[The following is a longer and un-footnoted draft of a fourth Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on harmonising consumer protection law.]
1. Introduction
Public regulation of food safety is typically an early and major priority for law reformers at the national level, given potentially high risks and degrees of harm from unsafe foods. For products that present lower risks, for which it is more difficult to mobilize political resources to regulate, product liability regimes can also incentivise manufacturers to consider food safety – especially if potential harm is extensive, liability is strict, and court systems work effectively. Further incentives can come from reputational effects, in the context of growing (social) media coverage of food safety concerns. Nonetheless, as outlined in Part 2 below, serious food safety failures continue to occur in both developing and developed countries.
General food laws have been enacted in ASEAN Member States (AMSs). As shown in a recent comparison of Indonesia, Malaysia, Thailand and Singapore, they generally impose criminal and/or administrative sanctions for food adulteration, foods injurious to health, food unfit for human consumption, insanitary facilities, and false labeling or deceptive advertising. (Indonesia’s Food Act 1996 further provides specific civil remedies for consumers harmed by unsafe food.) Yet enforcement is problematic: “Food quality and safety standards are usually strictly followed for exportable food commodities, but not always enforced for food destined for the domestic market”.
In addition, such food laws tend to fall under the jurisdiction of ministries of agriculture and/or health. To minimize conflicts of interest, namely agriculture ministries favouring suppliers rather than consumers, there is a tendency to establish independent food agencies, as in the United States (US, although the agriculture department still regulates some products) or Myanmar (within the Health Ministry). This is especially true for risk assessment functions, as in the European Union (EU) since 2002, and Japan since 2003 (for risk management if harm eventuates, Japan’s agriculture ministry still regulates farm safety while the health ministry deals with the subsequent supply chain).
However, other government departments are also increasingly involved in food safety regulation. On the one hand, ministries of commerce or trade get involved because international treaties now require science-based, proportionate regulation of import safety, preferably based on internationally agreed standards, as outlined in Part 3 below. On the other hand, there is existing and potential scope for consumer affairs regulators to become (more) involved in food safety regulation, even though they may constitute smaller and more recently created public authorities, because:
• they often have or share responsibility for enforcing food standards set by other departments (as seen in the Consumer Protection Laws enacted in Vietnam in 2010 and Myanmar in 2013);
• consumer regulators may also be given a coordinating role, or “back-up” powers to regulate if a harmful food product falls outside the jurisdiction of other agencies (eg konnyaku jelly snacks in Japan until the Consumer Affairs Agency was established in 2009);
• consumer regulators may have powers to bring representative actions (as in Thailand) or order compensation (as in Myanmar) on behalf of consumers harmed by non-compliant foods.
Consumer regulators also develop helpful expertise in consumer behaviour and risk communication more generally, which is valuable for law-making related also to food nutrition (i.e. “healthy eating”) – a broader contemporary policy concern than food safety (i.e. avoiding food-borne illnesses). As explained by the Consumers International regional representative at the inaugural ASEAN Consumer Protection Conference, held in Vietnam over 8-9 November 2014, promoting healthy diets is a priority because adverse health effects associated with obesity are now spreading to Southeast Asia. In addition, consumer regulators can assist other government authorities in developing effective schemes for oversight of “food safety auditing” by private inspectors, already widely used in global food supply chains and likely to be further facilitated through international agreements on trade in services, yet potentially creating conflicts of interests for the auditors which may impact adversely on consumers.
Accordingly, there is a need to expand capacity in food-related health issues among consumer regulators in AMSs. They need enhanced opportunities to engage with other national regulators (with shared or primary responsibility for food safety regulation) as well as the growing numbers of international, inter-governmental or public-private partnership organisations involved in generating shared food safety standards in the region. This is especially important given that the ASEAN Economic Community (AEC) project, promoting free trade in goods and services by 2015, includes harmonisation of agri-food standards as a priority action item (as elaborated in Part 3).
Category: Consumer law and policy
Product Safety and Product Liability Laws in ASEAN
Chulalongkorn University’s ASEAN Studies Centre will sponsor this major international conference in Bangkok over 28-29 July 2015, with collaboration from and at the downtown venue of the Department of International Trade Promotion within Thailand’s Ministry of Commerce. The key organiser is the immediate past Dean of Law at Chula, Prof Sakda Thanitcul, assisted by Prof Luke Nottage, immediate past Associate Dean (International) at the University of Sydney Law School and a visiting professor at Chula for parts of 2015. Other speakers include Professor Geraint Howells, renowned consumer product safety law expert and presently Dean of Law at the City University of Hong Kong, as well as the following other country reporters:
1. Singapore: Mr. Lawrence Teh (lawrence.teh@rodyk.com)
2. Vietnam: Mr. Anh Thi Phuong Pham (phuonganh.p@tilleke.com)
3. Cambodia: Mr. Ly Tayseng (tayseng@hbslaw.asia)
4. Laos: Mr. Sornpheth Douangdy (Sornpheth.douangdy@la.pwc.com)
5. Myanmar: Prof. Dr. Khin Mar Yee (dr.khinmaryee.ygn@gmail.com)
6. Malaysia: Mr. Lim Chee Wee (lcw@skrine.com)
7. Indonesia: Mr. Riza Buditomo (Riza.Fadhli.Buditomo@bakernet.com)
8. Philippines: Prof. Emmanuel Lombos (emlombos@syciplaw.com)
9. Brunei: Prof. Dr. Colin Ong (onglegal@gmail.com)
Country reporters will summarise key features in their respective jurisdictions, elaborating eg from Jocelyn Kellam (ed) Product Liability in the Asia-Pacific (3rd ed 2009), but focus on new developments in private law, public regulation, enforcement and media coverage of product safety issues. The conference also draws on my research for a smaller project, focusing on free trade agreement aspects, for the Sydney Southeast Asia Centre.
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Enforcing Product Liability Law
[The following is a longer and un-footnoted draft of a third Policy Digest prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat project on consumer protection law.
A. Under-Enforcement of Product Liability Law for Small-Value Claims
Manufacturers can be incentivised to supply safe consumer goods due to market (reputation) mechanisms, public safety regulation, and/or private law (especially potential tort law liability if consumers claim compensation for harm caused by defective products). The first two mechanisms work better if there is a high probability or risk of harm, as public opinion is then easier to mobilize, although public safety regulation is usually only implemented when the potential harm from unsafe goods is also high. Product liability (PL) law is therefore particularly important to incentivise manufacturers of goods that present a lower probability of harm. However, because of costs associated with enforcing PL law – ultimately through the court system – it tends to work best where the harm and therefore compensation amounts are high. Strict liability PL regimes, increasingly common in ASEAN member states, aim to lessen the burden of proof on potential plaintiffs, who no longer have to prove negligence on the part of manufacturers. Accordingly, they can make more feasible this mechanism even for defective products that generate lower levels of harm and compensation amounts.
Nonetheless, strict liability PL law is still often difficult for consumers to invoke, even in developed countries with comparatively good access to court procedures. After all, unsafe products may often just cause consequential loss to other “consumer goods”. (Only a few countries extend strict PL law coverage to consequential losses to non-consumer goods, which tend to be more extensive. ) Even when personal injury results from the defective products, the harm suffered by each consumer may be low even if the aggregated harm is high. (Good recent examples may be Kanebo’s skin-whitening cosmetics, recently recalled throughout Asian markets, or defective foodstuffs – if consumed in small quantities. ) In such situations, each individual consumer will be reluctant to pursue claims through the court system.
Such problems are compounded in developing and even middle-income countries, where courts are under-resourced or face other generic problems, or accessing them still runs counter to prevailing social norms. This helps explain the limited impact of strict liability PL law reforms observed in South East Asia, despite some of those countries going beyond the European Union (EU) substantive law, for example by allowing consumers to claim multiple damages (i.e. more than the actual harm suffered).
The consequent under-enforcement of consumer law in this field is problematic from the viewpoint of economic efficiency as well as broader justice concerns. After all, the basic economic rationale for introducing strict liability for unsafe manufactured products is that consumers lack expertise to assess safety levels. The latter furthermore correlate only weakly with the pricing of such goods (except some that could cause catastrophic losses if risks eventuate, such as automobiles, which tend to subject to minimum public regulatory standards anyway). Even if particularly well-informed consumers are able to differentiate safety levels of various products, they may end up in the hands of third parties. The economic benefits of introducing strict liability PL law to mitigate such problems, by forcing manufacturers to “internalize” the full costs associated with putting goods into the market, is undermined if those substantive laws are inadequately enforced. This is also problematic from the perspective of justice and advancing the rule of law, a major objective particularly in developing countries and for ASEAN.
Product Liability: Complementing Substantive Law Reforms to Enhance Incentives to Supply Safe Consumer Goods
[The following is an un-footnoted draft of a second Policy Digest (also omitting Figures) prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat conference on consumer protection law in Hanoi over 8-9 December 2014. The footnoted final version is available at: http://www.asean.org/resources/publications/item/consumer-protection-digests-and-case-studies-a-policy-guide-volume-1?category_id=382]
1. Overview
Consumer product safety failures continue to occur ASEAN states. However, many reported cases involve product sectors that already involve some public regulation (Part 2). For other product types, many states have enacted strict product liability (PL) statutes, aimed at making it easier for harmed consumers to claim compensation and thus providing an additional incentive for manufacturers to supply safe goods (Part 3). Yet PL litigation and claims remain very limited, as in Europe (Parts 4-5). The incentive effect needs to be bolstered by other measures, including improvements in access to justice (Part 6).
Consumer Product Safety Regulation – Recalls and Accident Information Disclosure Mechanisms
[The following is an un-footnoted longer draft of one of two Policy Digests prepared for a Sydney Southeast Asia Centre joint research project and an ASEAN Secretariat conference on consumer protection law in Hanoi over 8-9 December 2014. The footnoted final version is available at: http://www.asean.org/resources/publications/item/consumer-protection-digests-and-case-studies-a-policy-guide-volume-1?category_id=382]
1. Overview
Consumer product safety is a major contemporary concern for developing, middle-income and developed economies. ASEAN, through its Committee on Consumer Protection (ACCP), has recognised this as a priority topic for international collaboration, as trade in goods accelerates through the region with its major trading partners world-wide. Part 2 of this Digest highlights the policy challenge. Part 3 shows how market and even private law incentives are unlikely to provide sufficient incentives for manufacturers to produce safe products; some minimum regulatory standards are needed. Part 4 focuses on regulatory powers to force recalls of unsafe goods, but also requirements for suppliers to notify national regulators about ‘voluntary’ recalls. It also outlines recall information disclosure efforts underway nationally, regionally (notably within the European Union, EU, but also through ACCP since early 2011), and now internationally (especially through the Organization for Economic Cooperation and Development, OECD, since late 2012). This Digest suggests there is scope already for greater engagement by ACCP and individual ASEAN member states particularly with the OECD initiative in this field. Part 5 also urges broader information-sharing as the OECD clearing-house expands over the next few years, as well as with product safety incident reporting systems already developed particularly in the EU and the United States (US).
Consumer Protection and Free Trade [and Investment] Agreements
My public lecture on this topic, bringing together two research fields of contemporary public interest, was presented on 24 September 2014 as part of Sydney Law School’s Distinguished Speakers Program.
The session was kindly introduced by my colleague Prof Chester Brown, and ended with a commentary by NUS Asst Prof Jean Ho who kindly arrived straight from Sydney airport after her flight from Singapore.
The audio file of my presentation and Chester’s introduction are available via Sydney Law School’s podcast channel (specifically here), my Powerpoint slides are here (as a PDF), and a related short paper is here. Below is the abstract (with further hyperlinked references available here) and speaker/commentator bios.
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Consumer Protection Law and Practice in South-East Asia: Implications for Regional FTAs and Australia
The Sydney Southeast Asia Centre, with in-kind support from the global law firm Baker & McKenzie, will fund over 2014 this project involving also my colleague specialising in Chinese law, Prof Bing Ling.
[Background] Regional economic integration is proceeding apace. ASEAN aims to completely eliminate tariffs among 6 original (out of 10) member states by 2015, as part of developing an economic, political (security) and socio-cultural “community”. Yet it has also established an ASEAN Committee on Consumer Protection, to avoid a regulatory “race to the bottom” along with this expansion of free trade. Since late 2012, ASEAN has also begun negotiating a “Regional Comprehensive Economic Partnership” (RCEP) with Australia-NZ, Japan, China, Korea and India – leveraging off existing Free Trade Agreements (FTAs) with each of those states. Consumer protection is likely to arise also in the context of RCEP, and even the Trans-Pacific Partnership FTA (with negotiations already well advanced and involving many of the same states).
Taking Seriously Consumer Product Accident Reporting Duties under Australian Law
On 8 June 2013 the Sydney Morning Herald reported that Volkswagen Australia would be formally recalling Golf and other Volkswagen-made models that had suddenly lost power. The family of one driver and the driver of a truck that rear-ended her Golf vehicle are arguing before the coroner that this was a possible cause for her fatal accident. Over 300 other owners of Volkswagen-made vehicles have also reported problems. Similar concerns about some of Volkswagen’s direct-shift gearboxes had led to formal recalls of some models as early as 2009 in the USA, then in China, Singapore, Japan, Malaysia and Taiwan. However, Volkswagen reportedly stated that Australia does not have the same gearboxes, and instead had initially undertaken a program involving its dealers. Marketing experts have criticised the recall recently commenced in Australia, suggesting that Volkswagen will have suffered extensive damage to its brands by not acting publically earlier to address consumer concerns – in addition to the estimated $170m in direct repair costs.
It will probably come as no surprise that Volkswagen conducted recalls more promptly in the USA. Toyota suffered extensive adverse publicity there relating especially to problems instead involving sudden acceleration, generating recalls of over 10 million vehicles over 2009-2011 and a recently-finalised $1.6b class action settlement. Nor should it be surprising that Volkswagen undertook a recall in Japan. Japanese consumers have become increasingly sensitive about product safety issues, especially since 2000 – when Mitsubishi Motors was found to have been conducting illegal clandestine recalls over an extended period. The delay in Australia is disturbing, especially given the increased attention otherwise being paid to consumer protection since “re-harmonisation” pursuant to the Australian Consumer Law (ACL) reforms enacted in 2010.
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Process and Substance in Contract Law Reform in Japan – and Australia?
Japan’s is well underway on the path to completing its first comprehensive reform of contract law since enactment of the Civil Code in 1896. A driving force has been Takashi Uchida, a prominent participant in Japan’s intense discussions over contract law theory in the early 1990s. He resigned in 2007 as Professor of Civil Law at the University of Tokyo in order to spearhead deliberations within the Legislative Council (hosei shingikai) of the Ministry of Justice (MoJ), now charged with recommending specific reforms.
At the Council’s first Working Group meeting on 22 November 2009, one member reportedly suggested that deliberations should proceed “without paying too much attention to ‘the Basic Policy for the Law of Obligation Reform’ (draft proposals by [the] Japanese Civil Code (Law of Obligations) Reform Commission)” because it had been confirmed that the Working Group’s deliberations should start “from zero”. However, the Draft Proposals (DP) published in April 2009 by that semi-private Reform Commission, along with a detailed five-volume commentary written by its members, were clearly intended to frame the subsequent debate in the formal Working Group arena – and have mostly achieved that effect.
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Reforming Private International Law – Finally ‘Australia in the Asian Century’?
Australia is long overdue for statutory intervention in private international law (PIL), so the recent ‘Discussion Paper 1’ (DP) from the federal Attorney-General’s Department (AGD) is very welcome. From a background in comparative and transnational business law, I strongly support legislative reform, particularly for cross-border consumer transactions and/or in relation to international arbitration. This can now draw on a wealth of experience at an international level and from our major (now mostly Asia-Pacific) trading partners. Such reforms will add tangible evidence of the Government’s recently declared commitment to ‘Australia in the Asian Century‘.
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