Common Questions Retailers Face when Defunct Companies Issue Recalls
Guest Blog by Mike Rozembajgier
When the U.S. Consumer Product Safety Commission (CPSC) announced a settlement with Baby Matters LLC this month over an alleged defect in the Nap Nanny, a portable baby recliner, retailers were put in an unusual position. Although the CPSC originally sought an order requiring the company to notify consumers of the defect and provide them with a full refund, Baby Matters had since gone out of business, leaving retailers without the process and funds normally available for providing customers’ refunds of the product.
A situation like this can be complicated, as manufacturers are normally required to bear the responsibility and expense of a product recall. As a result, retailers may be unsure how taking on the responsibility of a recall like this could affect their own brands and bottom lines.
My company, ExpertRECALL, has handled thousands of recalls and identified the most common questions and concerns about handling a product recall involving a defunct company. They include:
- Are their rules for handling a product recall as a retailer? There is no clear cut rule that says retailers are responsible for compensating the consumer if the manufacturer goes out of business. However, when a retailer does decide to take the matter into its own hands, best practices in recall management apply in order to remove the affected product from the market quickly and efficiently. Retailers have access to a variety of data such as shopping records, frequent shopper card programs and sales receipts that can help identify who purchased the recalled product and when. If the product poses a health hazard to customers, a retailer could also develop and distribute press releases and utilize social media. Retailers can also choose the remedy that is most appropriate, such as a gift card or a coupon. In the case of the Baby Matters recall, the CSPC has pointed consumers who bought a Nap Nanny at one of four retailers to contact the retailer for information on receiving a refund.
- What can a retailer do to be prepared for this situation? Most importantly, retailers can minimize the risk of exposure by carefully selecting product suppliers. Retailers should only do business with manufacturers that have insured against this risk and are prepared to fulfill any recall responsibilities even if they declare bankruptcy or go out of business. In addition, communicating continuously and effectively with your suppliers is critical so that you are aware of the latest product developments and recalls. Make sure to effectively train all employees on how to handle potential recall situations and ensure that they understand their obligations under the U.S. Consumer Product Safety Improvement Act (CPSIA).
- What are the risks to my company’s brand or reputation? The recall of a children’s product is a sensitive situation and one with which retailers may not want to associate. However, the recall of a product that cannot be handled by its manufacturer presents a unique opportunity for retailers to step up and elevate themselves in the minds of their customers. Parents may view a retailer who refuses to get involved as negligent and uncaring. But a retailer that takes on the responsibility of a product recall can construct a new message: “we genuinely care about the health and safety of our customers and those who use the products we sell.” A product recall can seem like it will only bring headaches and damage a brand, but a retailer can use the opportunity to build a better relationship with its consumers.
Recalls can – and should – be viewed as an opportunity, as opposed to a setback. Understanding federal guidelines, as well as preparing for a recall and understanding the risks and rewards, can ensure that retailers are never taken by surprise. While these circumstances are somewhat unusual, it appears as though the CPSC will turn to the retailer to conduct a recall, when the situation warrants. Overall, accepting responsibility is not just in the best interest of the public health, but can be in the best interest of the retailer as well.
Mike Rozembajgier is Vice President of Recalls for Stericycle ExpertRECALL (@ExpertRECALL). Rozembajgier is responsible for all aspects of recall service offerings, including development of strategic recall business initiatives and product enhancements. In addition to more than 10 years in the healthcare industry, his experience includes management positions at Guidant Corp. (now Boston Scientific) and Deloitte in the Strategic Consulting practice.