Product Liability & Safety 2022

“Modern Product Liability” and the Wave of Change

There is no doubt we are on the brink of significant change in the risk profile for product manufacturers internationally.

For the last few years, change has been visible on the horizon, and a variety of flags and markers have indicated the direction in which that change would likely go. Today, the product liability world stands at a very different place. Reform is upon it, and it is no exaggeration to say that the wave of change happening now is entirely unprecedented. It is unprecedented both in the scope (it affects all product sectors), but also in the sheer scale of change starting to happen around the world.

The procedures and practices that companies have built and maintained to manage product liability risks up to this point around the world are unlikely to be optimal for addressing the issues that face companies today, and immediately around the corner. “Modern Product Liability” is here and companies that wish to thrive need to adapt.

Our concept of “Modern Product Liability” recognises that the risks, responsibilities and liabilities of companies involved in the manufacture and distribution of products 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”.

The impact of new digital technologies is driving much of this change. After many years of policy discussions about the challenges of new technologies, and general agreement that it has been a struggle for regulation to keep pace, there is a real sense now that we are moving into a period of substantial regulatory reform and regulator engagement. The unveiling in April 2021 by the European Commission of its proposed Regulation for Artificial Intelligence, a world first in this field, is a clear sign of this, especially with the strong emphasis on product safety considerations reflected in that proposal. Similarly, the European Commission’s proposals to replace the General Product Safety Directive with a new General Product Safety Regulation contain many novel provisions driven by a desire to adjust existing rules to accommodate the perceived novel challenges of new technologies.

These issues are increasingly global. They arise across the world, and the changes internationally are happening at an increasing pace. The growing work and prominence in this area of international organisations such as the OECD, the United Nations, the Association of Southeast Asian Nations (ASEAN), and the International Consumer Products Health and Safety Organization (ICPHSO) in the field of product safety demonstrates the growing importance of this area internationally.

This gives rise to very practical challenges for all companies.

Especially as regulation becomes more complex and more onerous around the world, and changes happen rapidly, companies are struggling to find practical ways to stay abreast of requirements and effectively manage risk. There is no “magic wand” solution to this current dilemma, although solutions are being developed to help companies manage it in a sustainable way.

This guide 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; it explains the key features of the product safety regulatory landscape in individual jurisdictions, highlighting the areas of greatest risk; and it provides insight into what the future might hold and what changes might be on the horizon. And understanding what is on the horizon is increasingly important for those managing modern product liability issues – the impact of future changes can be significant and can require months and years of planning to accommodate.

As readers work through the chapters, they will start to discern certain trends and patterns in the laws. They will also see marked differences. Companies need to navigate this increasingly complex world of product law, and to find practical solutions to manage risks whilst 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 driving legal reform

As highlighted above, the changes now being seen reflect a strong focus amongst policy-makers and regulators around the world on the impact and implications of new technologies. There is a dominant view that existing regimes are not, in all respects, fit for the future, and change is needed. Regulators and policymakers are, for example, concerned that technologies such as artificial intelligence and machine learning, the internet of things and connected products, autonomous machines and robotics, and 3D printing might give rise to risks that existing rules cannot accommodate. There is not necessarily, however, consensus on the nature and extent of change needed.

These issues are being actively grappled with in various forums around the world – including within the European Commission, the OECD and the United Nations – as well as by national governments all around the world, and concrete reforms are emerging now.

This change, and uncertainty about the future regulation and liability regimes creates risks for companies that are developing and deploying these technologies. There is still an opportunity for businesses to take the lead and help develop principles that can help to ensure that the need for overly restrictive regulation and liability exposure is avoided. However, there are currently concerns that there is not yet sufficient international collaboration and consensus on the right way forward. This is an area for companies to watch closely, especially as they move into a period where the policy discussions are turning into tangible regulatory reform and new legislation.

The global context

The globalisation of markets presents tremendous opportunities for product manufacturers and sellers. The development of a more accessible global market has also meant that there are greater opportunities for communication between stakeholders.

Consumers and other stakeholders around the world are in constant contact with each other, sharing information and opinions about their product experiences. Through social media, online reviews and general access to news media internationally, information about product risks travels very quickly around the world, especially when major brand names are involved.

Moreover, regulators around the world are more connected than ever to these information sources, as well as benefiting from the development of systems that facilitate the sharing of information between authorities, such as those that exist within the European space, within the Organization of American States, and within the OECD.

All of this means that companies need to take a more global approach to managing their product risks. Companies are recognising, sometimes through bitter experience, that it is no longer acceptable to try to manage risks on a local, national or regional basis. Product risks that may affect the reputation of a company and its products need to be managed at a global level.

Companies are increasingly aware of this. As a result, to the same extent that they have traditionally managed product compliance and product liability at a regional level, they are now tending to bring responsibility more and more back to global HQ level. This trend will certainly continue as the challenges and the risks involved continue to increase.

New marketing models

New marketing techniques and distribution models are, themselves, giving rise to issues of product liability and product compliance, and are driving a focus on the need to reform product regulations and liability structures.

Again, there continues to be much discussion internationally about whether these new marketing models are appropriately dealt with under existing regimes, and many jurisdictions have seen legal reforms implemented or proposed specifically addressing the perceived risks here. Certainly, most major markets around the world have seen the development of consumer protection laws that specifically relate to e-commerce. This will continue as markets and marketing models continue to evolve.

Also of note is the continued emergence of voluntary initiatives to help address the specific issues presented by online sales, for example through the “Product Safety Pledge” initiated by the European Commission, subsequently replicated in some other countries, and now promoted by OECD. On the other hand, some policymakers and stakeholders say that these voluntary measures don’t go far enough, or that they are not sufficiently robust to ensure an adequate level of consumer protection. They say that something else is needed.

The expanding concept of safety

Basic concepts of “safety” are changing around the world. Product liability regimes and especially product safety regimes have traditionally focused on risk of physical injury and, to a lesser extent, risks of property damage. However, the concept of safety is growing and companies are having to adapt their own compliance and risk management systems accordingly.

For example, there is a new focus on the extent to which safety regulations, and producer responsibilities should extend to mental health considerations.

Furthermore, the concept of a safe product in various contexts is also taking into account concepts of environmental protection, data privacy and even (albeit tangentially) energy efficiency. It also, more and more, needs to account for both “end-of-life” safety and concepts of “foreseeable misuse” as well as intended use. These are all challenging issues for product manufacturers.

A new focus on enforcement

Whilst many countries around the world have had robust laws and regulations in place to help ensure product safety for some time, it has been a common feature in most parts of the world that enforcement has so far been sporadic or ineffective. This has been well recognised in many countries, where concerns have been raised about the lack of funding allocated by governments to product safety enforcement.

This issue has been raised more prominently in the eyes of the public in recent years through some high-profile international regulatory scandals that have caused some to lose faith not just in companies, but in regulators too.

We are now in a world where we are seeing greater emphasis amongst policymakers and regulators on finding more effective ways to enforce laws and regulations. In some cases, this involves empowering consumers and other claimants to bring claims more effectively against companies; in others, ensuring enforcement agencies have better resources, not only in terms of funding but also in terms of powers and information. This factor is well reflected in the various chapters of this publication.

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 who seek to take advantage of 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.

On the other hand, these developments also create opportunities.

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 a good customer experience, can be especially exposed when marketing their products in markets that have few controls, and where other 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 those practical ways to keep abreast of the changes, understand their implications and develop systems that are fit for the future.

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.