Useful information

GPSR is an update and modernization of an older European directive. It presents a broader definition of “product” (for example: also intangibles such as software) and of the term “producer”. In essence, the “producer” is the party that is first responsible for consumer safety of the product that they place into the European stream of commerce. In today’s world, things like online sales, web-shops, non-European mega-platforms from which consumers can “self-import” items from outside, drop-shipping, second hand products and other upcoming phenomena had to be addressed. This has now been done, to ensure (or at least attempt so), that consumers will always find a party within Europe that is responsible and approachable in case of accidents, caused by defective products, or for initiating a product recall.  
 
Consequently, the term “producer” does not just mean a manufacturer, but may involve everyone downstream in the chain, starting with the party who first has put the product into the European stream of commerce. In other words: the party that imported the product into Europe. If that party is no longer there, or cannot or doesn’t respond, the next link downstream in the chain may be on the hook. In any event, no-one has to seek outside of Europe to seek redress, for example in China.  
That sounds great, theoretically. But practice will have to tell exactly what it will bring for consumers, producers, importers and the many “hybrid” chains in the delivery route from point of entry in the EU to the end consumer. 

• For the financial consequences to an injured person or the estate of a deadly victim, there are usually broader social security systems in place than in most of the states in the U.S. Consequenly, the need for a person or family to seek financial redress by going to court has traditionally been less in most of Europe. 
• Most countries have written or unwritten systems to calculate the compensation amount. This is usually limited to the loss, on top of what the victims can collect from their respective social security systems. This may include pain and suffering or loss of future earning capacity, with all its (in)probabilities of course.
• In most European countries the plaintiff takes a risk by starting legal action, in that he or she may have to compensate the defendant for at least part of the fees and costs of defense, if the defendant wins the case. Not just for totally frivolous claims; this risk applies for almost all claims in court that are lost.
  
  
• Defendant companies, their defense lawyers and liability insurers – and also the plaintiff side - seem more focused on early resolution, before any litigation cost are made. The prevalence of coded law (i.e. Napoleonic, or systems more or less similar), as opposed to pure case law, may be a factor in this. Another factor may be that many countries have a more restricted type of discovery process, making it less likely that in a court case all prior out-of-court settlements must be disclosed.
  
  
• Most European countries do not have a lay jury system in civil liability matters. In most cases, a judge or a panel of judges will have that role, who  are usually not elected, and don’t have a re-electoral interest in the back of their minds.
  
  
• The social desire to “punish” a tortfeasor is where criminal law comes in. Fines and penalties are charged by the authority, not by the victim. Most European countries do not have remedies like punitive, exemplary or treble damages in their liability litigation system. Yet, “intent” or the level of  “gross negligence” may have a marginal influence on the awarded amount. 
  
  
• The practice of trial lawyers, actively soliciting plaintiffs (let alone: ambulance chasing) is less prominent in Europe. There are no rows and rows of billboards along the highway, asking you if you have been injured (yet?). 
  
  
• For a long time, “no cure, no pay”/contingency fees  were not allowed in many countries. In recent years, these have become more common, sometimes indirectly, through “intermediaries” carrying the risk of non-billable efforts of a lost case.
  
  
• Third Party Litigation Funding (TPLF) providers are a recent trend, where in the past this was the domain of national legal aid systems or private legal aid insurers. Both would typically prefer out of court solutions. The new TPLF players are mostly American/international firms, working with local partners or by setting up shop in Europe. Some are putting their bets on the new GPSR and the increased possibilities for mass claims. While welcomed by some claim bureaus representing victims suggest that TPLF provides “better access to the court room”, others have serious doubt. First of all, differences between the litigation environments across the Atlantic seem to be underestimated by some new players. As the late David Bowie said it: this is not America. Also, and quite recently, it has been suggested that some TPLF providers offer a potential new route for money laundering. Especially in the UK (technically not Europe, of course 😊) there has been some debate about this already. 
   
  Arguably, while some of the supposed differences between litigation worlds are deeply and historically rooted in culture, people might raise the question about cause and effect. Perhaps, with recent changes, the European landscape may turn out to be less hanging on tradition, and adopt more elements of the American claims culture. Time will tell. For now, foreign defendants may need to carefully consider which path to choose: confrontational/defensive, or more focused on out of court negotiations.  
   
  To deal with that question, foreign companies wanting to do business in the Netherlands and other European countries should familiarize themselves with real Practice. How are the chances that a claim will go to court, and what will happen first. How are things otherwise dealt with (it’s not a monopoly territory for the legal professionals). How to communicate at the onset, and what are the pro’s and cons? 

The new European General Product Safety Regulation (GPSR) of 2024 and new legislation on representative litigation such as class or group actions are shaking up the old ways. 
 
One of the biggest challenges of GPSR has been to deal with the wildly diversified ways in which these days a product may end up at the consumer. From internet platforms to “buying clubs” to private mini web shops and everything in between. Websites offering second-hand products are another point of concern. There have been documented incidences, where consumers offered products that had been subject to a public safety warning on these sites, especially after they found out that returning the products and getting a refund or replacement was impossible or too much work. 
 
At the same time, the national supervising authorities struggle with the increasingly complicated task, while often their budgets are only decreased under the pressure of deregulation, the electorate’s call for “smaller government”, budget cuts under political pressure without a proper plan, and huge difficulties to recruit qualified staff. 
 
In short: stricter and more complicated rules, and less budget and resources for supervision and enforcement. And a consumer population that demands no less than unquestionable product safety, for an unrealistic low price. Good luck!   
 
All together big changes, but then again, maybe not as dramatic as some people want you to believe. One thing is certain: it will be challenging. Certainly for a business from outside of the EU/EEA territory.  
How do you get a feeling of the reality in your overseas market? How to select your resources (legal, insurance and risk management) effectively? What about “tanking” some independent, real Practice experience first? And shouldn’t you at least define your strategy outline from a business perspective, before spending wildly on lawyers, consultants and insurance solutions? 
 
I have seen in Practice how helpful it can be to do some orientation first. It helps to interpret this into what it means for your line of industry, your company and your product (or service), and then to decide what you need. I will be happy to offer you my share in this process.  

The problem with perceptions and bias is not only that they lead to generalization but also that they don’t tend to move along with shifting realities. To make it even more complex: perceptions and biases are not just inside the minds of individual consumers, but also have an influence on how legislators and authorities put their focus. Since the first half of 2025 this needs no further clarification. 
 
In order to be less vulnerable to this effect, there is work to do. As an example, product safety authorities in many European countries appreciate that companies show active interest in regulations and compliance by attending their presentations for businesses, or to reach out to them with questions about the interpretation of certain regulations in practice. It may earn you credits; not that they apply rules to you more flexible than on others, but communication and mutual understanding in case of a real problem becomes easier and more constructive if you have a decent record with them. 
 
In a broader sense, understanding local perceptions, attitudes, typical reactions in case of a product issue, and the approach that “the public” expects from you is a good and almost certainly time and cost saving investment. Talk with people from practice. Visit events and informative presentations for local or regional businesses. Aligning your local risk management efforts with how your sales and marketing teams familiarize themselves with the foreign marketplace, may pay off in more than one way and save costs.  

Since decades, national industry standards for products and work processes in the (now) 27 + 4 countries have been harmonized, usually into European industry standards. This may increase the regulatory and financial impact if something goes wrong, but at the same time it simplifies life for industries too. Let’s see if this is also true for supervising and enforcement. 
 
Most supervising agencies have in common that they work together on European level through intra-European information platforms. If one of the national agencies imposes a corrective action (such as a recall), this decision will almost always be taken over by the peer organizations in other European countries. It is certainly recommended for businesses from outside Europe to get familiar with institutions such as EFSA and Safety Gate or, in case of special product categories, the applicable regulatory framework. This is an essential element in building up preparedness for incidents, and thus resilience.  
 
There is also a soft factor, which may not be the same everywhere outside of Europe: a level of  consensus that knowing how to manage a crisis from day one, and openly communicating what you plan to do, helps in protecting reputations, with consumers and investors. Aggressive defense against agencies imposing a  corrective action (i.e. a recall), and resisting to do so voluntarily, may be seen as “strength” by investors in some parts of the world, but usually not so in Europe.  
 
The financial damage on the long term, resulting from allegations of trying to cover up something (true or not), can be catastrophic, adding up to multiple times the cost of a proactively initiated product recall. But only if this takes place with an effective plan. And watch out: many factors can make a recall plan useless, if it is too strict, too theoretical, outdated, or not regularly practice-tested by simulation. 
 
   
 
Although every situation is different and must be judged on its own merits, foreign (parent) companies and investment firms controlling businesses or selling products in Europe may benefit from keeping this in mind.  

New start-ups are typically buzzing with enthusiasm, drive, energy and out-of-the-box creativity. Everybody is focused on how to get this going and to make it a success. Positivism all over the place. Not really the time for thinking what to do if something goes seriously wrong with a new product. 
 
Yet, every manager will understand somewhere in the back of his/her mind, that it will be necessary to develop some sort of contingency plan. Also, if you are a not-so-new start-up, the same advice mentioned above would apply. Familiarize yourself with how things work in such an unhappy case. Not in general, not based on practices in home-office country, but here, in your new market.  
 
Get it done. Plan a day with all disciplines that might be involved (from purchasing to sales, from production to R&D, from quality assurance to logistics, from work floor via legal to top management. Think and speak freely of scenario’s that you normally don’t want to hear about. Make a plan and test it by simulating practice. Have it, maintain it, improve it and make sure everybody who needs to know it, does actually know it. And nominate a few top people as the first response team, in case you get that big liability claim, or if authorities tell you to recall a product. 
 
New acquisitions normally have been vetted through and through during the due diligence process. Usually this is a very finance-driven exercise, and that is quite understandable. The new investor needs to know if the acquisition is worth its price and has the potential to become very profitable. You don’t want snakes in the grass and skeletons falling out of the cupboard.  
 
I will describe a few scenarios, dramatized, anonymous and with facts changed for the sake of anonymity. Inspired by combined scenarios from practice. Cases where a risk or an existing problem was never identified (or looked at too naively) during the due diligence process. I hope these examples will make my point. 
 

• Let’s imagine an industry of sports articles taking over an existing company in Europe. The parent company may itself have very mature, well-thought recall-plans that have proven themselves in practice, and even gained them appreciation from the supervising authorities. Because of the expedience and effectiveness with which they could act in a case in the past.  
  Now the new acquisition is on board, with its own history. Promising, financially sound, but did anyone ask about existing recall plans? No, but if they did, the answer might have been: “not yet”. (It wouldn’t have been a big deal, because the parent company has its proven recall plan.)  
  And in the first year after take-over, did anyone ever take the trouble to inform the management of the new daughter company about the recall plan? Were they given the chance to become part of the regular simulation-testing? No! Well, let’s say: not yet. So, they know nothing about it. As far as they know, there is no plan.  
  Then, on an unfortunate day after the take-over (or even worse: starting already before the take-over) comes some Central-European product safety watchdog, with a whole bundle of pretty alarming consumer reports about an unsafe product from this new daughter.  
  First of all: will the management of the new daughter company have the guts to immediately come clean with its new parent? For example if they got a complaint already, but didn’t take it seriously at the first notification? Possibly not. And if not, when will they finally come out? 
  It does not take much imagination to see that the chaos may be complete. In no time the parent company has to take over the whole problem and put its existing recall-plan at work. Except: it was never written for the situation and the downstream dealership chain of the new daughter company. All of this needs to be fixed first, with the safety authorities and media banging on the door. 
   
  Mergers and acquisitions quite often come with management replacement, sometimes all key people in the company that has been taken over. Management replacement may be a rush job, to be completed in a short time. The risk exists that not all existing issues, files, problems, threats and procedures (including contingency plans) can be thoroughly discussed between old and new management in such a short time, not even talking about disgruntlement. 
  Therefore, nobody may be aware of, let alone familiar with, existing plans and procedures, either on parent or on daughter company level. Let’s go back to the previous hypothetical case, but we add a new element.  
   
• Same scenario as above, but in the meantime the parent company itself has been part of a hostile take-over by a foreign venture capital investment group. That group, by itself, has no affiliation with the industry, the product or the market in which the parent and the new daughter company operate. The new financial group, owning both companies, has replaced the entire management of the parent company. 
  So, now there is nobody at management level in the new daughter company, nor in the parent company, nor within the investment firm, who knows about this existing recall-plan. It sits somewhere in a file cabinet or as one of the many files in the old administration system.  
  Adding further drama to this purely hypothetical case, the investors behind the venture capital group have a different view on first reactions towards authorities, that try to “shove an obligation to recall products down their throats”. They resist, if needed all the way to the supreme court, because that is how it works in some other places in the world. A voluntary recall “looks weak”, it will cost a lot of money, and that was not the idea with the new take-over. They have very good lawyers, so let them deal with it! 
  Well, it is quite thinkable that this is not going to end very happily, for some of the individuals involved….  
   
  Bottom line is that preparedness is a key element of the value of a company. It is an essential quality to protect the integrity and reputation of products, management and in fact the existence and viability of an entity.  
   
  In case of merger or acquisition, the buying company or the external consultant(s) involved in due diligence might – among others – especially want to  look at: 
  
  
• The level of preparedness in terms of business culture, existing contingency plans, familiarity with those in management who need to know, the frequency of practice testing these, and previous use of these; 
• The immediate availability of such plans for new management, others who will be involved in product related crisis situations, including those in the newly acquired companies 
  
  
• The possibility and expected difficulties in synchronizing  plans, if both the party being taken over and the new owner or parent company have these; 
  
  
• Existing cases anywhere known in the intended daughter company or immediate risk of new cases emerging; including impact analysis on financial and reputational level.  
  
  Additionally, in any situation of management change/replacement, these kind of plans should be on the top list of what has to be carried over to new management in a seamless way. New management may want to adapt or improve these, but should be aware of the existence of these from day one. 
   
  All that has been written above had to do with the risk of not knowing about existing issues and/or procedures, and what that may lead to. The question whether the opposite (i.e. overreporting or overstating) is a similar risk is quite valid. Although naturally it puts a lesser risk to the consumer. One might see it as the risk of buying a leaking balloon. The one going to be hurt would usually be the investor that takes over another business with its books of outstanding liabilities and collectible claims. Here is an example, also hypothetical and inspired by practice. 
   
• Let’s say the company involved is a producer of yoghurt in plastic cups, located in Greenland. It is part of a multinational group in Malta, and its product has rapidly become more popular. The cups are filled by a very advanced machine from  continental Europe. The machine has nozzles, which have to be replaced every month. If they don’t do that, too much ambient air may end up in the yoghurt causing shorter shelf life.  
  Then the Greenlandic company is taken over by another multinational with its head office in the Azores.  
  Before that acquisition happened, a thorough due diligence investigation had been done by a famous global accounting firm. One item on the list of obligations and claims had to do with a large production batch of yoghurt that had been blocked and discarded just before the acquisition. Wholesale value US$ 3 million. The case is on the list of claims, because apparently the manufacturer of the filling machine is held liable. A report says that the at one exchange, to replace the filling nozzles, they all had a sharp edge that caused leaks in the cover of the cups. There are also photo’s, but the machine manufacturer has not taken a position yet. An in-house legal has confirmed that the claim should have a 75% chance to succeed. For purpose of the due diligence report, the claim is valued at 2 million Euro.  
  Of course, once the acquisition is completed, the new owner in the Azores instructs the new local management to proceed on the claim against the machine manufacturer.  
  The machine manufacturer sends a team to a different client with the same type of machine, and for a whole day they try to simulate and reproduce the alleged problem. They can’t, it is simply impossible.  
  A few weeks later, they discover by coincidence that exactly in the month of the failed production, the Greenlandic company had not ordered any replacement nozzles at all. This triggers a big red flag, because for almost every complicated machine, there are imitation parts on the market, usually much cheaper than the original parts.  
  Just to try it out, the machine manufacturer has somebody go into a famous Chinese sales platform to order similar imitation nozzles from three Asian companies.  
  When the first delivery of imitation nozzles comes in, it is already “Bingo”. They inform the Azores owner of the company that they sympathize with the loss of so much production. However, they tell the owner, that the nozzles that are blamed for the problem must have been cheap imitations from Asia, for which they now have reasonable proof. Hence they deny all responsibility and will pay nothing.  
  Instead, they recommend the Azores company to do in-house investigation into the practices of the purchasing department in Greenland, before the take-over took place.  
  That’s it. End of story. A deflating balloon. A two million dollar claim gone up into thin air. The machine manufacturer never hears a single word about the claim anymore. The next month, a new order for replacement nozzles comes in from Greenland, as if nothing ever happened. 
   
  Morale of this story: accountant firms usually dispatch top people in business assignments like M&A. Big numbers, trends, future looks, not really an activity where you focus on something as little and trivial like a couple of nozzles, costing a few dollar each.  
   
  In theory such things don’t happen. Not to save on such cheap parts, and not in a place like Greenland. But sometimes it makes sense, also for top financial specialists, to seek for some practice experience in things that – on the surface – are too simple and too futile to be worth looking at.