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Companies Are Not The Enemy

It is gratifying to know that the folks at the CPSC do read my blog posts.   How do I know this?   My last post pointed to the statement, in a Fox News story about the Buckyballs lawsuit, of the agency spokesman denying that the agency “punished enemies”.  Apparently today the story was changed so that the agency is now denying that it punishes companies, not enemies. Since this change was pointed out to me by the agency spokesman, I want readers also to be aware of this change.

In the minds of some this may be a distinction without a difference. Craig Zucker of course, would be one of those who does not see a difference and it is easy to see why.  At the same time that small powerful magnetic desk toys are being sold legally across the country, the agency has demanded in a law suit that the magnetic product he distributed be recalled, and since his company is now out of business, that Zucker, one of the founders of the company, personally undertake this recall.  While two manufacturers have volunteered to do recalls of small magnets, I understand that only a handful have actually been returned.   In other words, the agency has put a company out of business and now has brought a lawsuit in order to accomplish a recall of a product that consumers apparently do not want to part with–a recall that the agency should know will not be effective.

I could go on about the questionable actions of the agency. The obvious prejudgment of both the law suit and the related rulemaking and the inappropriate extension of the “responsible corporate officer” doctrine are just two examples.   But I have written about these issues before.  For the purposes of this post, please rest easy knowing that the CPSC only punishes companies, not enemies.

A CPSC Enemies List?!

This morning, Fox News had a story on the ongoing saga of Craig Zucker, founder of the company selling the Buckyballs magnetic adult desk toy, who is refusing the CPSC’s demand that he personally conduct a recall of that product.  The CPSC is alleging that the product is defective because children have been injured by swallowing the small powerful magnets  even though the product is designed and marketed for adults and has warnings all over the box about the dangers of ingesting magnets.  Since the agency put the company out of business, it is now suing Mr. Zucker individuallenemies listy to make him recall the product.

The reason this particular story caught my eye, however, is the sentiment stated in the story and attributed to the CPSC spokesman that the agency was trying “to keep a dangerous product from children, not to punish enemies. “  That the agency thinks of those who challenge it as enemies is troubling, to say the least.

The agency is not used to being challenged and Mr. Zucker’s tactic of using humor to point to the weaknesses of the government’s case is unexpected.  Yet to brand as an enemy someone who does not capitulate and who forces the government to prove its case, even after that same government has forced him out of business, goes way beyond appropriate behavior.  If the sentiment is as stated in the story, then this is a frightening development.

 

 

Not Tweaking But Twerking

Anyone who watched the CPSC Commission meeting last Wednesday (November 13) knows that the word de jour at the agency is “tweaking.”   That was the verb form used over and over again by certain commissioners to minimize some rather dramatic changes that are being proposed to the way in which the agency and companies accomplish voluntary recalls of potentially unsafe products.  But the commissioners who used that verb clearly know that “tweaking” is not what actually is being proposed.  Those commissioners very well know that they are not tweaking the process but changing it radically.

The issue came to the commission in the form of a staff proposal to set out “guidance” (read “requirements”) for negotiating voluntary recalls and what must be included in the press release announcing the recall.  The staff proposal ranged from the helpful (encouraging direct notice to consumers who can be identified) to the innocuous (specifying type font) to the silly (requiring that recall posters be sent out in all instances—when was the last time you noticed a recall poster when shopping?)  The staff proposal also continued the theme that the CPSC should be dictating and designing corporate compliance programs, now as a part of a voluntary recall.  As I have stated often enough, the expertise of the agency’s excellent compliance staff is in negotiating recalls, not designing compliance programs.

The proposal morphed into something more when the Democrat majority of commissioners decided to undo 30 years of experience to change a system that everyone agrees has been working quite well.  The solution in search of a problem that they agreed to is to make the plan setting out the details of a voluntary recall binding and enforceable. As best as I can decipher from watching the meeting and reading their statement, the majority is troubled by the notion that there is no recourse in the courts if a company violates a voluntary agreement made with the commission.  It does not seem relevant to those commissioners that this has not been a problem over the course of the past 30 years that the system has been in place.  Apparently the thinking is that, in theory, this could be a problem so let’s fix it before it breaks.

The majority points to one or two instances where they say the company was slow-walking the agency.  What they do not point out is that, in those instances, the agency did not lack tools to modify conduct (and that any slow-walking was as much the agency’s fault as the company’s) or that going to court would result in an even slower and more burdensome process.  And they completely ignore how their proposal will remove the flexibility the agency now has to address problems that may be discovered as the recall is rolled out.  Under the majority’s proposal, the parties’ obligations will be as described in the agreement—no more and no less.

What is being proposed has the potential to delay and burden a process that everyone thinks has been working well–all to address a hypothetical problem that exists, it seems, only in the minds of some commissioners.   The agency’s mission is to protect consumers.  By decreasing flexibility and adding time and burden to a process that works well now, consumers stand to be on the wrong end of that “tweak.”  As my high school auto shop teacher said, “If it ain’t broke, don’t fix it.”

The Saga of Buckyballs–How Not to Regulate

Today’s Wall Street Journal has an Op Ed I wrote about the CPSC’s actions against Buckyballs and one of its founders, Craig Zucker.  While the Op Ed gives you the overview of the controversy, there is a substantial back story that space considerations only allowed me to touch on.  Nevertheless, that back story is important and it illustrates how the actions of the CPSC discourage the kind of corporate responsibility that the agency needs to encourage to protect consumers.

Skip the Warning—Just Ban the Product

We all acknowledge the harm that small powerful magnets can cause when several are swallowed.  The CPSC is aware of about 50 incidents of swallowed magnets over the past three years and, from this, estimates that there have been approximately 1700 incidents involving these magnets.  We also must acknowledge that the harm is only now being recognized by the medical community and that efforts to educate the public have been inadequate.

A number of manufacturers make small powerful magnet desk toys and manipulatives.  Buckyballs had the largest share of that market.  Even though Buckyballs were not intended for or primarily sold to children, when reports of ingestion started coming in, the company making them, Maxfield and Oberton, stepped up with an aggressive safety education program to warn against the danger of children swallowing powerful magnets.  Even though that education program was fully discussed with and encouraged by the agency, the CPSC then demanded a recall and decided to sue the company when it disagreed with its demand—all before the safety education program could be fully put into place.  A principle tenet of the agency’s case is that warnings were not sufficient to protect the public.  Yet, the only evidence it has to support that contention is its speculative conclusions, since the aggressive safety campaign envisioned by the industry was prematurely shut down by the agency.

I could point to other instances where the agency has worked to encourage public education campaigns to successfully address problems with equally serious injury patterns.  In this case, the agency apparently made a decision that warnings would not work and that a recall and product ban were needed before it had the real world evidence to support that conclusion.

Influencing the Process

The lawsuit against Maxfield and Oberton is not the only action the agency is pursuing.  Shortly after the agency sued the company, it also started a rulemaking proceeding to ban small powerful magnet desk toys and manipulatives as presenting unreasonable risks. The problem is that the agency in this rule is answering substantially the same question that it is litigating in the Buckyballs case.

Why is this a problem?   First, by issuing a rule essentially banning these products before the lawsuit against Maxfield and Oberton is concluded, the agency is determining that the product does in fact present an unreasonable risk of injury.  The issue before the judge is whether the product has a defect that presents a hazard. It is naïve to think that the judge will consider this case in a vacuum and that the agency’s determination in the rulemaking proceeding will not have an impact on the litigation.  By proceeding with the rule before the law suit is completed, the agency seeks to put too heavy a thumb on the scales.

Second, the commissioners are the venue for appeals coming out of the law suit.  When they have already make the ultimate decision that this product should not be on the market, it is questionable about how objective they are thought to be or actually are.

I am not arguing that the CPSC should not protect the public through the rulemaking process.  I am arguing that, when it made the decision to bring suit against Buckyballs, it then needed to recognize that procedural fairness comes with that decision.  As I stated at the time, both processes conducted simultaneously does not allow for an even playing field.

Legal Gamesmanship that Sacrifices Long-Term Safety

The agency staff’s decision to add Mr. Zucker as a party to the case is a truly pernicious development that, in the long run, may seriously damage the agency’s ability to work with stakeholders to carry out its mission.  Working with companies collaboratively to effect voluntary recalls is the foundation of the agency’s success.   The CPSC relies on the involvement of senior management to assure that cooperation.  To now say that senior management’s involvement, so essential to help protect consumers, could result in mind-blowing penalties imposed personally can only result in destroying the cooperative relationship the agency needs to do its job effectively.  It creates the perverse incentive for corporate officers to avoid involvement, hide behind lawyers and shun scrutiny of their safety systems when what is needed is more involvement.

If the agency seeks the involvement of senior corporate managers to help them assure compliance with regulations and then it penalizes them for that same involvement; if business owners have to fear personal financial ruin for making the government prove its case; and if speaking out against government action that is thought to be unfair results in what appears to be a personal vendetta, then we have to wonder about the quality of leadership that allows such results.

Yesterday, Mr. Zucker took the unprecedented step of suing the CPSC.  His lawsuit is being financed by the profits of his newest product, “Liberty Balls.”  I understand they are selling quite well.

Are Many Better Than One?

CommitteeLast week I spoke at a meeting of the American Bar Association’s Science and Technology Committee.  While the topic was the use of cost benefit analysis in formulating regulatory policy, the question I put on the table for discussion is whether the benefits of multi-member independent agencies outweigh the costs.  This is an issue that I have been thinking about for some time.  Based on my experience at the CPSC, I question whether these agencies really deliver to the public any better results than those headed by a single administrator.

The theory behind multi-member independent commissions is that with bipartisan members serving a term of office and who can only be removed for cause, the rules coming out of such commissions will be qualitatively better and have bipartisan legitimacy.  The reality is that the work product is not necessarily bipartisan and indeed, at the CPSC, has been very partisan.  Nor, I would submit, are the rules from independent agencies substantively different or “better” than those coming out of agencies with single administrators, but those rules have substantial process-based costs.

What are those costs?  For starters, each commissioner’s office and staff consume approximately $1 million, adding up to almost $5 million annually.  While for some agencies that is insubstantial, for the CPSC, with a budget of $108 million, that means almost five per cent of the agency’s budget is spent on housing, staffing and paying for commissioners.  But beyond just that obvious cost, there are significant costs associated with a top heavy management system.  For example, senior staff spend hours each week briefing commissioners in repetitive one-on-one meetings.   Having multiple commissioners also generates controversy where it might not otherwise exist.  For example, we have seen the agency start down a path, only to have a commissioner change his mind and, hence, change policy direction of the agency with significant burdens being placed on those who relied on the earlier policy.  As another example, commissioners and staff spend hours grappling with whether an issue is administrative in nature, and can be decided solely by the chairman, or whether the issue presents policy questions and therefore must be presented to the commission for decision.

Given these and other costs, would not a single administrator do better?  A single administrator would be charged with following broader administration policy and there would be clear accountability for agency decisions.  Such a change would avoid the costs of “collegial” decision-making.  With respect to the quality of decisions, with good data, the regulatory results would likely be as good as, if not better than, those coming out of a commission.  And if they were not, it would be an easy task to fix responsibility.

Singing a Different Tune?

Why put off until tomorrow what you can do today?  With respect to reducing the unjustified costs of its testing rule, the Commission has followed the notion of why correct today the problems you have made when you can put them off until tomorrow . . . or maybe until never.

We all know the history:  in 2011, Congress told the agency to look for ways to reduce testing costs and if it needed new authorities to do that, then ask for those authorities.  Since 2011, the agency has asked the public repeatedly for comments on how to carry out that mandate.  In spite of good suggestions from the public and from the staff, the Commission has taken no real action to implement any of those suggestions for well over two years.  In the meantime, product sellers are having to pay for tests that do not necessarily enhance safety but cost consumers in terms of higher prices and fewer choices.

I have written about this over and over again until I sound like a broken record.  Indeed, perhaps the CPSC theme song should be “Maybe Tomorrow” by the Jackson Five.  How about Amy Winehouse’s “Procrastination”? Or is it better to stick with an old standard such as Sinatra’s “Call Me Irresponsible”?

Given all this, I was surprised and pleased to hear all four Commissioners at yesterday’s briefing on the agency’s FY’14 Operating Plan say how much they each supported moving ahead with efforts to reduce testing burdens.  The two new Commissioners are dealing with this issue for the first time, and so their reaction that this is an issue overdue for attention makes perfect sense.  But it was startling to hear Chairman Tenenbaum and Commissioner Adler join that particular chorus since they have been less than positive about moving this issue forward.

Why this change of tune?  Perhaps the need to respond to inquiries from the Congress about the agency’s inaction has triggered this sudden interest.  And perhaps hard questions from new Commissioners has jolted them out of their somnolence on this issue.  At the briefing, there seemed to be some acknowledgement that products made from manufactured woods were real candidates for relief.  It would be a pity if the agency stopped there.  As Commissioner Buerkle pointed out, there are plenty of other areas where relief seems to be warranted.

And hard questions need to be asked about why this is taking so long.  Comments were submitted months (years) ago and there has been plenty of time to read, analyze, come to some conclusions, and initiate some real actions by the agency—if only the Commission gave the signal to do so.  Unfortunately, for example when I, as a Commissioner, tried to include some action to bring this to conclusion in the FY’14 budget, my effort was summarily rejected by both Chairman Tenenbaum and Commissioner Adler.  So it was especially gratifying that both now appear to have joined their colleagues in singing about the need for some relief.

To continue the musical theme, the agency now has some New Kids on the Block.  I hope we will hear their hit song, “No More Games” start being played at the CPSC.

To The Staff: Thanks!

As readers are aware, my term of office as a CPSC Commissioner ended on October 26. Yesterday, I had the chance to go back to the CPSC to say good bye to the dedicated agency staff who work so hard to protect American consumers.  Having the opportunity to work with, and learn from, professionals of the caliber of the CPSC career staff has been a high point of my career.  I know a number of CPSC staff members follow this blog so I wanted to use it to again say thank you to the staff for all the help, support, learning and spirited discussions you provided as we worked through so many important safety issues.


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