The 10 most important questions about manufacturers' recall obligations

Dr Carsten Schucht: Yes, experience has shown that such concerns are not unjustified: Recalls ordered by the authorities or ‘voluntary’ recalls undoubtedly represent a level of escalation that does not leave much room for further measures. Nevertheless, not every safety-related defect leads directly to a recall. In the B2B machinery sector in particular, a safety warning is typically sufficient (at least in Germany). And even if there is a recall, the costs do not always have to be immeasurable. The specific circumstances of the individual case are decisive, i.e. in particular the number of products affected, the sales regions, the traceability or the costs of the replacement or repair action. Secondly, recourse against a supplier may be possible if the action is attributable to a defective supplier part. And thirdly, recall cost insurance may be available to cover these costs.

Nevertheless, every economic player or manufacturer would do well to prepare intensively for a recall or a safety warning. Anyone who takes this task seriously and deals with the issue of traceability, for example, may be able to significantly reduce the costs in the event of a recall.

Dr. Carsten Schucht: It is indeed important to be properly prepared for the ‘worst case’. This refers to recall or product crisis management. In many cases, there are already obligations under public law to take these precautions. This applies to all consumer products, for example. Even without legal obligations, every manufacturer (especially in the unregulated B2B sector) would do well to ensure that appropriate processes are in place. This is required not least by the producer's liability under civil law. Even if such management is not currently spelt out as a separate commercial obligation, it is rightly an elementary component of the duty to avert risks. In other words, the effective avoidance of risk can easily suffer if there is a lack of customised recall management. In the worst-case scenario, this absence can then lead to civil liability.

Dr. Carsten Schucht: Yes, there are definitely stages like these. If the recall is at the end of the escalation, there are other measures beforehand that are typically considered less serious by the companies involved. When acting in the field, this is the mere (safety) warning, which is aimed at taking the offending product out of service or decommissioning it. If there are no longer any warranty claims under sales law in this case, the costs - to put it bluntly - are often limited to sending registered mail and the associated postage costs.

And then, of course, there are often scenarios where the product is objectionable because it does not have the desired or legally required safety, but a field action is not legally required because the product risks are not too serious. In such cases, a distribution ban may be the end of the story, which is typically accompanied by a product improvement to ensure that the products concerned meet the required safety standards in future.

Dr. Carsten Schucht: That is correct. Ultimately, everything we are talking about is nothing more than a challenge for the company's internal organisation. Specifically, there should be internal processes that cover precisely this issue, i.e. that deal with the topic of risk analysis following product monitoring. In fact, this topic is often anything but trivial in the event of a crisis, especially if the (technical) situation is not clear. In these legally tricky cases between clearly defined poles, experience has shown that it always depends on all the circumstances of the individual case when it comes to developing a customised response to the safety-relevant process. And this is of course also the reason why companies often like to seek help from external (technical and/or legal) specialists on this issue. It must be made clear that the question of an obligation to act in the field is a genuinely legal issue and must therefore also be answered from a legal perspective.

Dr. Carsten Schucht: Once the necessity of the recall has been determined, it is important to start implementation planning as quickly as possible. Ideally, the necessary planning should be started during the risk analysis, i.e. in parallel with it, especially if it becomes apparent that the process is likely to result in a field operation. Those who have implemented a good recall management system for these cases will have less work because they know what needs to be done. In this case, it is particularly important to notify the authorities. For this purpose, it should be known which authorities are to be informed, how and when. In addition, contacts to law firms in the respective sales regions, which take care of the (flanking) handling of the action in the respective region, are helpful. Of course, this work is typically coordinated by the (home) law firm that was (hopefully) consulted at an early stage for legal advice on the matter. And last but not least, the roll-out of the specific field campaign must be driven forward at full speed, indeed started promptly.

Dr. Carsten Schucht: In fact, this is the fine art in the event of a product crisis: a bad product that is a hazard to safety must be talked about as much as possible.. In terms of communication, this is a challenge because there are of course legal guidelines for communication in the event of a hazard. For example, the existing risk must be named and the potential consequences of injury must be clearly communicated. Experience shows that open, honest, even authentic communication is often effective if and to the extent that it is legally ‘framed’.

Dr. Carsten Schucht: Yes, of course, because communication in the event of a crisis is nothing more than an admission that your own product is faulty or defective. In practice, premature admissions of guilt by the respective key account manager of a supplier manufacturing the dangerous product to the affected (main) customer are relevant in the run-up to external communication.

Dr. Carsten Schucht: The biggest mistake is certainly to believe that such crises can be overcome without any processes or preparatory measures. Experience has shown that the opposite is the case: activities based purely on improvisation in a hectic situation unfortunately often lead to avoidable and costly mistakes. It should therefore always be borne in mind that the fire brigade does not only rehearse when there is a fire!

Dr. Carsten Schucht: Unfortunately, there will never be 100 per cent security, especially as we live in fast-moving times with an increasing susceptibility to errors and barely manageable supply chains. The fact that issues such as product sabotage and cyberattacks are increasingly being added to the mix does not make life any easier for economic players. What always helps, to follow on from the previous question, are the ‘basics’, i.e. existing processes, especially in product development, robust quality assurance, sensible legal and standards management and, yes, also the selection of the ‘right’ suppliers.

Dr Carsten Schucht: There is no general answer to that question. However, it will not have a negative impact on non-safety-related EU legislation such as ecodesign law. The new machinery legislation or the new legislation on consumer products in the EU Product Safety Regulation should not have a noticeable effect either, because the products in question have had to be safe for a long time. Therefore, the regulatory standard will not be tightened, even if it is of course spelt out or concretised in more detail. However, this can also be helpful for the stakeholders concerned.

Finally, the new EU Product Liability Directive will not lead to more recalls. Yes, due to its still clearly recognisable consumer protection thrust, it brings with it various tightening measures for the economy. But no, it still does not regulate the use of risks in the field, i.e. after the product has been placed on the market. However, it should not be overlooked that in future the manufacturer may also be liable for the defectiveness of a product after it has been placed on the market if he retains control over it. This becomes relevant in the case of software updates or upgrades, for example.