Having spent 17 years in Shimano’s legal department, Rutger Oldenhuis has been around the block with all kinds of legislative dilemmas. Upon leaving, he spotted a gap and set up a business based around getting recalls right. Here he shares his experience…
Tell us what your business does to help in the recalls process:
First of all, we help companies to manage their (potential) product recall. Our services are unique in the sense that we offer legal and operational support. Our key focus is Europe, but we can help companies with managing their recall globally. Our tagline is “to lead or complete your recall team” and we can tailor our services to the needs of our clients.
For companies that never experienced a recall before, hiring an expert could make a huge difference. Also, for companies that do have recall experience, adding an expert to the recall team definitely adds value. A recall typically adds a lot of workload to your key staff. Hiring an expert will ease the burden on their shoulders, and by experience I can tell you it even works very well remotely via video.
Secondly, the best thing about a recall is not having one. We advise companies on how to mitigate the risk of having a recall. There are many things you can do in that respect. Specifically for that purpose, RecallDesk has developed a QuickScan. The QuickScan is partly based on two relevant (but mostly unknown) ISO standards in the field of product safety, supplemented with own experience. The outcome of the QuickScan is a heatmap identifying quick wins in the field of product safety relevant to the selected product. You may also see it as a ‘fresh pair of eyes’ helping your business to identify possible weaknesses in your product safety process. Even the biggest, listed companies have weaknesses, so there’s no shame.
Recalls can become large problem for businesses. What is the best course of action upon detecting a possibly recall?
In Europe you will have to make a risk assessment. The risk assessment helps you to determine the level of risk your product may pose; that is low, medium, high or serious. The corrective action strongly depends on the identified risk level. If is it high or serious, you can almost be sure that the affected product has to be recalled from the end-users. If the risk is medium or low, other corrective actions may be sufficient; for example, a withdrawal or a modification of your labelling or manual. A product recall really is a last resort remedy.
What should a company not do, should they suspect they need a recall?
First of all, ignoring a suspected product safety issue is the worst thing you can do. If there are signals within your company indicating a possible product safety issue, you should take the appropriate action.
I am not sure if media outside the Netherlands paid any attention to the Philips recall lately, but their stock market value at some point had halved, because Philips allegedly ignored product complaints from the market since 2015 involving a medical device.
Another example is last year’s Peloton treadmill recall. Peloton in first instance publicly refuted the claim of the CPSC (Consumer Product safety Commission in the USA) that the affected treadmill posed a safety risk, while allegedly reports of adults, children and pets being pulled under the rear of the treadmill already had been received. Peloton later admitted they had made a mistake.
Secondly, although easier said than done, don’t panic. A (potential) recall definitely means crisis, but if carried out in the right way – and this is supported by research – it will likely have a positive impact on your brand’s reputation.
Talk us through the process, start to finish:
A recall can be triggered by different events, including internal quality controls, sample checks by market surveillance authorities, product tests done by media, or incident reports from the market. No recall is the same (even within the same company) and a ‘perfect’ recall does not exist. Mistakes will be made and improvising is often needed. Having said that, certain milestones are similar for each recall.
As mentioned before, typically the first important step is to make a risk assessment. Additional product testing may therefore often be necessary, ideally done by external test institutes. The outcome of the risk assessment will indicate if and to what extent a product is unsafe or dangerous and subsequently, which corrective actions need to be carried out. The risk assessment will have to be discussed with and approved by the responsible market surveillance authority. Based on the outcome of the risk assessment, the appropriate recall strategy will have to be determined in liaison with the responsible market surveillance authority.
Another key milestone is the setting up of a recall infrastructure. Ask yourself the question how (as a business) are you going to retrieve the affected product from your customers and compensate them. While doing so, really carefully think through the whole supply chain process. The recall infrastructure largely depends on the business model and sales channels of the affected business. For a ‘traditional’ brick and mortar sales model this may look different than e.g. a pure online or omni-channel environment. The ultimate goal is to make the recall process as smooth and easy for your customers as possible.
Typical examples of other milestones are making a communication and media plan, drafting a communication kit (that is press releases, dealer letters, consumer letters), translating all relevant communication, and notifying and liaising with relevant market surveillance authorities.
Before publicly announcing a recall, it is important that the full scope and scale is known. You really want to avoid a public recall announcement and then having to broaden the scope and scale of your recall, forcing you to publish a new recall announcement shortly after the first. Customers (and potential new customers) may get the impression your company is not in control of its quality and safety processes, which may harm your brand reputation.
The most successful recalls are the ones where 100% of the affected products have been returned. However, except perhaps in the car industry, in many cases this will be a Utopia. But with the growing online sales and D2C business, it becomes a lot easier to directly contact end-users. I strongly believe that in the near future e-labelling and IoT will play an important role too.
How does a company navigate a voluntary recall and what is the key difference when it becomes compulsory?
The term “voluntary” is globally under debate. Some countries (e.g. Australia) would not allow that term when announcing a recall. Consumers may misunderstand the term as if it was “voluntary” for them to stop using the product. In Europe however, product safety legislation still distinguishes between a voluntary and a compulsory recall. My advice is pretty straightforward; if you take your business seriously, at all cost try to avoid measures ordered by public authorities. While a voluntary recall may likely increase your customers’ trust, a compulsory recall will probably do the opposite.
What costs can a company expect to incur upon a recall?
It is really difficult to give any ballpark figure. There are direct and indirect costs to be considered and indeed, these can be high. Some cost items, like loss of turnover and profit, can be calculated fairly easy, but for ‘collateral damage’ this is difficult. For example, what if your recalled product gets replaced by retailers with a competing brand? Furthermore, the costs largely depend on the scale and scope of a recall, such as how many products are affected and in which countries?
Many companies outsource the production of their products to third-party producers. Of course, your brand name is printed on the product, so you are responsible to recall it in case it is unsafe. However, an aspect that is often neglected, is to make sure the burden of a recall is taken where it should: the supplier of the defective product. Many companies do not have (properly) written supplier agreements in place and therefore minimise the opportunity to claim recall damages upstream in the supply chain. “We don’t need a contract, our relationship is based on trust!” I often hear. Yes, but it’s just like a marriage: everything is fine until something goes terribly wrong.
But apart from all that, the costs of a recall may never be an argument not to carry out a recall. The ultimate goal of any potential product issue should be a safe customer that continues to trust your product and brand. Personally, I am happy to see a company voluntarily take responsibility to recall a product. Customers will likely remain loyal, since they know their safety is taken seriously.
Finally (and insurance companies will not be happy to read this) many companies do not seem to know that in quite a number of countries certain recall costs can be claimed under a standard product liability insurance. It can be a long process, but it’s definitely well worth it. It’s difficult to say if recall costs would mount in case there is a hesitancy in action. From experience, hesitancy leads to loss of control of the recall process, which will likely harm your customers’ trust and brand reputation.
In terms of marketing the recall notice, what is advised?
Although certain templates are recommended to be used, there is certainly some room to draft a recall notice in your corporate style. However, don’t downplay the issue. Stay factual, clear and to the point. Typically, the authorities will push back if they think your recall notice is too vague or ambiguous. Also, some authorities prefer to use their own recall notification text and may use pretty stark language. My advice would be to give some more context about the background of the recall on your corporate website.
You have a partnership with the WFSGI, tell us about this:
RecallDesk is proud partner of the World Federation of the Sporting Goods Industry (WFGSI). The bicycle industry has a large representation among its members. Members of the WFSGI will get an attractive discount on RecallDesk’s fees if they would use our services. Many of RecallDesk’s clients are active in the outdoor, sporting goods and bicycle industry. Next to the WFSGI, RecallDesk has partnered with a number of other industry associations with similar discount offers. We believe such partnerships are a win-win situation for both RecallDesk and the members.