The In-House Lawyer has published “Product Liability, Product Recall and Impact on Brand. What In-House Counsel Need to Know,” by Shook, Hardy & Bacon Partner/Solicitor Alison Newstead, in its Spring 2019 issue.
In the article, Newstead discusses how companies can and should manage the brand risks of product liability claims and product recalls. While the two categories have significant differences—for example, Newstead describes product liability claims as having a “slow-burning” effect on brand, while the effects of recalls are usually immediate and unpredictable—Newstead says that companies can anticipate and prepare for both with careful risk assessments. Doing so is key to determining the nature of a safety hazard and whether corrective or preventive action should be taken, she writes, and companies are well advised to monitor customer complaints, social media and trends in product liability litigation in the same or similar industries in order to plan for such events. “Having a multi-faceted approach to spotting safety issues and a system to unite the information and analyse its potential significance is crucial,” said Newstead.
In the event of a recall, Newstead says that companies should consider prompt sharing of information with regulators and the public, because withholding safety information is likely to lead to extremely negative consumer reaction. Companies also have to balance fears of future litigation against the potential positive effect of a “genuine and timely apology,” she writes. “Failure to say sorry, or producing an anodyne company statement are often the basis for negative PR,” she says, and can lead to significant brand damage and potentially disastrous effects on share prices, consumer confidence and sales revenue.