Product branding and product liability risk
Product liability is creeping ever higher up the list of boardroom priorities for businesses, writes Peter Shervington. Increased media attention on product safety incidents brings the potential for a badly managed crisis to kill off a company entirely.
It’s interesting that retailers and others in the supply chain who do not actually make a product often regard themselves as immune from product liability risks and assume that their suppliers will be the target of claims or regulatory scrutiny if things go wrong. Unfortunately, this is not always a safe assumption: many regulatory regimes place responsibilities not only on the manufacturer, but also on others in the supply chain, particularly those who place their brand on the product.
Most products intended for or likely to be used by consumers - including those which might be targeted primarily at professionals but which consumers may buy too - fall within the scope of the General Product Safety Regulations 2005 (GPSR) which implements the EU General Product Safety Directive.
These regulations place a strict and onerous obligation on producers to ensure that the product is safe – meaning that under normal or reasonably foreseeable conditions of use it presents either no risk or only the minimum risk compatible with the product’s use.
Critically, for the purposes of the GPSR, a producer is any person who manufactures a product, or a person who presents himself as the manufacturer ‘by affixing to the product his name, trademark or other distinctive mark’.
This means the obligations placed on producers are also applicable to retailers, merchants and distributors in circumstances where they place their own brand on the product.
The effect of this is that retailers and merchants applying their own brand to products need to ensure that they can be satisfied with the safety of those products. This means not only that they are designed and manufactured in accordance with technical requirements and industry standards, but also for example, that adequate warnings and instructions for use are provided.
The act of placing an unsafe consumer product on the market is an offence, regardless of whether or not a producer knew about a potential safety defect. There is a requirement to notify the authorities promptly where a producer becomes aware that a product he has placed on the market - or supplied – presents risks to a consumer that are incompatible with the GPSR.
Many other regulations also extend obligations to businesses placing their own brand on products – including, amongst others, the Construction Products Regulations 2013 and the Electrical Equipment (Safety) Regulations 2016.
Any business supplying articles for use at work will also be caught by the requirement under Section 6 of the Health and Safety at Work Act 1974 (HSWA) to ensure that the article is so designed and constructed that it will be safe and without risks to health at all times when being used by a person at work. Fines for breaches of the HSWA have recently been scaled up dramatically.
In addition to the regulatory regime, those placing their brand on products are potential targets of civil claims for damages under the Consumer Protection Act 1987 which implements the Product Liability Directive in the event of an injury or damage to personal property caused by a defect.
Potentially, resellers and distributors who deal directly with consumers could face further claims under the Consumer Rights Act 2015 (CRA). Here goods sold must be fit for purpose and of satisfactory quality.
The commercial benefits of own-branding are often compelling, but businesses entering this area should do so with their eyes open, understanding that by placing their name on a product they may be substantially increasing the legal and reputational risks which they bear.
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