Product Safety and Liability:

Corporate Responsibility towards

Consumers from Legal and GROUP 2

Ethical Perspective
Firms that wish to be morally responsible in providing products/services that meet a high standard of safety may face problems competing against firms that
make unsafe products/services and sell these at cheap prices. These problems further compounded when consumers don't accurately process information
about safety and risk.

The Provision of negligence information heightens consumer concern for safety and firm’s ethical behaviour, and increase the proportion of consumer choices
in favours of the brand sold by manufactures with a favourable track record of quality.

Corporate Responsibility towards Consumer

Corporates exist to satisfy the needs of consumers through products or rendering of services; therefore, products and services need to be designed and
delivered in a way that they meet consumer expectations in terms of reliability, safety, pricing, and quality. The focus for much of the business’s responsibility
for product safety is on assigning liability (fault) for harms caused by unsafe products.

Product Safety:
Measures undertaken by manufacturers:
❑ To avoid injury to consumer during product use
❑ To deliver sustainable and quality product to consumer

Product Safety Requirement:

❑ To be compliant to Consumer Protection Act

❑ Establish good brand name in market
❑ Avoid future liabilities by way of compensation to consumer
❑ Potential hazards associated with consumer products

Product Safety should be deployed as a regular practise by taking following measures:

❑ Establishing quality checks at different stages of manufacturing

❑ Deployment of Quality control measures
❑ Abide by industry established norms

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2. PRODUCT LIABILITY
This is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held
responsible for the injuries those products cause. Encompasses a number of legal claims that allow an injured party to recover financial compensation
from the manufacturer or seller of a product.

Claims are associated with:

• Negligence,
• Strict liability
• Breach of warranty
• Various consumer protection claims

TYPES OF PRODUCT LIABILITY

There are three major types of product liability claims:
• Manufacturing defect
• Design defect
• A failure to warn

LEGAL LIABILITIES OF MANUFACTURERES

Provide customers with a product that lives up to the claims the firm makes about the product
• Due-care theory of the manufacturer’s duties to consumers
• Caveat emptor
• Strict Liability

DUE CARE THEORY

Due care is the idea that consumers and sellers do not meet as equals and that the consumer's interests are particularly vulnerable to being harmed
by the manufacturer, who has knowledge and expertise the consumer does not have.

According to the due care view, the manufacturers have an obligation above and beyond any contract, to exercise due care to prevent the consumer
from being injured by defective products.
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CAVEAT EMPTOR

• “Let the buyer beware”

• The law now requires that goods must be of “merchantable quality”
• CE also applies to the return policy
• There is no legal requirement for the vendor to provide a refund or exchange
• According to the doctrine of caveat emptor, consumers were held to the ideal of being knowledgeable, shrewd and sceptical in their purchases.
• It meant that the consumer was entirely responsible if harmed by a purchased product.

Caveat Venditor

• “Let the seller beware”

• Seller must take the responsibility for the products they sell
• Seller is held liable in case of any defect/deficiency

PRODUCT LIABILITY LAW IN INDIA

• The Consumer Protection Act,1986 imposes strict liability on a manufacturer, in case of supply of defective goods by him, and a service provider, in
case of deficiency in rendering services. The term “defect” and “deficiency”, as held in a catena of cases, are to be couched in the widest horizon of
there being any kind of fault, imperfection or shortcoming.

• The Sale of Goods Act, 1930 interalia, confers, upon a buyer, the right to repudiate the contract and sue for damages in case of breach of a
condition, whether relating to quantity, quality or description. Breach of warranty, on the other hand, entitles the buyer, to sue for damages but
not repudiate the contract.

• The Monopolies and Restrictive Trade Practices Act, 1969 The MRTP Act, on the other hand, has been comprehensively drafted so as to empower
the Commission to grant temporary injunctions and compensation, for loss and damage, as a result of monopolistic, restrictive and unfair trade
practices. The MRTP Act, though, remains in force but the Competition Act, 2002 has been enacted to supersede the prevailing MRTP.
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Challenges faced by Corporates and Managers due to Product Safety & Liability

For ensuring product safety throughout lifecycle, firm’s must implement numerous regulatory policies, processes, and practices that promote the
safety of products. The increasing complexities of global supply chains related to offshoring and outsourcing , coupled with the constant development
of new goods/product , processes and technologies have created product safety and security challenges in various industries.

The major areas share commonality and criticality across industries are :
a) Collaborating with governments in developing new regulations
b) Using better tools and methodologies for managing information during entire product lifecycle
c) Implementing technologies for tracing products across the global supply chain & managing product recalls
d) Building supplier relationship as a critical elements of product safety risk management strategy

A product manufacturer shall be liable if the product:

❑ Has a manufacturing defect;
❑ Has deviation from manufacturing standards;
❑ Is of substandard quality;
❑ Does not conform to the express warranty;
❑ Fails to contain adequate instructions of correct usage to prevent harm or any warning regarding improper or incorrect usage
❑ Fails to specify the important information on product packaging like manufacturing date, expiry date etc.

A Service provider is liable in case:

❑ Offers a sub-standard service quality;

❑ There is negligence or conscious withholding of any information which causes harm;
❑ Do not conform to express warranty, or the terms and conditions of the contract.

All the liabilities stated above has:

❑ Financial Impact: Like Product recalls, Customer Claims, Replacement of products in case of substandard products;
❑ Goodwill Impact: It impacts the brand; 5
❑ These all future liabilities increase the corporate responsibility at the time of product manufacturing, sale and service delivery.
 Examples of Implications of Product Liability
Automobile Industry

❑ The Motor Vehicles (Amendment) Act, 2019, mandates manufacturers to recall defective motor vehicles in India.
❑ The amendment entrusted the Ministry of Road Transport and Highways with powers to order a recalling of vehicles which bore some defect. The
defects could be either in the vehicle or its components, which could pose a danger for the driver, occupants, and other users. The amendment in
the Central Motor Vehicles Act, 2021, also defined penalties on manufacturers.

Pharmaceutical Industry

❑ Sanofi was asked to recall Combiflam,  a combination of Paracetamol and Ibuprofen. It was found to not meet the specifications for disintegration
tests.
❑ Johnson & Johnson has been accused of selling its faulty ASR hip implants to approximately 4,700 Indian patients between 2004 and 2010. The
company announced a global recall of the ASR hip implants in 2010 after doctors in the U.K. and Australia reported an extremely high failure rate
for the implant.

Real Estate: The Real Estate (Regulation and Development) Act, 2016, amongst its several regulations, puts the responsibility of timely and quality
construction on real estate developers. It holds developers accountable for the structural defects for a minimum of five years after the delivery of the
project.

❑ Roof collapse in Gurugram apartment leaving 2 dead and thereon FIR lodged against builder.
❑ Building Collapse in Mumbai in June, 2021

Food Industry: The Food Safety and Standards (Food Recall Procedure) Regulations, 2017, deals with the provisions ensuring the safety of food or
perishable products.

❑ On June 5, 2015, Nestle had to recall its Maggi noodles stock following an order from FSSAI Delhi due to, “Misleading labelling information on the
package reading no added MSG and Lead.”
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 How corporates can proactively face these challenges?

Product responsibility and customer care are important issues when discussing a company’s responsibility to the public. Good corporate citizens must
acknowledge, understand, and apply appropriate ethics to matters relating to the company's primary business objective: to sell customers' goods or services. That
means that in companies that sell products, those products should be safe and should inform and sometimes warn customers of any potential problems with such
products. Additionally, the marketing and advertising of goods and services should also reflect the overall CSR policies of the business entity, including the
authenticity and impartiality of such items. Finally, companies must plan for and acknowledge potential privacy issues that may or may not arise when it comes to
their customer data.

Prior to any product launch into the market , Firm’s should access its product liabilities, safety and compliances. As the launch of an innovative product present an
unique set of challenges: typically they involve state of art technology, engineering and design, new safety and quality standards and expectations might also have
to be assessed and established.

Hence when launching an innovative product firm should be ready to answer questions such as : what consumer reasonably expect? What is the right bench mark?
What is the state of art? How to navigate the big unknown?

Another element of product launch is proper technical documentations and proper authority communications. Depending on the respective product, a company
might need certain approvals or certificates.

Today, it is possible that ideas for a product credit or liability can be obtained as part of a larger corporate policy statement or commitment to "product
responsibility," "increased producer responsibility," or "product management." What started as a basic but straightforward treatment compared to risk sharing and
responsibility questions about manufactured products has now been transformed into a more complex and comprehensive approach to reducing health, safety,
and environmental risks associated with consumer products. CSR can also be achieved through the efforts of certain companies to take a life cycle approach to
these issues, which not only focuses on managing sustainable end-of-life, but also incorporates waste management solutions resulting from product design
innovation and discussions among multiple stakeholders.

In terms of CSR voluntary efforts, non-profit organizations are at the forefront of some of the programs in the area and work closely with member companies and
governments to develop not only volunteer programs, but also recommendations on legal solutions to product or producer issues. responsibility.

Facilitate contributions to building a sustainable society. The Ten Guidelines apply to the annual practical plans, also called applications, developed on each
guideline and implemented using the plan-do-check-act (PDCA) management procedures. Such applications adapt to changing circumstances and community
needs, and are updated as needed. 7
 How corporates can proactively face these challenges?

Business Management and Public Administration

Continue to review management systems, strengthen internal controls and strive for the disclosure of timely and relevant information as part of efforts to fulfill
corporate corporate obligations.

Business Ethics and Compliance

Ensuring that all managers and employees promote a sense of responsibility, fairness and high standards of conduct, and always act in accordance with the law to
maintain public trust.

Safety, Risk Prevention, and Environmental Protection

Ensuring the safety and health of the community and employees, and protecting the environment in all business processes, from procurement and supply to the
supply and disposal of products.

Product Safety and Quality

Provide secure, highly reliable products that strive to improve product safety management systems and quality assurance, and disclose relevant information.

Risk Management
Improve team-based risk management systems, including those related to information security. Build systems that can respond quickly to unexpected situations
and disclose accurate information.

Communication
Encourage dialogue and collaboration with stakeholders including staff, shareholders, investors, business partners, consumers, local communities, non-profit
organizations, government and administrative organizations, the media and other organizations.

Providing Solutions to Social Issues through Business Operations

Provide solutions that help to address global environmental issues such as climate change, address community issues by improving the quality of medical care,
reducing the burden on medical staff, and contributing to health care and longevity.

Human Rights Promotion and Human Resource Development

To protect and train employees, diversity and strive to protect employment, respect human rights, and the continuous development of workplaces.
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Promoting CSR Steps Throughout the Delivery Series
References: (To be Included)

https://www.lexology.com/library/detail.aspx?g=36c3ba25-4dbb-4c0f-9df9-025f1835e1d1 

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 Thank you
EPGP-13C-003 ABED KHAN
EPGP-13C-015 ARUN KUMAR ARYA
EPGP-13C-027 CHAIKEE PARASAR
EPGP-13C-040 KAMAL KISHLAY
EPGP-13C-052 MUKUL ARORA
EPGP-13C-064 PRASANT KUMAR PATI
EPGP-13C-077 RAUNAK DHOOT
EPGP-13C-090 SAKET SHANKAR
EPGP-13C-102 SAURABH KATARIA
EPGP-13C-114 SOUVICK DHAMALI

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