The report highlights the need to make recalls sooner rather than later, and to have insurance in case of a problem. Mark Kendall, a partner at the London-based law firm said that the negative media coverage of the slow response of Cadbury to finding salmonella in its chocolate clearly illustrates the dangers of not taking pre-emptive action. "Corporate reputations have become more fragile as consumers increasingly use the internet and other media to share and publicise information about faulty products," he said. While food recalls fell to a total of 71, overall product recalls of all goods rose by eight per cent to 179, the law firm stated. The increase indicates businesses are moving more decisively to protect their reputation from the harm caused by faulty goods, he said. Companies were also driven by the treat of insurers not paying out due if they delayed making a recall, and fears over regulatory action against them. The largest increase came in the consumer goods sector, where recalls leapt by about 20 per cent. The reasons for recalls in the food sector varied from mislabelling to the discovery of glass, wood and even moths in products. Kendall noted that legal costs and compensation paid out due to placing faulty products on the market can be massive. Sony 's withdrawal of faulty laptop batteries worldwide reportedly cost the company about $429m. Drug maker Merck is facing lawsuits from 46,000 individuals since it withdrew the painkiller Vioxx back in 2004. Bank of America's latest estimates for Merck's total Vioxx liabilities are $11-15 billion. "The legal costs and compensation paid out can be colossal, so the need to recall quickly is vital and so is insurance cover," he said. "With consumers becoming ever more litigious, companies are playing it safe and recalling even where the risk of a liability is slight. They know the courts and the press will punish them if they are seen as dragging their feet." Companies also have more incentive to make recalls due to the threat of criminal charges for those who fail to withdraw unsafe products. A failure to comply with an official safety notice to withdraw can result in 12 months' imprisonment for executives. Failing to act quickly can also create problems for a business when it tries to recoup the cost of a product recall from its insurer. An insurer might not pay for a recall that it does not consider to be essential for health and safety reasons, Kendall said. "Furthermore, some product recall insurers will not pay out if the recall is forced on its policyholder by a public body, such as the Food Standards Agency," he said. Many businesses, especially those outside of the food and pharmaceutical sectors, still do not have insurance cover for product recalls. "There is a fear that, if a company does not have product recall insurance in place, it will not launch a recall and consumers will be put at risk," Kendall said. "However, if you are a food manufacturer supplying to a supermarket, it is practically compulsory to have product recall insurance. Supermarkets want to know that, if there is a problem, their supplier will have the funds for a recall and to continue trading." The Food Labelling Regulations 2004 came into force on 25 November 2005 and introduced a much stricter regime for the labelling of allergens. The General Product Safety Regulations 2005 came in to force on 1 October 2005 and gave regulators the power to make a firm recall its products if there is a health and safety risk. Firms are also now obliged to inform the relevant government agencies when they recall a product. In 2005 the number of food recalls appeared to have fallen, but this is because the firm's research counted Sudan 1 as one recall. Sudan 1 actually caused hundreds of individual recalls to be made.
Product recalls in the UK food sector fell by seven per cent last year, according to a report by law firm Reynolds Porter Chamberlain.