111. Product Recalls

Summary

Podcast Summary: The Economics of Everyday Things – "Product Recalls"

Podcast: The Economics of Everyday Things
Host: Zachary Crockett (Freakonomics Radio Network)
Episode: 111 – Product Recalls
Date: October 20, 2025

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Overview

This episode dives into the world of product recalls: what triggers them, how companies manage them, who pays the price, and why they are so complicated. With frequent media headlines about radioactive shrimp and exploding batteries, host Zachary Crockett uncovers the hidden logistics, legal, and financial stakes behind product recalls, joined by recall expert Chris Harvey, Senior VP at Sedgwick.

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Key Discussion Points & Insights

1. The Notorious Shrimp Recall

• [02:21–03:46] Recent news spotlighted radioactive material in shrimp sold at Walmart, leading to a widespread recall by Aquastar.
  • The amount of radiation was not harmful, but the FDA and companies acted out of caution.
  • Highlights hypervigilance and rapid responses in U.S. food safety.

2. Recall Frequency and Industry Reach

• [04:56–05:32] Thousands of product recalls impact every sector: food, drugs, medical devices, automotive, and consumer products.
  • In the past year alone, the U.S. saw over 3,200 recalls, affecting 681 million product units.

3. Why Do Recalls Happen?

• [06:01–06:39]
  • Common triggers: safety hazards (e.g., batteries overheating), regulatory violations, sterility issues, undeclared allergens, and foreign objects.
  • Sometimes, banned features (like infant drawstrings) still sneak onto shelves.
  • Quote: “Sometimes there’s bugs and things you don’t want to really know about.” – Chris Harvey [06:41]

4. How Are Problems Detected?

• [06:52–07:33]
  • Detection may come from internal quality checks, customer complaints, social media, or regulatory agencies.
  • Agencies involved: FDA, USDA, Consumer Product Safety Commission, NHTSA.

5. The Mechanics of Tracing & Stopping a Recall

• [09:06–10:20]

  • Companies must trace contamination to its source—sometimes requiring full supply chain audits or product component testing.
  • Path of the product is tracked through batch/lot codes.
  • Quote: “There has been a vast improvement in traceability… but honestly, a lot of companies struggle…” – Chris Harvey [10:20]

• [11:09–12:11]

  • To halt distribution, “stop sale” notices go to retailers/distributors. Larger retailers might “sweep” shelves, returning even unaffected products out of caution.
  • Memorable moment: A retailer once literally returned an entire product shelf, saran-wrapped.

6. Who Bears the Cost?

• [12:11–12:40]
  • Manufacturers often reimburse retailers for returned products, but covering unaffected products can be a significant financial hit.

7. The Challenge of Reaching Consumers

• [15:52–17:05]
  • It's much harder (and often costlier) to reach end-users than retailers.
  • Strategies include mass media, social media, loyalty program emails, and printing notices on receipts.
  • Companies establish recall websites and hotlines for consumers.

8. Logistics of Returning and Destroying Recalled Goods

• [17:05–18:10]

  • Most retailers do not want consumers bringing products back to stores.
  • Manufacturers provide return kits, prepaid labels, and in some cases, manage bulk returns and disposal (e.g., incineration of drugs, secured destruction of high-value/black-market items).

• Notable story: Armed guards sometimes escort shipments of recalled infant formula due to high black-market risk.

9. Recalls in the Digital Age

• [18:10–18:45]
  • Many tech and automotive recalls can be resolved via software updates or local repairs.
  • For food, consumers are advised to dispose of items and submit evidence (like photos) to claim reimbursement.

10. The Economics of Recalls

• [19:55–21:34]
  • Average food recall costs $10 million, encompassing:
    • Notification and collection costs.
    • Lost business during shelf sweeps.
    • The “remedy”: refunds, replacements.
  • Insurance is common in high-risk sectors.
  • High-profile recalls (Takata airbags: $24B; Samsung phones: $5B) show how massive costs can climb.
  • Not recalling is riskier: legal penalties, lawsuits, brand failure.

11. Recalls and Reputation

• [22:02–22:47]
  • A well-managed recall can boost customer loyalty; mishandled recalls can damage a brand irreparably.
  • Quote: “It’s less about being known for having the recall that matters, but how you handled it that truly sticks.” – Chris Harvey [22:44]

12. Lingering Liability and Consumer Responsibility

• [23:15–24:44]
  • Even successful recalls leave unreturned products and ongoing risk: some consumers don’t respond, and unsold units end up on secondhand markets.
  • The effectiveness of a recall is measured by whether incidents still occur post-recall.

13. Human Factor

• [25:27–26:10]
  • Recalls require buy-in from everyone, including consumers.
  • Personal vignette: Chris Harvey’s own mother ignored his recall warning about carrots.

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Notable Quotes & Memorable Moments

• On the challenge of reverse recalls:

  • “Companies are great at forward distributing their products… but with a recall, they have to reverse that process. And there’s a lot of gaps…” – Chris Harvey [03:46]

• On consumer apathy:

  • “I can’t even get my own mom to pay attention to these recalls… I was a little worried. Turns out they are recalled carrots she was eating. Luckily, she didn’t get sick.” – Chris Harvey [25:27]

• On residual risk:

  • “Just because you close a recall with the agency doesn’t mean the liability is gone… are things being sold that were recalled, could have been a year ago, could have been three years ago?” – Chris Harvey [23:50]

• On cost versus alternatives:

  • “In the end, that litigation can be much higher than the actual execution piece of doing a recall. Companies have gone out of business...” – Chris Harvey [21:34]

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Timeline of Key Segments

| Timestamp | Segment | |-------------|----------------------------------------------| | 02:21–03:46 | Frozen shrimp recall media story | | 04:21–05:32 | Chris Harvey’s expertise, types of recalls | | 06:01–06:39 | Why recalls happen, typical issues | | 09:06–10:20 | Tracing problems, batch and lot codes | | 11:09–12:11 | Retailers’ recall process | | 15:52–17:05 | Public notification, consumer outreach | | 17:05–18:10 | Product retrieval and destruction logistics | | 18:10–18:53 | Digital remedies and self-disposal | | 19:55–21:34 | The staggering cost of recalls | | 22:02–22:47 | Brand reputation, trust and recovery | | 23:15–24:44 | Lingering liability, unreturned products | | 25:27–26:10 | Chris Harvey’s mom and the recall carrot |

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Tone and Style

Crockett’s narration is wry and curious, using relatable analogies and consumer-focused questions, balanced by Chris Harvey’s seasoned, matter-of-fact explanations and behind-the-scenes anecdotes.

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In Closing

This episode pulls back the curtain on a hidden, high-stakes part of commerce. Product recalls aren’t just bureaucratic necessities—they’re massive logistical and financial undertakings, requiring swift action, transparency, and cooperation from suppliers, retailers, and consumers alike. Sometimes, companies can turn a crisis into an opportunity; other times, ignoring recalls can spell disaster. Ultimately, the real story is in the details—and, as Harvey says, “It’s how you handle it that matters.”

Transcript

[Zachary Crockett]

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Aquastar issued the voluntary recall after traces of radioactive material were found in shrimp.

[Zachary Crockett]

From from an Indonesian supplier.

[Chris Harvey]

More shrimp are being recalled because of radioactive contamination.

[Zachary Crockett]

Seattle based Aquastar expanded the recall yesterday to cover more than 100,000 bags of frozen shrimp. Radioactive shrimp even made it into a congressional hearing.

[Chris Harvey]

The shrimp was radioactive. If you eat this stuff, I guarantee you'll grow an extra ear.

[Zachary Crockett]

Those fears ended up being a little overblown. It turned out that the amount of radioactive material in the shrimp was far below the threshold of what would be considered harmful. And there was no evidence that the affected shrimp was ever even sold in US Stores. But the FDA still decided to issue a recall. Multiple retailers pulled shrimp products from store shelves just in case. Every year there are thousands of recalls that affect millions of units of products. There are contaminated corn dogs, tainted deli meats defective bicycle helmets and cell phones that catch on fire. Pharmaceuticals, toys, smartwatches, blow dryers, cars. Recalls span nearly every sector of the economy. And it's not a simple process.

[Chris Harvey]

Companies are great at forward distributing their products down through the supply chain to make their way to a consumer. But with the recall they have reverse that process. And there's a lot of gaps associated with that.

[Zachary Crockett]

For the Freakonomics radio network, this is the economics of everyday things. I'm Zachary Crockett. Today, product recalls. When a company discovers radioactive elements in its shrimp or finds out that a battery in its toy is explosive, it usually enlists a professional to help with the recall. Someone like Chris Harvey.

[Chris Harvey]

I've been working in recalls for 20 years, so predominantly my entire career. It's really all I know.

[Zachary Crockett]

Harvey is a senior vice president at Sedgwick, one of the largest product recall specialists in the world.

[Chris Harvey]

We help companies globally with the execution and the logistics of a recall. We do these day in and day out, and we can make sure they're running and effective and efficient recall to really check those boxes of reducing liability litigation, protecting their brand, protecting consumers.

[Zachary Crockett]

Sedgwick has no shortage of business, really.

[Chris Harvey]

All products can be subject to recalls, but the top five main categories include drugs. So like pharmaceuticals or over the counter, you have medical devices that could be a blood pressure monitor that's in a hospital that has a defect. Food and beverage, so produce meat, egg products. The automotive industry can have a lot of recalls. And then consumer products. That's electronics, toys, appliances.

[Zachary Crockett]

Last year, there were more than 3,200 recalls in the US across those five categories, affecting 681 million units of product. In recent times, the number of product recalls has gone up. Globalization and mass production have led to more frequent manufacturing issues. And sometimes a company doesn't realize a mistake has been made until after a product has been sold and distributed all over the world.

[Chris Harvey]

It could be a product has a substantial safety hazard. So we're talking about an electronic product that has a lithium battery, and the battery could overheat, could cause a fire, burn, property damage. There's some that violate a standard. So drawstrings in infant sweatshirts are banned. You still see those popping up on the market and being recalled. Other times it's sterility. It was unclean as it went through the line. You hear about these food recalls, all the bad bacteria, the salmonella, listeria, E. Coli that can create these recalls. Undeclared allergens, foreign objects.

[Zachary Crockett]

And when you say foreign objects, a.

[Chris Harvey]

Lot of times it's metals, it's plastics. Sometimes there's bugs and things that you don't want to really know about.

[Zachary Crockett]

There are all kinds of ways that a company might identify an issue like this.

[Chris Harvey]

The exposure of a problem can come from the manufacturer themselves. A lot of times they have samples that they've retained that they do testing and they may identify an issue. Other times, companies are getting caught into their customer service line where they may have a complaint. For example, my child was eating this snack and they found a little piece of wood in it. So from there it should trigger an investigation. Has anyone mentioned a similar type issue on social media?

[Zachary Crockett]

Other times they might be made aware of an issue by the regulatory agency that oversees their product.

[Chris Harvey]

You've got the Food and Drug Administration, who regulates drugs, medical devices, the majority of the food in the US you have the US Department of Agriculture, they regulate other foods, Consumer Product Safety Commission, consumer products, and then the National Highway Traffic Safety Administration, they regulate automobiles. And they all have some slightly different requirements for reporting.

[Zachary Crockett]

Manufacturers and regulatory agencies take product recalls very seriously, because if defective products aren't recalled quickly and adequately, they can cause injury or death.

[Chris Harvey]

With any type of recall, there's liability of having a product out there that could hurt someone. Typically, the liability does fall on that producer, the grower, the manufacturer. In most cases, manufacturers will do the right thing. The majority of all recalls are voluntary. It's very rare across all the industries to have a recall that's mandated.

[Zachary Crockett]

So imagine you're a company that sells frozen shrimp. You buy thousands of pounds of them every day from fishermen, package them in a giant facility, and ship them all over the world. These frozen bags are sold to dozens of different retail chains like Kroger and Walmart, and they make it into the freezers of thousands of individual consumers all over the country. What do you do when you find out that some of those shrimp contain radioactive isotopes? One of the earliest steps is to cease production of the product in question and figure out the root cause of the problem.

[Chris Harvey]

Most companies will retain some of the product, they just don't send it out. But they have it on hand so they can test it and use it for investigations. In some cases, they don't find any issues. So at what point between when they shipped it to now it's on the shelf, could it have been contaminated?

[Zachary Crockett]

For food products, the company might go through its supply chain systematically to pinpoint where contamination was introduced. For something like, say, a cell phone that overheats, every single component of the device might be tested.

[Chris Harvey]

They have to see what's making it overheat. Is it the connector? Is it the battery cells? They have to go back to suppliers to see did they change something. Sometimes these companies also go to external labs. They're trying to create a fire within a controlled environment to see if they can't replicate it happening again.

[Zachary Crockett]

Once they've established the source of an issue, the company has to figure out the scope of the problem. Which batches of product were affected and where they were sold. In the US Most food suppliers use codes that can track the day and time that a product was produced. They can analyze the codes on the affected products and determine which batches were contaminated.

[Chris Harvey]

There has been a vast improvement in traceability from the farms growing the product to it being packaged all the way to the store. But honestly, a lot of companies struggle to quickly put a fence around. Okay, we know this food product, it's only three date codes because of our investigation. So out of an abundance of caution, they may actually add a couple lot numbers that came before the batches that you knew were impacted or after a lot of times. The recalling firm will then through their records be able to identify where the distributor sent the product. They should have good data that traces it as, let's see, food comes off of the boat, goes into a distribution site, and then goes to the individual stores.

[Zachary Crockett]

To stop the affected product from spreading. The manufacturer sends its distributors and retailers a stop sale notice. Sometimes a retailer will just pull the affected batches of a product from shelves. They typically get a reimbursement or future credit from the manufacturer for any unsold goods. In other cases, the retailer might get rid of everything that the supplier sold them.

[Chris Harvey]

Retailers deal with a lot of recalls. I mentioned some 60 recalls being announced on a weekly basis. And retailers, if they don't have the time, if it's not easy, they may just sweep the shelf and send back non affected product. They may not take the time to look at the date codes or the lots and just send it back. I still remember this to date where a retail grocer literally took the shelf off of one of their racks and they saran wrapped all of this company's product and just shipped it back to the manufacturer and most of it was non affected product, but they were just done with it.

[Zachary Crockett]

So let's say I'm Walmart and I just bought like $200,000 worth of frozen shrimp and then I'm told it could be radioactive. So I decided to just dump everything out of caution. Who covers that cost?

[Chris Harvey]

It's a business decision for that manufacturer if they want to replace or credit for non affected product that comes back. In some cases they do make that call.

[Zachary Crockett]

And we could be talking in some cases like tens or hundreds of thousands of dollars.

[Chris Harvey]

Oh absolutely. It can get very expensive.

[Zachary Crockett]

But for manufacturers and suppliers, there's an even more expensive part of the product recall getting defective goods back from thousands of individual customers. That's coming up. The Economics of Everyday Things is sponsored by SurveyMonkey. Look, we get it. You can hardly go anywhere or do anything these days without hearing about AI this or AI that. And if you're like most people when it comes to AI, you're impressed but have a few concerns. But what if AI was used not as a tool to replace people, but as a way to help understand people better? AI from SurveyMonkey is designed to do just that. From crafting the perfect survey, which is harder than you might think, to analysis that digs deep, finds patterns and surfaces trends quickly. SurveyMonkey's powerful suite of AI capabilities makes it faster and easier than ever before to get insights from real people helping you make confident decisions for your business. Try it [e-mail] Economics the economics of Everyday Things is sponsored by Mint Mobile. If you're still overpaying for wireless, it's time to say yes to saying no. At Mint Mobile, their favorite word is no. No contracts, no monthly bills, no overages, no hidden fees, no bs. Here's why you should say yes to making the switch and getting Premium Wireless for $15 a month. Ditch overpriced wireless and their jaw dropping monthly bills, unexpected overages and hidden fees. Plans start at $15 a month at Mint Mobile. All plans come with high speed data and unlimited talk and text delivered on the nation's largest 5G network. Use your own phone with any Mint Mobile plan and bring your phone number along with all your existing contacts. Ready to say yes to saying no? Make the [e-mail] economics that's mintmobile.com economics Upfront payment to $45 required, equivalent to $15 a month Limited time new customer offer for first three months only. Speeds may slow above 35 gigabytes on unlimited plan, taxes and fees extra. See Mint Mobile for details. Vitamin Water zero Sugar Tine Gran Savor.

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[Chris Harvey]

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[Zachary Crockett]

Ideally, companies catch problems before a defective product has been disseminated to the public. Sometimes it's enough to just cease production and alert retailers, but in many cases the product in question has already been sold to hundreds Thousands or even millions of individual customers warning all of them about that radioactive shrimp in their refrigerators can be a big challenge. Chris Harvey says that companies like Sedgwick often use a multi pronged media strategy to get the word out.

[Chris Harvey]

You have to rely on the media, social media, the press release. Some retailers do a little bit better job of tracking this through loyalty programs that they can actually email the consumer that may have that seafood recalled. Or in some cases, retailers actually print a recall notice on their receipt as well to notify them that, hey, you may have purchased this recalled seafood in the past.

[Zachary Crockett]

With the help of a company like Sedgwick, manufacturers set up toll free numbers and recall websites that customers can use to report faulty products. And they provide clear instructions on what to do with damaged goods.

[Chris Harvey]

Most retailers do not want consumers taking product back to their stores. So that already is a gap within the supply chain to reverse it. So manufacturers need to have mechanisms and infrastructure in place to provide return kits. Prepaid return labels, in some cases freight shipments, palletized larger shipments to get product back to their warehouses.

[Zachary Crockett]

Once products are back at the warehouse, there's a protocol for destroying them. Some products pose special challenges.

[Chris Harvey]

Most drugs are just incinerated. Sometimes the FDA will want to witness it being destroyed. So that does add some complications. Now the medical devices like infusion pumps, CPAP devices, they have a lot of metals and other components in that at times now there could be options to recycle some of that. And then you have things like infant formula. There's a large black market for infant formula because it's expensive. We actually have armed guards who will follow it to be destroyed.

[Zachary Crockett]

These days, a lot of product recalls can be done without physically reclaiming something. Some modern vehicles can address recalls with over the air software updates and others may try to find local solutions.

[Chris Harvey]

In many cases, the remedy for the auto industry is a repair, so you're having to take it into a dealership. In some cases, the recall issue is so severe a stop drive order is issued, you can't drive it. Now you're dealing with a lot of consumers that can't go to their jobs, can't take their kids to school.

[Zachary Crockett]

But with food products like frozen shrimp, it's far easier to instruct the customer to just dump it in the trash can.

[Chris Harvey]

Many times they'll have you dispose of it and then call in or go to a website to register that you had that product. You may put in the lot number or the date code and from there the manufacturer, the grower, they may then Directly send you a reimbursement check.

[Zachary Crockett]

These days, the reporting systems also require you to submit photographic evidence as a part of your claim. Because as it turns out, there's a lot of fraud in the product recall space.

[Chris Harvey]

It's gotten worse and worse. Whether it's just a general consumer that's upset they had to undergo a recall and they want to get double the reimbursement, or actually organized crime, where they may look at every recall being announced to get a refund. And I've actually seen counterfeit products. So they pretend that they have an expensive recall product and try to send that back in as well.

[Zachary Crockett]

Even without fraud, a recall can be incredibly pricey for a manufacturer.

[Chris Harvey]

The average food recall cost about $10 million. What is contributing to that? You have the execution costs. So cost to notify the market, collect the product, destroy the product, that's one thing you have loss of business. A lot of retailers, they won't sell any of your product until they know the recall product is out of there. One of the bigger items, though, is the cost of the remedy. So sending reimbursement checks, that value of that product to refund, sending replacement inventory.

[Zachary Crockett]

You sort of get slammed on both ends. You have to take the loss in all the products that you have to incinerate or destroy, and then you also have to issue those refunds for new products in addition to that.

[Chris Harvey]

Absolutely. And that's why some companies actually buy recall insurance. It's more common in the food and beverage industries. And that pays for the majority of those items. The execution, the loss of business. The remedy, which can be very beneficial.

[Zachary Crockett]

In the grand scheme of product recalls, $10 million is actually fairly reasonable. The Japanese auto parts manufacturer Takata reportedly had to pay as much as $24 billion to recall faulty airbags in millions of vehicles around the world. And A recall of 2.5 million smartphones in 2016 set Samsung back at least $5 billion. The cost is steep, but it often beats the alternative. If a company and its executives are aware of a problem and don't issue a recall, they can face civil penalties in the millions of dollars. And even worse, they might be slammed with class action lawsuits.

[Chris Harvey]

There are law firms that the only thing they do is look at recalls being announced and look at how it was executed, look at what remedy was made available, and look for opportunities for litigation with that. In the end, that litigation can be much higher than the actual execution piece of doing a recall. Companies have gone out of business when they've not undergone a recall properly.

[Zachary Crockett]

Aside from the dollar amount. A bungled recall can lead to reputational damage and lost trust. Those things tend to be harder to recover from than a bad quarterly report.

[Chris Harvey]

I've seen this many times before where they didn't necessarily want to do a full refund, but they said, all right, we'll send a replacement. It's more cost effective. But in the end, they lost a lot of brand loyalty because it took months to actually get these consumers their replacement product. But if they run the recall right, I've actually seen customer loyalty increase. I've seen sales increase. They can bounce back very quickly. Companies can make mistakes. We all make mistakes. It's less about being known for having the recall that matters, but how you handled it that truly sticks.

[Zachary Crockett]

From start to finish. The entire recall process can take anywhere from a few weeks to a few months for a food product and 12 months or more for a consumer good. But just because a recall is successful doesn't mean it's fully resolved. There are almost always some units of product and by proxy liability left out in the market because lots of consumers either don't hear about a recall or don't care to take action on it.

[Chris Harvey]

With consumer products, if you have like a power bank that was 5 to $10, you're probably looking at a 5 to 10% response rate. Now, if you have an $800 cell phone that people use every single day, the response rate's going to be much higher. You might be able to hit in the 90% response rate.

[Zachary Crockett]

I'm just trying to wrap my head around this. Even if you do everything right, there are probably thousands or millions of products out there that people are still using that have some kind of recall issued on them. And each one of those products that's out there is still a liability.

[Chris Harvey]

Yeah. Just because you close a recall with the agency doesn't mean the liability is gone. You still have to actively monitor the marketplace. The big thing is companies monitoring the online secondary marketplaces to see are things being sold, their products that were recalled. Could have been a year ago, could have been three years ago. With my boys who are now older teenagers, half the stuff we had in their room you can't use anymore. It's been banned. Most consumers that are buying don't look to see if it's recall before they buy it. But the big thing I always look at to deem the effectiveness of recall. Are there still injuries? Are there still adverse events occurring after the recall has been announced? If that is true, then you probably ran an ineffective recall and the agencies are probably going to make you do more.

[Zachary Crockett]

In some sense. Chris Harvey can never really tie a nice little bow on his caseload.

[Chris Harvey]

Once you've done your due diligence, you've done what you can. I mean, that's really it. You've done what you can to protect the brand, to reduce risk, mitigate liabilities. Now, it doesn't mean you're completely done, but you do have to move forward.

[Zachary Crockett]

But in the end, he says, a successful product recall is a team effort not just between the suppliers, distributors and retailers, but also me and you and every other consumer that buys something at a store, whether it's a cell phone, baby formula, radioactive shrimp, or a vegetable.

[Chris Harvey]

My mom, I text her about a recall on some carrots and I said, you know, check your carrots. Make sure you're not eating recall carrots. About a week later, I go over to her house and she's eating carrots. And I said, ma, are these recalled carrots? And she'd go, I took these out of the freezer. They're really old. And knowing that listeria can survive in frozen conditions, I was a little worried. Turns out they are recalled carrots she was eating. Luckily, she didn't get sick or anything like that. I can't even get my own mom to pay attention to these recalls. So there is a little degree of, I think, shared responsibility throughout the supply chain to, you know, pay attention and take appropriate action.

[Zachary Crockett]

For the economics of everyday things. I'm Zachary Crockett. This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz Rapson and Dalvin Abuadi. And it would help us so much if you could fill out our super short survey. You can find [e-mail] everydaysurvey we appreciate it so much. All right, until next week.

[Chris Harvey]

A few years back, peanut butter. We was being pulled off of the store shelves. And I remember when my two boys were young, we didn't have any peanut butter and all they ate was peanut butter.

[Zachary Crockett]

The Freakonomics Radio Network the hidden side of everything Stitcher.

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[Chris Harvey]

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