Consumer Product Safety Act

CommissionerBuerkle370x500This morning it was announced internally at the CPSC that Commissioner Ann Marie Buerkle has become the Acting Chairman of the agency. The CPSC has not yet released a statement concerning the transition of the chairmanship from Elliot Kaye to Ann Marie Buerkle, but we have confirmed the change in leadership with multiple sources inside the agency. In a move largely seen as a precursor to this change in leadership, the Commission recently voted to install Buerkle as the Vice Chairman of the agency — ensuring that she would become the Acting Chairman of the agency once Kaye vacated the Chairman’s office.

Continue Reading CPSC Begins Transition: Ann Marie Buerkle is Now the Acting Chairman of the Agency

We do not get many court decisions in the CPSC world, but yesterday we received one.  Last evening, a Wisconsin federal district court essentially held in the Government’s case against Spectrum Brands, Inc. (Spectrum) that (1) Spectrum failed to timely report defective coffee pots in violation of Section 15(b) of the Consumer Product Safety Act (CPSA) because they could create a substantial product hazard, and (2) the Government’s imposition of a civil penalty pursuant to the CPSA was not in violation of Spectrum’s statutory or constitutional due process rights.  In doing so, the Court rejected Spectrum’s procedural and substantive arguments, including that the CPSC’s claims were time barred and that the CPSA’s reporting requirements are unconstitutionally vague.

The Department of Justice and CPSC alleged that a company acquired by Spectrum (Applica Consumer Products) knowingly failed to timely report under Section 15(b) of the CPSA a hazardous defect relating to certain coffee pot handles.  The Complaint alleged that the Company had received approximately 1,600 consumer complaints over a four year period (2008-2012) related to the breakage of the pots’ handle resulting in coffee spillage and burns on consumers.

In response to the filing of the lawsuit, Spectrum asserted, among other arguments, that (1) the Commission’s claims against it were time barred under the so-called Gabelli doctrine; (2) the CPSA’s reporting requirements are unconstitutionally vague; (3) the CPSC failed to provide fair notice that a report was required in light of its finding that other Spectrum coffeemakers with similar issues did not present a substantial product hazard; (4) the CPSC’s late-reporting determination was arbitrary and capricious; (5) Spectrum had no duty to report because the CPSC had already been “adequately informed” of the handle failures and (6) the CPSA did not authorize the CPSC to seek certain forms of injunctive relief including the establishment of a compliance program and prospective liquidated damages in the event of noncompliance.

coffee-pot-cpscThe Court rejected all of these arguments and handed almost a total victory to the CPSC that may have future ramifications in the product safety community.  For example, the decision certainly lends new credence to the CPSC’s common refrain to regulated entities “when in doubt, report” when deciding whether a product defect could present a substantial product hazard.  The Court even went so far as to cite this common CPSC advice in the opinion.  It’s also noteworthy that the Court concluded that the CPSC does not need to articulate its reasoning for a civil penalty amount in writing and provide more transparency in the process generally­­­—a complaint often raised by industry defendants.

Continue Reading BREAKING: COURT RULES POSITIVELY FOR CPSC IN FEDERAL CIVIL PENALTY CASE AGAINST SPECTRUM BRANDS

We have had a huge election result, perhaps the most significant in our lifetime, potentially even exceeding what was called the Reagan Revolution.  It is critical, particularly for anybody from Washington DC, to have a great deal of modesty and humility in prognosticating the future under the Trump administration even in the CPSC world.  We assume, but really do not know, what the attitudes of the new Trump administration and the Republican-led Congress will be in our parochial, but critical, little product safety world.

We can understandably assume that within a year or less there will be a new CPSC Chairman and a new Republican majority on the Commission. We can also assume that this will change the direction and substance of many regulatory initiatives and maybe even some of the approaches to compliance and civil penalties.
Though we may be unsure about the future, I can say confidently that what we badly need from the outgoing Democratic majority and the yet to be defined incoming Republican majority is some perspective, restraint, and Aristotelian moderation.  I hope that the current majority commissioners will not take advantage of their present but fleeting power to push through ill-conceived regulatory or compliance and enforcement initiatives.  Such actions will be bitterly opposed and this Commission’s reign will end on a sour note and be subject to regulatory and congressional reversal.

vote-pins-CPSC-Post-Election On the other hand, all five of the current commissioners swore to uphold the Constitution and the laws of the United States.  Those laws absolutely include CPSIA and other governing statutes of the CPSC.  So the Commissioners need to, and I am confident that they will, continue to do their jobs.

There are some very important initiatives which will enhance safety and not be politically controversial.  For example, I welcome Chairman Kaye’s interest in a comprehensive and interagency review of the lithium ion battery problem.  We do not need to have any more spectacular safety problems to recognize that even without hoverboards and cell phones catching on fire, the increasing use and push-the-envelope application of products which use lithium ion batteries is causing lots of problems.

Indeed, the situation with respect to lithium ion batteries is even worse for smaller companies which don’t have vertical integration, don’t design batteries or battery packs, don’t have much control over their vendors, and basically have to take solutions off the shelf.  Everybody in the product safety community will benefit from figuring out what combination of standards, practices, and designs we need to protect the public and thousands of businesses.

Nevertheless, the business community and the future leaders of the CPSC need to show some restraint as well.  It would be a mistake to take advantage of the present politics to fundamentally reverse the key elements of the Consumer Product Safety Act, to strangle the agency with inadequate funding, or tie the agency up in knots so it cannot adequately function.  This is a formula for exponentially increasing an already problematic patchwork of state and local government regulation of consumer products.  It would also potentially allow for cheap, unsafe imports to flood our country and undermine significant product safety investments already made by U.S. companies.

This does not mean that nothing should be done or that the statute shouldn’t be revisited in some regards.  There are plenty of ways the business community can achieve meaningful regulatory improvements and burden relief that would not cause larger issues.

I do not support crippling the CPSC.  No members of industry that I have spoken with support such drastic action either.  It will not be in the long term benefit of the business community and it leaves American consumers, our families and friends, less protected.

I’ve been involved in the product safety world for 30-plus years and have seen the political pendulum swing on multiple occasions. One constant is that most reasonable, informed people, whether business executives or consumer advocates, agree that a well-functioning CPSC is a critical part of a vibrant economy for consumer products in this country.

 

On Tuesday, the U.S. Consumer Product Safety Commission (CPSC) announced that Best Buy Co., Inc. entered into a settlement agreement with the CPSC to pay a $3.8 million civil penalty to resolve allegations that it “knowingly sold, offered for sale, and distributed in commerce recalled consumer products.”  This civil penalty is significant because the alleged violation of the Consumer Product Safety Act (CPSA) had nothing to do with timely reporting under Section 15(b)—the usual suspect in civil penalty cases.  Rather, the allegation against Best Buy is that it violated CPSA Section 19, which prohibits the sale, distribution, or importation of any product that has been recalled.

This penalty is just the second such penalty in recent years (see Meijer 2014 civil penalty).  In a tweet commenting on the penalty and noting the reason for it, CPSC spokesman Scott Wolfson said “[The] challenge is great enough to get recalled products out of homes.  We need retailers to keep them out of their stores.”

Scott_Wolfson_US_CPSC_Tweet_Best_Buy

The CPSC alleged here that Best Buy knowingly sold and distributed sixteen different recalled products between 2010 and 2015, including washing machines and dryers, ovens, televisions, surge protectors, computers and other electronics.  Notably, according to the CPSC’s allegations, sales of recalled products continued even after Best Buy had told the Commission that measures were put in place to catch such products and reduce the risk of sales of recalled products.

Importantly, the CPSC imposed the penalty and highlighted in its press release that internal logistics issues caused the sale of the recalled products. Specifically, the CPSC alleged “Best Buy, in some cases, failed to permanently block product codes due to inaccurate information that signaled that the recalled product was not in inventory.  At other times, the blocked codes were reactivated prematurely, and in a few cases, overridden.”

In a complicated and massive supply chain, these issues are not unheard of.  However, where such issues lead to the sale of recalled products, the CPSC is clearly not accepting them as excuses or defenses, and will not hesitate imposing a hefty civil penalty.

In response to the civil penalty announcement, Best Buy stated the following: “We regret that any products within the scope of a recall were not removed entirely from our shelves and online channels.  While the number of items accidentally sold was small, even one was too many.  We have taken steps—in cooperation with the CPSC—to help prevent these issues from reoccurring.”

Along with paying the $3.8 million civil penalty, Best Buy has agreed to maintain a product safety compliance program with the common program elements we have seen in recent timeliness penalties to ensure that the Company complies with product safety standards and regulations enforced by the Commission.  Not surprisingly, the compliance program also contains elements related to the “appropriate disposition of recalled goods,” and management and oversight of that program.

As we frequently advise, companies in the consumer products arena should remain mindful of and attentive to their obligations under the Consumer Product Safety Act—not just Section 15(b) reporting (as that, deservedly, receives a lot of attention)—but also to the CPSA’s many other requirements and prohibitions, including the prohibition on the resale of recalled products.

This civil penalty is a good reminder that companies, large or small, must have robust procedures in place to identify and set aside recalled products whether on the shelves, in inventory, or otherwise, and to control all supply channels to prevent this from happening.

 

 

 

In the wake of two tragic amusement park ride accidents in Kansas and Tennessee, and the ongoing political debate in America over gun safety issues, we felt it timely to help answer a question that continues to be asked in the media: does the U.S. Consumer Product Safety Commission (CPSC) have the authority to address the safety of amusement park rides and guns?

amusement-park-guns-cpscAmusement Park Rides.  Every time there is a tragedy on a ride at an amusement park, the nation turns its attention and scrutiny on the CPSC as the nation’s safe products regulator.  However, and crucially, the CPSC does not have jurisdiction over the safety of “fixed site” amusement park rides.  In 1981, the Congress stripped the CPSC of its jurisdiction over these rides through an amendment to the Consumer Product Safety Act (CPSA).  As a result, rides that are “permanently fixed to a site” (such as the ones at the Kansas and Tennessee parks) are subject to voluntary standards written by the ASTM F-24 Committee on Amusement Rides and Devices and state and local regulations.

The CPSC does have jurisdiction over “mobile” amusement rides (those transported from location to location).  The agency also acts as a clearinghouse for safety information on ride incidents identified by Commission investigators and state and local ride officials.  The following 2012 CPSC Directory of State Amusement Ride Safety Officials provides a helpful introductory overview of the CPSC’s activities with respect to amusement park rides and a directly of the relevant state and local officials dedicated to ride safety.

Read our previous post about this jurisdictional issue here.

Gun Safety.  Like fixed amusement park rides, firearms and ammunition are excluded from the definition of a “consumer product” in the CPSA.  As a result, the CPSC does not regulate the safety of guns, shells and cartridges (the Bureau of Alcohol, Tobacco, and Firearms does).

guns-amusement-park-cpscNote: CPSC Commissioner Marietta Robinson recently issued a thoughtful perspective describing how she believes the CPSC can make guns safer and help bring down the number of accidental incidents involving firearms.  According to Robinson, “guns should be defined as the consumer products they are so that we may do our job of protecting the American consumer.”

Despite its lack of jurisdiction to regulate the safety of guns and ammunition at present, the CPSC does have authority to regulate the safety of some products and accessories related to gun use.  For example, the CPSC has asserted its jurisdiction over separate firearm trigger locking devices.  Additionally, the CPSC has recalled previously gun storage boxes, handgun vaults, and gun holsters, thus all squarely falling within the regulatory authority of the agency.  In fact, as recently as 2013, the White House requested the CPSC to “review and enhance as warranted safety standards for gun locks and safes” as a measure to improve gun safety.

Without a further act of Congress, the CPSC’s activities with respect to fixed amusement park rides and gun safety will not likely change.

 

This article originally appeared on Law360 on June 14, 2016 and provides additional analysis to our prior posts on civil penalties.

This past March, while speaking at a Consumer Federation of America luncheon, U.S. Consumer Product Safety Commission Chairman Elliot Kaye stated that he “was pleased to announce” that the agency had secured a $15.45 million civil penalty. Commissioner Joe Mohorovic, who voted in favor of the penalty, issued a statement expressing reservations that “too few of the compelling facts” were reflected in the public facing settlement documents for the regulated community to draw conclusions and lessons.

He has since issued two strongly worded dissents raising concerns about the overall transparency of the civil penalty demand process (here and here).  Commissioner Ann Marie Buerkle has recently stated that “consumers will be safer if we help companies prevent violations rather than celebrate marquee penalties,” while Commissioner Marietta Robinson has defended the CPSC’s approach to civil penalties against such criticisms calling them “unwarranted” and “misguided.”

These four perspectives represent some of the dueling philosophies within the CPSC leadership about the role and purpose of civil penalties.  The differences of opinion as to the commission’s approach to civil penalties have never been more pronounced.  Over the past two weeks, the CPSC announced civil penalty settlement agreements with Teavana Corporation and Sunbeam Products (d/b/a Jarden Consumer Solutions) for $3.75 million and $4.5 million, respectively.  These recent penalties come on the heels of the CPSC’s obtainment in March of the record-breaking $15.45 million civil penalty referred to above against various Gree Electric Appliances entities.

It is no secret that over the past two years the CPSC has sought higher civil penalties against companies for alleged violations of the requirement to report product safety issues to the agency in a timely manner — and has notably achieved that goal as announced penalties creep higher and higher into the millions of dollars.  However, in pursuing such civil penalties, the commission’s approach has increasingly divided along partisan lines.

Since last May, the commission has accepted nine civil penalty settlement agreements presented to it by the agency’s professional staff that ranged from $2 million to $15.45 million.  Five of those penalties received a 4-1 vote with Commissioner Buerkle dissenting, while four penalties received a 3-2 vote with Commissioners Mohorovic and Buerkle dissenting.

Approach of the Chairman and Commission’s Democratic Majority 

Chairman Elliot Kaye

Last year, CPSC Chairman Elliot Kaye made waves in the product safety world when he remarked at the 2015 annual International Consumer Product Health and Safety Organization product safety conference that he was directing staff to seek significantly higher civil penalties against companies for violations of the CPSC’s product safety statutes.  Chairman Kaye doubled down — literally — on those remarks earlier this year when, at the same conference, he stated that he wanted to see “double digit” civil penalties based on certain fact patterns that he was seeing.  Kaye reasoned that Congress had intended such increases when it significantly raised the civil penalty ceiling in the Consumer Product Safety Improvement Act of 2008 (CPSIA) from $1.825 million to $15 million.  A few weeks later, Chairman Kaye announced the $15.45 million civil penalty against the Gree entities.

Most recently, after the CPSC announced the Teavana civil penalty, Chairman Kaye made the following remarks regarding Section 15(b) reporting obligations and civil penalties:

All companies who do business before the CPSC must understand that they cannot withhold information from the commission that impacts public safety.  If consumers are suffering product-associated cuts by broken glass and burns by hot liquid then that type of information needs to be reported to the CPSC — immediately.  The $3.75 million penalty agreed to by Teavana is appropriate and is another sign that the CPSC will consistently hold companies accountable when they do not comply with the law …

In short, it is evident from his remarks that Chairman Kaye believes that companies have a heightened duty to report potential defects to the commission, intends to pursue higher civil penalties against companies who violate their obligations and responsibilities under the product safety laws, and supports the general process and procedures currently followed by the Commission and its staff in prosecuting civil penalty demands.

Commissioner Marietta Robinson

One of Chairman Kaye’s Democratic colleagues, Marietta Robinson, has supported the commission’s general approach to civil penalties and has voted in favor of all of the recent civil penalties levied against companies.  In a recent statement, Robinson stated that the following criticisms against the commission’s current approach — the settlement was too high, the CPSC is penalizing a company that made an honest mistake, and too little information was provided to the public on precisely how the CPSC calculated the civil penalty demand — are “unwarranted, misguided and belied by the facts.”  According to Robinson, the commission is using an important tool given to it by Congress to do something about those “rare occasions” when the agency determines that a company has failed to report a potentially hazardous product in a timely manner, and is “hardly pursuing an overzealous enforcement agenda.” Commissioner Robinson’s full statement can be found here.

Commissioner Robert Adler

Although Commissioner Adler has not made any official statements regarding civil penalties recently, he has shared some insight of his thinking on civil penalties in prior years.  For example, in 2012, Adler voted against a civil penalty agreement with Hewlett-Packard.  In a dissenting opinion, Adler stated that the size of the penalty ($425,000) was “infinitesimal” in relation to the size and revenues of the company.  He also rejected the idea that the amount of the penalty could serve as precedent in future cases, specifically citing the new $15 million civil penalty ceiling authorized in the CPSIA.

Approach of the Agency’s Republican Commissioners

While the Commission’s Republican members, Joe Mohorovic and Ann Marie Buerkle, have some differences in their respective approaches to civil penalties, both have expressed concerns over how the agency calculates, imposes and settles civil penalty demands for alleged violations of CPSC statutes, such as Section 15(b) of the CPSA.

Commissioner Joe Mohorovic

Commissioner Mohorovic has voted for some civil penalties in the past, including Gree, although he has consistently and repeatedly expressed concerns over the way by which the commission seeks and then publicizes such penalties.  Recently, Mohorovic voted against the Teavana and Sunbeam civil penalties and issued strongly worded dissents setting forth his perspective on civil penalties in greater detail (see Teavana statement here and Sunbeam statement here).

In the Teavana case, for example, Mohorovic stated that he is “unpersuaded by any of the facts … that [the] settlement amount is appropriate or that a penalty is justified at all,” and that he believes the commission is “failing in [its] duty to tell people why [it is] imposing the penalty [it is] imposing.”  Mohorovic’s perspective could be summarized as follows: settlements of civil penalty demands are teachable moments to educate the regulated community, yet that can only be accomplished through public facing settlement documents that provide sufficient case facts and the commission’s analysis of how those facts are applied to its civil penalty framework.  The commission, according to Mohorovic, is not doing so and missing an important opportunity.

Most recently, Mohorovic has asked the commission to add to its annual agenda and priorities hearing some potential elements of a way forward on “what should be our highest priority: the fair, just, and orderly calculation and imposition of civil penalties for alleged violations of our rules.”  Such steps include, among others, directing the CPSC’s Office of General Counsel to produce a publicly available report comparing the CPSC’s statutory and regulatory penalty constructs with those of peer agencies and holding one or more open meetings or workshops on “CPSC penalties, their purposes and their ideal function and present dysfunction.”  This statement can be found here.

Commissioner Anne Marie Buerkle

Finally, Commissioner Buerkle has been, perhaps, the most strident critic of civil penalties generally and the commission’s approach to pursuing such penalties against companies.  According to Buerkle, she does not oppose civil penalties as a “matter of course;” rather, her opposition has “been for a variety of reasons.”  From Buerkle’s viewpoint, the defect reporting requirements of Section 15 are vague, civil penalties for failure to immediately report are difficult to evaluate and value, and, like Mohorovic, Buerkle has concerns with the CPSC’s lack of transparency throughout the civil penalty process.  Commissioner Buerkle’s recent statement on civil penalties can be found here.

Conclusion

These recent civil penalty settlement agreements illustrate the commission’s desire to increase the amount of penalties assessed against companies for late reporting violations.  But they also illustrate another trend: a commission increasingly divided along party lines with respect to civil penalties. This division, however, is not focused on “whether” the agency will impose multi-million dollar civil penalties.  At least four commissioners have recently supported multi-million dollar civil penalties in cases where they thought a penalty was warranted.  Rather, the major policy divide on civil penalties relates to the role of such penalties in CPSC enforcement, how they are calculated, and the ability of stakeholders to be guided by previous settlements.

Based on the current dynamic, it seems that a robust public debate on the role of civil penalties will continue to unfold at the commission over the next few months.  Although this commission has found middle ground more consistently than in recent years, it remains to be seen whether the various sides of the debate will reach a middle ground on these questions.  In the meantime, companies should expect the CPSC’s current practices for civil penalties to remain much of the same.

Time Expired Statute of LimitationsAfter filing a Section 15(b) report and conducting a recall with the Consumer Product Safety Commission (“CPSC”), it is not uncommon for a company to wonder whether it timely filed its report under the Consumer Product Safety Act (“CPSA”). A question sometimes asked of us is how much time must pass before the company can feel confident that the agency is not going to initiate a timeliness investigation or civil penalty action.

CPSC’s Statute of Limitations

The CPSA does not contain an explicit statute of limitations that answers this question. Instead, the CPSC operates under the general statute of limitations for the government to bring an enforcement action for a civil penalty, 28 U.S.C. § 2462, which states the following: Continue Reading What is CPSC’s Statute of Limitations for Civil Penalties? That’s a Gabelli Question

There have been many twists and turns over the past four years concerning the CPSC’s regulation of certain high powered, rare-earth magnet sets and its litigation against various entities selling these magnets.  In the latest chapter of the magnets saga, a federal court in Colorado has permanently enjoined Zen Magnets (Zen) from selling magnets purchased from another distributor, Star Networks USA (Star Networks) who later recalled them to settle administrative litigation with the CPSC.

It is illegal to resell previously recalled products under the Consumer Product Safety Act (CPSA).  Zen asserted the products were “fungible commodities” and it had taken them out of the scope of the prohibition by repackaging and rebranding them.  In a victory for the CPSC, the court disagreed vehemently and ordered Zen to recall the magnets.  The court reasoned as follows: Continue Reading Federal Court Makes No Exceptions for “Commodity Products” and Orders Zen Magnets to Stop Selling Previously Recalled Magnets

adult apparel regulation CPSCEarlier today, the CPSC unanimously agreed to publish in the Federal Register a new enforcement policy proposed by Commissioner Joe Mohorovic regarding the certification of certain adult wearing apparel (click here for policy-related materials and statement prepared by Commissioner Mohorovic).  Specifically, the CPSC will not require manufacturers and importers of adult apparel made of fabrics exempt from testing under the Flammable Fabrics Act (FFA) and subject to no other CPSC regulation to furnish a general conformity certificate (GCC) stating that such apparel is exempt from testing.  This is a meaningful, common sense policy that will hopefully precede more agency efforts to find ways to reduce regulatory burden without sacrificing or otherwise impacting product safety.

Commenting on the new policy, Commissioner Mohorovic stated: Continue Reading CPSC Adopts Mohorovic’s $250 Million Burden Relief Proposal for Adult Apparel

shutterstock_252171946Over the past few months, numerous national media outlets have published stories about the potential health risks of a material commonly used on playground surfaces—crumb rubber.  Crumb rubber is a granule material typically made from recycled scrap tires that is used to provide a soft play surface for playgrounds (and infill for artificial turf fields).  Recently, some have questioned whether crumb rubber surfaces are safe for children to play on due to the materials’ potential toxicity.

From this debate, a narrower, more legally technical question has arisen over whether playgrounds—many of which use crumb rubber as a play surface—constitute “children’s products” under the Consumer Product Safety Act (“CPSA”).  A “children’s product” is defined under that law as a consumer product designed or intended primarily for children 12 years of age or younger and any children’s product must meet CPSC’s requirements for lead content, lead paint, third party testing and certification, tracking labels, and other regulations.  According to Public Employees for Environmental Responsibility (PEER), the U.S. Consumer Product Safety Commission (CPSC) has decided not to enforce the strict lead limits that apply to children’s products for playgrounds with crumb rubber play surfaces.

In a recent letter sent to CPSC Chairman Elliot Kaye about the crumb rubber issue, Senators Richard Blumenthal (D-CT) and Bill Nelson (D-FL) asked: Continue Reading Must Playground Equipment & Surfaces Comply with CPSC Lead Limits for Children’s Products?