07 February 2016
by Marianna Papadakis

Woolworths hit with $3.057m penalty for unsafe products

Woolworths has been slammed with $3.057 million court penalty for selling faulty products it knew were unsafe and for failing to immediately issue recalls after it became aware customers who bought the products had been injured.

Federal Court Justice James Edelman handed down the penalty, which he said was by consent of both parties, during a short hearing on Friday.

The retailer will also have to put $50,000 towards some of the ACCC's legal costs, upgrade its product safety compliance program and provide details on its website including how to report safety incidents and products recalls over the past 12 months.

The Australian Competition and Consumer Commission launched the case in 2014 alleging Woolworths made false or misleading claims about the safety of a number of house brand products.

The products included the retailer's the Abode 3-litre stainless steel deep fryer, which had loose handles, Woolworths Select 1-litre drain cleaner with a faulty child-proof lid and self-igniting Homebrand Safety Matches. They have all been withdrawn from the market.

Woolworths argued the penalty should stand at $2.2 million but the ACCC contended it should be $4 million given Woolworths repeated failure to notify regulators about the injuries and senior management's awareness of an increase recalls concerning its home-brand products, quality-related complaints and customer injuries.

Insufficient 'given seriousness'
Justice Edelman said $2.2 million would be insufficient given the seriousness of the contraventions. He found Woolworth's senior management was not directly involved in the contravening conduct, but was aware of inadequacies in its quality assurance procedures from around September 2012 when it was notified of concerns by the ACCC.

"Woolworths' management was aware of inadequate procedures, with different degrees of specific awareness at different times," Justice Edelman said. "However, the effect of this awareness on specific deterrence is substantially reduced because management nevertheless did make significant efforts to improve the processes. Those efforts were, in some respects, inadequate or not made in time."

The ACCC had argued Woolworths did not immediately recall the products from sale despite at least seven people suffered burns from faults in its deep fryers and drain cleaners.

In one incident, a faulty lid on the drain cleaner led to an 11-month child "burning a hole" in her leg while a Woolworths employee also suffered burns to his eyes because of the faulty product.

The penalty took into regard the need for deterrence and vigilance concerning quality management procedures. It also took into account Woolworths' previously substantially clear compliance record and the retailer's early admission of culpability and cooperation with the ACCC, Justice Edelman said.

A statement by Woolworths said it took product safety and quality extremely seriously. It acknowledged the failures in its quality processes and apologised to customers.

It said it invested more than $20 million on a new product lifecycle management system, implemented over two years, to ensure its products were the quality customers expected.