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27 May 2010
In October 2007 the Ministry of Justice entrusted a working group with the task of suggesting limitations to the criminal risk of companies and revisions to regulatory methods that would be more in keeping with commercial realities. In particular, the purpose of this task, in light of concerns expressed by manufacturers and entrepreneurs, was to suggest the removal of 'useless' criminal penalties, or their adaptation or replacement with civil or commercial procedures or administrative penalties. The working group published its report in early 2008.(1)
Two years after publication of this report, which was never followed up by the legislature, the criminal risk incurred by manufacturers for products that they manufacture or put on the market has not diminished.
This increasing criminal risk is due to several factors which are examined in this update, which include the complexity and diversity of regulations, and the numerous sources of liability. Manufacturers must thus find solutions that allow them to limit and, if possible, anticipate such risk.
The Consumer Code imposes significant obligations on manufacturers. Notably, they must comply with a general safety obligation for all products that they put on the market which may be used by consumers. The implementation of this obligation is guaranteed by self-monitoring by the company that is first to introduce the product to the market,(2) as well as by a follow-up obligation which requires manufacturers to enquire about the risks associated with a product and to take all necessary measures to control such risks (eg, consumer warnings; withdrawal or recall of products).(3) Manufacturers and distributors are also bound by an obligation to inform the authorities of products that do not comply with the safety obligations and must thus be considered as dangerous.(4)
Even though the safety obligation, as established by the Consumer Code, does not provide for specific penalties under French law, any breach may give rise to the manufacturer's criminal liability on the basis of offences under common law, such as manslaughter or unintentional injury. Criminal liability may also be incurred with respect to the self-monitoring obligation; breach of this obligation may be taken into account by the courts when examining the offence of deceit.
The regulations applicable to French manufacturers of chemicals and foodstuffs serve as an example of the abundance of rules and obligations which manufacturers must observe.
EU Regulation 1907/2006 on the registration, evaluation and authorization of chemicals (REACH) imposes numerous obligations on manufacturers of chemicals.(5) Breach of some of these obligations may give rise to criminal penalties under the Environmental Code.(6)
EU Regulation 178/2002 on general principles and requirements of food law established a safety obligation(7) and an obligation to comply with the requirements of food law,(8) as well as the principle of self-monitoring(9) and obligations relating to traceability(10) and information.(11) Meanwhile, Article 3 of EU Regulation 852/2004 on the hygiene of foodstuffs requires food business operators to ensure that each stage in the production, processing and distribution of food under their control satisfies the relevant hygiene requirements laid down in this regulation. Numerous decrees and orders also apply to food hygiene and safety.
Pursuant to Decree 2009-697, the purpose of standardization is to provide consensually established reference documents in relation to rules, features, recommendations or best practices. Standards are not mandatory, in principle. However, pursuant to Article 17 of the decree, standards may become mandatory by order of the Ministry of Industry and the relevant ministries.
Moreover, even if standards are not the subject of an order, they can increase the risk of criminal penalties in the event of non-compliance, as they may characterize a professional practice and will be considered by the courts when assessing the degree of care to be taken by a manufacturer.
In the absence of an applicable regulation, the courts may refer to established commercial or professional practices.(12) Thus, for instance, a finding of deceit can be established on the basis of commercial or professional practices.
Sources of liability
It is easy for consumers to initiate public actions. This may be done by the filing of a complaint, by simple letter or by an oral declaration, which will be recorded by a judge. Practical explanatory guides are available on the website of the Ministry of Justice.
Consumers are no longer hesitant to avail of this course of action, which is extremely hazardous for the company at stake - not only in terms of liability, but also in terms of media 'cost'. For instance, in 2008 a family filed a complaint against Bouygues Telecom based on the offence of administration of harmful substances.(13) The claimants accused the operator of having installed a mobile phone mast in their area which, they alleged, had caused their children's health to deteriorate. Several national daily and weekly newspapers reported on this complaint.
In the event of a complaint by a consumer, the necessary investigatory measures are carried out by the Public Prosecutor's Department or by the investigating judge, on the basis of procedural rules that are extremely strict and favour the punishment of offences. The investigating judge has extensive investigatory powers, including searches,(14) seizures(15) and hearings.(16)
The investigating judge can also order the suspension of trade in a product(17) or the cessation of misleading advertising(18) before any sentence is issued; its decision is enforceable irrespective of any appeal. These powers are also extended to the Ministry for Consumer Affairs(19) or the prefect,(20) so there is thus a risk that decisions may ultimately be unjustified. Breach of such orders, however, is a criminal offence. (21) The trial courts have similar powers, after sentence.(22)
Victims may be assisted by consumer associations, which can become civil parties to ensure the collective defence of consumers.(23)
These associations not only can launch an action to seek compensation for an established damage, but also can obtain from the judge "any measures to put an end to illegal activities"(24) and even refer the matter to summary proceedings, if the case is urgent.(25)
Authorities and administrations
Various specialist agents can search for and report on offences for which manufacturers can be blamed.(26) These specialist agents have significant powers, including the right to access certain evidence or documents(27) and the right to conduct dawn raids(28) and seizures.(29) Any hindrance to these activities constitutes a criminal offence.(30)
Various authorities or administrations also have supervisory and investigatory powers which may lead to the initiation of a public action against manufacturers. They include the Consumer Safety Commission, the Directorate General of Customs and Indirect Taxes and the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF), whose investigatory powers can be exercised throughout the national territory.(31) In the event of an offence, the DGCCRF may transfer the file to the Public Prosecutor's Department in order for the latter to initiate proceedings.(32)
Main applicable offences
Manufacturers cannot ignore the risk of incurring criminal liability on the basis of the offence of manslaughter,(33) given the seriousness of the penalties that may be imposed and the strictness of recent case law.
In the health product sector, in 2006 the legal representative of a pharmaceutical laboratory which specialized in manufacturing plant-based medication was given a two-year suspended sentence and a fine of €45,000 by the Aix-en-Provence Court of Appeal, after the deaths of two women who had taken slimming capsules made from plants imported from China and sold by the company. A toxic plant had been used by mistake in the preparation of the capsules. The court held that the legal representative of the laboratory had not organized its controls in a way that would have allowed the toxic plant to be detected. This sentence was upheld by the Supreme Court on April 1 2008.(34)
As a further example, one year ago the Colmar Court of Appeal confirmed a decision of the Saverne Criminal Court that had fined car manufacturer Volvo €200,000 for manslaughter and unintentional injuries following a road accident in 1999 which had caused the deaths of two children and injury to a third. The vehicle's braking system was found to have caused the accident.
Unintentional damage to the physical integrity of others
A company that had been entrusted with designing and constructing a bridge crane on a steel production site was fined €50,000 for unintentional injuries after an employee at the site was seriously injured due to a fatigue failure of part of the crane. The Supreme Court approved the lower court's decision to hand down a sentence against the manufacturer for failing to carry out the fatigue calculations recommended by the European handling standards, with which it was contractually bound to comply. Moreover, the court specified that faults which had been committed by the company in charge of the production site when putting the bridge crane into service and when using it did not exonerate the manufacturer from liability.(35)
Direct exposure of the public to an immediate risk
In an April 15 2008 decision(36) the Criminal Chamber of the Supreme Court upheld an order handed down on the basis of direct exposure of the public to an immediate risk, as well as for deceit, against a professional who had sold as fresh meat that had been frozen and defrosted or had been subject to ionization processes to hide its state. A two-year prison sentence was imposed, of which 18 months were suspended, together with a fine of €40,000 and a definitive prohibition against management. A publication measure was also ordered.
Criminal consumer law - deceit
The offence of deceit is often raised in cases involving public health and safety. French case law contains numerous examples of sentences on the basis of deceit ,(37) relating to the introduction onto the market of products that did not comply with standards.
For example, penalties were imposed on this basis for the sale of electrical equipment(38) imported from China that did not comply with the applicable safety standards, and for the sale of products bearing the European conformity symbol even though they did not comply with the applicable safety standards and were dangerous.(39) A company and its manager were also penalized for selling illuminated frames that were not compliant with the applicable standards and which presented a risk of electric shock. Again, compliance with the applicable requirements had not been ensured.(40)
In terms of health products, on May 24 2007 the Toulouse Court of Appeal fined the representative of a pharmaceutical laboratory €30,000 in a case, similar to that mentioned above, in which capsules made from Chinese plants and sold by the laboratory had caused two consumers to suffer irreversible renal lesions. The capsules had contained a different plant from that labelled.
The strictness of case law is also revealed by decisions to postpone the start of the statute of limitations for public action: the Criminal Chamber of the French Supreme Court has held that this begins to run not on the date on which the act was committed, but rather on the day when the offence becomes apparent and can be observed under conditions that allow for exercise of the public action.
Finally, some courts have found that carelessness is nearly sufficient for a finding of deceit, even in the absence of fraudulent intent. Thus, it was held that a finding of deceit could result from an importer's failure to control compliance upon delivery of a product in France, where the samples that had been requested prior to import had not satisfied the legal requirements.(41) It was also held that the bad faith of an importer-distributor could be inferred from the fact that the latter had failed to check the composition of products it imported and distributed, relying solely on indications provided by the supplier.(42) However, certain recent decisions seem to indicate a return to greater strictness when assessing the element of intent.(43)
Abundance of specific provisions
In addition to these abundant general potential sources of liability, specific criminal penalties can apply for certain categories of product.
In addition to the criminal provisions which penalize breaches of the REACH regime, the French legislation on health products offers a new example of this phenomenon. Order 2008-717 established a set of criminally punishable actions applicable to this category of product. The stated aim of this law is to make it easier for criminal actions to be initiated on the basis of these offences and thus to avoid the need to refer to offences of common law, which can be more difficult to establish.
Strategies for manufacturers
The manufacturer may succeed in challenging fault, as was demonstrated by an April 30 2007 decision of the Grenoble Court of Appeal. In this case, which received wide media coverage, Panzani was sued, notably on the basis of the offence of deceit, after a consumer discovered a dead rodent in a packet of Panzani pasta.
To challenge deceit, the company detailed all of the prevention and self-monitoring measures it had implemented. It demonstrated that the site where the packet of pasta in question had been manufactured had been the subject of certification by the International Standards Organization, and stated that a general process to analyze hygiene risk, in compliance with the applicable regulation, had also been implemented. The company also highlighted a contract it had concluded with a pest control company and the completion of audits by supermarket chains, which had all confirmed that the site complied with their food safety requirements.
This argument was confirmed by the court of appeal, which emphasized that "to be punishable, deceit must result from fraudulent intent" - which was not the case here in light of the implemented measures.
The media risk that arises from criminal action may force the manufacturer to consider the possibility of responding to hostile or defamatory comments made against it. Reports, right of reply and actions for defamation are among the available options, but they must be handled with particular care.
Limit the risk: criminal settlement
Order 2005-1086 established the principle of settlement with regard to minor offences under the Consumer Code.(44) Upon approval by the Public Prosecutor's Department, the DGCCRF will send the offender a recommendation that it pay a fine within a specified period in return for withdrawal of the public action.
However, the scope of application of this settlement method remains too limited to represent a true option for manufacturers to limit their risk. None of the abovementioned offences may be subject to this.
Anticipate the risk
The April 30 2007 of the Grenoble Court of Appeal provides guidance for manufacturers on how best to anticipate the risk: internal self-monitoring, third-party controls, official analyses, analyses of suppliers or their laboratories and similar actions can all help the manufacturer to limit its criminal risk. However, the objectives which the manufacturer hopes to achieve through these self-monitoring procedures must remain realistic, in order to avoid any possible discrepancies being used against it.
Finally, regular contact with the authorities, and notably with the DGCCRF, may allow the manufacturer to gather useful information on the relevance of its self-monitoring measures.
For further information on this topic please contact Christine Gateau or Jean-François Le Gal at Hogan Lovells (Paris) LLP by telephone (+33 1 53 67 47 47), fax (+33 1 53 67 47 48) or email (email@example.com or firstname.lastname@example.org). The Hogan Lovells website can be accessed at www.hoganlovells.com.
(2) Article L212-1 of the Consumer Code: the company is required to ensure that the product "complies with the applicable regulations" - notably, those "relating to the health and safety of persons" - and prove this compliance. It must thus establish and keep evidence of checks and controls, as the burden of proof is incumbent on it.
(32) For example, hearing a case brought by the DGCCRF, which had presented a file containing 100 complaints from clients recorded from May 2006 to May 2008, in June 2009 the public prosecutor sought a fine of €50,000 from the Nanterre Civil Court for entreparticuliers.com, a property advertisement website, for misleading advertising and misleading commercial practices, and a three-month suspended sentence and €10,000 fine for its manager. The court ultimately fined the website €150,000 and issued the manager with a three-month suspended sentence and a €15,000 fine.
(33) The offence of manslaughter is defined by Article 221-6 of the Criminal Code as causing the death of another person by clumsiness, rashness, inattention, negligence or breach of an obligation of safety or caution imposed by the law or regulations.
(34) Criminal Chamber of the Supreme Court, April 1 2008. However, the decision of the Aix-en-Provence Court of Appeal was quashed insofar as it had declared as inadmissible the filing as civil party of the Federal Union of Consumers.
(39) Criminal Chamber of the Supreme Court, April 7 1999. In this case, the manager of a company that had sold folding pushchairs that were not compliant with the standard (they presented a risk of sagging) was sentenced for not checking for compliance; the fact that they had been imported from China by a Belgian supplier was found to be irrelevant. The Supreme Court upheld the decision of the lower court, which had further found it irrelevant that the European conformity symbol had been affixed in Belgium. It thus dismissed the defence of the importer, which had asserted that it did not need to ensure the compliance of a product bearing the symbol that had been shipped from an EU member state.
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Jean-François Le Gal