Product liability law holds manufacturers, distributors, and retailers accountable for damages caused by defective products. In the UK, this framework is primarily governed by the Consumer Protection Act 1987 (CPA), which imposes strict liability on producers for defective products that cause personal injury or property damage. This means that claimants do not need to prove negligence; they must only demonstrate that the product was defective and caused harm.

Key Provisions of the Consumer Protection Act 1987

  • Definition of ‘Product’: The CPA defines a product as any goods or electricity, including components and raw materials. However, it does not explicitly include software or digital products, which has led to legal ambiguities in the context of modern technological advancements.
  • Defectiveness Standard: A product is considered defective if it fails to meet the safety standards that the general public is entitled to expect, taking into account factors such as marketing, instructions, and the time of supply.
  • Defences Available to Producers: Producers can defend against liability by proving, among other things, that the defect did not exist at the time the product was supplied or that the state of scientific and technical knowledge at the time was insufficient to detect the defect (the ‘development risks’ defence).

The New EU Product Liability Directive

On 10 October 2024, the Council of the European Union adopted a new Directive on Liability for Defective Products, replacing the original 1985 directive. This updated directive aims to address challenges posed by the digital age and the circular economy.

Key Updates Include:

  • Expanded Definition of ‘Product’: The directive now explicitly includes software, digital manufacturing files, and AI systems, ensuring that digital products are subject to the same liability standards as physical goods.
  • Presumption of Defectiveness: In certain circumstances, such as non-compliance with mandatory safety requirements or obvious malfunctions, there is a presumption that a product is defective, easing the burden of proof for claimants.
  • Data and AI Considerations: The directive addresses issues related to data loss and the role of AI in products, reflecting technological advancements and associated risks.
  • Parties Liable: The directive also extends the liability in a more diverse economic world, for example: as the definition of “product” has been extended to digital manufacturing files and software, online platforms selling software (even if not manufactured by them) could be held liable for any defective software sold by them; even repairing or modifying a product in today’s circular economy could inadvertently make the person modifying the product also liable.

Impact on UK SMEs

As the UK has exited the EU, it is not obligated to implement this new directive. Member states have up to two years to implement the new Directive into national law. However, UK SMEs, especially those exporting to the EU, must be aware of these changes. Products sold in the EU will need to comply with the updated liability standards, potentially requiring design modifications, enhanced safety features, and comprehensive documentation. Non-compliance could lead to legal challenges and barriers to market entry.

Sectors affected

Industries integrating digital components, such as electronics, automotive, and consumer goods, will be significantly impacted. The inclusion of software and AI under the directive means that products with embedded digital elements must meet stringent safety standards. Additionally, sectors involved in the circular economy, like recycling and remanufacturing, will need to ensure that refurbished products comply with current safety expectations.

Recommendations for Businesses

  1. Review Product Portfolios: Assess all products, especially those with digital components, to ensure they meet both UK and EU safety standards.
  2. Enhance Quality Control: Implement robust testing and quality assurance processes to identify and rectify potential defects.
  3. Update Documentation: Maintain detailed records of product design, manufacturing processes, and safety assessments to facilitate compliance verification.
  4. Monitor Regulatory Changes: Stay informed about both UK and EU regulatory developments to ensure ongoing compliance.
  5. Engage Legal Expertise: Consult with legal professionals specializing in product liability to navigate the complexities of differing legal frameworks.

While the UK’s product liability laws remain distinct from the EU’s updated directive, UK businesses, particularly SMEs operating internationally, must proactively adapt to these changes. By implementing comprehensive compliance strategies, they can mitigate risks and maintain market access across jurisdictions.