Retailers play a central role in assuring that defective products are identified and removed from use, and that consumers are protected. They also have ongoing obligations to protect the public from defective products.
As part of the NBDA’s Bicycle Mechanics Certification program development, project director Rich Kelly asked attorney Jim Moss to take a look at the mechanics of recalls, and to clarify the legal rights and obligations of the retailer. Moss specializes in legal work in the outdoor market, and is advising the NBDA on legal issues related to certification.
Here’s his overview of dealer obligations in recalls that can be applied to today’s recalls, as well as those in the future:
Product Safety and Recalls: Your Obligations as a Retailer
Retailers are a key part of the process of producing, selling and marketing products to the public. In the eyes of the law, they play an important role in ensuring that those products are safe and can be expected to apply pressure on manufacturers to produce safe products.
The issue in the mind of the courts is not only who is at fault in the case of a defective product, but who could have prevented the injury.
It may seem unreasonable to expect dealers to notice defects in modern products with welds that can only be inspected by x-ray and complex, technologically advanced components that are difficult enough to understand, let alone examine. However, the law has not evolved much from the days of the general store, and retailers should behave as if they are jointly liable along with manufacturers and follow the obligations clearly laid out for them by the law.
Retailers’ Obligations Under the Law
A retailer’s obligations under the law fall into the following broad categories.
A retailer has a duty to:
- Fix/Repair or Replace
- Notify manufactures of problems
- Notify federal and state agencies
What do these obligations mean, specifically?
Duty to Notify
Currently, the requirements for duty to notify are fairly limited for retailers. Retailers are required to post notices in-store about recalls and inspect bikes in the store that are for sale or are brought in for service. Making a good faith attempt to make customers aware of the recall of a product they purchased will satisfy the duty to notify.
Duty to Fix/Repair or Replace
This duty exists whether or not the manufacturer has initiated a recall. If you become aware of a potential product defect, you must inform the consumer of the problem and fix/repair or replace the product based on your policies and the manufacturers’ instructions.
Duty to Inspect
The details of this duty vary by state. You should regularly look out for general problems with bikes that come through your store and check whether any of them or the components mounted on them have been recalled in the past.
Duty to Notify Manufacturers
This duty appears in many state regulations and may also be a requirement in any signed dealer agreements that you have with your manufacturers and suppliers. You may be required to notify them when you see problems that are out of the ordinary or are occurring too frequently in your opinion.
Duty to Notify the CPSC or State Agencies
The Consumer Products Safety Commission (CPSC) has specific rules regarding when a retailer must notify them of problems. You may also have a state agency that has a similar requirement.
The CPSC has guidelines for when to report on its website:
What do you need to do when a recall is issued?
1. Contact the manufacturer to determine how many of the affected products have been shipped to your store.
2. Notify your customers that have purchased the affected product. This requires a good faith effort to contact the customers in a way that you can document such as these examples:
– Post a notice of the recall in your store
– Email your customers
– Post recall information on your website and in your newsletters
– Phone call to customers who bought the product
3. Remove any unsold recalled products from your showroom and quarantine them until they can be made safe per the manufacturer’s instructions.
4. Follow the manufacturer’s instructions to fix, repair or replace the recalled product.
Ongoing Retailer Product Safety Recommendations:
1. Maintain a customer database with contact information. Consider this a marketing opportunity that may save your business in case a product liability or recall situation arises.
2. Be vigilant for potential defective products. Look at every new part and bike with a skeptical eye and look for recalled bikes and products when they come through your store for service. Advise your customer of any outstanding recalls that you discover.
3. Notify the manufacturer if you spot a problem. Recall decisions are based upon the number and severity of accidents. One defective product, no matter how severe the injury, is not necessarily a recall.
4. You should notify the CPSC and any appropriate state agencies if you believe that a manufacturer is not taking appropriate action to address a product defect.
Frequently Asked Questions:
What if I do not agree with the solution provided by the manufacturer in a recall?
A retailer should perform the fix/repair or replacement as instructed by the manufacturer of the recalled product. If the retailer fails to perform the fix, for any reason, they may become solely liable for an injured customer if the defective part fails. The manufacturer will have a strong defense to any claim of joint liability by the retailer in the case of a lawsuit.
After following all of the manufacturer’s recall instructions, the retailer may contact the company to discuss any concerns they have with their remedy.
Are manufacturers required to compensate retailers for their work involved in handling a recall?
The issue of compensation for recall and warranty work is typically covered by contractual agreements between the retailer and his supplier. The supplier’s dealer agreement may contain clauses that outline whether and how much they will compensate a dealer for such work. The retailer may wish to ask suppliers about their policies in this area when negotiating future dealer agreements and purchases.
I sell used bikes. Am I liable for selling bikes that have been recalled in the past?
Yes. Federal law prohibits the sale of recalled products. Federal law also states that it is retailer’s responsibility to monitor CPSC recalls and ensure that their business complies with the law. It may be prudent to check whether a bike in question is listed in the recall database when considering buying any used bikes and to check whether the bike was fixed or repaired to the manufacturer’s recommendations.
This is an overview of the law. Each state has its own laws concerning product liability and some states provide retailers with some protections from manufacturer’s product liability issues. You should check locally to see if you can take advantage of any of these protections and the specific laws in your state.