Product Safety Update – new recall guidelines released and first penalties issued under button battery safety standards 

In line with its annual priorities, the Australian Competition and Consumer Commission (ACCC), has recently taken some big steps towards addressing product safety concerns in Australia. This began with the release of the ACCC’s new consumer product safety recall guidelines in April, and continued with the ACCC’s announcement in May that it had issued its first infringement notices and penalties for non-compliance with new mandatory button battery safety standards, introduced in mid-2022.

These steps indicate that product safety will continue to be an important compliance and enforcement priority for the ACCC throughout 2023 and beyond, and should serve as a warning to manufacturers and suppliers of consumer products in Australia to be aware of the risks and have in place operational procedures to ensure compliance with product safety obligations under the Australian Consumer Law (ACL) and applicable mandatory standards.

In this article, we provide an overview of the new consumer product safety recall guidelines and take you through the ACCC’s recent action in relation to the mandatory button battery safety standards, finishing with some important takeaways for manufacturers and suppliers.

New kid on the block – the new and improved product safety recall guidelines

In April 2023, the ACCC introduced the new 72-page consumer product safety recall guidelines (New Guidelines),¹ a significant update to the previous 16-page consumer product safety recall guidelines published many years ago in 2015 (Old Guidelines). The New Guidelines, which were developed in consultation with industry, provide businesses with a comprehensive document explaining consumer product recalls.

What is a consumer product recall?

There are two types of consumer product recalls recognised under the ACL – a voluntary product recall initiated by the supplier of a consumer product (VPR),² and a compulsory product recall initiated by a State Premier or Territory Chief Minister (Responsible Minister), generally on advice from the ACCC (CPR).³ While the ACL does not specifically require suppliers to initiate a VPR, it sets out the process that a supplier must undertake where the supplier recalls goods because of a risk of injury, non-compliance with a safety standard, or in response to a ban of the goods.⁴ Similarly, a Responsible Minister may initiate a CPR where it identifies that the goods present a risk of injury, do not comply with a safety standard, or in response to a ban of the goods, and where it appears to the Responsible Minister that the supplier has not taken ‘satisfactory action’ to prevent the goods causing injury to a person (ie initiating a VPR).⁵

While a VPR is in a sense ‘voluntary’, it is generally in a supplier’s best interest to initiate a VPR in circumstances where failure to do so may lead to a CPR. A CPR is generally the less desirable option, as it allows the Responsible Minister and the ACCC to have full control over the marketing and communication surrounding the recall. In contrast, a VPR generally gives the supplier more control over the messaging relayed to the public, subject to requirements of consultation with the ACCC. There are also additional reputational concerns with a CPR, as consumers may be aware that a CPR is an act of ‘last resort’, and regard the initiation of a CPR as a failure by the supplier to appropriately manage a product safety hazard.

In addition to the recall requirements under the ACL, there are other rules and regulations that may apply to a recall for specific kinds of products – including mandatory safety standards, the rules of industry-specific regulators (such as the Electrical Regulatory Authorities Council’s recall guidelines), and the Therapeutic Goods Act 1989 (Cth) in the case of therapeutic goods. The New Guidelines specifically note that the ACCC has arrangements in place with other specialist agencies to identify which agency will be the ‘lead agency’ where a product safety issue occurs with consumer products that give rise to recall obligations relating to more than one agency.⁶

What’s changed in the New Guidelines?

The updates in the New Guidelines can be summarised as follows:

1. It’s in the details: broadly speaking, the New Guidelines are much more detailed than their predecessor, containing useful tools and resources for suppliers such as checklists, examples, case studies and ‘how-to’ guides. In general, there is a lot more context around suppliers’ obligations under the ACL and what the ACCC expects of suppliers in relation to a product recall.
2. Risk assessment: there is more commentary on how safety risks can be assessed in the New Guidelines, including an appendix containing the European Union’s RAPEX risk assessment tool, which suppliers can use as guidance when conducting a risk assessment. A unique feature of the risk assessment section in the New Guidelines is the direction for suppliers to consult the ACCC’s product safety priorities when assessing risk. These product safety priorities are published by the ACCC each year and set out specific areas of focus in this space.⁷ This may indicate that there will be a higher bar for suppliers who supply products that are already on the ACCC’s radar for the year. For example, for this year, that would include button batteries, lithium-ion batteries and inclined infant sleep products, among others.⁸
3. Prevention is key: another unique feature of the New Guidelines is the focus on prevention, to reduce the likelihood of needing to recall a product in the first place. The New Guidelines encourage suppliers to exercise care and take steps to confirm facts when sourcing products, and to consider engaging a consultant to check that all required safety criteria are met. Some other examples listed are engaging a National Association of Testing Authorities (NATA) test facility to compliance test products, contacting Standards Australia to determine which standards can be used to make the products safe, and setting up and maintaining a quality assurance framework.⁹
4. What not to say: while the Old Guidelines simply directed suppliers initiating a VPR to avoid using the word ‘voluntary’ in their recall notice, the New Guidelines are far more prescriptive on what not to say, advising suppliers not to use the following words or phrases in any recall communications: ‘voluntary’, ‘this is a voluntary recall’, ‘precautionary’, ‘we are recalling this product for precautionary reasons’, ‘out of an abundance of caution’, ‘it is highly unlikely the defect will occur’, ‘the chance of injury or death is low or rare’, ‘it is unlikely that an incident will occur’, ‘in the unlikely event’, ‘low risk’, ‘in rare circumstances/occasions’, ‘isolated incidents’, ‘extremely rare cases’, ‘no injuries in Australia have been reported’ and ‘no injuries have occurred’.
5. The communication plan: the ACCC have upped the ante in terms of what suppliers are to consider when preparing a communication plan for the recall, directing suppliers to use multiple channels of communication that are tailored to the affected consumers. Some of the suggestions that are unique to the New Guidelines include paid advertisements on social media, publishing in online communities and groups (eg parenting groups for children’s products), and even engaging the services of influencers. The New Guidelines include a ‘communications package’ appendix with sample language that can be used in recall communications, including draft SMS and social media messages.
6. Pivoting the communication plan: another unique feature of the New Guidelines is the direction for suppliers to adjust their recall communication plan based on recall progress. For example, if suppliers experience low return rates of a recalled product, they are asked to modify the recall strategy to reach more affected consumers and to consider using incentives and different communication styles and channels to increase engagement.
7. Guidance for the supply chain: the reality with most consumer products is that there will be many ‘links’ in the supply chain, which can create confusion over who is responsible for a product recall when a safety defect arises. The New Guidelines provide more clarity on this point than the Old Guidelines, directing suppliers (including manufacturers, importers and distributors) to decide among themselves which supplier will lead the recall and what each supplier will be responsible for. The New Guidelines direct that if no other supplier takes responsibility, the supplier in question must take responsibility for what it supplies.
8. Making the remedy consumer-friendly: another unique feature of the New Guidelines is the direction for suppliers to provide a remedy that is ‘suited to the product’ and ‘easy to receive’ by the consumer. Suppliers are asked to minimise the number of steps that consumers must take to obtain a repair, replacement or refund, and to consider employing methods such as organising a courier service for return, sending reply paid packaging, or offering an extra incentive for the return of goods (such as a gift or discount voucher), particularly in the case of recalled products that are low value.
9. Finalising the recall: the New Guidelines provide a slight update to (and far more detail on) the finalisation of a recall. Under the Old Guidelines, a recall could be ‘closed’ when the supplier had taken ‘all reasonable steps to effectively mitigate the risk posed by the unsafe product’. Under the New Guidelines, a recall can only be ‘closed’ when all affected products are accounted for. Where this has not occurred, but the supplier has taken ‘all reasonable steps to effectively mitigate the risk posed by the unsafe product’, the status of the recall can be moved to ‘not reporting’, meaning ongoing recall reporting will no longer be required. Notably, remedies must still be provided for affected products even where a recall is closed or moved to ‘not reporting’.

First penalties for non-compliance with button battery standards

The release of the New Guidelines is not the only update making waves in the product safety space this year. Following the introduction of mandatory button battery safety standards in June 2022 (Safety Standards),¹⁰ the ACCC has issued its first infringement notices to Dusk and The Reject Shop in relation to alleged non-compliance with the Safety Standards, with the businesses paying a total of nearly $240,000 in penalties.¹¹

What are button batteries?

Button batteries (also known as coin batteries) are small, single cell batteries with a diameter greater than their height. They are used in a broad range of consumer products such as remote controls, watches, calculators, scales and some children’s toys.

There is a known safety risk with button batteries for young children – if swallowed, they can become stuck in a child’s throat and cause catastrophic injury and even death. Product Safety Australia reports that in Australia, one child a month is seriously injured after swallowing or inserting a button battery.¹²

What do the Safety Standards require?

The requirements of the Safety Standards can be summarised as follows:

• Goods containing button batteries that are intended to be replaced by a consumer must have a secure, child-resistant battery compartment;
• Goods containing button batteries must be secure and not release the batteries during reasonably foreseeable use or misuse conditions;
• Most button batteries sold on their own must have child-resistant packaging, and where this is required, blister packaging must be used to release only one battery at a time;
• Warnings and emergency advice must in most cases appear on the goods, batteries, packaging and instructions; and
• Goods containing button batteries must be compliance tested before they are sold to ensure they comply with the Safety Standards.

So, what led to the infringement notices?

The ACCC alleged that Dusk and The Reject Shop failed to compliance test their respect Halloween-themed products, as required by the Safety Standards.¹³

In the case of Dusk, when looking at samples of the products, the ACCC said it was concerned that the products did not have secure button battery compartments, and that they may not have complied with the Safety Standards even if they were tested, ultimately fining Dusk $106,560.

In the case of The Reject Shop, the products were compliance tested after they hit the shelves (not beforehand, as required by the Safety Standards) and found to comply with the Safety Standards. However, this did not cure the non-compliance in the eyes of the ACCC, with The Reject Shop still forced to pay fines of $133,200 for its conduct.

What does this tell us?

These two very ‘spooky’ penalties serve to illustrate the ACCC’s commitment to enforcing its brand-new Safety Standards in the interests of protecting the safety of children. Manufacturers and suppliers should not delay any required compliance testing under the Safety Standards even where they believe that, if tested, the products would comply with the Safety Standards.

Takeaways for suppliers of consumer goods

When it comes to product safety, the obligations on suppliers of consumer goods are more onerous than ever before, and it is reasonable to expect that this position will only become more prescriptive over time.

In the interests of managing financial and reputational risk, it is critical that suppliers understand their obligations under Australia’s product safety framework and have mechanisms in place to ensure compliance, particularly for those consumer goods that are subject to a number of different standards and regulations (eg electrical consumer products or therapeutic goods),or have been identified as a product safety priority by the ACCC.

How can we help?

We have a dedicated Consumer Law team and Product Liability, Recalls and Advisory group that can assist you with understanding your obligations in the case of a product recall. Please contact us if you would like more information about the services we provide.

This article was written by Teresa Torcasio, Partner and Zoe Vise, Associate.

¹Australian Competition and Consumer Commission (ACCC), ‘Conducting a consumer product safety recall: a guide for suppliers’ (April 2023) (New Guidelines);
²ACL, s 128;
³ACL, ss 122 – 127;
⁴ACL, s 128;
⁵ACL, s 122;
⁶New Guidelines, page 52;
⁷ACCC product safety priorities 2022-23: https://www.accc.gov.au/about-us/accc-priorities/product-safety-priorities;
⁸Ibid;
⁹New Guidelines, pages 7 – 8;
¹⁰Consumer Goods (Products Containing Button/Coin Batteries) Safety Standard 2020 (Cth), Consumer Goods (Products Containing Button/Coin Batteries) Information Standard 2020 (Cth), Consumer Goods (Button/Coin Batteries) Safety Standard 2020 (Cth), and Consumer Goods (Button/Coin Batteries) Information Standard 2020 (Cth);
¹¹ACCC, ‘Retailers pay penalties for supplying Halloween products allegedly in breach of button battery standards’ (Media Release, 1 May 2023);
¹²Product Safety Australia page on button batteries: https://www.productsafety.gov.au/products/electronics-technology/button-batteries; and
¹³ACCC, ‘Retailers pay penalties for supplying Halloween products allegedly in breach of button battery standards’ (Media Release, 1 May 2023).