By the time this year comes to a close, the food and beverage, dietary supplement and cosmetic industries may be ready to refer to 2009 by an unfortunate name: the Year of the Recall. It’s not just the large number spanning a wide range of issues; but, there have been several high-profile recalls, including a massive recall involving peanut butter that, due to the enormous number and volume of products and brands recalled, rates as one of the largest recalls ever in the United States. With the emphasis the incoming FDA commissioner has placed on food safety, attention to the recall process is likely to increase, resulting in more recalls than ever. For companies, recalls can cause severe financial drains, monopolize tremendous amounts of resources and bring production to a standstill. It is therefore critical to understand the processes involved in initiating a recall, the ramifications of a recall, and some preventive measures that can be taken to lessen its impact.
There are myriad ways in which a situation can give rise to a recall. Whether a product is potentially contaminated with bacteria, mislabeled due to a failure to list all ingredients contained in the product, or non-compliant with the food allergen labeling requirements, the determining factor is whether a product is potentially harmful to the public. If so, a recall is likely warranted.
One of the most common misconceptions is that FDA recalls products. Absent some select circumstances in which FDA has statutory authority to mandate recalls, recalls of products are “voluntary,” to be initiated by a company responsible for the problem product. While recalls are technically “voluntary” in nature, several factors can contribute to making the “voluntary” process feel very “involuntary.” Once FDA is made aware of a potential problem with a product, it may send agents to inspect the manufacturing facilities. A company may receive continuous contact from FDA, encouraging the company to initiate a recall. Additionally, repeated inquiries from retail customers and consumers about products receiving intense media scrutiny may leave a company feeling a recall is the only option.
Once a company makes the decision to initiate a recall, it must provide notice to customers and the general public. The company must also submit a variety of information regarding the recall to FDA, including the nature of the product, potential issues, manufacturing and distribution records, and the overall recall strategy. After reviewing the information, FDA will follow-up with retail customers and consumers to evaluate the effectiveness of the recall.
Any company that has the misfortune of participating in a recall will discover it can result in huge losses of time, money and reputation. Recall costs from retail customers, refunds to consumers, costs to destroy and replace products, attorneys’ fees and other associated costs rapidly pile up. The ramifications of a recall move up and down the production chain, reaching suppliers, manufacturers, distributors, marketers and other companies. It is vital that a company evaluate its procedures to ensure it is prepared when a recall occurs.
There are some preventive steps a company can take to reduce the impact of a future recall. The inclusion of indemnity provisions in agreements with suppliers, manufacturers and distributors can potentially insulate a company if recall situation arises. Evaluating and establishing internal crisis management and recall procedures will help streamline processes and avoid wasting additional time. A careful examination of insurance policies to ensure coverages are clear will avoid the surprise of discovering coverages are excluded for recalls or other similar situations.
While it may be impossible to prevent all situations that warrant a recall, companies that are well-informed about the process will be better situated to deal with this often difficult situation. Furthermore, taking time to make some preventive evaluations can ultimately save a tremendous amount of time and money for a company in the future and lessen the impact of a recall.
Justin J. Prochnow is an attorney with the international law firm of Greenberg Traurig LLP.
Check out Justin Prochnow's presentation on food recalls on Nov. 11, 2009 at the
Supplyside West
in Las Vegas. Visit the Supplyside web site for more information.