When Turkish firm Arcelik learned its fridge-freezers may
cause fires, it did not tell customers for years. Did Europe's
system encourage the delays?
By Tom Bergin
LONDON, Oct 21 In June, when a fire ripped
through a concrete tower block in Bermondsey, a low-income
neighbourhood in south-east London, residents initially blamed
it on a lightning strike. "It was only later we heard the truth
on the television," said Kathy Pullady, who lives across a
chipped tile-covered landing from the 17th-floor flat where the
blaze took hold.
The London Fire Brigade had in fact been investigating the
probable cause of the fire for years. In July it publicly
pointed to a faulty fridge-freezer made by Turkish company
Arcelik, Europe's third-largest appliance manufacturer. The fire
brigade says timers in certain models of Arcelik fridges have
caused at least 20 fires in the UK since 2006. One man has been
killed and at least 15 people injured.
Since 2005, the European Commission has recorded fire safety
warnings for 37 fridge-freezer models. Sixteen of those models
were made by Arcelik under the Beko brand, 18 by Swedish-based
Dometic (including some fridge-freezer-oven combinations used in
mobile homes), and three by South Korea-based Samsung.
Fire chiefs told Reuters they took the unusual step of
issuing a public statement about the Arcelik appliances because
the company itself had failed to publicise the danger. Consumer
groups also charge the company -- along with British regulators
-- with dragging its feet when it came to warning customers.
Arcelik (pronounced Arch-e-lick) agrees design flaws in
certain fridge-freezers are to blame for the fires. A company
spokeswoman told Reuters in an email it believes "there have
been 29 incidents which can be attributed to an issue with the
defrost timer since 2006." But the company says it acted as
quickly as possible to tackle the issue. Regulators have
declined to comment.
The issue highlights how an increasingly globalised supply
chain can expose consumers to weaker safety regimes than they
may be used to. The European Union's database of unsafe products
has seen a sharp rise in product warnings since 2003, and the
vast majority is on products made in emerging markets. Against
this backdrop, Britain's fragmented regulatory regime can slow
public notification of life-threatening defects. And companies
whose products injure or even kill face much milder sanctions in
Europe than in the United States.
"The regulatory and safety standards in the U.S. and the EU
have developed over a long period of time," said Luke Upchurch
of lobby group Consumers International. "A lot of the products
are coming from jurisdictions where there aren't tight controls
... It's still very difficult to monitor that on an
Up to half a million of the Arcelik appliances have been
sold in the United Kingdom and another 9,000 in other countries.
Following the Fire Brigade's July announcement the company
started a media blitz inviting owners of affected models to have
"They could have acted faster ... there are a lot of
questions unanswered in this," says Alice Judd, senior
researcher at the UK's Consumer Association.
LOW PRICES, LARGE MARGINS
Arcelik is listed on the Istanbul stock exchange and
majority-owned by Koc Holding, an $8 billion-group controlled by
the Koc family, Turkey's richest. The company, which is
expanding around the globe and has huge ambitions in China,
sells its products under a number of brands including Beko,
Arcelik and Leisure. For the most part it targets the economy
end of the market.
Low prices don't mean low profits. Arcelik reported revenues
of 3.5 billion euros ($4.8 billion) last year and an operating
margin of 9.2 percent. That's well above the 5.1 percent
achieved by Sweden's Electrolux, the number one appliance-maker
in Europe, and the 5.5 percent reported by Whirlpool of the
United States, the global number one by sales.
Arcelik operates factories in Turkey, Romania, China and
Russia and says it exports to 115 countries across the world.
According to Ragip Balcioglu, the company's UK country manager,
Beko refrigerators are already the biggest sellers in the UK,
accounting for one in three of all sold. Beko's UK website says
British Prime Minister David Cameron is among its customers.
In the United States Arcelik's range includes sleek,
expensive cookers and fridges sold under the Blomberg brand,
which it describes as a "German quality brand" despite the fact
the appliances are not made in Germany. Arcelik acquired
Blomberg in 2002 and the brand hasn't issued a safety warning
about its fridges since 1994, when it flagged a potential fire
risk from overheating in certain models.
YOUR WARNING'S IN THE MAIL
The London Fire Brigade dealt with its first Beko fridge
incident in 2007. By June 2010, the brigade says it had
identified the defrost timers as the probable ignition source
and notified Arcelik.
The company says incidents involving the timers dated back
to 2006, but the information it received from fire authorities
did not clearly identify the source of the fires. It says that
between 2007 and the middle of last year it worked closely with
the fire service to pinpoint the problem. The brigade would not
discuss details because of a police investigation into a 2010
The June 2010 notice from the fire service -- Arcelik says
it did not receive the letter until the middle of July --
confirmed that timer units on certain models manufactured
between 2000 and 2006 were prone to condensation, according to
Andrew Mullen, Director of Service at Arcelik's UK unit.
Condensation can cause a short-circuit, which may ignite plastic
components and other highly flammable insulation inside the
Mullen said the company then spent months trying
unsuccessfully to recreate an accidental fire: "As soon as we
received this letter... we intensely tried to simulate the
Then last November, a Beko fridge erupted in flames in the
west London house of the Benjamin-Muthiah family. Santosh
Benjamin-Muthiah, 36, died and his wife Jennifer narrowly
escaped with their two daughters aged three years and three
months. Ian Webber, secretary of Wealdstone Baptist Church where
the family worshipped, said that nine months on they were still
too distraught to speak to the media. Burnt furniture and
bedding were piled in a dumpster outside their home in August as
repair work continued inside.
After Santosh's death, Arcelik abandoned its attempt to
replicate the fires and started to design a fix that would stop
condensation getting into the timers, Balcioglu told Reuters in
an August interview at the company's UK head office in
Hertfordshire, just north of greater London.
At this point Arcelik also planned a campaign to alert
owners. But it decided against taking out advertisements in
newspapers or issuing a press release, common practice in such
situations and measures it had taken in the past. The company
said it wanted to contact people by mail rather than rely on
people seeing a notice in a newspaper.
It began gathering addresses, but did not post its first
letters until mid-April 2011. A spokeswoman for the fire service
said that between February and April 2011, there were nine fires
in London involving the Beko fridge freezers under scrutiny.
BY THE GUIDELINES?
Approached for further comment shortly before Reuters
published this story, an Arcelik spokesman said the company had
always intended to launch a media effort, later in the campaign.
Arcelik said its decision to run a postal campaign was not aimed
at minimising damage to the Beko brand.
"It wasn't a concern ... ultimately we were driven by what
has been suggested by the EU safety guidelines," the youthful,
Rolex-wearing Balcioglu told Reuters in a large showroom full of
glistening Beko appliances.
Waving a copy of a document titled 'Product Safety in
Europe: A Guide to corrective action including recalls', Mullen
said the European Union deems direct contact the best way to
alert consumers to a defect.
The document, produced jointly by the EU and industry trade
bodies, is as close to a rulebook on such matters as Europe has.
While it says "personal" contact is the most effective way of
informing people at risk, it also warns that relying on a mail
shot alone leaves a risk some customers will not be contacted.
The guide also advises in several places that companies should
use the media to alert customers.
Mullen said one reason the company did not launch a media
campaign was because it wanted to concentrate resources on
direct contact. But with 480,000 affected fridges sold, the 10
call-centre staff and team of engineers Beko hired to handle the
modifications could only handle so much at once. Letters were
sent out at a rate of 10,000 a week; Balcioglu said this was to
ensure the team was not swamped. By the time of the Bermondsey
fire, only a third of owners had been contacted, he added. The
company did not have the address of the family in the Bermondsey
A staggered approach is at odds with EU guidance to act as
quickly as possible.
That guidance also states that companies should highlight
"details of the safety risk". Arcelik's initial letter mentioned
only a risk that the "timer may fail and overheat". Arcelik said
it worded its message that way because it still believed a
faulty unit was more likely to emit smoke than catch fire. But
Hertfordshire Trading Standards, which regulates Arcelik's
British distribution unit, subsequently forced the company to
amend the warning to include mention of "a potential fire
After the publicity surrounding the Bermondsey fire, Arcelik
increased the resources committed to its corrective action,
boosting modifications from 3,000 a week to 24,000.
Arcelik's approach to notifying regulators also seems to
have been at odds with EU guidelines. The EU General Product
Safety Directive says companies should inform the "competent
authority" as soon as they become aware that a product may be
But Arcelik said it notified Hertfordshire Trading Standards
in January 2011 -- seven months after the London Fire Brigade's
warning to the company, and two months after it had started on a
It took the company even longer to inform regulators in
other places. Ireland's National Consumer Agency (NCA) said it
first heard of the problem in March 2011, when it received a
tip-off from a retailer. It sought a meeting with Arcelik which
took place in May; immediately afterwards, the NCA issued a
The Consumer Association's Judd said the gaps between the
various stages of the corrective action, given the nature of the
warning, were unsatisfactory.
SLIPPING THROUGH THE CRACKS
Hertfordshire Trading Standards' response also appears to
have been wanting (see ). Consumer advocates say
this highlights flaws in the UK's decentralised approach to
monitoring product safety, in which units of local governments
oversee companies based in their region.
Most other EU countries have dedicated product safety
bodies, noted Christine Heemskerk, product safety lead officer
at the Trading Standards Institute. Safety experts and consumer
lobby groups say the British set-up can lead to an uneven
application of the rules and allows companies to call the shots
when it comes to corrective action.
"Agencies that are set up to deal with a specific consumer
issue tend to be better functioning," said Consumers
International's Upchurch. "Agencies that are broader and cover a
wider range of areas can sometimes let things slip through the
After Arcelik informed Hertfordshire Trading Standards, the
regulator was bound by the UK's General Product Safety
Regulations to "immediately" notify the government so it could
file a notice with Rapex, a European body charged with logging
EU product safety problems. But the Department of Business,
Innovation and Skills said Hertfordshire Trading Standards
informed it only on July 15, after the publicity around the
Bermondsey fire. The department filed a Rapex notice within
days, the EU database confirms. Hertfordshire Trading Standards
NOT THE UNITED STATES
Shortly after the Bermondsey fire made headlines, Arcelik --
which has said Beko's annual revenue in Britain is above 300
million pounds ($470 million) -- told investment analysts it did
not expect serious financial repercussions from the accidents.
Arcelik's UK subsidiary has declined to comment on the cost of
settling any cases involving its fridges and cookers.
Its optimism may be partly based on the fact that courts in
Britain and elsewhere in Europe do not generally award punitive
damages or compensation for pain or emotional loss. Arcelik may
have to compensate victims only for fire damage to their
properties and medical bills, according to Paul Verrico, a
lawyer with London-based Eversheds and an adviser on product
safety issues. Even the death of a family's main earner like
Benjamin-Muthiah is unlikely to bring a big payout.
"You're not normally looking at more than a couple of
hundred grand in total," Verrico said. Deaths of children, since
they have no dependents, warrant only minor compensation --
about enough to pay for a modest funeral, he added.
A company which fails to notify the regulator in a timely
fashion about a product risk can be fined, but only up to 5,000
By comparison, failure to promptly notify the authorities in
the United States can lead to fines of many hundreds of
thousands of dollars, while companies that fail to warn
consumers about known defects have seen potentially ruinous
awards for punitive or exemplary damages.
A Los Angeles court in 1999 awarded a record $4.9 billion
product safety payout in relation to defects in the fuel system
on a General Motors vehicle; the payout was later reduced to
Simon Smith, a personal injury lawyer with London-based
Goodmans Law, said the UK legal regime, which is similar to that
in other European countries, is stacked against victims.
"The law is a bit harsh in that respect ... it expects us to
be fairly stoic about things," he said.
Arcelik could still face serious criminal repercussions,
In July, after learning of the fire brigade's June 2010
warning to the company, the coroner investigating the death of
Benjamin-Muthiah called in the police.
While Arcelik might not face large fines, Ashley Mott,
solicitor at London-based law firm DLA Piper, says if a UK
business, or its officers, are suspected of having failed in
their duty of care they can be charged with the criminal offence
of corporate manslaughter.
Arcelik's Balcioglu said the company had been helping
police, but believes it did its best to protect consumers.
"Being open and honest, we really had all the right reasons
and the best intentions with safety in mind ... without
consumers in mind and safety in mind, I don't believe there is a
future for any company," he said.