Report Faulty Products or You'll Be Locked Up; as Cadbury's Voluntarily Recalls Millions of Chocolate Bars in a Salmonella Scare, a Leading Lawyer Warns Executives Risk Their Freedom Unless They Adopt a Principled Approach to Product Safety
Company directors are being reminded that they could be jailed or face hefty fines for failing to turn 'whistleblower' on their own companies.
Too few directors understand the impact of new regulations that came into force nine months ago requiring them to report immediately any of their products which pose a danger to the public, says product liability specialist Paul Llewellyn, a partner in the Midlands office of international law firm Reed Smith.
The Department of Trade and Industry is currently consulting industry and consumer groups on proposed new laws which will grant extensive powers of search and seizure to enforcement agencies that suspect companies of suppressing damaging evidence.
Mr Llewellyn, who heads Reed Smith's nationwide product liability team, believes many directors are unaware of the risks they take when they fail to disclose concerns they may have about safety issues involving their products.
The General Public Safety Regulations were introduced last October with the aim of giving increased protection to members of the public when faulty goods and products make their way onto the market.
When Perrier conducted a complete recall of its carbonated water some years ago, it did so voluntarily. Now enforcement authorities can require a recall. But not all product concerns are clear cut, says Mr Llewellyn.
"There is a grey area in which directors may find themselves in difficulties," he said. "Companies need to be clear about the facts when they issue product recalls, because they are very expensive, and can be extremely damaging to the reputation of a brand that might have cost millions of pounds to establish."
In Perrier's case some of the firm's rivals had managed to gain valuable market share in the aftermath of the health scare.
Mr Llewellyn added: "Unfortunately, when there is a suspicion that something might have gone wrong, directors often don't have much time to make a proper assessment.
"They have to make a decision, notify the appropriate authorities, and take all the necessary steps - all in the space of a few days at best."
As a result directors have either erred on the side of caution, and ordered recalls that were not strictly necessary - or have turned a blind eye to potential problems and hoped for the best. …