Review of the Australian Consumer Product Safety System Discussion Paper

Chapter 3 - International Approaches to Consumer Product Safety Regulation

The ongoing challenge of delivering a consumer product safety system which protects consumers from unsafe products while promoting overall community welfare is faced by governments worldwide. Each government, in partnership with businesses and consumers, approaches this challenge in a different way, using a range of tools including various forms of regulation.

Of special interest to this review are countries with similar systems of government to Australia and which have similar community expectations of the level of protection to be afforded to consumers. This Chapter provides a brief overview of consumer product safety regulation in the United Kingdom (UK), United States (US), Canada and New Zealand. Regulation in the UK also reflects product safety directives of the European Commission (EC), of which the most significant is the EC General Product Safety Directive (GPSD).

The discussion below focuses on aspects of government regulation in these countries that are relevant to the areas for improvement in the Australian product safety system identified in Chapter 2.

United Kingdom

Consumer product safety in the UK is principally regulated by the Consumer Protection Act 1987 (CPA) and the General Product Safety Regulations 1994 (GPS Regulations), which implement the EC GPSD.

Voluntary standards are important, and often reflect international standards

The CPA gives the Secretary of State for Trade and Industry, who is assisted by the Department of Trade and Industry (DTI), a broad range of regulatory powers, including the power to set mandatory product safety standards and to make temporary emergency regulations without consultation. Many mandatory standards incorporate, directly or indirectly, references to voluntary British Standards, which are often based on international standards. In addition, the CPA includes a general product safety requirement similar to that in the EC GPSD and subsequently introduced in the GPS Regulations.

Similar to the Australian TPA, the CPA also contains a strict product liability regime which gives consumers the right to seek compensation for personal injury or loss caused by unsafe products. This complements the common law rights of action available to the consumer, particularly under the tort of negligence.

A strong emphasis on co-ordination between enforcement bodies

While responsibility for policy is centralised, enforcement of product safety regulations, including the pursuit of criminal sanctions where appropriate, is undertaken by local government Trading Standards Authorities. The Authorities co-ordinate their efforts through a computer database and with the assistance of a central co-ordination unit. In cases where a business operates in more than one area, enforcement responsibility lies with the Authority in whose area the business’ decision making base is located.

EC General Product Safety Directive

The EC GPSD, introduced in 1992, was incorporated into UK law by the GPS Regulations in 1994. It imposes a general requirement on producers not to place a product on the market unless the product is safe. This requirement is supported by other duties on producers, including duties to provide information to consumers to enable them to assess the risk of a product and to be informed about risks that their products might present. The EC GPSD applies to both new and second-hand products.

Compliance with mandatory and voluntary standards can satisfy the general safety requirement

If a product complies with an applicable mandatory standard, it is presumed to comply with the general safety requirement. The courts will also take into account, amongst other things, compliance with voluntary European and British standards and accepted industry codes of good practice.

The requirements of the GPSD have recently been reviewed and amended,⁴ with application from 15 January 2004, and are being progressively incorporated in the laws of EU member States. Significant changes included:

• the establishment of a new class of voluntary European Standards, compliance with which is deemed to satisfy the general safety requirement;

Introduction of mandatory recall powers and notification obligations on businesses

• a new obligation on producers to be in a position to recall products from consumers and the power for enforcement authorities to be able to order a product recall; and
• requirements on producers and distributors to notify dangerous products to enforcement authorities.

The GPSD also establishes a system (known as RAPEX) for the rapid exchange of information on products causing serious risks between EU member States and the EC.

Since the GPS Regulations were introduced in 1994, there have been few occasions where the UK authorities have found it necessary to make mandatory product safety standards under the CPA.⁵

United States

The US devotes substantial resources to consumer product safety regulation

The cornerstone of US consumer product safety regulation is the Consumer Product Safety Act 1972 (CPSA), which established the Consumer Product Safety Commission (CPSC). The CPSC is a large independent agency, reporting directly to the Congress, with approximately 480 employees and a budget of approximately US$57 million. It is responsible for both policy making and enforcement at a national level.

Like the TPA in Australia, the CPSA provides for a range of sanctions, including criminal penalties, which are pursued by the CPSC. These are complemented by strong private rights of action under product liability law which allow consumers to seek redress for harm caused by unsafe products.

One of the primary tools available to the CPSC is the development of consumer product safety rules. These rules can be either consumer product safety standards, which contain mandatory product performance requirements or warning/instruction requirements, or rules banning hazardous products. A ban can only be instituted when a standard cannot adequately protect consumers from unreasonable risk of injury.

Voluntary standards are preferred to government regulation

A detailed and lengthy process of consultation and justification must be followed in order to make a consumer product safety rule. The substantial effort involved, in conjunction with a requirement in the CPSA that voluntary standards be preferred to rules wherever possible, mean that voluntary standards play a very important role in the US consumer product safety system.

The CPSC is also able to take a variety of actions against products that it considers present a substantial product hazard. These include requiring businesses to issue various forms of notification and other powers which enable the CPSC to effectively order a mandatory product recall.

Government involvement in voluntary recalls

As in Australia, voluntary recalls are an important part of the US system. The CPSC operates a fast track recall process under which a company undertaking a voluntary recall must provide a full report of the product safety problem and a proposed recall plan for the approval of the CPSC.

In exercising its regulatory powers, the CPSC draws upon information from a greater variety of sources than are available to product safety regulators in Australia. In particular, information is gathered from businesses under mandatory reporting requirements and from the National Electronic Injury Surveillance System (NEISS).

Mandatory reporting obligations

Under the CPSA, a manufacturer, distributor or retailer must report to the CPSC if a product: fails to comply with a consumer product safety rule; fails to comply with a voluntary standard relied upon by the CPSC in deciding not to progress with a rule; contains a defect which could create a substantial product hazard; or creates an unreasonable risk of serious injury or death. Manufacturers are also required to report to the CPSC if their product is involved in product liability litigation.

The NEISS is an extensive nation-wide system for gathering information

The CPSC also maintains an Injury Information Clearing House which collects, analyses and disseminates injury data and information dealing with the causes and prevention of death, injury and illness associated with consumer products. An important tool which the CPSC uses to do this is the NEISS, which collects information on product related injuries each day from over 100 hospital emergency rooms across the US.

Canada

Most consumer product safety regulation in Canada is undertaken by the federal government, principally under the Hazardous Products Act 1969 (HPA). The Minister of Health, assisted by Health Canada, is responsible for both policy and enforcement in respect of consumer product safety. As the federal government’s authority in relation to product safety derives from its constitutionally conferred power over criminal law, all offences under the HPA are criminal offences.

Government regulation of consumer product safety is complemented by consumers’ private rights of action under civil law to seek compensation from the makers of products that have caused them injury or economic loss.

Emphasis on voluntary standards that do not act as a barrier to trade

The HPA contains provisions which effectively allow Health Canada to ban products or to impose mandatory standards, but not to order compulsory product recalls. In many cases, mandatory standards reference voluntary standards, of which the most well known are National Standards of Canada. For approval as a National Standard, a standard must not be framed in such a way that it will act as a restraint to trade, and must be consistent with or incorporate appropriate international standards as well as pertinent national standards.

Legislative reform programme

Health Canada is currently undertaking a review of Canada’s health protection legislation. The proposal is to introduce a new Canada Health Protection Act, which would replace a range of existing health protection legislation including the HPA.

The legislative reform programme seeks to address a number of perceived weaknesses in the current Canadian health protection regime. As they relate to consumer product safety, these weaknesses include: a lack of uniformity in the treatment of products; variations in enforcement powers between different statutes; an inability to respond in a flexible and timely manner to emerging product safety issues, due to the need to develop specific regulations for each identified product hazard; and limited government resources to identify and regulate unsafe products.

Many of these weaknesses echo those identified in Chapter 2 of this paper in relation to Australia’s consumer product safety system.

A general safety requirement is proposed, placing greater responsibility on businesses to sell safe products

The Canada Health Protection Act would introduce a general safety requirement, similar to that contained in the EC GPSD.⁶ The general safety requirement would place greater responsibility on businesses to deliver safe products to the consumer, rather than on the government to identify and regulate hazardous products. The general safety requirement would apply to all products unless exempted and, in practice, would apply to most consumer products.

Under the proposed general safety requirement it would be an offence to:

• make or sell a product that causes undue adverse health effects (this requirement would relate to the entire life cycle of a product, from its manufacture to disposal);
• fail to monitor a product after sale in a manner commensurate with the risks that it poses; and
• fail to report serious risks found in a product to Health Canada or fail to take appropriate corrective actions.

Voluntary standards would become more important

Amongst the factors to be considered in determining whether a product represents an undue risk of adverse health effects would be federal, provincial and territorial laws and regulations and relevant generally accepted voluntary standards. The proposed general safety requirement is seen as a means of enforcing voluntary standards, which could be National Standards of Canada or relevant international standards.

However, the proposed general safety requirement would not preclude Health Canada from adopting mandatory product standards as it currently does under the HPA. The general safety requirement would operate as a safety net where there is no applicable mandatory standard.

New Zealand

Consumer product safety in New Zealand is principally regulated by the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA).

The Ministry of Consumer Affairs administers both these Acts and is responsible for policy formulation under the FTA. The Commerce Commission, an independent crown entity, enforces policy decisions taken under the FTA. This division of responsibility mirrors that in Australia at the Australian Government level between the Treasury and the ACCC.

Unlike in Australia, consumers do not have the right to sue for personal injury, other than for exemplary damages. Instead, New Zealand has a comprehensive accident compensation insurance scheme, administered by the Accident Compensation Corporation.

General guarantee of safe products for consumers

The CGA establishes certain guarantees that consumers have in relation to their purchases. Of particular significance is the guarantee that goods will be of acceptable quality, which includes being ‘safe’. If a good is unsafe, consumers can seek legal redress, including compensation for consequential loss. Such redress can be sought at the consumer’s choice either directly from the retailer or from the distributor, manufacturer or importer.

The safety guarantee places a general obligation on businesses that is similar to that imposed by the EC GPSD and Canada’s proposed general safety requirement. However, the New Zealand safety guarantee can be enforced only through private action. The CGA does not make it an offence to provide a product that is unsafe. Government action, if considered necessary, must be taken through the FTA.

The FTA is modelled closely on, but is not identical to, Part V of the Australian TPA. It applies to the supply of services, as well as goods.

The FTA allows the Minister of Consumer Affairs to: recommend the introduction of consumer information standards, product safety standards, and services safety standards; ban products; and order a compulsory recall. Goods that are subject to safety standards, bans or recalls under the FTA may not be imported into New Zealand and can be prevented entry at the border. Unlike under the Australian TPA, the FTA does not require notification of voluntary recalls.

Product or services safety standards can cite a New Zealand voluntary standard or an overseas mandatory or voluntary standard. There is a statutory obligation for the Minister to consult with substantially affected parties before making standards.

All government actions under the FTA are subject to judicial review. Any person may take court action under the FTA, and a breach of the FTA is an offence.

Lessons for Australia

Governments in all of the countries discussed above share, in common with Australian governments, the objective of minimising the harm caused by unsafe products in a way that best serves the welfare of their citizens. There are many similarities between the regulatory approaches adopted internationally and in Australia, as well as some significant differences.

In each country, governments seek to ensure that unsafe consumer products do not reach the market and that consumers are adequately informed about the safety of products. As well as the traditional tools of mandatory safety and information standards and product bans, the general product safety requirement in force in the EU and currently being considered by Canada is of note, along with the important role that voluntary national and international standards can play in conjunction with it. A general safety requirement places greater responsibility on businesses to supply safe products.

As in Australia, each country studied seeks to ensure that any unsafe products that reach the market are readily detected and reported. A range of methods are employed to gather information on product safety problems, including some not currently available to governments in Australia. The US, through the NEISS, maintains an extensive nation-wide information gathering system. Mandatory reporting requirements, such as those imposed on suppliers in the US and under the revised EC GPSD and proposed Canadian general safety requirement, are another important source of information.

Effective and timely removal of unsafe products from the market is another important shared goal. In each country, governments have, or intend to implement, compulsory product recall powers. However, the level of government involvement in voluntary recalls varies, with the US CPSC having a significant role via its fast-track recall process.

As in Australia, consumers in each country are able to obtain redress and compensation in the event that they purchase an unsafe product. In each country, breaches of consumer protection laws can also attract criminal sanctions.

Governments in the four countries employ different organisational structures for making product safety policy decisions and enforcing them. However, in each country, including those with a federal system of government, core policy-making responsibility is centralised in a single body at national level. This differs from the Australian situation, in which responsibility is shared between the Australian Government and the governments of the States and Territories. Enforcement of national product safety regulation is also a centralised responsibility in each country other than the UK.

Finally, the most significant lesson from this examination of overseas regulatory approaches is that no single element of a product safety system will be decisive in protecting consumers against unsafe products. The interrelationship between different elements of a product safety system is important when considering the options for reform of Australia’s consumer product safety system discussed in Chapter 4 of this paper.

⁴ See Directive 2001/95/EC of the European Parliament and of the Council of 3 December 2001 on general product safety. Further information on the EC GPSD is available at http://europa.eu.int/comm/consumers/cons_safe/prod_safe/gpsd/index_en.htm.

⁵ Based on advice from the UK Department of Trade and Industry.

⁶ Further information on Canada’s legislative reform programme, including the proposed general safety requirement, can be found at http://www2.itssti.hc-sc.gc.ca/HPCB/Policy/LegislativeRenewal.nsf.

Next: Chapter 4 - Options for Reform of Australia's Consumer Product Safety System

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