Former CPSC Chairman Ann Brown recently sent a letter to the leaders of the CPSC’s congressional oversight committee asking for them to “urge the Commission to consider its proposed [voluntary recalls] rule carefully and to assure that it does not adversely affect CPSC’s Fast Track Recall Program.” As we’ve previously written, some aspects of the proposed amendments to CPSC’s voluntary recalls rule are considerable departures from longstanding agency practice and resulted in nearly 50 stakeholder comments that criticized the same aspects of the rule that Brown calls out in her letter.
Former Chairman Brown identified two of the proposed changes as potential threats to the “Fast Track” voluntary recall program initiated during her administration. The Fast Track recall program is a program that allows companies to fulfill their product safety reporting obligations to the CPSC and conduct a voluntary recall without the agency making a “preliminary determination” (or PD) about the safety of the recalled product that could later be used against the company in product liability litigation. After describing the virtues of the Fast Track recall program and the praise it has received since its implementation in 1997, she states:
Now this award winning program appears to face the risk of being unintentionally undermined by a rule proposed by the CPSC in November 2013. One of the CPSC’s proposals is to prohibit firms desiring to conduct a voluntary recall from disclaiming that there is a hazard presented by the product unless the Commission agrees to the disclaimer. I am concerned that this proposal if adopted could undermine the efficacy of the Fast Track program. Another proposal would classify a voluntary Corrective Action Plan (CAP) as “legally binding” thus transforming a CAP into a Consent Decree, potentially delaying an otherwise effective recall weeks or even months due to haggling over legalities. A Fast Track procedure would be rendered impossible under these circumstances.
Both of the proposals that Brown refers to center around the written corrective action plan (CAP) that companies reach with the CPSC prior to conducting a joint voluntary recall. The existing rule explicitly states that a CAP is not a legally binding agreement and that a recalling company may insert a disclaimer into the agreement at their own discretion—something that most companies do. Brown later expounds on the potential effect of requiring CPSC’s agreement to the disclaimer language, stating:
If reporting firms are not allowed to make this disclaimer, they have no incentive to participate in the Fast Track Program. Not making the disclaimer may be perceived in product liability litigation as akin to admitting that the product reported on is a substantial product hazard. If so, reporting firms might just as well report to CPSC, not offer to conduct a recall, and take the chance that the CPSC staff might conclude their product is not a substantial product hazard and that no recall is necessary. If this occurs, recalls would be delayed, CPSC would be required to use substantial technical resources to evaluate products so that the staff can determine whether to make a preliminary determination of hazard, and consumers are left unprotected potentially for many months.
Corrective action plans have received renewed attention recently because of the agency’s revisions to the monthly recall progress reporting form that recalling companies are required to submit throughout the course of a recall (click here for our entry on those changes). As we previously noted, the cumulative effect of these changes, if implemented, will considerably formalize the process of reaching recall agreements with the agency and require a higher level of scrutiny by companies and their counsel. While this seems to be the intended result of the current Commission (two nominees are currently pending), Brown’s letter combined with the pushback from the regulated community may cause all involved to pause and reflect on the need for the proposed changes versus the potential drawbacks of their implementation.
It is also worth noting that these two provisions were not part of the original staff proposal to the Commission. Instead, the Commission inserted the changes into the staff draft prior to finalizing and publishing the proposal. Also, the Commission did not unanimously support the amendments. Commissioner Buerkle voted against incorporating them but was outvoted by current Acting Chairman Adler, Commissioner Robinson, and former Chairman Tenenbaum.
The Commission has indicated in both its 2014 Operating Plan and again in its 2014 Midyear Review that it intends to consider a Final Rule prior to October of this year. It will be interesting to see whether the agency staff includes these provisions in the final recommendation to the Commission and how the Commission, possibly with a new Chairman and Republican Commissioner, will vote on these and other issues.