The Canada Consumer Product Safety Act (the Act ) is still relatively new. It was proclaimed in force on June 20, 2011.

Borden Ladner Gervais LLP (BLG) has been closely tracking the development of the legislation and its application. The Act affects manufacturers, importers, distributors, retailers, advertisers, and testers of most consumer products sold in Canada, and their insurers. Proactive steps need to be taken to ensure compliance with the Act and proper risk and responsibility allocation along the distribution chain.

Executive Summary

  • The importation and sale of certain specified consumer products is banned
  • The government now has sweeping powers to order a recall of consumer products
  • The government may order manufacturers and importers to test and study consumer products at their expense
  • It is an offence to package, label, or advertise consumer products with false or deceptive health or safety claims
  • There are new onerous record-keeping requirements placed not only on manufacturers and importers, but also on retailers, product testers, and advertisers
  • “Incidents” involving consumer products occurring anywhere in the world must be reported to the government within two days and the manufacturer or importer must follow up with a detailed report within 10 days, including proposed remedial measures. “Incidents” include actual and possible serious adverse health effects resulting from the product, mislabelling, and recalls in other jurisdictions
  • The government has broad powers to search for and seize information relating to consumer products without a warrant
  • The penalties imposed under the Act are severe including fines of up to $5 million and prison terms of up to two years. Directors and officers can be held liable

Further Detail

Breadth of the New Legislation

  • The Act imposes obligations not only on parties in the distribution chain of consumer products (i.e. manufacturers, importers, retailers), but also on advertisers and testers of products
  • The Act covers only certain types of products. Notable exceptions include: cars, food, drugs, cosmetics, boats, and aircraft.

Some Products Banned

  • The Act bans the manufacture, importation, advertising, or sale of certain consumer products listed in its schedules, such as: baby walkers with wheels, BPA baby bottles, and lawn darts with elongated tips.

Recalls

  • Section 31 of the Act gives the federal Minister of Health the right to order an immediate recall of a consumer product that the minister believes is “a danger to human health or safety”
  • Recall powers were not previously available to the government
  • The recall can affect a person who manufactures, imports, or sells the product for commercial purposes
  • It is noteworthy that retail sellers of a product can be made responsible for the recall even though they may have had nothing to do with the product defect
  • Retailers should ensure that supply agreements expressly allow recovery of recall expenses from distributors and manufacturers and that there is sufficient security for such expenses.

Tests and Studies

  • Section 12 of the Act allows the government to order a manufacturer or importer to test, study, and compile information regarding a consumer product at their expense.

Deceptive Labelling, Packaging, and Advertising

  • Section 9 of the Act makes it an offence to label or package a consumer product in a manner that creates “an erroneous impression regarding the fact that it is not a danger to human health or safety”, or that is misleading “regarding its certification related to its safety or its compliance with a safety standard or regulations”. Section 10 makes is an offence to advertise or sell such a product.

Record-keeping

  • Section 13 requires retailers to maintain documents that indicate the name and address of the person from whom they obtained the product and the location where, and the period during which, they sold the product
  • Manufacturers, importers, advertisers, and testers of consumer products for commercial purposes must maintain documents that indicate the name and address of the person from whom they obtained the product, and to whom they sold it, as applicable
  • It is noteworthy that persons outside of the distribution chain, i.e. advertisers and testers of products, have these recordkeeping obligations as well.

Reporting

  • The Act imposes a positive obligation to report “incidents”. “Incidents” include actual and possible serious adverse health effects resulting from the product, mislabelling, and recalls in other jurisdictions
  • Section 14(2) of the Act requires manufacturers, importers, and sellers of consumer products for commercial purposes to report an “incident” occurring anywhere in the world to the Minister of Health within 2 days after the day on which they become aware of it
  • Section 14(3) of the Act requires manufacturers or importers to provide the Minister with a written report containing information about the incident, the product involved in the incident, any products that they manufacture or import that to their knowledge could be involved in a similar incident, and any measures they propose be taken with respect to those products, within 10 days after the date on which they became aware of the incident.

Inspection Powers

  • The Act provides very broad search and seizure powers for inspectors. Inspectors can enter any place without a warrant except houses
  • Sections 19 through 30 set out the inspection powers under the Act. These powers include the right to enter premises at any reasonable time and to examine, inspect, test, seize, detain, take photographs and make recordings of records and products. Section 20 explicitly prohibits a person from knowingly obstructing, hindering, or making a false or misleading statement, to inspectors
  • Confidential business information is not exempt from inspection and disclosure. Under s. 16 of the Act, the Minister may disclose confidential business information to a person or a government that carries out functions relating to the protection of human health or safety or the environment without the consent of, or prior notice to, the business, if the recipient agrees in writing to maintain the confidentiality of the information and to use it only for the purpose of carrying out those functions
  • Under s. 17, the Minister may, without the consent of the person to whose business or affairs the information relates and without notifying a person beforehand, disclose confidential business information about a consumer product that is a serious and imminent danger to human health or safety or the environment, if the disclosure of the information is essential to address the danger. The Minister must then notify that business within 1 day after disclosure.

Penalties

  • Section 41 of the Act provides for significant fines and penalties. A person who contravenes the Act is liable:
    • on conviction on indictment to a fine of up to $5 million dollars or up to two years in prison or both; and,
    • on summary conviction, for a first offence, to a fine of up to $250,000 or to imprisonment up to six months, or both and, for subsequent offense, to a fine of not more than $500,000 or to imprisonment for a term of more than 18 months or to both
  • Due diligence is a legitimate and recognized defence to prosecution for “offences”, but not for “violations” for which relatively minor Administrative Monetary Penalties (like a “ticket”) are assessed
  • Section 41(3) of the Act provides that a person who contravenes certain sections of the Act or who knowingly or recklessly contravenes any part of the Act, a provision of the regulations, or an order made under the Act, is guilty of an offence and is liable:
    • on conviction on indictment, to a fine in an amount that is at the discretion of the courts or to imprisonment for a term of not more than five years or to both; or
    • on summary conviction, for a first offense, to a fine of not more than $500,000 or to imprisonment for a term of not more than 18 months or to both and, for a subsequent offense, to a fine of not more than $1 million or to imprisonment for a term of not more than two years or to both
  • Directors, officers, agents, and mandataries are parties to the offence and can be prosecuted if they assented to, or acquiesced in, the commission of the offence.

Other Authors

Michael C. Smith
Court Peterson

Expertise

Insurance and Tort Liability
Product Liability