Pressing Ahead - First Penalties Issued for Button Battery Standard Breaches

Two large Australian retailers, The Reject Shop and Dusk are the first suppliers to be penalised under the world-first mandatory standards for button batteries (BBs), enforceable since June 2022.

Both companies paid a total of almost $240,000 in fines for their failures to comply with the mandatory product safety and information standards for button batteries (BB standards). The ACCC is taking a serious and proactive approach to enforcing the BB standards, in line with its enforcement priority to target consumer product safety issues affecting young children and has previously indicated that it will focus on proactively assessing unsafe BB products both online and in stores such as discount retailers, variety shops, major retailers, pharmacies, newsagents and at large events.

You will be subject to the BB standards if you manufacture, import, distribute or retail BBs or BB products within Australia or for the Australian market. Given the prevalence of BBs in retail products, here’s what you need to know about the BB standards and what the ACCC’s latest actions mean for your business.

What do you need to know about the BB standards?

1. Both BB and BB products are covered, including second-hand BB products – There are four information and safety standards (covering BBs and BB products), which cover the supply of both new and second-hand BB products and BBs to consumers from 22 June 2022 onwards.
2. Limited exemptions for compliance with the standards where products are not intended for the general public – The BB Standards do not apply where the supply of BBs or BB products are not intended for the general public, such as the supply of professional equipment to be used in a trade, profession or industry where children will not be present. There is also a carve out for the use of zinc-air batteries for use in hearing aids from compliance with safety standards.
3. Infringement notices may be issued – The ACCC can issue an infringement notice if it has reasonable grounds to believe you have breached the BB standards. From 1 January 2023, the penalty amount for an infringement notice is fixed at $165,000 for listed corporations, $16,500 for non-listed entities, and $3,300 for individuals.
4. Heavy penalties apply for breaches – The ACCC may initiate legal proceedings rather than issue an infringement notice in certain circumstances, including where it suspects that the breach is particularly serious or has caused significant detriment. The maximum penalties that can be ordered for businesses that don’t comply with the safety standard is the greater of $50 million, 3 times the value of the benefit obtained, of if that value cannot be determined, 30% of the business’ turnover during the breach period. Individuals may be liable for penalties up to $2.5 million per breach.
5. Child-resistant packaging, compliance test and warnings must be included – BBs must be supplied in child-resistant packaging and contain the prescribed warnings, including potential injury risks. Similarly, BB products must meet secure battery requirements and subject to compliance testing, include prescribed injury risk warnings and include mechanisms that prevent the release of batteries during foreseeable use or misuse of the product.

ACCC’s actions against The Reject Shop and Dusk

The ACCC alleged that Dusk and The Reject Shop each sold Halloween-themed novelty products that had not been safety tested as required by the BB standards.

a) Dusk

Breach: Dusk is an in-store and online retailer which sells candles, homewares and fragrance products to consumers in Australia and has 131 retail stores nationwide. During August – October 2022, Dusk sold four BB Products that had not been safety tested to the relevant standard prior to sale. It also failed to include safety information and warnings about the safety risks of BBs.

Outcome: For selling over 7700 units of non-compliant BB products, the ACCC issued Dusk with eight infringement notices totalling $106,560, including:

• four infringement notices for failings to test BB products before sale; and
• four infringement notices for failing to include safety information and warnings.

Dusk also agreed to a court-enforceable undertaking to implement a 3-year compliance program. In response to the ACCC’s investigations and concerns, Dusk also ceased supplying the products and initiated a voluntary recall of these products.

b) The Reject Shop

Breach: The Reject Shop is a publicly listed discount retailer that has an online presence and 370 stores around Australia. During September – December 2022, The Reject Shop sold over 20,000 units of a Halloween-themed LED pumpkin product and failed to perform safety tests prior to its sale of these products.

Outcome: The Reject Shop paid a penalty of $133,200 in response to one infringement notice issued by the ACCC, and also committed to improving its existing compliance procedures and staff training.

What does this mean for you?

1. Test before you sell BB or BB products and keep compliance records – In the case of The Reject Shop, subsequent testing conducted by it found that its products actually complied with the requirements of the Safety Standard (although this retrospective finding was still insufficient to prevent it from paying heavy fines). It is important that you ensure you have reliable written verification regarding the testing of the products and keep a record of the steps you have taken to comply with the requirements of the BB Standards in case the regulator comes knocking.
2. Ensure marketing and regulatory staff receive up-to-date compliance training regarding the BB standards and review internal processes – targeted and ongoing training is an effective way to ensure staff can be keen issue-spotters for potential non-compliance issues and internal processes should be reviewed to reflect the new BB standard requirements.
3. Seek legal advice if you suspect you may have sold non-compliant products – If you have inadvertently sold non-compliant products, it may be prudent to seek legal advice to assist you to formulate an appropriate commercial and legal strategy including regulator engagement to minimise the risk of penalties.