Law Times

LAW TIMES / JUNE 16, 2008 INTERNATIONAL BAR ASSOCIATION Product safety and in-house counsel BY KIRSTEN McMAHON For Law Times about yet another product recall. From pet food to children's I toys to toothpaste, the amount of recalls conducted in 2007 more than tripled from 2006, according to Health Canada stats. It seems 2008 is shaping up the same way, with about 40 voluntary recalls occurring to date. While no company wants to be an expert at conducting recalls through experience, ex- perts say it's wise for companies involved with consumer prod- ucts to have a plan in place. "The general rule of thumb is that the first 48 to 72 hours are absolutely critical. That's the time where you need to triage a crisis situation," says Martha A. Healy, a partner at the Ottawa office of Ogilvy Renault LLP and member of the firm's recall and crisis-management team. "The best advice would be to get as much planning as you can do up front," she says. "I'm talk- ing well before the crisis has even arisen. The company needs to know what their product is and what could possibly go wrong and to put in place some sort of recall- management or recall-crisis plan to deal with that." Because this plan potentially spans multiple departments and ar- eas of operation within a company, t seems you can't pick up a newspaper or watch the news these days without an advisory corporate counsel are ideally suited to spearhead and oversee this plan, says Peter J. Pliszka, a partner at the Toronto office of Fasken Martineau DuMoulin LLP who mainly prac- tises in the area of product liability. This plan should involve a good risk-management program that's designed to reduce the risk of safe- ty-related defects in the product, as well as an organized, understand- able recall strategy, he says. "There's so much that needs to happen, essentially, simultaneously once some indication of a safety- related defect comes to light that if there isn't a clearly defined plan that sets out what needs to be done and who needs to be involved in doing what, it's typically going to result in a mad scramble of panic to try and deal with it." Indeed, in those first crucial 48 to 72 hours, "companies are making important decisions on what the problem is, what the risk is, what the harm could be, what the impact could be, whether they have to notify a regulator, whether they need to notify insurers, and what they need to do with the me- dia," Healy says. "There's a lot to be decided right up front." When devising a plan, in-house counsel might keep a cautious eye on developments concern- ing proposed federal legislation — namely, bills C-51 and C-52. In short, the controversial C-51 would amend the federal Food and Drugs Act and proposes new requirements around food, drugs, and medical devices. Meanwhile, C-52 is the proposed new Canada Consumer Product Safety Act, to replace Part I of the Hazardous Products Act, which would give more power to Health Canada re- garding consumer products. "One of the big changes that bill C-52 brings is it imposes a mandatory reporting regime on products that have never been regulated in the past," says Healy. "It definitely is a new landscape for manufacturers and it definitely elevates the importance of in-house counsel to make sure their senior management are aware of these obligations and the importance of having proper risk-management number of steps the company can take to respond quickly and proactively to a situation, the bet- ter off they're going to be from a reputational perspective." While it's more than 25 years since seven people died in the Chicago area after taking cyanide-laced capsules of Ex- tra Strength Tylenol, the lessons from that tragic event remain. Upon hearing the news of the product-tampering and re- sulting fatalities, Johnson & Johnson placed consumers first by recalling 31 million bottles of Tylenol capsules from store shelves and offering replacement product free of charge. problem is, what the potential issue to them could be, and what they should do," says Healy. Pliszka says the message, firstly, should identify the problem to stakeholders — distributors, retail- ers, and consumers — and inform them how to determine whether any units they have are part of the affected group of products. Secondly, the message should show that the company is respond- ing in a responsible way. In order to keep the message clear and consistent, it helps to use few spokespeople — even just one. Who that person is depends upon the issue at hand and the severity of the problem, says Pliszka. In some The greater the number of steps the company can take to respond quickly and proactively to a situation, the better off they're going to be from a reputational perspective. practices and proper quality-assur- ance processes and good, effective recall plans in place," says Pliszka. If and when someone at a com- pany comes across information re- garding the safety of a product, the plan can be put into action. Avoid- ing or ignoring a potential problem can be the kiss of death for a com- pany, whether it is reputational or financial fallout or the risk of litiga- tion down the road. "When it comes down to it, many of these situations arise through no absence of goodwill. It's a problem that arose and no one intended the issue to arise but it happened nonetheless," says Healy. "The greater the Marketers predicted that the brand wouldn't recover from the sabotage, but within months Ty- lenol was back on the market in tamper-proof packaging, and with- in a year its share of the $1.2-bil- lion analgesic market, which had plunged to 7 per cent from 37 per cent following the poisoning, had climbed back to 30 per cent. This example shows that quick internal and external com- munications are key in the face of a product recall. "It can be dangerous to have just a little bit of information. One of the things that the company wants to do is to make sure that there's an accurate representation of what the cases, a public relations specialist or a senior executive could suffice. In other cases, having the CEO or president speak out could send a very powerful message. One last key issue is often over- looked, says Healy. "It's critical that once this crisis is over that there's a post-mortem conducted," she says. Pliszka agrees and says compa- nies and in-house counsel use an unfortunate scenario to learn about how the problem happened in the first place and how the company ranked in responding to the crisis. "There is a lot that can and should be looked at after all the dust has settled," he says. LT PAGE 17 guidance high performance positive outlook what's in a name? Yours is a leadership agenda. And so is ours. Now McMillan Binch Mendelsohn will serve its high performing Canadian, US and other global clients as McMillan. We know what it takes to help you operate at ever higher levels of performance so you can take the lead. leadership McMillan LLP | Toronto | Montreal | www.mcmillan.ca Untitled-3 1 www.lawtimesnews.com 6/12/08 10:25:35 AM

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