As part of the European Commission’s continued commitment to product safety, the Commission has proposed a product safety and market surveillance package for ‘safer products and more fair play in the internal market’. The aim is two-fold: primarily, strengthening consumer protection with a new Regulation on Consumer Product Safety (COM (2013) 78). Secondly, rationalising and strengthening market surveillance powers and obligations to provide fair competition for businesses across the member states. This will be achieved by the introduction of a specific Regulation on Market Surveillance of Products (COM (2013) 75).
Most EU manufacturers, importers and distributors carry out their activities responsibly. They comply with requisite safety legislation for their sector and take all reasonable steps to ensure only safe products enter the marketplace. Should a product present a risk to consumers, appropriate voluntary corrective action is usually taken to protect the health and safety of consumers and enhance consumer confidence.
It is unjust that the actions of less compliant manufacturers, particularly from outside the EU, are endangering health and safety and putting EU manufacturers at a competitive disadvantage. Notably, in 2012, 58% of unsafe products notified to the Commission originated from China. To date, increased market surveillance activities have helped identify and remove such products. However, the new Market Surveillance Regulation goes further and, together with better co-ordination of product safety checks and co-operation between member states, should help to redress the balance.
Alison Newstead of Shook Hardy & Bacon International looks at the proposed Market Surveillance Regulation, as set out in the product safety and market surveillance package, and examines how the proposals may affect businesses.
The market surveillance provisions are far reaching. The package of proposals relating to product safety legislation is primarily confined to consumer products. However, the activities and responsibilities of the market surveillance authorities will apply irrespective of the intended user of the products. Manufacturers of commercial products also need to be aware of the potentially heightened activity of the market surveillance authorities, the proposed obligations that they must meet and the enforcement action which they may face.
There are four core themes set out in the proposed Market Surveillance Regulation:
- Increased and new powers given to market surveillance authorities.
- New obligations on market surveillance authorities, such as the need to report on their activities, provide details of the controls that they have implemented and a requirement that they provide statistics regarding their activities.
- Market surveillance authorities are required to carry out more active surveillance across the EU via co-ordinated and targeted activities, with positive obligations to carry out ‘appropriate checks’ with ‘adequate frequency’ and on an ‘adequate scale’ (Article 6). The types of checks are prescribed to be both documentary and ‘where necessary’ physical and laboratory tests. In particular, powers are given to authorities to enter onto premises and take samples to carry out their investigations. Businesses should be aware of their legal rights and responsibilities and how to manage their premises in such situations.
- Border controls will be strengthened.
Enforcement will be more vigorous and consumers will be better protected from non-compliant products. Businesses should see a reduction in the prevalence of unfair competition on the EU market.
The proposals are due to come into force in 2015, but the current global economic crisis means that many authorities across the EU are having their budgets cut at the same time that obligations are set to increase. How the market surveillance authorities will flex their muscles in line with their new powers and take steps to comply with their new proposed obligations will be interesting to observe.
Economic operators, including manufacturers, distributors, importers and authorised representatives, are also affected by the proposals.
Article 8 sets out the general obligations of economic operators. In particular, they must, on request, make available any documentation or information that the surveillance authorities require. This includes information that enables the precise identification and tracing of the product. This will assist the Commission with the prescribed risk assessment process and addresses problems with consumer products and traceability. There have been consistent shortcomings in the ability of economic operators to trace unsafe products. In its 2012 annual report ‘Keeping European Consumers Safe’, the Commission notes that 80% of unsafe product notifications made to the Commission identified both the brand and the type/model of the product in question and in 18% of cases, either the brand or the type/model. However, in 2% of cases, neither the brand nor the type/model of unsafe product was known, creating significant difficulties in taking effective corrective action. Economic operators who currently have robust systems for identification and traceability of their products should not have any concerns with the proposed Article 8 obligations. Conceivably such requests should only be made when there is a question regarding the safety of a product and the task should not be onerous if products are correctly marked and robust records are maintained by economic operators throughout the supply chain.
Article 9 prescribes the action to be taken when a product presents ‘a risk’. Where, in the course of checks, or on the basis of information received, market surveillance authorities believe a product ‘may present a risk’, they have an obligation to carry out a risk assessment in respect of the product.
Article 13 sets out the factors that should be considered in carrying out the risk assessment. Market surveillance authorities are permitted to take into account any risk assessment or tests already carried out by the economic operator or another person. They may request copies of any existing risk assessments and, where not available, may suggest to the economic operators that such assessments be carried out at their own cost.
Should a product be deemed to present a risk, the authority is obliged to specify the necessary corrective action to be taken within a specified period. Article 9 also allows market surveillance authorities to recommend or agree with the economic operator the corrective action to be taken, which is in line with the current voluntary approach that is commonly favoured by businesses and enforcing authorities.
In Article 10, when a product is considered as a ‘serious risk’, the market surveillance authority is obliged to take ‘all necessary measures’ and may do so without requiring the economic operator to take corrective action first or providing the opportunity to be heard beforehand. This includes, ultimately, recall. This is a draconian provision but is aimed at the removal of unsafe products from the market as soon as possible. Similarly, if a product poses a ‘risk’ and the economic operator cannot be ascertained or does not take corrective action, the market surveillance authority can take ‘all necessary measures’.
Any ‘formal non-compliance’ will require rectification by the economic operator, as it creates a presumption that the product may present a risk. This includes:
- product not being affixed with the appropriate CE mark;
- shortcomings in the EU declaration of conformity;
- technical documentation being incomplete or unavailable; or
- instructions for use or labelling being incomplete or missing.
If it is not rectified, the market surveillance authority is obliged to ensure that the product is withdrawn or recalled, regardless of whether the risk assessment shows that the product in fact presents a risk.
Products presenting a ‘risk’ are defined as products:
‘… having the potential to affect adversely health and safety of persons in general, health and safety in the workplace, consumer protection, the environment and public security as well as other public interests to a degree which goes beyond that considered reasonable and acceptable under the normal or reasonably foreseeable conditions of use of the product concerned, including the duration of use and, where applicable, its putting into service, installation and maintenance requirements’.
Products presenting a ‘serious risk’ are defined as:
‘… products presenting a risk requiring rapid intervention and follow-up, including cases where the effects may not be immediate’.
There are some concerns surrounding the clarity of these definitions and whether, in practice, obligations are clear regarding the action to be taken in response to such risks. Indeed, the definitions set out in the proposal may need to be revised for the sake of clarity before they come into force.
Article 10 proposes that market surveillance authorities may charge fees to economic operators which wholly or partly cover costs of their activities, including testing or risk assessment.
Articles 14-18 set out measures to control products entering the EU, including checks at borders, suspension of release of products and refusal to release products. Currently the UK customs authorities are not designated with a market surveillance function. Co-operation between customs authorities and current market surveillance authorities with regard to external border controls will need some management.
In conclusion, the new regulations, which will largely replace the current product safety and market surveillance provisions, should ensure that safer products are placed on the EU market and that economic operators are able to conduct business in a competitive environment. It remains to be seen how intrusive the activities of the market surveillance authorities will be. However, economic factors are likely to play a role in limiting the extent of increased activity in this area.
By Alison Newstead, partner, Shook, Hardy & Bacon International.
E-mail: anewstead@shb.com.