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How Do Product Recalls Affect a Company?

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Types of Products the FDA, USDA, and NHTSA Commonly Recall

When a company’s products are found to be defective, it is typically the FDA, USDA, or NHTSA that would be responsible for formally recalling it. Different agencies handle different types of recalls, but their reasoning behind doing so is primarily the same: to prevent consumers from being harmed by the product. Below are three governmental agencies that often handle recalls, as well as some information about what kind of recalls they would handle:

U.S. Food and Drug Administration (FDA)

When an FDA-regulated product is deemed defective or harmful, the FDA issues a recall on the product, which removes it from the market. Sometimes, the company discovers a problem and chooses to recall the product. Other times, the issue is brought to the attention of the FDA, whose job is then to oversee the company’s process and make sure it is completed properly. FDA-regulated products that can be recalled include human drugs, animal drugs, medical devices, radiation-emitting products, vaccines, blood and blood products, transplantable human tissue, animal feed, cosmetics, and most foods. The leading cause of food recalls in the U.S. is the presence of undeclared allergens, like peanuts, almonds, and soy.

United States Department of Agriculture (USDA)

The USDA provides leadership on food, agriculture, natural resources, rural development, and nutrition. The USDA has programs to monitor food recalls for products like meat, poultry, and egg products. The organization is known for meat inspections and meat grading. The Food Safety and Inspection Service (FSIS) is an agency of the USDA that issued a recall on the animal products mentioned above. For example, in March of 2021, the FSIS issued a public health alert for beef and lamb products produced without the benefit of federal inspection by One Meat Corp., doing business as Eastern Asia Trading Corporation.

National Highway Traffic Safety Administration (NHTSA)

The U.S. law requires auto manufacturers to alert current owners when a vehicle needs to be recalled. This allows the owners to take their car to the dealership and have the defect fixed for free. The NHTSA issues a recall when the agency or a manufacturer determines that a vehicle, equipment, car seat, or tire creates a safety risk or does not meet minimum safety standards. Typically, these decisions are made prior to NHTSA involvement. The most common vehicle-related recalls are due to design defects. This happens when a part of the vehicle was not designed as safely as it should have been, increasing the likelihood of accidents and injuries.

How Companies Handle Product Recalls

When a company’s products need to be recalled, either because of their own lack of due diligence or because of a governmental agency’s intervention, a few different responsibilities fall on the company. For one, they must absorb the cost of replacing and repairing the defective products. Secondly, they must reimburse affected customers. Even if they do their best to compensate for the mistake in the short term, some of the repercussions of a recall can be quite damaging in the long run. Recalls damage a company’s reputation and can lead to expensive lawsuits and reparations.

Smaller companies, in particular, tend to have difficulty recovering from recalls. While large companies are better equipped to handle the repercussions of a recall, they still suffer long-term impacts to their reputation. Because the recall might be more highly publicized with a larger company, they can experience more widespread reputation tarnishing than a smaller company might.

One famous example of this was the Samsung Galaxy Note 7 recall in 2016. The phone was recalled after several of them exploded in the owners’ pockets. Samsung issued replacement phones, but they still lost an estimated $5 billion as a result of the issue. During this year, the quarter three profits dropped by 30% due to the cost of the recall and the drop in sales because of lack of confidence in the brand.

At Belushin Law Firm, P.C., our personal injury attorneys stand strong in the belief that designers and manufacturers have a legal duty to ensure they are creating safe products. While unsafe products can have negative impacts on the company’s reputation and future sales, those products can be even more catastrophic for the consumers they harm. That is why we are committed to holding companies accountable for maintaining a high standard of safety, and we want to help you get the justice you deserve if you are impacted by a defective product.

To work with one of our skilled and passionate personal injury attorneys, call Belushin Law Firm, P.C. at (888) 918-9890 or contact us online.