22 Jul 2021

Countdown continues until strict button battery standards become mandatory

By Alexandra Rose, Will Atfield, Alex Corsaro and Max Carter

In less than one year, strict new standards governing button batteries will become mandatory in Australia.

On 22 June 2022, new mandatory safety and information standards regulating the supply of button batteries – and consumer products containing them – will become enforceable. From this date onwards, significant regulatory exposure arises for non-compliance, and active enforcement is expected from the Australian Competition & Consumer Commission (ACCC).

The Standards, set to become mandatory and enforceable on 22 June 2022, are comprised of the:

  • Consumer Goods (Products Containing Button/Coin Batteries) Safety Standard 2020
  • Consumer Goods (Products Containing Button/Coin Batteries) Information Standard 2020
  • Consumer Goods (Button/Coin Batteries) Safety Standard 2020
  • Consumer Goods (Button/Coin Batteries) Information Standard 2020

Background to the button battery reform

Button batteries are used in a wide variety of consumer products including remote controls, watches and toys. Despite their appearance, button batteries can pose a safety risk to consumers, particularly children. The ACCC reports that an average of one Australian child per month is seriously injured after swallowing a button battery.

It is not surprising that button batteries and products containing them have been a key area of interest for the regulators over recent years. This reached a crescendo when the ACCC announced new mandatory safety standards for button batteries in December 2020, and again identified button batteries as an area of priority in 2021. The Therapeutic Goods Administration (TGA) has also played a role in the increasing regulation, having conducted a post-market review of 175 sponsors of home medical devices containing button batteries (such as thermometers) starting in 2016. After assessing themselves against the previously applicable code of practice, 35 sponsors found that they had non-compliant products. As the requirements were not mandatory at the time, these suppliers were invited to work with the TGA to assess and mitigate the risks associated with their products. However, when the new mandatory standards take effect in June 2022, we expect regulatory attention from the ACCC and possibly the TGA to further intensify.

The ACCC has stated that once the Standards become mandatory they will be conducting market surveillance to monitor compliance. When announcing the new Standards, ACCC Deputy Chair Delia Rickard signalled that they "will enable the ACCC to take strong action". As such, manufacturers and suppliers are on notice to ensure their products are tested and compliant by June 2022.

How the new requirements work

The Australian Consumer Law (ACL) provides for the relevant Commonwealth Minister to make two types of mandatory product standards: "safety standards" and "information standards".

Previously there was no specific mandatory legal regime that regulated the supply of button batteries or products containing them – there were only voluntary industry standards including a code of practice. The new mandatory standards impose more onerous requirements on manufacturers and suppliers.

The four new mandatory standards were introduced in December 2020 and are subject to an 18-month transition period, during which they are not enforceable. This was intended to give manufacturers and suppliers time to make the requisite design, manufacturing, testing and packaging adjustments to their products to ensure they are compliant with the new Standards.

The Standards comprise separate safety and information standards for button batteries (when sold separately) and products containing button batteries. The safety standards contain requirements relating to design and testing, for example, how the batteries must be secured (when sold separately, or when installed in another product). The information standards require that certain warnings and labels be displayed on the packaging of button batteries and products containing them.

The new mandatory safety standards will apply to "suppliers" of button batteries or consumer products containing button batteries. The term "suppliers" is defined broadly under the ACL to encompass multiple entities in the supply chain and can include manufacturers, importers, distributors and retailers. This means that entities involved in the supply of button batteries, or products containing them, will all be held to compliance. In practice, this means that all entities in the supply chain need to be aware of the compliance status of products they distribute or sell and seek appropriate assurances.

What manufacturers and suppliers need to do

Manufacturers and suppliers have until 22 June 2022 to ensure that they comply with the new mandatory standards including ensuring that their product designs and packaging are compliant. A summary of the requirements is set out below and in April 2021 the ACCC released a guide for businesses on the application of the Standards.

For consumer products containing button batteries, the Standards include the following requirements:

  • the batteries must be secure. For example, a replaceable button battery in a product must be held in a compartment designed to be resistant to being opened by young children;
  • if the batteries are kept behind a cover or door secured by screws or other fasteners, it must be designed such that the fasteners remain connected to the door or cover;
  • the product and packaging must display certain prescribed warnings; and
  • valid testing demonstrating compliance with the Standards must be conducted, with evidence of this testing available to be produced to regulators upon request.

For the supply of button batteries as a standalone product, the Standards mandate that the batteries must be sold in "child-resistant" packaging. There are equivalent compliance testing and warnings requirements which can also apply, as is the case for consumer products containing button batteries. One example is that certain button batteries must be marked with an internationally recognised "keep out of reach of children" symbol, on the battery itself.

What are the dangers of not complying?

The requirements in the Standards are a pre-requisite to the legal supply of a button battery, or a product containing button batteries, in Australia. Non-compliance then carries the risk of significant penalties.

For example, under the ACL, supplying goods which do not comply with a mandatory safety or information standard is an offence. For a corporation, the maximum penalty is the larger of AU$10,000,000, three times the value of the benefit gained by the contravening conduct, or 10% of the corporation's turnover in the year preceding the offence. Other consequences can include enforceble undertakings with the ACCC, infringement notices or orders disqualifying indivduals from managing corporations.

Failure to comply with the Standards could also lead to significant penalties and the need to conduct product recalls. Over recent years, the number of product safety recalls involving button batteries has gradually increased and is likely to reach record numbers in 2021. Many of the recalls seen to date have involved low-value products, such as children's toys or promotional items with lights or sounds.

Takeaways for manufacturers and suppliers of button batteries

Manufacturers and suppliers should be aware that although the process of ensuring compliance with the new Standards may be involved and costly, the potential consequences of failing to do so can be very significant.

In addition, separate from the regulatory hurdles, manufacturers and suppliers of button batteries or products containing button batteries ought to be apprised of the residual product liability risks associated with their products. In Australia, while in certain circumstances compliance with the new Standards will be a defence, it will not necessarily be a defence to claims from consumers such as claims that a toy or other product containing a button battery was unsafe.

It remains incumbent on all manufacturers and suppliers to have a thorough understanding of supply chain risk and to ensure that product design and testing is compliant with local laws.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.