Kmart Faces Federal Court Proceedings Over Alleged Safety Failures Involving Millions of Products

By Editorial Staff

The Australian retail landscape has been rocked by significant legal action as the Australian Competition and Consumer Commission (ACCC) formally launched Federal Court proceedings against Kmart Australia. The retail giant, a cornerstone of the Wesfarmers retail empire, stands accused of systemic compliance failures regarding product safety standards. At the heart of the litigation are millions of units of cosmetic nail glue and thousands of button-battery-operated devices that the regulator claims were sold in breach of mandatory safety requirements, exposing consumers—including young children—to severe health risks.

The ACCC’s allegations suggest a pattern of negligence that spans years, encompassing products ranging from personal grooming items to children’s watches and tracking devices. As the regulator seeks substantial penalties and declarations, the case shines a harsh spotlight on the responsibilities of major retailers to ensure that the convenience of low-cost consumer goods does not come at the expense of public safety.

The Scope of the Allegations

The legal proceedings center on three specific categories of products sold under the "Anko" and "OXX" private labels. The ACCC alleges that Kmart’s conduct not only bypassed mandatory testing protocols but also ignored clear indicators of harm reported by consumers over a period of several years.

The products in question include:

• OXX Cosmetic Nail Glue: Sold in both standalone bottles and as part of false nail kits. The ACCC alleges that Kmart failed to warn consumers of the risk of severe chemical burns upon contact with fabric.
• Anko Watches: The regulator claims that approximately 64,000 units of children’s and adult digital and analogue watches were sold without the mandatory pre-supply testing required to ensure button battery compartments remain secure.
• Anko Smart Tags: The ACCC alleges that over 800 of these GPS tracking devices were supplied without adhering to the mandatory information standards designed to alert parents to the dangers of button batteries.

"Kmart sold millions of units of some of these products, each posing a potential danger to consumers, including young children," said ACCC Deputy Chair Catriona Lowe. "We will allege Kmart’s conduct showed serious compliance failures which exposed the public to a significant risk of product safety harm."

Chronology of Negligence: A Timeline of Concerns

The gravity of the ACCC’s case is compounded by the timeline of the alleged failures. In the instance of the OXX nail glue, the regulator points to a history of consumer reports that allegedly went unheeded for years.

The Nail Glue Burn Crisis (2017–2024)

According to the ACCC, the risk associated with the OXX nail glue is not merely theoretical. Between August 2017 and December 2024, Kmart received multiple reports of consumers suffering chemical burns from the product. These injuries were frequently linked to the glue coming into contact with fabric, such as clothing, tissues, or wipes, which can trigger an exothermic reaction.

In some instances, the reactions were severe enough to require professional medical intervention, including hospitalisation and skin grafts. Despite these reports spanning several years, the ACCC alleges that Kmart failed to implement appropriate warnings on its packaging until December 2024. This delay, the regulator argues, represents a failure to protect the public from an ongoing and known hazard.

The Button Battery Standard (2022–2024)

The button battery issue relates to the mandatory safety standards introduced by the Australian government in June 2022. These regulations were implemented specifically to combat the "silent killer" that is the button battery. The standards require that products containing these batteries must feature secure, child-resistant compartments and include specific warning labels.

The ACCC alleges that between June 2022 and November 2024, Kmart supplied 64,000 watches that had not undergone the required safety testing to prove the battery compartments were secure. Furthermore, the Anko Smart Tags, which were sold until the ACCC engaged with the retailer, were found to be missing mandatory safety information, leading to a recall in 2024.

Supporting Data and Technical Hazards

The technical nature of these safety breaches underscores the danger to the public. Button batteries are particularly treacherous because they are small, shiny, and easily swallowed or inserted into ears or noses.

When a button battery becomes lodged in a child’s throat, it can create an electrical current that burns through soft tissue in as little as two hours. This process can cause catastrophic internal bleeding and, in tragic cases, death. The ACCC has confirmed that three children in Australia have died following the ingestion of button batteries, a statistic that serves as the backdrop for the regulator’s strict enforcement of the 2022 standards.

The hazard posed by the OXX nail glue is chemically distinct but equally dangerous. When cyanoacrylate—the primary component in many nail glues—contacts cotton or wool, it undergoes a rapid polymerization process. This generates intense heat, often resulting in skin burns. The ACCC’s case highlights that even if a product carries general safety warnings, the failure to explicitly warn about the specific chemical reaction with fabric constitutes misleading and deceptive conduct when the retailer is aware of such incidents occurring.

Official Responses and Regulatory Stance

The ACCC has been firm in its assessment of the retailer’s conduct. Catriona Lowe’s remarks emphasize that size is not a shield against accountability.

"Button batteries are potentially deadly to young children if swallowed or inserted," Lowe stated. "We expect all businesses, especially large retailers like Kmart, to have consumer safety front of mind. We consider that Kmart’s failure to warn consumers of the risk of burns after receiving numerous consumer reports… exposed consumers to an ongoing risk of serious injury, as an incredibly serious matter."

The ACCC is currently seeking a range of remedies from the Federal Court, including:

1. Pecuniary Penalties: Financial fines intended to serve as a deterrent against future compliance failures.
2. Declarations: A formal judicial statement that Kmart’s conduct was in breach of the Australian Consumer Law.
3. Costs: Compensation for the legal expenses incurred by the regulator.
4. Injunctions/Orders: Potential requirements for Kmart to implement enhanced compliance training and auditing processes.

While Kmart has yet to issue a detailed public defense in court, the retailer has previously engaged with the ACCC regarding the Smart Tags, which led to the 2024 recall. However, the breadth of the current proceedings suggests that the regulator believes a systemic, rather than isolated, failure occurred within the retailer’s supply chain management and product safety assessment protocols.

Implications for the Retail Industry

The proceedings against Kmart serve as a watershed moment for the Australian retail industry. As global supply chains become more complex, the burden of ensuring product safety remains firmly with the importer and retailer.

The Burden of Compliance

Retailers who utilize "private label" strategies—whereby they brand and sell products directly sourced from manufacturers—assume the legal role of the supplier. This means they are responsible for ensuring that all products meet the Australian Consumer Law, including mandatory safety standards. The Kmart case suggests that "labeling" a product is not enough; rigorous, independent testing is non-negotiable.

Consumer Trust and Brand Reputation

For a household name like Kmart, the reputational damage may extend far beyond the courtroom. Consumers rely on major retailers to act as a filter for safety. When that filter fails, it creates a crisis of confidence. The involvement of the Federal Court signals that the ACCC is moving toward more aggressive litigation when it perceives that a company has neglected its duty of care, particularly concerning children’s products.

Future Regulatory Oversight

Industry analysts suggest that this case may prompt the ACCC to conduct broader audits of other large retailers. The 2022 button battery standards were a landmark piece of regulation, and the ACCC has signaled that it will not tolerate a "grace period" for compliance. Retailers are now on notice that they must proactively monitor consumer feedback and integrate incident data into their risk management frameworks.

Conclusion

The Federal Court case against Kmart is a stark reminder of the potential for mundane household objects to cause life-altering harm. Whether it is a bottle of nail glue or a child’s watch, the legal obligation to ensure consumer safety is paramount.

As the legal proceedings unfold, the focus will remain on whether Kmart’s internal systems were sufficient to identify and mitigate these risks. For the Australian public, the case highlights the critical importance of remaining vigilant when purchasing products that contain batteries or chemicals, and the necessity of reporting incidents to regulators like the ACCC. Ultimately, this litigation serves as a forceful reminder that in the eyes of the law, the safety of a child is worth far more than the speed or cost-efficiency of a retail supply chain.