement was introduced to enable potential product safety hazards to be identified more readily, enabling a more rapid and targeted response to emerging safety issues.”

The laws are vastly different to current rules, under which companies are only required to make a report to regulators after a product recall has been issued.

The ACCC released draft guidelines on the mandatory reporting requirements yesterday to give companies and stakeholders the chance to comment.

However, there has already been some criticism from some in the legal fraternity, who warn that the two-day reporting requirement is unreasonable.

Prof Dr Jocelyn Kellam, partner at law firm Clayton says the two-day timeframe for reporting is very short, particularly for larger companies. She gives the example of a large manufacturer who may use a call centre to handle customer complaints, or a large retailer that might receive complaints in store.

“I just think it’s going to take quite a bit of time for those complaints to filter upwards, unless you have some sort of new whiz bang system where complaints are logged electronically and then tracked by management every day.”

Kellam also believes the law is unclearly drafted, particularly around the definitions of serious injury or illness, which is defined in the bill as “an acute physical injury or illness that requires medical or surgical treatment by, or under the supervision of, a medical practitioner or a nurse”.

Kellam says it may be difficult for companies to interpret whether a safety complaint made by a consumer fits under that definition.

“If, for example, I feel dizzy, if have a rapid heartbeat and I am sweating, they are symptoms of something, but they don’t necessarily mean an illness.”

“Injuries or illnesses treated with the assistance of a pharmacist would also not be reportable”.

She also questions the use of the term “acute” which generally refers to sudden injury illness and points out that under this definition, illnesses that take a longer time to manifest – such as lead poisoning or from asbestos exposure – could be missed under the new reporting regime.

Another concern with the tight reporting timeframe is the inability for companies to investigate for fraudulent complaints.

“You’ve got to report regardless – even if you’ve got a serial complainer. You are not going to be able to investigate, you are not going to be see if the dizziness or the rash was caused by the product, or something else such as an idiosyncratic reaction or a pre-existing medical condition.”

Without time for a thorough investigation, it is possible that companies will have to move to launch a product recall or take other remedial action earlier than they would like – even if the complaint later turns out to be fraudulent.

“I think it would need to be a very serious case for the ACCC to use their mandatory recall powers. But what they can do is to exert pressure on a company, pushing them to a voluntary recall before they would have liked ,” Kellam says.
From a practical point of view, Clayton Utz is advising businesses to prepare for the new reporting requirements by reviewing their internal complaints-handling processes so that reports of injury or illness can be escalated quickly.

Companies will also need to ensure they have technical expertise available (whether it is internal or external) to be able to conduct a thorough and very fast investigation into a safety breach.