Legislation may have ‘seller beware’ philosophy

In its 2007 throne speech, the Conservative government promised to “introduce measures on food and product safety to ensure that families have confidence in the quality and safety of what they buy.”
With the introduction in May of bill C-51, which amends the Food and Drugs Act, and bill C-52, the proposed Consumer Product Safety Act, the government was well on its way to fulfilling that promise - in spades. The legislation, if enacted, will substantially change the regulatory regime for food, therapeutic products (including drugs, natural health products, and medical devices), cosmetics, and other consumer products.

The legislation has a very wide reach, with implications for pharmaceutical, medical-device and other health-product companies, food manufacturers, and anyone that manufactures, imports, advertises, or sells consumer products.

“The breadth of the legislation really does impact on everyone by adding an enormous level of infrastructure throughout the supply chain,” says Martha Healey of Ogilvy Renault LLP’s Ottawa office. “But it also goes so far as to affect individuals to the extent they give away or sell products at garage sales.”

Which means the legislation may be impacting on a host of organizations that don’t realize they’re affected until it’s too late.

“Under the present wording, even a product that is only occasionally used for non-commercial purposes could be covered,” says Elizabeth McNaughton of Blake Cassels & Graydon LLP’s Toronto office. “You could, for example, have a company that sells commercial stoves to restaurants with the occasional sale to a consumer, and that makes the stove a consumer product.”

Doubtless, the fact that product recalls and public notices of voluntary withdrawal are at a record high in Canada has made product safety and quality a leading issue for consumers and retailers.

Yet there are lingering questions about the scope of the legislation, namely whether all these effects were intended or whether the proposed laws are just another instance of legislative overkill.

“Everyone’s for child safety,” Healey says, “But it’s odd that someone could be held liable if they give their neighbour a used baby stroller that turns out to be defective and an injury occurs.”

Indeed, bill C-52 creates a general prohibition on manufacturing, importing, selling, or advertising any “consumer product” that poses a danger to human health or safety. “Consumer product” is very broadly defined as “a product, including its components, parts or accessories, that can reasonably be expected to be obtained by an individual to be used for non-commercial purposes, including for domestic, recreational and sports purposes.”

Authorities have a broad power to recall products or take other measures where there is danger of health and safety; power to order the conduct of tests and the compilation of information necessary to verify compliance; power to order corrective measures such as issuing public advisories; and power to stop manufacturing, importing, or advertising.

 The act also requires manufacturers, importers, advertisers, sellers, and testers of consumer products to document and record preparation and maintenance requirements.

As well, the act requires manufacturers, importers and sellers to report “incidents” to Health Canada. An “incident” includes an “occurrence in Canada or elsewhere that results, or could reasonably be expected to have resulted, in a death, serious adverse effect on health or serious injury”; a defect or characteristic that could reasonably be expected to result in death, serious injury or an adverse effect on health; incorrect or insufficient information on a label, or instructions that might reasonably be expected to result in death, serious injury, or adverse effect on health; and a recall initiated by a foreign entity, provincial government, public body, or aboriginal government.

Somewhat impractically, the legislation requires reporting of incidents within two days.

“Two days is an incredibly short time to investigate and figure out what the issues are,” McNaughton says.
For its part, bill C-51 is also expansive. It broadens the FDA to cover the importation of food as well as its sale; expands regulatory authority to establish food-safety controls for high-risk foods; creates new record-keeping and reporting requirements; mandates that all sellers and importers of food establish tracing systems; and adds licensing and registration requirements for importation and interprovincial trade in food.

Among the most significant changes for the health-products industry are the creation of broader recall powers for goods that pose “a serious or imminent health and safety risk;” and the establishment of a progressive licensing regime for therapeutic products that includes the power to order providers to conduct reassessments of their products, conduct tests, and monitor experience for the purpose of obtaining more information about their products’ effects on health and safety.

Backing up these measures are increased fines and penalties of up to $5 million (the current maximum is $250,000), with unlimited fines for willful or reckless behaviour. Compounding the severity is a provision that makes each day on which an offence is committed or continued a separate offence.

All in all, what both pieces of legislation appear to effect is a “seller beware” philosophy, in conformity with the “precautionary principle” described in the preamble to both bills as meaning that “a lack of full scientific certainty is not to be used as a reason for postponing measures that prevent adverse effects on human health if those effects could be serious or irreversible.”

 Criticism of both bills has been cacophonous: complaints centre around the broad levels of discretion given the minister and government officials; the lack of due process (inspectors don’t need reasonable grounds to stop the manufacturing, importation or advertising of consumer products); limited rights of appeal that appear to be wholly undefined; and the unworkability of reporting times, as well as conflicts with other reporting requirements.

More particularly, the language of the proposed legislation is less than clear with respect to even the most important elements.

“The actual definition of terms like ‘danger to human health or safety’ and ‘serious’ incidents, for example, are so vaguely defined they could include almost anything,” Healey says. “There’s also no definition of what a ‘recall’ is, and whether it means a stop sale or product withdrawal or something else.”

And, because goods cannot be sold if the seller ought to have known they could constitute a danger, it remains unclear whether retailers now have to inspect every single item they place on their shelves.

As Healey sees it, a strict construction of the legislation might produce a regime fraught with over-reporting.

“And you’ve got to ask yourself whether over-reporting results in effective management or enforcement,” she says.

There are also difficulties from a competitive standpoint.

“If Canada gets too far ahead of other major countries, especially in the recordkeeping and reporting areas, multinationals operating here will have to incur the cost of establishing and maintaining separate policies for this country,” McNaughton says.

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