A product recall can result in serious collateral consequences, including government investigations, enforcement actions, and product liability litigation.
Depending on the product at issue, federal agencies that may have oversight over a recall include the Consumer Product Safety Commission (“CPSC”), the U.S. Food and Drug Administration (“FDA”), or the National Highway Traffic Safety Administration (“NHTSA”). For these agencies, protecting consumers and the public health is the primary objective in a recall event.
The following six steps are crucial if a potential recall event occurs:
- Ensure the recall is implemented in accordance with the company’s recall plan.
Companies should systematically prepare for potential product recalls by preparing a recall plan that identifies key personnel and responsibilities; outlines procedures; establishes a communication strategy internally, as well as with regulators and the public.
This plan should be updated regularly to reflect evolving risks, product developments, and regulatory changes. Companies should undertake annual training to evaluate recall preparedness.
Once a product issue arises that necessitates a recall, it is time to put the recall plan into action. The plan should be housed in a central location (e.g., shared site, app) accessible to employees involved in the recall process.
Key company functions that should be involved include quality, product safety, risk management, medical affairs (for medical products), legal, communication and crisis management, and external technical experts.
Recalls on a broader scale may require engaging with other vendors, such as translators, to ensure that any communications are made in an effective manner across all implicated jurisdictions.
Key decisions and actions in the recall decision-making process should be contemporaneously and properly documented, including by compliance with applicable regulatory requirements or guidance.
- Determine whether a recall is necessary.
Safety concerns may arise suddenly, and it is important to quickly ascertain the nature and severity of the risk to affected parties and to identify the root cause of the product issue, as well as the scope of products affected.
In this early part of the process, it is crucial to coordinate with the company’s product safety teams. In determining whether a recall or other market action, such as a market withdrawal or stock recovery, is appropriate, laws, regulations, and guidance issued by the agency with product jurisdiction should be consulted.
These may include, for example, FDA guidance and regulations on recalls, as well as the CPSC Recall Handbook.
- Brief senior management on the recall determination and estimated costs.
Product recalls and other market actions involve many moving parts, which may include customer or public notices; tracking, receiving, and disposing of affected products; repairs or refunds, where appropriate; and coordination with regulators.
Significant costs, time, and effort are often involved. Company leadership should be promptly made aware once a product issue is identified and provided with a recommended course of action.
It is important for leadership to understand the costs, components of the market action, and regulatory and enforcement landscapes, to take the appropriate next steps.
- Engage specialized outside counsel and crisis management specialists to mitigate the potential for government enforcement actions and private litigation.
It is advisable to involve outside counsel with appropriate expertise, for example, in regulatory matters, securities law, civil litigation, and government investigations and enforcement actions. In-house attorneys should seek advice both on recall strategy and any communications and actions undertaken in connection with a recall.
Outside counsel can be particularly helpful in retaining external parties, such as technical experts, to aid in the provision of legal advice under privilege.
- Scrutinize communications with a focus on potential legal action.
Communications, whether internal to the company, or external to regulators, supply chain partners, or the general public, are essential to protecting the public and to efficient and effective conduct of the recall.
It is important to have these communications reviewed by in-house and outside counsel to identify, prepare for, and mitigate the risks of potential legal action on multiple fronts — from consumers and advocacy organizations, parties in the supply chain, competitor businesses, and government agencies.
Notably, any meeting materials, minutes, or other correspondence with regulators becomes part of the administrative record and could inform future regulatory action, enforcement actions, or investigations.
Crisis management specialists can also work with the company and its legal advisers to address potential public relations risks.
- Conduct a thorough after-action review.
Once the company has conducted its recall, it should evaluate whether its recall plan and employee training were effective, and what changes, if any, should be made.
The company should also evaluate whether an internal investigation is warranted.
Finally, it is critical for the company to implement and monitor any corrective and preventive actions, as well as to comply with any residual regulatory reporting or recordkeeping requirements, or communications with regulators, including as relates to concluding or terminating a recall.
For example, FDA may take an extended time to terminate a recall, and a company may wish to request that the agency terminate a recall that they believe to have been completed.
Authors: Katlin McKelvie, Partner, and Carlo Felizardo, Associate (Gibson Dunn)
