The Assistant Minister to the Treasurer has today issued a compulsory recall for all vehicles with defective Takata airbags, following an ACCC safety investigation.
The ACCC has today stated that the Minister decided to issue a compulsory recall because, based on extensive evidence provided to the ACCC:
- It is reasonably foreseeable that use of vehicles fitted with defective Takata airbags may cause injury to drivers and/or passengers; and
- One or more suppliers of vehicles with defective Takata airbags has not taken satisfactory action to prevent those vehicles causing injury to drivers and/or passengers.
The compulsory recall comes in the wake of many years of voluntary recalls concerning Takata airbags which, since 2009, have seen approximately 2.7 million vehicles in Australia being subject to voluntary recall notices. However, the ACCC estimates that:
- Approximately 860,000 vehicles in Australia with defective Takata airbags were not subject to any voluntary recall; and
- Replacement rates for individual suppliers conducting voluntary recalls varied from between 36% to 84%, with four Suppliers having replacement rates of less than 50% of the vehicles subject to voluntary recalls.
Compulsory recalls
The difference between a voluntary recall and a compulsory recall is that a compulsory recall:
- Is initiated by the responsible Minister, as opposed to the Supplier;
- Requires all Suppliers of affected vehicles to recall all affected vehicles in Australia (whereas a voluntary recall Can specify whatever terms a Supplier decides);
- Specifies the manner and timing of all recall activity; or
- If contravened, makes the Supplier liable to potential penalties.
A compulsory recall does not compel consumers to take their vehicles to the Supplier for the recall activity.
To whom do the Takata recall obligations apply?
For the purposes of the Takata Airbag compulsory recall, a reference to ‘Suppliers’ will not usually apply to dealers. This is because under this specific recall, a vehicle’s Supplier is deemed to be the first person to supply a vehicle with a defective Takata airbag into Australia. In most cases, this will be the Australian corporate subsidiary of the vehicle’s manufacturer. Other Suppliers to whom obligations apply under the recall are businesses which import and supply ‘grey’ or parallel imports.
If a manufacturer (or its subsidiary), not a dealer, is the Supplier for the purposes of the compulsory recall obligations, the manufacturer may still use its dealer network to perform the action required by the recall (such as the replacement of the airbag).
The Takata recall obligations
- Recall, as soon as possible and on a rolling basis, all affected vehicles and replace the airbag at no cost to the consumer – with priority given to replacement of airbags that present the highest safety risk (these being the ‘alpha airbags’ fitted to certain makes and models between 2001 and 2004);
- Publish a recall ‘schedule’ by 1 July 2018 which specifies when – on a rolling basis – affected vehicles are scheduled to have their airbags replaced under the recall – in this way an affected vehicle will either be under ‘active recall’ or ‘future recall’;
- Complete all replacements by 31 December 2020;
- Contact consumers directly to initiate the recall action;
- Publish a VIN search tool on their websites by 1 July 2018 that allows consumer to identify if their vehicle is affected; and
- Make arrangements for towing or transporting a vehicle or providing loan or hire cars during the replacement process in certain circumstances.
The recall obligations apply regardless or whether a customer bought their affected vehicle new or second-hand.
Prohibition on sale of affected vehicles – new & demonstrator vehicles
The Compulsory Recall Notice prohibits the sale of a new or demonstrator vehicle with an affected Takata airbag after 31 December 2018.
A person may sell a new or demonstrator vehicle with an affected Takata airbag before 31 December 2018, but must, first if doing so, comply with a prescribed communications regime set out in the Compulsory Recall Notice. In summary, this requires the seller, before the sale, to:
- Inform the consumer using specific prescribed wording of the following summary of matters:
- there is an affected Takata airbag in the vehicle;
- to avoid future risk of injury or death, the affected Takata airbag needs to replace as soon as possible once the vehicle is on ‘active recall’; and
- suppliers will make direct contact with the consumer to arrange for the recall activity to occur once the vehicle is on ‘active recall’;
- Record, in the service record of the affected vehicle, the:
- presence of an affected Takata airbag in the vehicle;
- the location of the affected Takata airbag (e.g. driver side, passenger side or both);
- the need to replace the affected Takata airbag during the active recall period; and
- affix a notice to the vehicle’s windscreen and engine bay containing prescribed text about the affected Takata airbag.
Prohibition on sale of affected vehicles – used vehicles
The Compulsory Recall Notice prohibits the sale by a car dealer of a used vehicle with affected Takata airbag if that affected vehicle is under active recall.
If a used vehicle with an affected Takata airbag is not under active recall (but is instead either on ‘future recall’ – or the used car dealer otherwise believes the vehicle has an affected Takata airbag – the Compulsory Recall Notice permits a sale of the vehicle, provided that the used car dealer first informs the prospective purchaser, using specific prescribed wording which, in summary, includes that:
- If the vehicle is less than six years post manufacture:
- the vehicle has an affected Takata airbag which, depending on its age and other factors, will pose a risk of injury or death;
- to avoid the risk of injury or death, the affected Takata airbag must be replaced as soon as possible after recall action is initiated by the Supplier because, as the airbag gets older, the risk of injury or death increases;
- the Supplier will initiate the recall of the airbag at the time specified in the Recall Initiation Schedule on the Supplier’s website;
- the Supplier will contact the consumer if the Supplier has the consumer’s contact details; and
- the consumer can contact the Supplier for further information.
- If the vehicle is more than six years post manufacture:
- the vehicle has an affected Takata airbag was poses a risk of serious injury or death which risk increases as the vehicle gets older;
- the affected Takata airbag must be replaced as soon as possible after recall action is initiated;
- the Supplier will initiate the recall of the airbag at the time specified in the Recall Initiation Schedule on the Supplier’s website;
- the Supplier will contact the consumer if the Supplier has the consumer’s contact details; and
- the consumer can contact the Supplier for further information.
The Compulsory Recall Notice does not prohibit the private sale of an affected vehicle by an individual. The ACCC advises that if an owner of a vehicle wishes to sell it privately before receiving a final replacement airbag, the owner should inform the new owner that the vehicle has an affected Takata airbag that will require replacement, and contact the Australian office of the manufacturer and provide them with the new owner’s contact details (with the new owner’s consent).
The Compulsory Recall does not render an affected vehicle un-roadworthy or un-registrable. The ACCC also advises that it should not affect a vehicle’s insurance, and that if any insurer takes a contrary view, a consumer should report that to the ACCC.
For more information, and to view the Compulsory Recall Notice, please visit: https://www.productsafety.gov.au/recalls/compulsory-takata-airbag-recall/about-the-compulsory-takata-airbag-recall
This article was written by Evan Stents, Partner and Christian Teese, Senior Associate.