What is a 'Product Recall'

A product recall is the process of retrieving defective and/or potentially unsafe goods from consumers while providing those consumers with compensation. Recalls often occur as a result of safety concerns over a manufacturing defect in a product that may harm its user.

BREAKING DOWN 'Product Recall'

While the process behind a recall can vary depending on local laws, there are some general steps that occur. For example, if a pet food manufacturer releases a batch of product that contains an ingredient that may accidentally poison animals, the company will publicly announce the dangers of the food and request that its customers return the product to the firm, or simply discard it. Customers will usually be given a full refund or replacement. A public relations campaign is often created to handle the publicity surrounding the event.

Recalls may negatively affect a company's stock. Concerns grow over a company's capabilities when a dangerous product is released, and customers may turn away from purchasing its goods in the future, leading to declining sales.

Some recalls may ban the sale of an item, while others may ask consumers to voluntarily return a defective item for replacement or repair. In certain examples, such as an automobile recall, a seller may provide a new part or perform a diagnostic that reduces the danger of using the product.

Examples of Product Recalls

Tens of millions of vehicles have already been recalled in recent years over concerns that the installed Takata air bags are defective. The National Highway Traffic Safety Administration (NHTSA) says that long-term exposure to high heat and humidity can cause these air bags to explode when deployed. This particular recall includes the phasing and prioritizing of repairs, as all of the replacement parts could not be made available right away and certain vehicles were at much higher risk of a dangerous air bag explosion than others.

Back in 2009, a major salmonella outbreak for peanut butter products processed by Peanut Corp. of America reportedly killed a number of people and sickened hundreds more. Thousands of products containing potentially-tainted peanut butter sold by a large number of different companies were associated with the massive recall. Peanut Corp. went out of business shortly after and the industry took a major hit as a result.

Many toy makers, including Mattel and Fisher-Price, were forced to recall millions of their children's toys back in the mid-2000s due to excessive amounts of lead in the paint of the products. These unsafe toys were mainly manufactured in Chinese factories.

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