The recall is an effort to limit liability for corporate negligence which can cause significant legal costs and limit ruination of the corporate image. It can be difficult, if not impossible, to determine how costly can be releasing to the consumer a product that could endanger someone’s life and the economic loss resulting from unwanted publicity. Recalls are costly having to handle the recalled product, replacing it and possibly being held financially responsible for the consequences of the recalled product.
A country’s consumer protection laws will have specific requirements in regard to product recalls. Such regulations may include how much of the cost the maker will have to bear, situations in which a recall is compulsory (usually because the risk is big enough), or penalties for failure to recall. The firm may also initiate a recall voluntarily, perhaps subject to the same regulations as if the recall were compulsory.