While manufacturers are already exposed to civil product liability litigation following an incident or accident, a new type of litigation is emerging, giving rise to an unprecedented and threatening sword of Damocles over them in France. This new exposure arises from the alleged non-compliance of products with regulations, which can trigger investigations by the market surveillance authorities and lead to civil, administrative and criminal penalties.
These past years, French product liability law has shifted towards a preventive rather than a compensatory system. The result is purely objective liability through (i) the disappearance of the concept of fault, (ii) the dilution of the causal link and (iii) an overly favorable regime for plaintiffs with regards to the demonstration of their alleged damage1. In addition, new types of claims have developed such as mass litigation (especially in the toxic tort context) and class actions. Manufacturers, therefore, already face significant risks when doing business in France.
The Volkswagen emissions scandal has pushed forward a new type of exposure for companies in France. Indeed, market surveillance authorities are now hunting for regulatory breaches even where there is no risk of injury. These disputes generally arise from reports communicated to Public Prosecutors by agencies such as the French Directorate General for Competition Policy, Consumer Affairs and Fraud Control and its decentralized services.
The example of the emissions scandal is self-explanatory. All manufacturers are exposed to a risk of investigation because only one of them has admitted a breach. This example can be extended to all suspected breaches of regulations and/or mislabelling issues for all types of products. In this respect, manufacturers should realize that the French authorities are not just looking at punishing the fact that a product breaching the relevant regulations is placed on the French market (e.g. breach of the homologation process, product composed of a prohibited substance, design defect). They are also hunting down mislabelling, misrepresentation and deceit (the product is compliant but its presentation is not). The consequences are unfortunately, in practice, the same.
In this context, companies are exposed to very strict penalties (such as the obligation to recall the products, sale bans, complete modification of the manufacturing process) and damage to their reputation, even though in many cases there is no safety risk.
More specifically, when the authorities decide to check whether or not a product is compliant (even when there has been no report of injury), companies are facing investigations, which can lead to the seizure of documents, data, products, the questioning of employees and requests to conduct specific tests to demonstrate compliance. In other words, this type of procedure is very time-consuming for the company and gives rise to significant media coverage with sometimes immediate consequences on the value of the shares of the company just because an investigation has been initiated.
Consumers can further file a class action, called "consumption group action" (action de groupe consommation). This mechanism has been introduced in France by the Consumer law of March 17, 2014, the so-called "Hamon law" which came into force on October 1, 2014. The claim must be filed by a representative consumer protection association authorized at national level to seek compensation for the individual losses sustained by a group of consumers (at least two). Only material losses affecting a consumer's assets may be compensated through this type of class action. In other words, if a company places a non-compliant product on the French market, it can be subject to a class action, even if there has been no bodily injury and just for the sake of condemning it for damages. The introduction of this mechanism into the French legal system shows the strongly punitive logic of the French legislator.
Furthermore, all clients of the manufacturers of spare parts/components can file claims on the ground of contractual liability.
Finally, one can easily imagine that if the French authorities' investigations lead to the liability of the manufacturer, the latter's exposure will start spreading in all the countries where it does business and especially all the other Member States of the European Union given that most industry sectors are subject to European Law. This new type of "administrative and criminal" disputes deserves the attention of manufacturers as it can hit hard. The consequences can, indeed, be dreadful and even lead to a recall of all the products even if there is no health or safety risk. This punitive logic is extremely controversial in a context where France lacks business attractiveness and tries to work on it, notably by currently undergoing a reform of contract law and civil liability.
Our experience shows that it is, therefore, very important to tackle both the regulatory issues in this type of cases in order to defend the choices made by the manufacturer when designing, testing and placing its product on the market and the criminal procedure aspects in order to rightly understand the powers of the authorities, anticipate the steps they may take, train the relevant people and identify the loopholes.
- See "The worrying changing face of French product liability law", Thomas Rouhette & Sylvie Gallage-Alwis, March 1, 2014, https://www.expertguides.com/articles/the-worrying-changing-face-of-french-product-liability-law/the0wo14