Businesses manufacturing, importing and/or supplying products in Australia must ensure the products meet Australia’s regulatory standards. Failure to comply with regulatory standards can result in harsh penalties, with the Australian Consumer Law allowing courts to fine companies up to AUD50 million.
Earlier this year, retailers Dusk and The Reject Shop paid infringement notices totalling AUD240k for supplying battery-operated Halloween toys that did not meet Australia’s mandatory standards. During this year, we have also fielded an increasing number of inquiries from international clients on automotive standards relating to navigational equipment, braking and LED lighting, and have been called upon to advise on battery product recall procedures.
These developments likely suggest an uptick in government scrutiny of standards compliance, or at the very least, reflect increasing manufacturer and supplier reliance on emerging technologies in their products, where the implications of technology failure could cause dire outcomes, including injury or death. Whatever the motivation, these examples underline the desirability and necessity for Australian suppliers to increase their awareness and vigilance in this critical area of business risk.
What are product standards?
Standards set out technical specifications for particular products. These include testing, packaging, performance, physical design, instructions, and warning requirements. Product claims by suppliers cannot be inconsistent with applicable standards. Standards aim to ensure that products are safe, consistent, and reliable for consumers, and that product descriptions are not misleading or confusing. Higher risk products attract more stringent regulatory oversight than lower risk products.
It is a legal obligation for a supplier to ensure that the products it sells are safe. To avoid facing significant penalties, it is important for business to be aware of the relevant standards that can apply, to understand how to comply with these standards and, in certain circumstances, to be able to demonstrate compliance.
Manufacturers, importers, distributors and retailers who supply products in Australia are considered a “supplier” and are generally responsible for ensuring regulatory standards are met.
Products covered by Australian standards range from sunglasses, aquatic toys and treadmills through to road vehicles and devices with electromagnetic capabilities. At the same time, not all products have accompanying standards, and not all standards for a product necessarily apply in Australia.
Some standards are mandatory and require compliance, whereas other standards are voluntary and only represent best practice. Standards developed by non-Australian government bodies (such as Standards Australia, the International Organization for Standardization and the International Electrotechnical Committee) will generally be voluntary, unless Australia has adopted such standards into its domestic regulatory frameworks.
What products are covered?
Only standards that are prescribed by domestic regulation are mandatory in Australia. Australia has specialist regulatory frameworks prescribing standards for products including:
- food – regulated by Food Standards Australia New Zealand;
- motor vehicles – regulated via the Australian Design Rules, in accordance with the Road Vehicles Standards Act 2018;
- agricultural and veterinary chemical products – regulated by the Australian Pesticides and Veterinary Medicines Authority;
- devices with electromagnetic compatibility capabilities – regulated by the Australian Communications and Media Authority;
- pharmaceuticals, medical devices and therapeutic goods – regulated by the Therapeutic Goods Administration; and
- certain consumer products – regulated via the Australian Consumer Law (“ACL”), contained in Schedule 2 of the Competition and Consumer Act 2010.
Applicable standards for a product are prescribed under the relevant regulatory framework. For example, the Australian Communications and Media Authority regulates devices with electromagnetic compatibility capabilities according to the Radiocommunications (Electromagnetic Compatibility) Standard 2017 and its related legislative instruments.
In line with the objective of collaborative standardisation as encouraged by the WTO Agreement on Technical Barriers to Trade, Australia has adopted many international standards into its domestic regulations. Australia’s focus on harmonising “voluntary” standards means that many “voluntary” standards are not voluntary at all – instead, they can have the force of law in Australia.
Is the standard voluntary, mandatory, or mandatory even if “voluntary”?
To determine whether a voluntary standard applies, reference must be had to the specific terms of the mandatory Australian standard. The Australian standard will describe the technical specifications for the product, and whether another standard (if any) has the force of law in Australia.
By way of illustration, we refer to the process for prescribing voluntary standards under the ACL’s regulatory framework, a process which is similar to that used by other regulatory frameworks.
Voluntary standards are mandatory under ACL’s regulatory framework if they have been:
- “declared”, in full or in part, as the applicable legal standard in Australia; or
- “referenced”, in full or in part, in the mandatory standard.
Voluntary standards can be listed as applicable alternative standards within a mandatory standard. This means that suppliers can cite compliance with a voluntary standard as an alternative to citing express compliance with the Australian standard.
For example, sunglasses are regulated through the ACL’s Consumer Goods (Sunglasses and Fashion Spectacles) Safety Standard 2017. The standard provides that the “Australian standard means the Australian/New Zealand standard AS/NZS 1067.1:2016…”, and that “the Australian standard as varied… is declared to be a safety standard for sunglasses and fashion spectacles”. This indicates that the voluntary standard AS/NZS 1067.1:2016, developed by Standards Australia, has been adopted as the applicable standard in Australia. It is therefore mandatory.
How to comply with a mandatory standard?
The first compliance step is to ensure that the product meets the technical specifications of the standard. Depending on the contents of the standard, it may be necessary to conduct performance testing and attach safety warnings and/or instructional labelling to the product.
The second compliance step is to refer to the broader regulatory framework that the relevant standard sits within. This will indicate whether any further compliance steps need to be undertaken. Some regulatory frameworks will require suppliers to demonstrate compliance to the relevant standard, certify that the product has met that standard, and then label the product accordingly.
The third compliance step is to remain alert to any changes to the applicable standard. Australian standards change to reflect emerging technological developments, modernised safety expectations and changing international standards. There will usually be a transition period providing suppliers leeway to transition to the new requirements, but that will not help a supplier that fails to maintain an awareness of the status of standards that apply to its products.
What if a mandatory standard applies?
If a supplier has not complied with a mandatory standard, the best course of action is to immediately obtain legal advice. Legal advice can mitigate any consequences arising from the supply of non-compliant products in Australia, as well as assisting to identify the most appropriate course of action.
Depending on the nature of the non-compliance, an appropriate course of action may require a supplier to:
- immediately stop supplying the (potentially) non-compliant product;
- remove the product from retail and supply outlets;
- retrieve the product from the supply chain;
- issue a voluntary recall notice, allowing the product to be removed from consumer hands and for potential safety and non-compliance issues with the product to be addressed;
- consider what other steps may be required according to the relevant regulatory framework (such as reporting the product to the appropriate regulator); and then
- seek to establish that the product complies with the mandatory standard.
Suppliers must act diligently and expeditiously, including to refrain from supplying the product until its adherence to the mandatory standard has been established.
Consequences of non-compliance with an applicable mandatory standard
Consequences of non-compliance will depend on the regulatory framework that applies to the product concerned.
As demonstrated by the recent infringement notices issued to Dusk and The Reject Shop, suppliers can face significant penalties for supplying non-compliant products. A range of other consequences can also arise, depending on the applicable regulatory framework. Aside from civil and pecuniary penalties, other consequences can comprise:
- a safety warning notice being issued alerting consumers that the product is under investigation and may present a safety risk;
- an infringement notice being issued allowing suppliers to pay a penalty without admitting fault;
- a recall notice being issued requiring suppliers to undertake a particular course of action (i.e. recall the products, publicly disclose a safety issue etc.);
- a nationwide ban being enforced on the product if it presents a risk of serious injury, illness or death;
- criminal liability for supplying consumer products which do not comply with an applicable standard; and
- any other consequences as prescribed by the relevant regulatory framework.
Suppliers can be liable to compensate consumers who suffer loss or damage as a result of using non-compliant products. A consumer who suffers loss or damage as a result of using a non-compliant product can seek compensation or seek to enforce other consumer protections contained in the ACL. For example, a consumer could argue that a supplier has made false representations that its products are of a particular standard (this “standard” being the mandatory Australian standard), in contravention of Section 106 of the ACL. A consumer could also seek to establish a claim in negligence against the supplier.
It's best to do something, and to do it now
Australia has a strong regulatory spotlight on products that have mandatory standards in force. As suppliers face a range of significant consequences, including financial penalties, criminal liability and reputational implications for getting it wrong, it is best to take a “safety first” approach to complying with Australia’s regulatory standards. However, given the complexities in determining whether a particular standard is mandatory in Australia, this task is often easier said than done.
If in doubt, suppliers should immediately conduct an audit to determine whether the products it supplies into the Australian market comply with any applicable regulatory requirements. Undertaking this activity has no downside. It enables suppliers to confirm that its products comply with mandatory standards and will be attractive to the increasingly savvy consumer, who expects a certain level of safety and design be guaranteed in the products they purchase.
This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.
© Moulis Legal 2023