Part 2: Product compliance for consumer products powered by AI

Key changes under the General Product Safety Regulation (GPSR)

The EU adopted the GPSR in June 2023 to address risks associated with AI-related products. The GPSR aims to seamlessly integrate AI technology into existing product safety frame-works.
With the growing prevalence of AI technologies, particularly in consumer products, part 2 of this article provides an outline of the new requirements that, while not exclusively AI-specific, significantly affect AI-powered consumer products.

1. Responsible person for products placed on the Union Market

The GPSR introduces the concept of "responsible person" to ensure accountability of EU economic operators. This concept extends the scope of the existing Market Surveillance Regulation (Regulation (EU) 2019/1020) to all consumer products under the GPSR, including AI-powered consumer products. Products without a responsible person in the EU, including so-called fulfilment service providers as new economic operators in the supply chain that were not previously covered, must not be sold in the EU. This ensures that a clear entity within the EU can be held accountable for product safety.

However, establishing a responsible person can be burdensome for non-EU manufacturers without EU operations. For example, EU-based authorised representatives (which could be designated by non-EU manufacturers as a responsible person) must notify manufacturers if they consider an AI-powered consumer product to be dangerous, which is challenging for them due to the rapidly evolving field of AI and potential unforeseen risks. Issues such as these may become a common theme in the future, given the increasing trend for consumers to buy products directly from non-EU countries where there is no EU-based manufacturer or importer.

2. Novel requirements for online marketplaces and traders

The GPSR imposes specific obligations on online marketplaces to improve consumer safety. They must register with the Safety Gate Portal, comply with regulatory orders to remove or display warnings about dangerous products, and ensure that traders provide consumers with essential information, such as manufacturer details and product identification. Traders of AI-powered consumer products will thus need to work with online marketplaces to ensure that the necessary information about the manufacturer and detailed product information is prominently displayed. These measures aim to improve transparency and make it easier to identify and remove unsafe products from online platforms.

It is critical for merchants and online marketplaces to track down manufacturers and vet their AI-powered consumer products to avoid increased liability risks, not only under the GPSR but also under the new liability rules proposed by the EU (see here). Under the proposed Product Liability Directive, if a manufacturer cannot be identified or is based outside the EU, importers, distributors or even online marketplaces could be held liable for damages caused by defective AI-powered consumer products, including data loss. In addition, under the proposed Artificial Intelligence Liability Directive, traders and online marketplaces could also be held liable for non-pecuniary damage, such as inconvenience or emotional distress caused by any infringements. As AI-powered products carry a higher risk of data corruption or leakage, such risks can be significant.

3. Novel requirements for accident reporting to regulators

The GPSR introduces a new requirement for accident reporting. Manufacturers and online marketplaces must report accidents through the Safety Business Gateway as soon as they become aware of an incident. Manufacturers are required to report incidents involving death or serious health and safety effects, while online marketplaces must report serious risks or actual harm to the health or safety of consumers. This requirement helps regulators monitor and respond to safety incidents, thereby improving consumer protection.

When accidents are reported, manufacturers of AI-powered consumer products must, to comply with the GPSR, take immediate action to investigate the causes, assess the severity and implement risk mitigation measures. Manufacturers must quickly investigate to prevent further accidents and strategize to protect themselves against potential claims under the proposed EU Product Liability Directive and/or the proposed EU Artificial Intelligence Liability Directive, which provide consumers with disclosure rights and a reduced burden of proof. This is particularly important to mitigate the increased liability exposure of manufacturers of AI-powered products if their product causes a serious accident under the mentioned proposed new EU liability legislation.

4. Strengthened requirements for product recalls

The GPSR strengthens product recall requirements to ensure effective action in the event of safety issues. Economic operators and online marketplaces are required to notify authorities and affected consumers of product recalls or safety warnings. If a manufacturer believes a product, they've placed on the market is dangerous, they must take corrective action, including withdrawal or recall. Mandatory recall notices with specific format and content are also required. In addition, economic operators must provide consumers with an effective, free and timely remedy, such as repair, replacement or refund.

To comply with the GPSR, manufacturers must improve their recall processes and establish clear protocols for notifying authorities and consumers in the event of a recall or safety alert. Given the complexity of AI-powered consumer products, identifying the cause of a problem and developing effective risk mitigation solutions can be challenging. Therefore, manufacturers should be prepared to review the logs of their AI-powered product, where possible, to gain insight into their product's performance and identify any issues or failures that occur.

5. Penalties

The GPSR emphasises the need for effective sanctions to enforce compliance with the GPSR. Member States are responsible for transposing these penalties into national law to ensure maximum effectiveness. The GPSR aims to encourage economic operators to prioritise product safety by imposing penalties for non-compliance, thereby acting as a deterrent to negligence and increasing consumer safety.

Manufacturers must be aware of the penalties associated with non-compliance and take steps to avoid them. They should familiarise themselves with the specific penalties laid down by the Member State in which they operate and ensure that their operations comply with the legal requirements. This should include investing in compliance training, establishing internal audit processes and maintaining comprehensive documentation to demonstrate compliance with product safety requirements.

For AI-powered consumer products, post-market surveillance is critical due to their self-learning capabilities. Manufacturers should robustly monitor user feedback, incidents and complaints related to the products, and promptly investigate and address any potential safety concerns to minimise the risk of fines from EU regulators.

Outlook

The GPSR introduces significant changes to the EU product compliance landscape, although not exclusively, but particularly for AI-powered consumer products. Companies involved in the manufacture and distribution of such products will need to adapt to meet these new requirements and mitigate the increased liability risks that will result. Understanding and complying with the GPSR is critical for businesses to protect themselves and their customers, and to navigate the changing regulatory landscape.

Read Part 1: Product compliance for consumer products powered by AI here