The product liability provisions of the Trade Practices Act allow persons who suffer injury or loss as the result of a defective product to take legal action for compensation against the supplier of that product. These provisions apply to goods supplied after 9 July 1992.

• When is a product defective?
  
• Who may be liable for supplying a defective product?
  
• Who can bring an action for compensation?
  
• What type of loss may be compensated?
  
• Time limits for bringing a product liability action
  
• The manufacturer may not always be liable for the defective product
  
• What can a manufacturer or importer do to reduce the risk of action?
  
• What is the ACCC's product liability role under the Trade Practices Act?

When is a product defective?
A product is defective if it does not provide the level of safety that the community generally is entitled to expect. The level of safety will vary from case to case and it is ultimately for the court to determine whether a product is defective. However, there are various factors the court will take into account when making its determination, including:

• how and why the product has been marketed;
  
• its packaging;
  
• the use of any mark in relation to it;
  
• instructions for, or warnings about, doing or refraining from doing anything with or in relation to the product;
  
• what might reasonably be expected to be done with it;
  
• the time when it was supplied.

Products that are older and subject to more use would not necessarily be expected to be as safe as brand new ones. Similarly, products would not necessarily be defective simply because the safety of later models had been improved.

Who may be liable for supplying a defective product?
The product liability provisions of the Trade Practices Act will generally apply to a company that:

• manufactured the product, or
  
• imported the product, or
  
• sold 'own brand' goods manufactured for it under license.

The retailer may sometimes be deemed to be the manufacturer of the product and hence liable.

Who can bring an action for compensation? -and- What type of loss may be compensated?
The Trade Practices Act allows anyone to claim for personal injury or damage to private property (including land or buildings) resulting from a defect in the product.

Dependants of a person injured or killed by a defect in goods can also claim for the losses they suffer as a result.

Damage to commercial property is not covered nor is any loss arising from a business relationship, such as loss of profits. The Act also excludes losses for which a claim might be made for workers compensation and losses regulated by international agreements.

Time limits for bringing a product liability action
A person has three years to bring an action from the time he or she becomes aware (or ought reasonably to have become aware) of the loss, the defect and the identity of the manufacturer. Also, any action must be commenced within ten years of the time the defective goods were supplied by the manufacturer.

The manufacturer may not always be liable for the defective product
Several statutory defences are provided to a manufacturer against a product liability action. The defences are available when:

• the defect did not exist at the time of supply by the manufacturer;
  
• the product was a component of a finished product and the defect attributable only to the design of the finished goods or the packaging, instructions or warnings included in those finished goods-then, the manufacturer of the finished goods will be liable and not the component maker;
  
• the defect that arises could not have been discovered at the time the manufacturer supplied the goods because there was insufficient scientific or technical knowledge at that time;
  
• compliance with a mandatory Commonwealth or state standard was the sole cause of the defect.

It should also be noted that when an injured person's acts or omissions contribute to the loss the court can reduce the amount of compensation payable to whatever extent is appropriate. The reduction could be as low as zero.

What can a manufacturer or importer do to reduce the risk of action?
Minimising the risk of action under the product liability provisions generally requires no more of manufacturers, importers and retailers than responsible business practice.

A culture of safety is an important attribute of any responsible organisation and this should include being aware of the firm's product in the hands of the consumer.

Prudent firms review design, production, record keeping and marketing procedures as well as customer information material to ensure the safety of their products with consumers. Attention should also be paid to quality assurance systems.

What is the ACCC's product liability role under the Trade Practices Act?
While the Act provides rights that people will generally pursue through the courts for themselves, the Australian Competition and Consumer Commission (ACCC) may sometimes take representative action on behalf of one or more people who have suffered harm from a defective product. This is intended to improve access to the law and to allow the ACCC to act when goods have (or may) cause widespread detriment.

An important role of the ACCC is to inform businesses and consumers about their rights and obligations under the product liability provisions of the Act.