Supplier liability: Italian Court’s referral to the ECJ expands definition of supplier

The automotive industry has long been central to discussions on product liability. A recent ruling by the European Court of Justice (ECJ) in case C-157/23 expands the interpretation of what it means for a supplier to “present themselves as the manufacturer” under Article 3(1) of Directive 85/374/EEC.

While not completely unexpected, considering the Directive’s goal of consumer protection and guaranteeing accountability, this decision broadens liability by extending it to any links in the supply chain (including distributors) who, even without actively branding a product, may be seen as assuming responsibility for its quality simply by sharing a name identical to the manufacturer’s.

This extension applies even when said links have not failed to provide the consumer with the manufacturer’s name, as the ECJ held that distributors consciously using the same name as the manufacturer, to gain consumer and supply chain trust, risk being held liable for the product’s quality.

The prejudicial question referred by the Italian Court

In 2023, the Italian Supreme Court referred a prejudicial question to the ECJ regarding a case involving Ford Italia. A consumer sued both Ford Italia and the authorized dealer after a defective airbag failed to deploy in a Ford vehicle. Ford Italia argued it wasn’t responsible for the defect, as it wasn’t the manufacturer. The Supreme Court questioned whether a distributor sharing the manufacturer’s name but not applying its own trademark could be held liable under the 1985 Directive. The ECJ ruled that Ford Italia could be liable, as its name was identical to the manufacturer’s, leading consumers to reasonably assume it was involved in the manufacturing process.

The legal background

While it has long been established that suppliers can be held liable under certain circumstances, the ECJ’s decision expands the scope of this liability. Under Article 3(3) of the 1985 Directive, if the manufacturer of a product cannot be identified, each supplier will be treated as the producer unless they inform the injured party, within a reasonable time, of the identity of the producer or the person who supplied them with the product. This provision also applies to imported products where the identity of the importer is not provided, even if the name of the producer is indicated. Essentially, if a distributor fails to disclose the manufacturer’s identity, they can be held liable for any harm caused by product defects, as they are considered the “producer” under this provision. This principle remains in effect under the new 2024 Directive, which will replace the 1985 version.

However, the ECJ’s ruling differs from the provisions of both the 1985 and the new Directive. It upholds that in cases where a distributor shares the same name as the manufacturer, simply informing the injured party of the producer's identity does not exempt the distributor from liability. The distributor can still be held jointly and severally liable for any injuries caused by the product defect.

The implications of the ECJ’s ruling

This ruling broadens supplier liability by extending it to distributors who, even without actively branding a product, may still be seen as assuming responsibility for its quality if they share a name identical to the manufacturer’s. This interpretation goes beyond the 1985 Directive’s original text, raising concerns about legal certainty. The ECJ emphasized that distributors who consciously share the same name as the manufacturer to gain consumer and supply chain trust should bear the risk of being held accountable for the product's quality, even without failing to provide the consumer with the manufacturer’s name.

It seems unlikely that automotive distributors (or dealers from other economic sectors) will change their name in response to this ruling. The economic risks and potential damage to relationships within the supply chain outweigh the possible liability concerns. In any case, as pointed out by the ECJ in the same ruling, under article 5 of the 1985 Directive the supplier’s liability “is without prejudice to the provisions of national law concerning the rights of contribution or recourse and, in particular, to the provisions enabling that person to invoke, in turn, the liability of the manufacturer of the defective product”.

The ruling’s broader impact will likely be seen in clarifying supplier responsibilities and enhancing consumer protection.

The new 2024 Directive on Product Liability

The 2024 Directive on product liability, set to replace the 1985 Directive, does not specifically mention the principle established by the ECJ regarding suppliers who share the same name as the manufacturer. However, Article 8(3) of the new directive, which mirrors the previous Article 3(1), still applies the same principles regarding distributor liability. While the new Directive doesn’t explicitly include this principle, the ECJ's interpretation will continue to be relevant under the revised legal framework.

In conclusion, although the 2024 Directive does not codify the ECJ’s principle, it will still inform its application. Suppliers using the same name as the manufacturer may remain liable for defective products, continuing to shape the future of product liability law in the EU.