February 16, 2017

Product recall legislation on the rise in southern Africa

Risk managers need to be aware that South Africa’s Consumer Protection Act 68 of 2008 (CPA), which came into effect in April 2011, was the country’s first foray into consumer rights legislation and has dramatically altered the legal landscape around product recall and product liability more generally.

And it is a growing issue across the region. In Zimbabwe, a Consumer Protection Bill (informed by South Africa’s legislation) has been debated since 2014 and in Botswana, consumer protection legislation has been in place since 1999.

Until South Africa’s CPA came into force, product recalls were an entirely voluntary undertaking. The CPA changed this position, vesting power to order the recall of a consumer product in the newly established National Consumer Commission (NCC). Section 60(2) of the CPA provides that if the NCC has reasonable grounds to believe that a good is unsafe or poses a risk to the public it may, by written notice, require the producer of the good to either conduct an investigation into the safe use of the product or in fact carry out a recall programme on the NCC’s own terms.

Once a recall has been initiated, the NCC must be notified in writing and such notice must set out the nature of the defect or dangerous characteristic affecting the implicated product. If no notice is given, a supplier is guilty of an offence.

Even in the event that a recall is undertaken voluntarily, the NCC fulfills an oversight function and it is plain to see from the NCC’s set of Recall Guidelines (published in June 2012) that that the NCC will involve itself at an early stage where a recall is anticipated. Where a supplier becomes aware of a possible safety hazard in a product, the guidelines require it to immediately conduct an investigation and to inform the NCC that such an investigation has been undertaken. Such advance warning enables the NCC to engage the supplier concerned and use the threat of compulsory recall to achieve cooperation from an affected supplier.

The guidelines then call for the affected supplier to produce a recall strategy, which must be submitted to the NCC; to proceed with the actual recall; and then to report back to the NCC on the process followed. It is worthwhile noting that the guidelines provide moderate relief for international purchasers too.

Since its inception, the NCC has been involved in various recalls. On 9 April 2014, together with Massmart stores, it announced the recall of a toy baby doll after it was found that the circuit board in the doll’s chest was defective; and in May 2016, it oversaw the voluntary recall of 180 KIA Cerato vehicles due to a defect affecting automatic transmission cooling hoses.

In the past 12 months, the NCC has faced its biggest test. In December 2015, a South African man was killed after being trapped in his burning Ford Kuga after it caught alight. The incident has, understandably, captured the public’s attention. By January 2017, and after 39 further confirmed engine fires (11 of which took place during the summer month of December) and a highly publicised criminal inquest into the death, Ford was summoned before the NCC, allegedly under threat of a compulsory recall.

Shortly thereafter, Ford announced a nationwide voluntary recall of all Kugas manufactured between 2012 and 2014 fitted with the allegedly problematic engine. In the space of 24 hours, it was announced that owners of the affected vehicles had joined forces with a view to instituting a class action (another very recent development in South African law).

Given the regional integration between southern Africa, it will come as no surprise that that only four days after the Kuga recall was announced in South Africa, the recall was extended to Botswana.

Recalls are an expensive business and the associated costs often have to be borne by insurers. In South Africa, product liability policies will not typically cover the costs of a recall by default, although extension can be purchased. Most recall policies will only respond if the defective product presents a danger to third parties.

Published in Commercial Risk Africa on 16th February 2017: http://www.commercialriskonline.com/product-recall-legislation-rise-southern-africa/