There are many factors to recalls. The issues you’ll face differ depending on whether you’re a manufacturer/supplier, distributor, or retail seller as a corporate transaction lawyer can share. The recall can also be voluntary or required by a government agency. The most important thing to think about is if you handle this honestly, transparently, and reasonably, there will be a temporary cost, but this shouldn’t hurt your business in the long term.
What Is A Product Recall?
A recall is a request to return something to its place of origin. It’s a request to return, exchange, or replace a product after defects are found that could lessen performance, harm users, or result in legal actions against those involved in producing, distributing, or selling the product.
A government agency could require the recall, or a party involved with the product could issue one independently. Often, an agency will work with an impacted company to convince them to issue the recall or threaten to do it themselves without the company’s cooperation.
If you refuse to recall a product despite the agency’s warning and they do it, you carry the additional risk of bad publicity. The public may perceive you as trying to hide a dangerous defect and refusing to take responsibility as our friends at Focus Law LA can explain.
How Would We Recall A Product?
You’ll need to contact customers individually using the contact information you have or spread the word through press relations, advertising, and social media. You should inform them of the problem, tell them to return the product most appropriately and offer to repair the product, issue a refund, or replace it with a non-defective, equivalent product. You can use a contractor who specializes in product recalls to help you.
If you’re the manufacturer, you may have insurance that may cover these costs. If you’re a seller or distributor and there’s a manufacturing defect, you could seek reimbursement from the manufacturer or their insurance carrier.
How Damaging May This Recall Be To My Business?
Nearly nine out of 10 consumers (87%) stated in a survey they’d be more likely to purchase a product and stay loyal to a brand handling a product recall responsibly and honorably, according to a 2010 report from the Relational Capital Group, reports Forbes magazine. These consumers also stated they would feel this way about a brand even though mistakes were made, leading to a safety or quality problem.
Nearly all respondents (91%) stated they understand product recalls happen with even the best-run companies. Recalls are a moment of truth for companies, and depending on how they’re handled, customer loyalty can be strengthened or weakened. Recalls leave a lasting impression on consumers, for better or worse.
If you’re on notice of systemic problems with a product and aren’t sure of your options, talk to your attorney. Letting problems fester without proactively addressing them could result in regulatory action and lawsuits against your company, especially if they result in injuries or deaths. The price of a recall may be a fraction of what ignoring the problem will cost.