Five steps to take before a recall
If it seems like you are hearing about more recalls these days, it’s because you are.
According to the National Highway Traffic Safety Administration, automakers recalled a record 51 million cars last year, and the Consumer Product Safety Commission announces an average of at least one consumer product recall every day.
During the past few weeks, federal agencies have announced recalls for cars, hammocks, oven mitts, crossbows, baby monitors, dressers, cosmetics and a range of food from fresh to frozen to processed goods. Besides the surge in vehicle recalls — attributed largely to heavy government scrutiny on automakers for safety concerns — food recalls in the United States have nearly doubled since 2002, according to a report last year from insurance company Swiss Re, based in Switzerland.
Why the surge? Experts say a number of factors are contributing to the increase, including the ease of making consumer complaints online, the hyper speed of communication with the advent of social media and regulatory agencies arming themselves with bigger sticks in the form of steeper fines.
With the blessing of Congress, the CPSC and NHTSA increased civil penalties to get the attention of manufacturers that believed enforcement risks are just the cost of doing business. CPSC amped up its maximum fine to $15 million, which is a sobering number — until you look at NHTSA, which has a whopping $105 million maximum.
Both agencies are serious about going after scofflaws, too. NHTSA issued more fines and penalties in the past two years than in the entire history of the agency combined. CPSC’s chairman recently called for eight-figure penalty amounts, and then issued its first $15 million penalty earlier this year.
So, what’s a manufacturer to do? Follow these five steps to ensure you’re ready if you have to pull the trigger on a recall:
1. Have a plan: Whether you produce consumer products, food or auto components, have a written recall plan and safety protocol in place before an issue comes up. It may seem simple, but it’s a step many companies skip. Having a plan is important, because when a problem does arise, you know exactly what steps to take — and who within your company is going to do it. The plan also should outline how the company deals with consumer and employee reports of product issues, which often are the first indicators of a safety issue.
2. Form your team: A key part of any recall policy is the formation of a product safety or recall team within the organization. When a problem comes up, they are they attack team — they know what they need to do and what outside professionals they need to call. Make sure it’s a cross-functional team that includes executives to lead the charge, engineers to evaluate safety issues, accountants to gauge costs, logistics experts to manage traceability and other internal team members. Don’t forget to involve outside consultants, such as attorneys and PR professionals. Involving your attorney early in the process can help protect sensitive internal communications regarding potential liability and safety issues. A PR consultant will help communicate news to key stakeholders, including the media.
3. Ensure your products are traceable: Being able to identify which of your products contain defective components can mean the difference between a small targeted recall and a broad recall of an entire product line.
4. Practice: As part of your product safety and recall protocol, companies should conduct mock recalls. The process involves simulating an issue with the product — let’s say a safety problem with a component — and asking your team, “How do you manage this?” Can you notify the right people, from the regulatory agency to the customers to employees? Can you identify where all of your finished products have landed? Can you develop a press release and pinpoint the media outlets needed to satisfy requirements? Anyone who has tried to conduct an actual recall from scratch without having a plan knows how hard it is. The recall process is so foreign, and the level of stress that comes in a time of crisis can be overwhelming.
5. Evaluate your options: It’s critical to have a professional advisor on your team who is experienced when it comes to recalls. You’ll want a compliance attorney with regulatory, recall and product liability expertise, one who knows the rules of the game, the players involved, the agencies where they work, when it’s time to push back and when it’s time to concede. Have your attorney investigate the issue. Recall decisions often come down to lab tests, reported incidents or complaints from the field. When considering a recall that can be costly in terms of money and reputation, it pays to conduct a thorough investigation.
Chris Predko is a partner at Warner Norcross & Judd LLP and co-chair of the firm’s regulatory & compliance practice group. He has nearly two decades working with food, drug, device, automotive and consumer product manufacturers in product safety matters, including enforcement actions, product recalls and product liability defense. He can be reached at firstname.lastname@example.org.