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On 8 June 2013 the Sydney Morning Herald reported that Volkswagen Australia would be formally recalling Golf and other Volkswagen-made models that had suddenly lost power. The family of one driver and the driver of a truck that rear-ended her Golf vehicle are arguing before the coroner that this was a possible cause for her fatal accident. Over 300 other owners of Volkswagen-made vehicles have also reported problems. Similar concerns about some of Volkswagen’s direct-shift gearboxes had led to formal recalls of some models as early as 2009 in the USA, then in China, Singapore, Japan, Malaysia and Taiwan. However, Volkswagen reportedly stated that Australia does not have the same gearboxes, and instead had initially undertaken a program involving its dealers. Marketing experts have criticised the recall recently commenced in Australia, suggesting that Volkswagen will have suffered extensive damage to its brands by not acting publically earlier to address consumer concerns – in addition to the estimated $170m in direct repair costs.

It will probably come as no surprise that Volkswagen conducted recalls more promptly in the USA. Toyota suffered extensive adverse publicity there relating especially to problems instead involving sudden acceleration, generating recalls of over 10 million vehicles over 2009-2011 and a recently-finalised $1.6b class action settlement. Nor should it be surprising that Volkswagen undertook a recall in Japan. Japanese consumers have become increasingly sensitive about product safety issues, especially since 2000 - when Mitsubishi Motors was found to have been conducting illegal clandestine recalls over an extended period. The delay in Australia is disturbing, especially given the increased attention otherwise being paid to consumer protection since “re-harmonisation” pursuant to the Australian Consumer Law (ACL) reforms enacted in 2010.

Reporting Voluntary Recalls under the ACL

In particular, the ACL (s 128) carries over the longstanding requirement for suppliers to notify the regulator (the ACCC) if they voluntarily “recall” consumer goods that “will or may cause injury” (including expressly, now, through foreseeable misuse). This information is now helpfully collated and publicised online (at www.recalls.gov.au). Unfortunately, however, the Law has not added a definition of what constitutes a “recall”. The ACCC’s non-binding Consumer Product Safety Guidelines (July 2010) mentions generally that “A consumer product safety recall occurs when a problem, that may mean that the consumer good presents a hazard, is identified” (p2), and that a voluntary recall (under the predecessor s65R of the Trade Practices Act) occurs when the supplier “voluntarily takes action to remove it from distribution, sale, and/or consumption” (p3). Perhaps the ACL should be amended to specifically define a recall, and penalties strengthened if suppliers fail to report their recalls to the ACCC.

Nonetheless, the present Guidelines add (pp 2-3) that:

“Goods that are monitored by other specialist Commonwealth regulators, such as … the Department of Infrastructure [and] Transport […], also fall within the jurisdiction of the ACCC. However, as a matter of administration and in recognition of the mandate and specialist expertise of those agencies, goods regulated by the other specialist Commonwealth regulators are normally not considered for direct action [by the ACCC]. On occasion, the ACCC has become involved in specialist matters when a specialist regulator’s powers have not been able to satisfactorily address safety issues.”

It would be helpful if the ACCC could help regulators (like the Department) charged with implementing specific legislation providing for recalls, including State and Territory statutes on road safety and accidents, to “lift their game”. An entire industry can suffer if consumer confidence is eroded in the regulatory regime designed to maintain minimum safety standards.

Reporting Serious Consumer Product Accidents

With effect from 1 January 2011, the ACL also adds a new requirement on a supplier of consumer goods to promptly the ACCC within two days if it “becomes aware of the death or serious injury or illness of any person” and it considers that this was “caused or may have been caused by the use of foreseeable misuse of the consumer goods” (s 131). However, this mandatory reporting duty does not apply if there is a similar notification requirement under other statutes specified by regulation – including road safety statutes (Reg 92). An automobile supplier like Volkswagen therefore is not obliged to report serious accidents to the ACCC, unless they fall outside the other statutes (eg because the accidents occurred off a public road). Yet the ACCC’s online reporting form includes (pre-ticked) consent allowing it to disclose any accident report submitted to that regulator to other regulators including the Department of Infrastructure and Transport.

Unfortunately, the ACL’s new reporting obligation for unsafe consumer goods is anyway narrower in scope and impact compared to those regimes introduced (often many years ago) by all Australia’s major trading partners, especially the European Union. (An exception is New Zealand, where the Consumer Law Reform Bill still before Parliament only proposes to add an obligation on suppliers if they go on to conduct a voluntary “recall” – as in Australia, not defined. The nation's largest dairy products supplier has recently, and seemingly belatedly, announced a world-wide recall of baby formula and sports drinks containing bacteria that can cause botulism.) In particular, in Australia:

- the supplier needs to have actual knowledge of the accident;
- the wording of s 131(1)(b) is unclear as whether or not the causal link between the accident and the supplier’s good is determined purely objectively; anyway, there is no reporting requirement if it is “very unlikely” or “clear” that the accident was not caused by the use or foreseeable misuse of the goods (s 131(2));
- there is no obligation to report “near-misses” or other serious risks of accidents, only actual accidents – with serious “illness” limited anyway to a rapid-onset illness;
- most remarkably, pursuant to s 132A (a late amendment to the Law), the ACCC is placed under comparatively strict confidentiality obligations regarding accident reports received from suppliers; it cannot even share this information with counterpart regulators in trading partners linked through Free Trade Agreements (such as New Zealand or the USA).

Bearing in mind ongoing problems involving unsafe consumer goods in Australia, the ACL’s new provisions should be reviewed in light of the more expansive regimes operating overseas, which arguably also encourage suppliers to undertake and disclose other early corrective action such as voluntary recalls. Responsible exporters from Australia are probably already becoming familiar with the stricter reporting regimes overseas, as their trading partners are starting to call for disclosures pursuant to export contracts, in order to comply with the regulatory standards overseas.

Meanwhile, all consumer affairs professionals in Australia should remember that the ACL does already add mandatory accident reporting requirements for suppliers of general consumer goods. And the ACCC has recently declared that it is now moving from “education” to “enforcement” mode. Better safe than sorry.

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Japanese Law in Asia-Pacific Socio-Economic Context
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