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outsourcing and legal standards August 16, 2007

Posted by Bradley in : Uncategorized , trackback

When firms outsource functions to other jurisdictions they may incur new risks. Recent recalls by Mattel of toys produced in China, and distributed around the world, illustrate this problem. Mattel had attempted to shield itself from risks that local manufacturing standards might not be consistent with toy safety requirements around the world by imposing its own standards by contract. In a filing with the SEC, Mattel said that:

Mattel believes that it has some of the most rigorous quality and safety testing procedures in the toy industry. Consistent with this, Mattel has launched a thorough investigation and expanded its testing programs to ensure that painted finished goods, at third-party contract manufacturers and facilities operated by Mattel, are systematically tested prior to being shipped to customers.

Mattel’s 2007 Global Citizenship Report describes Mattel’s Global Manufacturing Principles. Despite these GMPs, some products were produced for Mattel in China using lead paint, and distributed for sale to consumers. Mattel recognises in its most recent form 10Q that these developments may have an adverse impact on demand for Mattel’s products.

According to an EU Commission Press Release, the EU’s Consumer Protection Commissioner, Meglena Kuneva, “expressed her satisfaction that the danger posed by these toys was detected by the producer in its own audits and that the company acted responsibly.”

Some consumers are less sanguine:

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