Regulatory Outlook | Product Regulation | July 2017

Current issues

Civil drones (small unmanned aircraft)

Following the government’s consultation on civil use of drones, it has been announced that owners of drones over 250g will have to be register their drones and users will be required to sit safety awareness tests. The idea behind this is to improve accountability and encourage owners to act responsibly. The government also plans to bring forward the use of ‘geo-fencing’, and is exploring whether to tighten rules around where users can fly, increasing penalties when the law is broken, possibly banning of the use of drones within the proximity of airports, and reviewing the powers law enforcement agencies have to enforce.

Driverless cars

The Government has provided an £8.6 million grant to a British consortium to test driverless cars on UK roads in 2019. This is indicative of the Government’s desire for the UK to be seen as a frontrunner in this area and backs up what was touted as the motivation for the Vehicle Technology and Aviation Bill (previously the Modern Transport Bill). However, this Bill was not passed before Parliament was dissolved for the general election. It remains to be seen whether the Bill will be reintroduced in the same form, and how quickly this will progress through Parliament. Regulatory change in this area may not take effect until later this year or next.

Predicting the impact of Brexit on CE marking

The practical impact of Brexit on the CE marking product regulation regime currently in place is still unclear.

Our prediction is that the UK will either maintain the scheme, as it would still allow UK manufacturers to sell throughout the EU, or adopt a similar but more relaxed regime, which might allow for more innovation but could leave manufacturers that sell in the UK and the EU having to comply with separate regulatory regimes.

Medical devices

The New Medical Devices Regulation and IVD Regulation have now been published. The new EU Medical Devices Regulation came into force on 25 May 2017, marking the start of the three-year transition period for manufacturers selling medical devices into Europe.

The transition period allows manufacturers time to update technical documentation and processes to meet the new requirements. However, they will now find themselves subject to greater scrutiny of technical documentation, clinical evaluation, post-market clinical follow-up, and traceability of devices through the supply chain.

Product Safety and Market Surveillance Package

The long-awaited new package of legislative measures aimed at improving EU consumer product safety and strengthening market surveillance of products is still not yet in force and there is no clear date set for this. From a practical perspective, it would be preferable to have the new legislation in place prior to the Great Repeal Bill, which is expected to convert all EU law as at the date of Brexit into UK law. This would ensure that manufacturers that sell in the UK and EU only have one set of rules to comply with for the foreseeable future.

In focus: Personal liability

Non-compliance with product safety related regulation carries a risk of personal liability for directors, managers and officers. While product regulation encompasses a range of different regulations, the detail of which will differ, most offences require that the company is guilty of an offence, and that the offence was committed with the consent, connivance or neglect of that individual.

Offences are punishable by fines and prison sentences. For more serious offences, fines could be unlimited and prison sentences could be up to 12 months. Directors can also be disqualified.

However, in practice, for non-food consumer products, we tend to see very little in the way of personal liability prosecutions. The focus of the regulators (such as Trading Standards) is typically on securing compliance through active engagement with the company as a whole (as opposed to individual officers).

There have been only a small number of significant prosecutions against companies and even fewer prosecutions against directors.

For example, even where we learn of household names supplying unsafe products, personal liability prosecution often doesn’t follow.

• In December 2016, Poundworld was ordered to pay over £190,000 in fines and costs after selling thousands of faulty phone charger kits with forged safety test certificates to UK consumers. Poundworld was criticised by the judge for slow handling of the matter and for failure to have developed a robust testing regime to ensure product safety. Despite this, there were no follow-on prosecutions of directors.
• Similarly, in November 2015, Poundstretcher was ordered to pay £370,000 in fines and costs following the sale of faulty batteries. The batteries were found to be leaking or out of date. Again, the company was criticised for appearing not to have established procedures in place for dealing with the issue, even once they were fully aware of the problem. However, there were still no prosecutions of directors.

Despite this, directors, managers and officers should not ignore the potential for personal liability. The post-Brexit world might require the UK’s regulators to be more litigious (more ‘stick’ than ‘carrot’) in order to demonstrate to the outside world that they take product safety seriously.

There is a defence of due diligence available if the relevant director, manager or officer can demonstrate they took all reasonable steps and exercised all due diligence to avoid committing the offence. Even though prosecutions are infrequent in this area, it is still important for directors, managers and officers to ensure that they can avail themselves of this defence, if ever required.

Practically, it means:

• having in place robust procedures for the testing of products to ensure full regulatory compliance before products are placed on the market;
• ensuring there is a strong market surveillance process, which can pick up and act swiftly on any reports of product safety incidents; and
• ensuring these processes are well known in the business (particularly by directors, officers and managers), are implemented effectively, and are updated on a regularly basis, as required.

Following these points doesn’t just help with a due diligence defence, it will also help the company meet its legal obligations concerning consumer products, and it makes commercial sense to ensure that only safe products make it to market and that product safety incidents can be dealt with minimal impact to the business.

Dates for the diary

13 June 2017 – Radio Equipment Directive fully in force. All products falling under the new definition of “radio equipment” that are placed on the market from this date should comply with the new directive – save that the UK has confused the situation by not yet implementing the Directive into UK law.

15 July 2017 – Government response expected to consultation on safe use of drones in the UK.