August 2004
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The trouble with recalls
In recent years, the number of recalls has risen substantially. Annual auto recalls have more than doubled since the early 1990s. Nearly 19 million vehicles were recalled in 2002--about 1 of 11 on the road. In 2003, recalls of products such as packaged food, drugs, and medical devices were up nearly 24 percent over 1999. And 2004 is on a record pace for household-product recalls. In all, more than 5,000 recalls were initiated last year, covering more than 60 million products. Whether the reason is better policing, more diligent reporting of problems to agencies, or worse products, the rise in recalls doesn’t necessarily mean that more faulty products are being repaired or returned to stores. A large percentage of them remain on the road and in the home: almost one-third of all vehicles subject to recall; more than half of toys, clothes, appliances, tools, and electronics gear; and three-fourths of child car seats. Part of the reason lies in the system itself. Despite talk years ago about consolidating recall authority, there is no single recalls czar with the power to banish all problem products from the marketplace immediately--or else. What we have is a complex, decentralized system granting recall authority to six federal agencies, each with its own rules and procedures. (For a matchup of agencies with the products they cover, see "Who's in charge of product recalls," below.) When a manufacturer resists a recall, the agencies are empowered to take it to court, but they prefer to gain a company’s cooperation. If many companies were to balk at recalling flawed products, the agencies simply wouldn’t have the money or staff to force them all to do the right thing. Critics contend that a system that cannot quickly pull problem products from consumers’ hands is far from perfect--and they’re right. The system can break down because product flaws aren’t reported to agencies in the first place, because companies are unable--or unwilling--to track down and notify customers once defects are recognized, because product owners can’t identify model numbers once they’ve tossed the packaging, or because of consumer apathy or the passage of time. By the time a baby carriage is recalled, for example, it might have been passed from one new parent to another, or donated to charity. The owner of a recalled toaster might toss it rather than return it to the store. Or a consumer might consider a flaw such as a missing warning label too trivial to worry about. Such situations lower the “completion rate,” insider-speak for the percentage of recalled products that are destroyed or returned for a fix, exchange, or refund. But a major reason that products officially declared problematic are still in homes and garages is that word too rarely reaches the people who need to hear. For every Firestone/Ford Explorer media-fest, there are thousands of choking hazards, breaking straps, and contaminated foods that get little publicity. How recalls work Consumer-protection laws such as the Food, Drug, and Cosmetic Act, the Consumer Product Safety Act, and the National Traffic and Motor Vehicle Safety Act require manufacturers, distributors, retailers, and importers to notify agencies when they learn about a safety hazard in their products (expected hazards, such as cuts from a knife, don’t count). Companies that don’t declare such hazards face civil, and sometimes criminal, penalties. Agencies also hear about potentially unsafe products through customs agents; through their own investigators, who inspect cargo at shipping ports, search warehouses, and make random purchases at stores; and through news stories, state consumer watchdogs, death certificates, and emergency-room records, for starters. Consumers are the primary whistleblowers. “We rely on the public to reach out to us,” says Scott Wolfson, a spokesman for the Consumer Product Safety Commission (CPSC), the agency with recall authority over 15,000 different household products. (What you can do explains how to report various kinds of faulty products.) Once it has been determined that a product is defective or violates mandatory safety standards, the government requests that the company repair, replace, or repurchase the product. If a company refuses to agree to a recall, agencies can take further action. “The tools we can use include administrative law proceedings, injunctions, and forced removal of goods from store shelves,” Wolfson says. Nevertheless, cooperation between the government and the company is the preferred method. It means that companies are less likely to stonewall, that agencies won’t spread their resources too thin, and that hazardous goods can be removed more quickly. When talks fail, fact-finding, negotiations, litigation, and appeals can drag on for months while dangerous products remain on the market. A recent recall of Bowflex fitness machines, for example, took 18 months to hash out. According to the CPSC, The Nautilus Group, maker of the equipment, had balked at the agency’s request for a widespread recall. Eventually, the company agreed, but by that time, some 73 injuries had been reported. (Rod Rice, chief financial officer of The Nautilus Group, said in an interview that problem incidents represented a fraction of 1 percent of the units the CPSC wanted recalled. The process took so long, he said, because Nautilus wanted to identify how significant the problems were and devise the correct repairs.) Why wouldn’t a company report a product that has harmed people? “Although most cases are black-and-white, and companies should report the problem, some cases involve shades of gray,” says R. David Pittle, senior vice president of Consumers Union, which publishes Consumer Reports, and former commissioner of the CPSC. “Many products have some inherent hazard. The question is whether a product contains a defect in design or manufacture that poses an unreasonable risk of injury. Congress didn’t want the federal government stepping in and demanding that all lawn mowers be recalled, for example, because they could run over your foot.”
In reality, companies and the government come to terms about 95 to 99 percent of the time, according to the agencies responsible for most recalls. A company that has a list of people who bought the problem product--based on returned registration cards, for example--will probably be required to contact them by first-class mail. Press releases go to the media, and posters warning of the dangers are distributed to places where the products were sold or where the target audience is likely to get the message. The agencies monitor a company’s actions and require proof that it is doing what it promised: They may inspect records of product returns, for example. When companies make the effort, recalls can be very successful. Take the case of Williams-Sonoma, the cooking retailer and catalog company. Several years ago, the company recovered almost all of the 1,000 or so portable propane grills it had sold with a faulty temperature control. Williams-Sonoma searched through its electronic credit-card records and worked with bank credit-card companies to identify buyers. In addition to refunding the price, the company offered a $50 bounty for each grill returned. When the system breaks down Too often, however, recalls work poorly. Instead of trusting that you’ll be notified, you might have to search for the information you need to protect you and your family. (You can start by checking our Recalls section.) Several factors can make it hard to find out about recalls: Manufacturers might not tell you. If a business keeps track of its customers, the government requires it to make a good-faith effort to notify anyone who bought a defective product. What constitutes a good-faith effort? It’s negotiated case by case. But “good faith” may not mean “all out.” Companies aren’t required to search through bank or credit-card records as Williams-Sonoma did. Asked why, Wolfson at the CPSC said, “Clearly, it’s beneficial to alert people, but we need to respect privacy rights and the law.” Finding car owners is generally easiest, and car recalls are among the most effective. “As long as a vehicle is registered with any state motor vehicle authority, the registered owner will get a recall letter,” says Liz Neblett, a spokeswoman for the National Highway Traffic Safety Administration (NHTSA), in charge of car recalls. Of the owners who receive that letter, she added, about 72 percent have the car repaired, a figure that has remained constant for years. Presumably the other 28 percent have tossed, lost, or ignored the letter. Some company Web sites lack information. As a rule, companies aren’t required to post recall notices online. Some do, some don’t. (Asked why Home Depot didn’t have a recalls page, a spokesman told us, “The concept is under review.” Soon thereafter, its site began noting that recall information about products sold at Home Depot would be “coming soon.”) For our evaluation of online recall information from 15 major companies, see our Ratings. Some agencies are less helpful than others. NHTSA and the CPSC, for example, have different rules about what and when to tell consumers about potentially hazardous goods. NHTSA’s home page links to consumer complaints, recalls, investigations, and technical service bulletins, which result from communication between the carmaker and the dealer or mechanic. (A service bulletin might tell dealers to tighten a car’s lug nuts to revised specifications, for example.) NHTSA tracks service bulletins to see whether safety concerns emerge. If so, an investigation is opened, and if a safety defect is confirmed, the manufacturer must recall the item and fix the problem. You won’t get that kind of early warning from the CPSC, which doesn’t even acknowledge that a product is under suspicion until its investigation is over. “Congress told the agency, ‘You can’t reveal the identity of a company until the day the recall is announced,’” says Wolfson, who sees an advantage in this process. “When NHTSA publicizes a recall, there may not yet be a remedy. When CPSC announces a recall, a remedy is in place, and consumers don’t have to wait for satisfaction.” Only serious drug recalls are widely publicized. Pharmacies are required to review records and contact patients only for a Class 1 recall, the most serious of three classes in the FDA’s reporting system, in which taking the drug could cause death or serious illness. Alerting patients to a potency problem, said Willie Bryant, the FDA’s senior recall officer, might needlessly worry patients and prevent them from taking their medicine--a greater concern, the agency contends, than getting an incorrect dosage. There are holes in the safety net. You might assume that the government has certified most products as safe. Not so. Although NHTSA has many safety standards for vehicles and child car seats, and the FDA must approve drugs (though not dietary supplements) before they’re sold in the U.S., most products under the CPSC’s jurisdiction are made in accordance with voluntary industry standards, and industries largely police themselves. Voluntary standards often work well and save the agency from devoting its limited resources to writing mandatory safety rules, which can take years to develop and implement. But dangerous goods can slip through the cracks. In some cases, companies simply ignore voluntary standards. Witness electrical extension cords. Since 1997, there have been 19 recalls of nearly 2.5 million inexpensive cords, most of which have undersized wires that could overheat, catch fire, and pose electrocution hazards. Despite the history of trouble, no mandatory standard has been set. Companies make registering your purchase a pain. Although the warranty or registration cards that accompany products could provide vital contact information in case of a recall, consumers rarely return them, discouraged by the litany of marketing questions about age, income, interests, and shopping behavior. One positive development: Some companies, including Whirlpool, General Electric, and Graco, now let you register your products online so that they can contact you if there’s a recall (although you may still be asked irrelevant questions). People think that recalls expire. They don’t, except in special circumstances. (Tire recalls, for example, expire after five years.) As long as a manufacturer remains in business, it or its distributor or retailer is obliged to honor the settlement negotiated with the lead government agency or face civil penalties. Yet over the years, Consumer Reports readers have routinely complained that companies have disconnected toll-free customer-service recall hotlines, insisted a recall was outdated, or denied the existence of a recall in the first place. We checked for ourselves. Without revealing our affiliation, we made nearly 100 calls to companies that recalled products in 2001 and 2002. Either we were lucky or the situation has improved. There were only five instances in which the company had gone out of business or we couldn’t find out anything about the recall. Fresh-food recalls may come too late. Last year, the U.S. Department of Agriculture initiated recalls of nearly 2 million pounds of food tainted with E. coli bacteria. When contamination is confirmed, the agency asks major media outlets to get out the word and notifies wholesalers and retailers that sold the tainted goods. But there’s no assurance that consumers will hear about the recall, and often they’ve already eaten the product. In meat and poultry recalls, therefore, the USDA focuses on preventing recurrences by inspecting plants and looking for the cause of contamination. Are companies coddled? Some watchdog groups say that the agencies responsible for protecting consumers are too soft on the companies that make defective products. Nancy Cowles, executive director of Kids in Danger, which advocates for safer children’s products, criticizes the CPSC for focusing too much on predictable dangers like choking hazards in toys and not enough on broader issues. “Very little is focused on safer product design in the first place,” she says, citing portable cribs and swings.
Unilateral recalls, Wolfson says, are permitted only when a company can prove it can contact at least 95 percent of people who bought the product, and follows through on that effort while being monitored by the agency. In such a recall--which recently occurred with the Segway Human Transporter, which could topple because of a software glitch--the CPSC issues a press release, but it’s placed in the agency’s online recalls archives, not on its home page, and the media are not alerted. Rachel Weintraub of the Consumer Federation of America, another watchdog group, also took aim at the CPSC. The CFA and Consumers Union petitioned the agency to require makers of children’s products and some other goods to include registration cards--minus prying personal questions--with their products. (As of now, children’s car seats are the only product for which marketing-free cards must be provided.) Industry fought the request, and the agency turned it down, partly because it was deemed too broad, too costly, and not effective enough, said Hal Stratton, CPSC chairman. The consumer groups’ action prompted federal lawmakers to get involved. The result: The Product Safety Notification and Recall Effectiveness Act, which would make companies keep track of buyers of juvenile products and small electrical appliances that could harm children. The legislation has been stuck in a Congressional committee for almost two years. The CPSC isn’t the only agency taking a hit. Clarence Ditlow of the Center for Auto Safety has concerns about regional recalls, which NHTSA has allowed since the mid-1980s. The manufacturer must repair vehicles bought or registered only in states where a problem is apt to occur: road-salt corrosion in the North, for example. Critics argue that such recalls are illogical, since a vehicle isn’t confined to its driver’s home state. The records, however, indicate that regional recalls are uncommon. The Center for Auto Safety cites 18 regional recalls since 1997, but during that same period, there were more than 3,000 national vehicle recalls. And our search turned up only two regional recalls in 2003. Positive steps In recent years, the CPSC has implemented a “Fast Track” program designed to remove dangerous products as soon as 20 business days from the date a report is first filed. For Fast Track to be in place, a company must come forward to admit a problem, eliminating the need for a CPSC investigation into the product’s flaws. It also eliminates an official determination of hazard, which could reflect badly on the company. Fast Track recalls, which usually involve newer products, have two to three times the completion rate of those that require investigations, the commission says. By contrast, since 2001, the CPSC has collected nearly $15 million in fines for delayed reporting of hazards or violations of mandatory safety standards, including the sale of banned products. (See Truants and fines.) Based on the severity of the violation and the number of similar violations, the commission can impose fines of up to $1.65 million, an amount CU’s Pittle calls “a blemish on their image but not even a blip on their bottom line.” Congress is considering raising the cap. This year, the CPSC is implementing a program to disseminate recall information to historically hard-to-reach groups such as Native Americans and the elderly, by partnering with organizations that interact with them. Working with the National Association of Resale & Thrift Shops and Safe Kids, the commission also offers seminars about defective products to secondhand stores, a frequent repository for dangerous goods. CPSC investigators turned up at least one recalled product in 70 percent of random thrift-store inspections. The government has gotten tougher on carmakers that try to hide safety defects. In 2000, after deaths from rollovers in Ford Explorers with Firestone tires, Congress passed the TREAD (Transportation Recall Enhancement, Accountability, and Documentation) Act to identify potential failures sooner. It imposes criminal penalties of up to 15 years in prison for anyone who knowingly conceals information about product safety defects, and it increases the top civil penalty against makers of defective vehicles or automotive equipment from $925,000 to $15 million. The FDA has made changes as well. Faced with a sixfold rise in food imports over the past 10 years, it has added inspectors at ports of entry and raised the recall status of products with labels that mislead people who have allergies. Products containing unlabeled fish, milk, or soybeans have been upped to Class 1 recall status, along with peanuts, eggs, and shellfish.
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