The young entrepreneurs that make up the emerging industry of novelty magnetic products are reportedly facing heat from Health Canada.
Andrew Gardner, a 28-year-old entrepreneur from Waterloo, Ontario, invented a magnetic pen called POLAR Pen. He even raised almost $1 million through the crowdfunding site Kickstarter to manufacture the pen, until he was faced with a cease and desist letter from Health Canada in November.
“I was three quarters of the way through the process when I heard about how [the pens] could potentially be an issue,” Gardner explains in an interview.
He reported that Health Canada told him the pen could fall into the category of “magnet sets,” which can be swallowed. After some back and forth communication, the pens were eventually recalled.
“This is ridiculous,” Gardner says. “I was already looking to start manufacturing here in Waterloo.”
He adds that he also invested $50,000 to $100,000 of his own money for manufacturing—money that he now stands to lose.
“It’s unfortunate to see the federal government taking this kind of stance,” says Tim Szeto, cofounder of the Toronto-based startup Nano Magnetics Ltd. “The industry started off with young entrepreneurs interested in tactile magnets that can do really cool things,” including building puzzles, sculptures or patterns.
Nano Magnetics was also subjected to a mandatory recall. The startup’s flagship product line, magnetic sets known as Nanodots, was forced out of the Canadian market in September.
In a statement about the recall, Health Canada notes that novelty magnet sets “contain small powerful magnets which can be easily swallowed or inhaled by children. Unlike other small objects that would be more likely to pass normally through the digestive system if swallowed, when more than one small powerful magnet is swallowed, the magnets can attract one another while travelling through the digestive system.”
However, Nano Magnetics adds that, “instead of working with the entrepreneurs that comprise this emerging industry, [the government] opted to impose the first-ever national prohibition against small magnets."
Gardner and the folks at Nano Magnetics aren’t the only ones affected. Earlier this year, Health Canada issued Canada’s first mandatory recall of any consumer product when it similarly forced the Montreal startup NeoMagnetic Gadgets to remove its magnetic gadget sets from the market.
Sylvia Weihrer of Health Canada’s Consumer Product Safety Directorate explains that the issue surrounding this once-thriving industry is “a very specific case.”
Novelty magnets contain more than one small powerful magnet, she says. “The magnets are so powerful and very easy to swallow. It’s an unknown hazard.”
When dealing with these companies, Weihrer says Health Canada uses “a step-wise enforcement.” In other words, it enters a negotiation phase with the company, which can make its case. She says that a mandatory recall is, essentially, a last resort if no negotiation can be made and the company fails to voluntarily comply.
Szeto explains that Nano Magnetics would have voluntarily recalled its Nanodots if the government allowed the company to express its position, identified who was responsible for the recall and engaged in public discussion about the issue.
“A recall has a big impact on reputation,” he says. “It's a lot harder to work with larger companies internationally when you've been recalled. That's going to have an impact on how we do business in the future.”
He adds that prior to the Nanodots being recalled, the company sold more than 100,000 of them across Canada in retailers such as FutureShop and Best Buy, and had no specific safety complaints.
Health Canada adds that, while they expect considerable financial losses for these startups, its number one priority is the safety of Canadians.
The Canada Consumer Product Safety Act (CCPSA), which came into effect in June 2011, gives Health Canada greater authority to handle what they deem unsafe products on the Canadian market. While the CCPSA aims to keep Canadians safe, it has implications for startups manufacturing or selling products.
Furthermore, companies that refuse to comply with mandatory recalls can face fines of $25,000 a day until the product is off the market.
“It sets a scary precedent for innovators, it sets a scary precedent for entrepreneurs,” Szeto says. “Entrepreneurs and innovators are the fuel of the future of Canada.”