MANAGING PRODUCT RECALL EXPOSURES

RC: How would you describe the general trend concerning product recalls in recent years? Has there been an increase in such events? What factors have driven these developments?

Reisinger: In recent years there has been an increase in product recalls, especially in the food industry. Each year 48 million people get sick, 128,000 are hospitalised and 3000 die from food borne diseases. In response, the Food Safety Modernization Act (FSMA) was signed into law. The act imposes stricter rules and regulations on the food industry for product safety requirements and gives the US government the ability, for the first time, to order a recall on its own volition. The law provides the Food and Drug Administration (FDA) with new enforcement authorities. Some authorities will go into effect quickly, such as the FDA’s authority to order companies to recall food; the FSMA provides the FDA with authority to issue a mandatory recall when a company fails to voluntarily recall unsafe food. As the number and severity of recalls increase, you can expect to see an increase in regulatory responses.

Eisert: Although the numbers vary from year to year, the general trend in recent years has been increased recalls, whether measured as the number of recalls or the number of units involved. Safety-related recalls have been increasing because of greater scrutiny and civil penalty enforcement by regulators, companies’ heightened awareness of regulatory requirements and safety issues, companies’ desire to better manage risk, and, contrary to some regulators’ perception, companies’ genuine desire to do what’s right for their customers and their businesses.

Apr-Jun 2014 Issue

Alvarez and Marsal

Kirkland & Ellis LLP

Navigant;
Norton Rose Fulbright Canada

Weil, Gotshal & Manges LLP