Archive for the 'Small Business' Category



Western Walkabout

I believe that one of regulators’ most important responsibilities is to assess the impact of the regulations they issue. A great way to do that is to get out of Washington and talk with the folks who have to live and work under the regulations we put out. I always welcome the opportunity to do that.

Recently I was in California and Arizona talking with various groups about how we are doing—both what we are doing right and what needs to be improved. In the “what we are doing right” column, there was appreciation that people in Washington would actually listen to concerns and talk candidly about how best to address them. In the “room for improvement” column, I heard strong concerns about the high costs of complying with regulations that are confusing or do not necessarily address real safety issues.

Here is an example. I visited an apparel manufacturer who has never had any safety violations or issues. They told me that, over the past 10 years, the average wholesale cost of a garment has decreased by about 50% and that costs increased by over 15% during the same time . The testing costs mandated by the CPSC under the CPSIA over the past three years have increased costs by an additional 3.5%. That added cost is an average: it’s much higher for small production runs. In fact, I was told that the testing costs for small runs “are killing us” and that this company has stopped doing small runs of products. In this case, the consumer loses: less choice and not necessarily any additional safety.

I also had the opportunity to visit with the Arizona Chamber of Commerce, doing more listening than speaking. The message I got was that businesses will support regulations that are based on sound science, are cost effective, and that advance a real safety goal. Unfortunately, some recent regulations do not meet these criteria so it is no wonder that we hear growing concern.

To me, this growing concern points to a system that is not operating in the public interest—that is, providing the appropriate level of safety in the most cost-effective manner. We need to fix this.

End Government by Guesswork

Regulators need good data to make good policy. As President Obama made clear yesterday in his speech to Congress, it’s important to reform regulations that are “unnecessary[] or too costly.” He demanded that federal agencies “eliminate rules that don’t make sense.”

But over the last two and a half years, the Commission hasn’t taken the time to make sensible rules. Instead, we crystal-balled benefits and ignored costs that we refuse to measure. And since our rules came into effect, costs for consumers have gone up needlessly as companies pass their costs on or leave markets entirely. These results are unnecessary and do not benefit consumers. We could have minimized them by performing cost-benefit analyses. Today, Politico posted my op-ed explaining in more detail why cost-benefit analysis makes for smart regulation and why the CPSC needs to get back to competent, sensible regulating. You can read it here.

Start Your New Year Off Right

As you turn your calendars, there are a few things you should be keeping in mind. The Commission’s stay on the enforcement of the Third-Party Testing and Certification Rule is gone as of January 1st. So you should make doubly sure that your manufacturing program is in compliance if you make a children’s product that is subject to a testing rule.

And, if you’re a small-batch manufacturer, you should hurry up and sign up on the Commission’s Small Batch Manufacturers’ Registry here to give yourself peace of mind that you are exempt from certain testing requirements until the Commission takes further action.

Finally, and most importantly, in all of the regulations that the Commission has put out over the past two years, we have not given any serious consideration to the cost imposed on the economy. Congress, after hearing some loud complaints, decided to fix that with H.R. 2715, the law passed last summer that requires the Commission to consider ways to reduce the burden of third-party testing, among other things. The Commission published a series of questions on the issue in October, and we asked you for your ideas on the ways the Commission can reduce costs. We need your ideas by January 23rd. So submit your comments here!

I will be pushing internally to make sure that the staff and the Commission give serious, thoughtful consideration to the ways we can reduce costs, and your ideas in particular. But we can only be successful in reducing costs if we get serious—and perhaps out-of-the-box—ideas from you on how we can best achieve those reductions. So, please, help us ensure product safety in the most rational, cost-effective manner possible; send us your comments!

Tumbling into a Registry

Remember when you were a kid and you really wanted nothing more than to go out and play, but your parents said you couldn’t until you cleaned your room? Did you try to get by with just shoving everything in the closet? That worked right up until the door was opened and everything tumbled out, revealing the sloppiness of your effort. Now replace the child with a federal agency, and replace parental orders with congressional mandates. That’s what’s happening at the CPSC.

Like a child who “cleans” his room by stuffing everything into the closet, the CPSC rushed through a congressionally-mandated small-batch–manufacturers registry sloppily and at the last minute. As a result the agency may be failing to protect the very people the registry was supposed to protect. Last week, we finally issued a press release to let small batch manufacturers (SBMs) of children’s products know how they can take advantage of the testing relief Congress provided SBMs last August. Left unclear was whether an SBM had to be on the registry not to be required to perform certain tests that are mandated to begin in January 2012.

There is no new rule, and there was no Commission action. We shoved everything into a press release and called it a day. And to make matters worse, we issued our press release on December 23, during the holidays and just days before the new testing requirement kicks in. Our insincerity is obvious.

Another policy question not discussed by the Commission was this: Should the registry be public? There are reasonable arguments that it should be. However, there are also reasons why it should not be public since, by publishing the registry, we are implicitly releasing confidential information. (To register, a company has to be below certain revenue and product-quantity thresholds. Commissioner Northup has detailed the problems with publicizing this information, and I won’t belabor them here.) My key concern is there was no Commission-level discussion of this important policy issue.

Instead of working to find a compromise or a solution that would accommodate both points of view—something that could have been accomplished—the concerns of half of the Commission were ignored. The Chairman decided to call the process of establishing the SBM Registry and the attendant issues surrounding it “operational” rather than policy in order to act unilaterally through staff, instead of through a Commission vote.

They have told companies to use the complicated Freedom of Information Act (FOIA) exemption process if they want to keep the CPSC from telling their financial particulars to the whole world. That process requires time and legal expertise, and I believe our retreat to FOIA is contrary to the spirit of the law.

Congress wanted to relieve the product-testing burden for companies least able to bear it and to protect America’s vital small business job-creation engine. Do we really think Congress meant for these businesses to save money on testing just to spend it on lawyers? All these points could and should have been part of a Commission discussion, so people understand the reasoning behind these important decisions.

Will there occasionally be some substantial, fundamental disagreements about the best course of action? Of course there will be, but we owe to each other and the public to work to make those as infrequent as possible and to resolve them as best we can when they occur. I know we can do better, and I hope we will, but I’ll need some help from my Democratic colleagues to build a bridge.

The Song That Never Ends

If you’re a close watcher of the CPSC Commissioner’s Statements page (and, really, who isn’t?) you may have noticed that my good friend and colleague Commissioner Adler and I have had another round on our perpetual motion statement ride. Back when we took the vote on our lead standard, we got a glimpse of this dynamic, as Commissioner Adler waited a couple weeks after the vote and my written statement explaining my vote, then issued a statement of his own, directly attempting to rebut the arguments I made in my statement.  He has done the same thing with respect to the recently-issued Testing Rule.  We are now on our third round of statements responding to each other.

As I have pointed out, I believe that the purpose of a commissioner’s written statement is to explain why a commissioner voted in a particular way.  If we use our statements as vehicles to respond to arguments made in other written statements, then the commissioner who writes last has the last word.  By using statements to explain ourselves, rather than directly to rebut others, we can guarantee that we do not find ourselves where we are now, trapped on a spinning merry-go-round.

Commissioner Adler does not share this view. In his most recent addition to the dialogue, he explained his rationale. He views these statements as an opportunity for “robust discussion and debate on the critical policy issues that come up before the Commission.” Discussion and debate are wonderful things, but, with all due respect, the time for them is before a vote. That way, the discussion actually has a chance to shape the policy issues. Statement after statement after the fact provides no such opportunity.  It risks becoming repetitive very quickly with the potential for descending into the petty.

The astute reader will no doubt be asking why I have responded to Commissioner Adler’s statements—both the Supplemental and the Further Supplemental—if I believe the entire exercise is such a misuse of the forum. The answer is simple: Unilateral disarmament may be noble, but it looks the same as surrender. If I don’t respond to Commissioner Adler’s arguments, no matter how fallacious they are, it will appear that I have conceded them. That is not so, and it would be inconsistent with my public policy role to allow such a misconception to exist.

That reality—that a Commissioner cannot let the conversation be one-sided, even if she feels it is hopelessly misplaced—is precisely why the CPSC statement format works best when it is kept to an explanation of the author’s perspective and decision. If we all stick to that approach, we give the public a clear, concise view of the arguments surrounding each CPSC action (or inaction) and an opportunity to provide informed comment on future debates on similar issues. If just one of us abandons this approach, we will all be inevitably sucked into a potentially endless exchange that leaves the reader confused, annoyed, or both.

I love Lambchop, but The Song That Never Ends is best sung on children’s television, not by the leadership of a Federal agency.

Help Wanted: Fixing the Testing Rule

Yesterday, with little fanfare, the agency posted in the Federal Register an announcement that we invite comments from the public on ways to reduce the costs of third-party testing of children’s products required under the Consumer Product Safety Improvement Act.  This inquiry is mandated by a new law (H.R. 2715) passed by Congress this past summer.  After reviewing the comments we receive, we may either implement cost-saving changes to our regulations and/or report to Congress on additional authority we need to reduce costs.  This new law explicitly acknowledges what our staff economists have told us—third-party testing by outside labs is very expensive and will result in increased costs and reduced choices for consumers. 

I remain hopeful (call me naïve!) that, with this push from Congress, my colleagues will finally get serious about addressing the costs of the CPSIA in an honest and forthright manner.  However, the recent vote on the Testing Rule, which imposes expansive and expensive third-party testing requirements beyond what is required by statute, may show this hope is misplaced.  Today I filed a supplemental statement describing why I believe that the CPSIA does not require that all periodic continuing testing of children’s products needs to be done by a third-party lab.  Had my colleagues adopted this interpretation, testing costs would have been lowered without sacrificing safety and without the months of staff time the majority’s piecemeal approach will require.

I challenge readers of this blog to respond to the Federal Register request with comments on how to lower testing costs.  Be creative and constructive in your comments!  All suggestions will be read and considered, and I will be pushing my colleagues and our staff to actually think about ways to drive down costs and adopt the best ideas we get.

Regulatory Malpractice

In a decision that surprised few, the CPSC voted today to ignore common sense and regulatory conscience. We witnessed a majority putting its last grasp of political power ahead of doing what was right.

In 2008, Congress required that we put in place a rule telling the regulated community how to test and certify that the products they make meet the relevant standards. The deadline Congress imposed has long since passed, but we all agreed that the details of the rule proved much harder to write than its basic idea did. Staff put much time and effort into a rule with some solid pieces that I could support. Then the majority, all behind closed doors, summarily dismissed these changes and determined they knew better than our experts. I cannot support their changes, and I cannot ignore their tactics.

The way the majority has handled this rule is, in my opinion, regulatory malpractice. They ultimately didn’t listen to staff, they really didn’t listen to Congress, they didn’t sincerely listen to the regulated community, and they certainly didn’t listen to their fellow Commissioners. All parties pointed in the direction of re-proposal so that we could hear and learn from public comment on the significantly changed rule and the new law surrounding it. Instead, the majority seemingly pushed this through because they soon would not be a majority.

Their reckless disregard for the value of public input in writing regulations is stunning. Other agencies have sought extra public comment when proposals or facts changed. Here, we had a new law change the framework supporting a rule, and, still the majority said we will listen to public comment only after we vote out the thing the public will be commenting on.

The majority is quick to suggest that seeking re-proposal is seeking delay. That’s pure fiction. I offered an amendment to re-propose this rule in light of the statutory changes Congress made, to make the rule better and more likely to stand up in court. Under my proposal, the rule still would have taken effect within the same timeframe as the rule passed today. The majority had a chance to get this done better and faster. Instead, they blew it.

My heart aches for any family who has lost a child due to a faulty consumer product. The pain they feel can never be dismissed or diminished. That pain, however, cannot justify irrational decision-making or misuse of power.

There’s an old lawyer adage: When you have the law on your side, pound the law; when you have the facts on your side, pound the facts; when you have neither the law nor the facts on your side, pound the table. The table-pounding by my colleagues today speaks for itself.

This arrogant dismissal of input from both peers and the public on such an important vote betrays the public trust we bear to implement statutes fairly, openly, and responsibly.


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