Archive Page 4

The $57 Million Shakedown

The CPSC’s action to force a recall of Buckyballs–small powerful magnets the Commission believes to be unsafe but which are still being legally sold by others—has raised many serious questions about whether the agency acted properly.  But its efforts to blow up the concept of limited liability by individually suing one of the company’s founders–absent any allegation of wrongdoing–has elevated this action into one that could impact all businesses. 

Recently Craig Zucker, a founder of the now-defunct company that sold Buckyballs and the object of CPSC’s ire, and I discussed this case with the U.S. Chamber of Commerce. Calling the long-term implications of this case shocking, the Chamber has now produced a video that details the concerns this case poses for American businesses.  As a former safety regulator, a mother and, of course, a consumer, I strongly believe the agency could have addressed any safety concerns with this product without the unprecedented overreach taken in this case.

Go to FreeEnterprise.com to see the video for yourself.  Here is a link:

The Side Effects of Tweaking

Much has been written here and in other publications about the substantive impacts of the CPSC’s proposed changes to the rules dealing with voluntary recalls.  The substantive nature of the proposed amendments cannot be discounted even though certain commissioners persist in describing them as only “tweaks.”

As commenters analyze the impacts of the proposed changes, it is important to look at how these changes impact other rules that stakeholders and the commission operate under, specifically those dealing with submission of information under §15(b) and disclosure of information under §6(b) of the Consumer Product Safety Act.  Former CPSC general counsel Cheryl Falvey has written an interesting piece that discusses that interrelationship.  It is worth reading and thinking about.

Information submitted to the agency under §15(b) is exempt from disclosure except under limited circumstances as described in §6(b)(5).  This protection is to provide incentive for companies to fully report information the agency needs to analyze a risk without having to worry that sensitive product information is made public unfairly or prematurely.  One of the exemptions to this protection is when the Commission has accepted in writing a “remedial settlement agreement” (see §6(b)(5)(B)).

Here is the question:  is the voluntary recall (or specifically the recall’s corrective action plan) a remedial settlement agreement?  The regulations currently say that the recall agreement is not enforceable.  The agency now proposes to make the recall agreement enforceable.  Is the effect of that to make any information submitted under §15(b) subject to disclosure where it otherwise would not have been?

What is the Commission’s current position on this issue?  Reading the NPR or listening to the debate does not provide any answers.  But one thing is clear:  with all this tweaking, some transparency is called for.

§6(b): Get Ready for More “Tweaking”

Rumor has it that the CPSC staff will soon be sending up to the Commission suggestions for “modernizing” the §6(b) regulations (16 CFR 1101) dealing with disclosure oftweak image company and product-specific information. “Modernizing” is a word that covers a lot of ground and it will be instructive to see how the agency staff and commissioners define it.

The §6(b) regulations were written in 1983 and do not, for example, contemplate communication by email—hence the perceived need for modernization. But if the Commission’s recent proposal with respect to voluntary recalls—where significant substantive changes are being proposed under the rubric of “tweaking” an interpretive rule—are any indicator, then interested stakeholders should pay close attention to the proposed §6(b) rule when it comes up for Commission review.

§6(b), along with §15(b) and the voluntary recall process are three legs of the stool that supports a collaborative and cooperative relationship between the Commission and product sellers.  This cooperation, in large part, is what makes the agency as effective as it is.  §15(b) requires submission of information indicating a product hazard, but most companies, up to now, heed the oft-stated advice of “when in doubt, report”, reporting information before, or even absent, the statutory obligation.   This happens because §6(b) protects the disclosure of information that is not fair or accurate.  (Here is a link to an article that discusses the consumer protection aspects of §6(b).) Taken together, the statute provides incentives for companies to give information to the agency earlier than they otherwise would because those companies have the assurance that information about specific products will be used internally but will not be prematurely released to the public, before the agency has determined if there is a problem.  The voluntary recall process compliments this statutory framework by allowing recalls to be made quickly and, in some cases, before there is a determination that a substantial hazard does, in fact, exist.

The important role that §6(b) plays in making the statute work is not appreciated by some within the agency.  That is unfortunate.  If the Commission decides to use this proposed §6(b) modernization rule as an opportunity to make more substantial changes (as it did with the voluntary recall proposed rule), it threatens to further erode the foundation of cooperation that is so vital to an effective CPSC.

Play at Your Own Risk

NO

Recently I was up in New York and met with two insightful and smart people I want to introduce if you do not already know them.

Phillip Howard is a lawyer, civic activist and the founder of an interesting organization, Common Good.  Part of the mission of the organization is to get back to a place where citizens can take responsibility for making sensible choices:  “Making choices for the common good is impossible if everyone is tied up in red tape. Reclaiming responsibility requires a basic shift—where law sets boundaries for free choice instead of dictating choices for the lowest common denominator. . .Common Good has developed practical solutions to bring reliability and balance to law in healthcare, education, and civil justice, as well as in areas such as children’s play. . .”.  With respect to this last item, the concern is that if all risk is taken out of play, our children will not be prepared for the risks that life inevitably throws at them as they mature.

This brings me to the second person I want to introduce—Lenore Skenazy.  Lenore is a journalist, mother, and the creator of Free Range Kids.  The (tongue-in-cheek) purpose of Free Range Kids is to fight “the belief that our children are in constant danger from creeps, kidnapping, germs, grades, flashers, frustration, failure, baby snatchers, bugs, bullies, men, sleepovers and/or the perils of a non-organic grape.” While Lenore’s writings are amusing, she does make the serious point that when the line between real and speculative risk becomes so blurred—which she contends is happening more and more—our children suffer as a result.

From my perspective as a former CPSC Commissioner, I do fear that the agency, when it is regulating, too often discounts the importance of personal responsibility on the part of consumers.  The result are regulations that try to address every possible risk, real or imagined, rather than actual risks that real-world data and science have demonstrated need addressing.   Imaging the worst-case scenario all the time cabins in our kids but gives government regulators a very wide swath indeed.

Finding the Needle in that Haystack

needleinahaystack1.1Anyone who has tried to use the CPSC website knows that finding information there is no easy task. When I was a commissioner I would get regular calls from the public asking for help in locating public documents that were on the site but buried in sub-directories and illogical places.

Therefore, I am pleased that a law firm has taken on the helpful task of making some sense out of the agency’s website. You can find the “CPSC Navigator” at www.CPSCNavigator.com. While it is unfortunate that an agency that regularly talks about “transparency” makes it so difficult to find important information, I am glad that the private sector has stepped up to the challenge that the agency’s opaqueness presents.

Fixing Non-Problems, Take 2

Yesterday I directed your attention to an article by the former general counsel of the CPSC pointing out the legal and policy issues in the agency’s proposed rule revamping the requirements of the voluntary recall process.  She is not the only former senior manager of the agency to weigh in on the proposal.  Matt Howsare, former Chairman Tennenbaum’s chief of staff, has also discussed the serious issues inherent in the agency’s proposed approach.

I think that it is significant that two former senior agency staffers—one a career staffer and the other a political appointee of the majority party–are rejecting the notion that the proposal is merely a “tweak” of the process, as has been claimed by some commissioners, and instead characterize the proposal as a major overhaul of the voluntary recall process.  The agency leadership’s insistence on fixing what isn’t broken is very curious–and ominous–indeed.

Fixing Non-Problems; Creating New Ones

In an exercise that exemplifies a solution in search of a problem, the CPSC has proposed an interpretive rule that sets requirements for voluntary recalls.  I have questioned the wisdom of this activity on several occasions (see here and here).

I wanted to flag for readers an excellent analysis of the proposal written by the CPSC’s former general counsel, Cheryl Falvey. During her four year tenure at the CPSC, Ms. Falvey was a career employee, rather than a political appointee.  She understood the need to represent the Commission, not Commissioners.  She has laid out some of the practical concerns of the voluntary recall proposal in a very detailed and compelling manner.

With no evidence that the process is not now working, the Commission proposes requirements that may well make the voluntary recall process certainly less flexible and, most certainly, more adversarial.  Such a result would erode the trust that has been build up over the past 30 years as the agency and product sellers have worked cooperatively to make the marketplace safer for consumers. Public comments on this proposal are due February 4, 2014.


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