Product Liability- Germany

The EU General Product Safety Directive (2001/95/EC) required 25 EU member states to enact compliant product safety state laws by January 15 2004. As a result, Germany enacted the Consumer Products and Work Equipment Safety Act, which came into effect on May 1 2004.

The new act governs the obligations of manufacturers and other entities before and after putting consumer products and technical work devices into circulation. It significantly increases the safety authorities' powers to ensure that only safe products are marketed and that safety hazards are remedied. In addition, it provides consumers with greater transparency regarding the safety of products.

Products under the Act

Contrary and in addition to the requirements set forth by the directive, the act covers not only the safety of consumer products, but also safety requirements of any 'technical work device'. These devices are defined as any ready-to-use device exclusively intended for work purposes, as well as the accessories of the work device and protective equipment (even if this is not part of a work device). The manufacturer of such a device needs to ensure the safety of the device; however, unlike consumer product manufacturers, it has no reporting obligations under the act.

'Consumer products' are defined as products intended for consumers or products likely, under reasonably foreseeable conditions, to be used by consumers even if they are not intended for them. Thus, this definition includes products that were originally intended for commercial use only, but that over time have migrated into the consumer sector (eg, 'professional' coffee machines, hairdryers and commercial hammers). Further, it includes all commercial products that were originally the subject of business-to-business contracts, but were later rented or leased by a business to a consumer (eg, professional exercise machines).

However, in general the act does not apply to products covered by specific German product safety legislation (eg, food, medical devices, pharmaceuticals, weapons, chemicals and vehicles). As an exception, the act has effect alongside these specific safety acts if the product is also covered by a transposed EU ordinance.

EU safety ordinances are available for and the act specifically applies to, among others, the following products:

• toys;
• machines;
• elevators;
• pressurized containers;
• sports boats; and
• explosion prevention materials.

Manufacturers under the Act

Under the act a 'manufacturer' is the producer, quasi-manufacturer or any party which restores a used product or brings a product to the market and influences the safety characteristics of the specific consumer product (eg, a dealer applying a warning label to a product).

General Duty to Bring Only Safe Products to Market

The act states that the manufacturer, agent, importer or dealer must bring only safe products into circulation. If specific EU ordinances apply to the products, they must meet the health and safety requirements set out by the regulations whenever they are used as intended or are foreseeably misused. A product must not endanger the health and safety of the user or other persons when it is used as intended or is foreseeably misused (ie, considering the reasonably foreseeable behaviour of the product user).

Contrary to previous German product safety legislation, the foreseeable misuse of a product now needs to be considered in the manufacturer's safety evaluation under the act. This opens up a wide range of additional safety considerations that, to date, many manufacturers have not taken into account during the product design period.

The act provides little guidance as to when a product is considered to endanger the safety of the user or another person. However, the following considerations must be taken into account:

• the characteristics of the product, its composition, packaging, assembly instructions, installation, maintenance and duration of use;
• its effects on other products;
• its appearance, presentation in trade, labelling, warnings, instructions for use and operation and other product information;
• if information for safe use is necessary under Section 4 IV(2) of the act, an owner's manual written in German; and
• groups of users that are exposed to a greater risk than others.

The EU guidelines, however, clarify that the manufacturer must perform a risk analysis that includes:

• an assessment of the severity of the hazard;
• the overall probability of safety; and
• the vulnerability of hazard-exposed persons.(1)

Manufacturers' Duties under the Act

The act sets out various pre and post-market duties for manufacturers.

Before/during market introduction

The manufacturer is obliged to provide sufficient information and warnings to the consumer regarding the safe use of consumer products.(2) It and/or the agent/importer must display its name and address on the product or packaging.(3)

The most important obligation for manufacturers under the act is the establishment and maintenance of a market monitoring and recall management system for consumer products.(4) A consumer product manufacturer needs to take the appropriate steps in order to be ready to take suitable measures to avoid hazards, including product withdrawal and recall.

After market introduction

Once a consumer product has been brought into circulation the manufacturer must perform additional sample tests,(5) evaluate field information and keep a claim book(6) and inform dealers of any product safety measures taken.(7)

Reporting duties for consumer products

In a similar manner to the US Consumer Product Safety Commission reporting requirements, the act requires consumer product manufacturers timely to inform the responsible authority of any product danger - that is, once it is aware of or, on the basis of available information or its experience, has a clear indication that the product is dangerous, it must act and report the actions.(8)

When to report

In an attempt to clarify when a safety hazard must be reported, the EU guidelines for the notification of dangerous consumer products state that the manufacturer must carry out a risk assessment. The same analysis is also used by the competent safety agencies to determine whether a product is unsafe and whether it must be notified.

When not to report

Under the act a manufacturer is not obliged to report concerning products that are not covered by the act or that are covered by another special notification procedure under transposed EU legislation (eg, food products). Furthermore, it is not obliged to report if:

• it has been able to take immediate corrective action for all items concerned and has limited the defects to well-identified items;
• the problems relate to the functional quality of the product, not to its safety;
• the problems relate to non-compliance with regulations that do not relate to safety; or
• it knows that the authorities have already been informed and have all the required information.

Dealers do not need to report if they know that the manufacturer has already informed the relevant authorities.

Who reports

Even though the act prescribes that manufacturers, their agents, importers and dealers are obliged to report safety hazards to the agency, in practice it does not generally make sense for a dealer to report directly to the responsible German agency because the dealer cannot be penalized by the agency for failure to notify. This particularly applies when the manufacturer or the importer, which generally has more information about the product, has already reported the hazard.

A manufacturer should discuss with all parties in the supply chain the practical arrangements regarding responsibility for notification before the need for notification arises.

The EU guidelines recommend that if the manufacturer is first to obtain evidence of a dangerous product, it should notify the responsible authority and send a copy of the notification to the distributor; the distributor must then notify other authorities unless it knows that those authorities have already been informed. If the distributor is first to receive knowledge of a dangerous product, it should contact the authorities and send a copy of its notification to the manufacturer, which must complete the information on the dangerous product and forward it to the relevant authorities.

In practice, however, only the manufacturer should report dangerous products and inform distributors that the products have been reported to all applicable EU member state authorities. Pursuant to the act, only manufacturers and importers face penalties for failure to report.

What to report

In addition to the producer and distributor information, it is necessary to report details of the product involved, the hazard, the corrective actions and the EU member states in which the product is marketed or otherwise supplied to consumers.

If a serious product risk exists (ie, any immediate or long-term risk requiring rapid intervention), the authority is obliged to file a RAPEX report (the EU system for the rapid exchange of information) and the manufacturer must supply additional information concerning other companies in the supply chain that hold affected products.

Whom to report to

It is necessary to report to the competent local commercial regulatory authority in the area of the place of business.(9) In general, it is strongly recommended to report to the authorities of all EU member states in which the dangerous product is marketed or otherwise supplied to consumers. However, the EU reporting guidelines state that a notification transmitted solely to the local authority is possible if the product risk is serious and the local authority makes a RAPEX notification. In such cases the local authority should forward the notification through the European Commission to the authorities of those countries in which the product is marketed. However, the manufacturer still bears the risk that the local authority does not report to other member state authorities, thus running the risk of being penalized in these countries for not reporting or not reporting in time.

Powers and Duties of Authorities

The directive provides member states with some guidance regarding the powers and duties of the safety authorities.

Under the act, authorities have the power to order product testing(10) and order the transfer of samples,(11) with costs to be paid by the manufacturer. If the product is dangerous,(12) the authority can order a complete or temporary market ban or recall, and/or order the seizure and/or the destruction of products. Further, it can order that the manufacturer provide adequate warnings on its products to warn the public of any dangers. In order to facilitate the taking of remedial action the authority can also revoke consumers' vehicle registrations until the remedy has been carried out.

The authority must always yield to the manufacturer's actions, if appropriate, and the manufacturer is to be advised first when a required remedy is recommended.

The German authorities also have the duty to inform the public(13) and to publish quarterly on the Internet(14) market ban orders for which no appeal is available or those which are immediately enforceable.

In order to fulfil their information obligations towards the public, the authorities must provide the general public electronically(15) with all information in their possession regarding:

• the hazardous product;
• information on identifying the product;
• the nature of the hazard; and
• the remedial measures taken.
• However, in general, unless consent is given or it is necessary to protect the health and safety of consumers, the authorities will not publish:
• personal data;
• data that is subject to legal proceedings; or
• company business or trademark secrets.

Penalties

A manufacturer (not the dealer) can be fined up to €3,000 for failing to report a hazard to the authorities in time, correctly or at all. Failure to carry out the authority's orders incurs a fine of up to €30,000.

Criminal penalties (ie, up to one year's imprisonment or a monetary fine) are applicable in case of an intentional failure to adhere to orders when the health of a person or property is endangered. However, unlike the legislation in many other EU member states, the German act does not lay down penalties for the introduction of a hazardous product or the failure to recall or withdraw a product. Nevertheless, the party responsible for not reporting may still face criminal responsibility under other German regulations (eg, the Penal Code).

The best way to reduce these risks is to produce only safe products. However, in the rare cases in which safety issues do arise, it is recommended to work with experienced engineers and lawyers who have a good working relationship with the relevant safety agencies.

ILO