Completing Unfinished Business

As the year ends, we often scramble to finish those tasks that have been put off during image.pngthe year.  At the CPSC, several unfinished tasks still need some regulatory housekeeping before the new year with new priorities takes over everyone’s attention.  Finishing outstanding regulatory work that is ripe for completion is just good practice and it furthers the President’s call to make the regulatory process more user-friendly and less burdensome.

The very best example is the outstanding proposed interpretive rule to dramatically change the voluntary recall process.  This rule, which was proposed back in 2013 and has never been finally voted on, would require all voluntary corrective action plans submitted to the Commission by the private party executing the recall be legally binding agreements. It would also prohibit the recalling firm from stating that the submission of a voluntary corrective action plan does not constitute an admission that a product hazard exists without explicit approval by the CPSC staff.  It would allow the agency staff to require the firm to implement a compliance program as a part of the voluntary recall.

The bottom line is that the proposal takes the “voluntary” out of the voluntary recall process and turns existing practice on its head.  While much has been written about why this would proposal would discourage firms from conducting voluntary recalls, with a resulting harmful safety impact on consumers, the proposal remains on the agency books as an unfinished piece of business.  Stakeholders—both product sellers and consumer advocates—have objected to the proposal and Congress has several times refused funding for implementation of the proposed rule.  It is time the Commissioners scheduled a vote on this proposal and then voted it down.

The Commissioners need to take the same action on a 2014 proposal that would change the long-standing regulations assuring the fairness and accuracy of any public statements made by the agency identifying specific products.  The requirement for fairness and accuracy is a statutory requirement added to the statute to assure that the agency did not violate due process tenants by regulating by press release. This was unfortunately happening in the early days of the agency and the Congress stepped in to stop it by passing Section 6(b) of the Consumer Product Safety Act (15 U.S.C. § 2055(b)).  The proposed rule would weaken the current protections that have been in place since 1983 and is contrary to the intent of Congress.  It should be finally voted down.

Also spinning in limbo is the agency’s Retailer Reporting Program, under which major retailers report safety complaints to the agency.  Since the beginning of the program, it has been understood that these reports, which are both voluntary and confidential, would satisfy the legal reporting requirements a retailer otherwise had.  The data collected has the potential to provide insight into developing hazards and could have been a useful supplement to the other data collection activities of the agency.  However, the CPSC changed the reporting underpinnings of the program, creating confusion and making it a questionable undertaking for retailers.  The agency has been “studying” the program for several years and it is time to bring that study to closure.  The CPSC’s regulatory actions must be based on data and the agency’s data sources are recognized by many to be outdated and inadequate.  A redesigned retailer reporting program could potentially augment the agency’s hazard data and be another useful tool to identify hazards in the marketplace.

Finally, it is inexplicable why the Commissioners have not moved to complete work on a proposed rule to modernize regulations addressing the hazards associated with fireworks.  Each year, overloaded fireworks kill or maim consumers.  The test to determine if a firework is “overly energetic” is quite subjective:  that is, CPSC staff listen to how loud it is and make an assessment.  For years, the agency has been trying to come up with a test that is not subjective and that can be implemented by the industry in the field. Working closely with the impacted industry and other stakeholders, the agency staff has now developed a test that can work and has buy-in from the majority of manufacturers.  Votes on this rule modernization have been scheduled and then cancelled without good explanation.  This proposed rule is a prime example of how regulatory reform can help product sellers and consumers alike.  It is time for the agency to move ahead on this proposed rule.

So, my year-end message to the CPSC is:  while housekeeping may not be that much fun, it needs to be done so that new tasks can be tackled in the new year.

 

 

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Just in Time for Thanksgiving:  Britax Settlement Signals Common-Sense Thinking at CPSC

 

At this time of year, we celebrate blessings large and small. For product sellers, consumers, and others who are interested in both product safety and the administrative process, the new make-up of the CPSC is one of those blessings worth celebrating. The agency has reassessed its approach to its mission of protecting consumers. It is allocating its scare resources on addressing defective and non-compliant products that actually can hurt consumers rather than trying to push the legal envelop with expansive theories that enhance the agency’s power to dictate consumer choice.

Let me give you an example.  The CPSC has now announced that it is settling the administrative case that it brought against Britax Child Safety Inc. earlier this year. Among other products, Britax makes jogging strollers with a front wheel quick release function which is very popular with consumers.  The CPSC alleged that the strollers were defective because some consumers “may not read, may fail to follow or may misunderstand the instructions” on how to use the quick release mechanism and, as a result, the front wheel could detach during use.  Note that the agency did not allege that the instructions were inadequate or confusing but rather that some consumers did not properly follow them and, as a result, suffered injury when the wheel detached.  The CPSC was especially concerned that if the quick release was not properly engaged, the jogging stroller could still operate with no clue to the user of the problem until the wheel fell off.

This settlement is noteworthy for several reasons. First, the case presented a very expansive interpretation of what is “reasonably foreseeable consumer misuse.”  The concept is addressed in the CPSC’s own regulations in only a cursory manor.  The regulations note that inadequate instructions that lead to consumer misuse of a product, resulting in injury, can be a product defect.  However, that is not the situation in the Britax case, at least as it is described in the agency complaint.  The agency did not allege that the instructions were confusing or inadequate, only that some consumers might not follow them.

The role of consumer misuse and the foreseeability of such misuse is also a consideration when assessing whether a risk of injury renders a product defective.  In other words, in assessing the utility of the product verses injury risks that may be presented, anticipating how consumers could misuse a product should be part of the analysis. However, the regulations cannot be read to require that every misuse must be anticipated as part of the product design process.  Nor can they be read to mean that the fact that consumers may ignore clear instructions renders a product defective.

It is significant that the stroller met CPSC safety standards applicable to this product, including the quick release mechanism. Given this and the scant support in the regulations, the case, as brought, suggests that the Commissioners wished to push the definition of consumer misuse to the point that product makers must be the guarantors of the safety of the products they sell regardless of circumstances.  The circumstances of this case, as brought, suggest that if there is the potential for a consumer to assemble a product improperly, even with adequate instructions and warnings, then that product can be considered defective.  Such a result would have a profound impact on today’s marketplace. Given all this, it is wise that the Commission, with new Commissioners taking another look, now has decided to settle the case.

In addition, the settlement is noteworthy for other reasons. The settlement does not acknowledge that a defect exists or that a recall is being done.  Instead it states that the company, among other things, will undertake an information campaign to try to educate customers on the proper use of the quick release function including a video with incentives being offered to promote viewing.  This is a departure from past commission practice insisting on calling every negotiated remedy a recall even if it was not. (See the Lumber Liquidators “Recall to Test” for one example.)

Because no recall is taking place, the product can continue to be sold on the secondary market.  Had the company agreed to call this a recall, the Consumer Product Safety Act would penalize a seller of a product recalled by the manufacturer.  Certainly, this is good news for consumers who wish to buy this product used and who are able to follow instructions on the proper use of the quick release feature.

More broadly, this settlement offers an opportunity for the CPSC, safety professionals and others with a stake in advancing product safety to begin a more thoughtful and productive conversation about reasonably foreseeable consumer misuse of products.  The Britax case, as brought, pushed the definition of consumer misuse to a point of meaninglessness—it would mean whatever a majority of commissioners decided on any given day.  Putting some better-understood bounds around the term would provide helpful clarity. And that would turn a turkey of a decision to sue into something we could all be thankful for.

 

New Leadership Sets New Direction at CPSC

 

Earlier this week, the United States Senate confirmed Peter Feldman to be a CPSC commissioner, to fill the seat vacated by Joe Mohorovic. Mr. Feldman’s term runs through 2019 and he also has been nominated for a full seven year term to begin thereafter.  Hopefully, the Senate will quickly confirm him for this additional term.  At the same time, one hopes that the Senate will also complete its unfinished work and confirm Acting Chairman Buerkle both to be permanent chairman of the agency and to an additional term.

Peter Feldman comes to the commission after many years of public service in the legislative branch. Most recently, he served as counsel to the Senate Committee on Commerce, Science and Transportation, where his portfolio of issues included legislation and oversight of the CPSC.  He brings a wealth of relevant and welcome experience to the agency.

Mr. Feldman’s arrival at the CPSC is especially timely since there has not been a full compliment of commissioners since 2017.  He now joins another new commissioner, Dana Baiocco, who was confirmed this past summer. One of the first issues he will be called on to consider is the Fiscal Year 2019 Operating Plan setting out budget and policy priorities for the upcoming fiscal year.

While the operating plan does not make dramatic changes in the direction of the agency, it does include a number of interesting and welcome activities that will put the agency on a more stable path.  The plan reflects the acting chairman’s priority to update and expand the agency’s information gathering capabilities.  For example, after several years of talk but no action, the agency will be looking at how the retailer reporting program can be revamped to provide meaningful and useful information about consumer injuries. Important work to better measure the effectiveness of agency recalls is included in the plan.  The plan anticipates a briefing package addressing a pending petition on small powerful magnets and provides an opportunity to clean up the mess the agency created here in its zeal to put ends above means. The plan includes work to better monitor e-commerce platforms, where there is the potential for real harm to consumers but where the agency’s efforts to date have been not especially effective. Work on the Internet of Things and on other emerging hazards is also called out.  Finally, in a truly refreshing change, the plan recognizes that stakeholder participation and involvement is both welcome and essential for effective regulating.

Acting Chairman Buerkle has provided needed steady and mature leadership to the agency.  Under her leadership, Mr. Feldman has an exciting opportunity to work to carry out the priorities of the agency to protect consumers from unreasonable risks while assuring that public resources are not frittered away on ill-advised litigation and open-ended overly-broad regulatory activity.

 

 

Shihan and the Order of the Phoenix

With an apology to J.K. Rowling, I note with some awe that Shihan Qu and Zen Magnets has once again bested the dementors at the CPSC to live another day. Yesterday, the United States District Court for the District of Colorado reversed and remanded the Commission’s Final Decision and Order (FDO) ordering Zen to stop sale of its small rare earth magnets (SREMs).

To review, the CPSC brought an administrative complaint against Zen in 2012 to force a mandatory recall of its SREMs product.  In tandem with this administrative action, in 2014, the Commission finalized a rule banning the future sale of SREMs.  Zen challenged the rule and in 2016, the Tenth Circuit vacated and remanded the rule, finding that the evidence the Commission relied on did not support the rule.

Also in 2016, the Administrative Law Judge in the Zen administrative complaint found that the agency had not proved that the magnets were a hazard when accompanied with proper warnings and allowed Zen to continue sale. The agency lawyers appealed this decision to the Commissioners.  Given the public statements three of the Commissioners had made about the merits of the case, it was no surprise that the Commission overturned the ALJ’s decision and issued the FDO to force Zen to stop sale of its SREMs. Zen appealed this decision, and the court has now ruled in Zen’s favor.

The court’s decision was a curious one.   First, the court considered the substantive rationale offered by the Commission in its FDO and concluded that the agency did not act in an arbitrary and capricious manner—the standard for overturning the agency’s decision.  After an analysis of the Commission’s reasoning, the court found, among other things, that “[T]hough a court might come to a different conclusion if it were in the Commission’s role, that does not render the Commission’s finding arbitrary and capricious.”

However, the court then went on to consider whether the due process afforded Zen met constitutional standards. Here the court found that the Commission fell short, stating that “Zen’s due process rights were violated because Zen was deprived a fair and impartial tribunal” in its appeal from the ALJ’s decision.  Specifically, the court found that the public statements of certain Commissioners prior to the FDO decision demonstrated such a closed mind by decision makers that it was clear that Zen was not provided an impartial tribunal.  The court then, strangely, concludes that while the Commission’s decision was not arbitrary and capricious, it was nevertheless unconstitutionaly tainted by the obvious prejudgment of certain Commissioners. The result is that Zen wins and the CPSC loses.

I will leave to others to debate the nuances of the court’s decision. What bothers me greatly are the safety implications of the CPSC’s actions here.  Zen has made clear from the get-go that it does not oppose reasonable safety regulations of its product.  Indeed, it has petitioned the CPSC to issue a regulation with rigorous requirements for packaging and labeling.  Instead, the agency has petulantly insisted that it will accept nothing less than the complete capitulation of the company to the agency’s demands that it cease sale of its only product.  This insistence has led to repeated “slap-downs” by those judicial bodies that have looked at the issue.

From a safety standpoint, the CPSC’s ineffectual regulatory and litigation strategy has resulted in opening the marketplace to companies who, unlike Zen, have no interest in promoting safe use of SREMs.  Because the agency’s position on both the regulation and the recall of the Zen product have been overruled, the market is now wide open, with no requirements for safety precautions applicable to the product in place.   This result is on the agency.  If any injuries involving this product occur in the future, the agency must look internally for the cause.  Their incoherent policies, in large part, bear the blame.

In 2012, Zen was viewed by most as a small company making a principled but quixotic stand against the overreach of the federal government. Like a phoenix, Zen has prevailed against overwhelming odds.  But, beyond the story of a small company prevailing against the federal government, is the concern that, in this case, the federal government is not effectively protecting the safety of consumers.  Because of the CPSC’s actions, the marketplace is less safe. That is on the agency and they need to answer for this result.

 

 

 

 

 

 

A Welcome Fresh Perspective at the CPSC

 

After a nearly nine month delay, the United States Senate earlier this week finally voted to confirm the nomination of Dana Baiocco to be a commissioner of the CPSC.  With this vote, one of the strange aberrations of the Trump Administration ceases:  the 3-1 Democratic majority that the Administration and the Senate has allowed for 18 months now comes to an end.

With Ms. Baiocco’s confirmation, the balance of power on the commission will be evenly split between commissioners from the two political parties.  There is another open seat (which the Administration, inexplicably, does not seem in a hurry to fill) which, when filled, would give the current Chairman a 3-2 majority and allow her finally to begin implementing the regulatory priorities of the Administration.

But equally important, Ms. Baiocco’s confirmation brings fresh perspectives and new ideas to the agency, which sometimes has difficulty embracing different approaches to regulatory issues.  Perhaps she will not accept the regulatory sluggishness that can come when the agency is challenged to rethink its approach to issues.

It is important that the Senate not think its work is done with respect to the CPSC.  Pending before it is the nomination of Acting Chairman Ann Marie Buerkle for permanent chair and another term.  Chairman Buerkle has proved to be a reasonable, thoughtful and steady leader of the agency and she deserves to be confirmed.  And it is hoped that the Administration may, at some point soon, nominate another commissioner to the existing open seat, giving the Chairman a working majority.  In the meantime, Ms. Baiocco is a very welcome addition to the commission.

 

Groundhog Day at the CPSC

In the 1993 classic movie, Groundhog Day, the protagonist is caught in a time loop and forced to repeat things over and over again.  This year, on February 2, the CPSC celebrated Groundhog Day by agreeing to settle a timeliness action brought against Michaels Stores.  For the CPSC, in true Groundhog Day-style, the Michaels’ settlement represents a situation that seems to repeat over and over again.

As I have written before, the pre-2017 political management of the agency was pressuring its staff to insist on large penalties that often seemed detached from the seriousness of the underlying violation.  The underlying policy driving penalties was nothing more sophisticated than “bigger is better” with escalating penalty demands that were not linked to more egregious behavior.  However, in September 2017, a court called out this behavior, (in the Spectrum Brands case involving coffee makers) refusing the agency’s demand for maximum penalties ($15+ million) and instead imposed a penalty just shy of $2 million.  Basically, the court found that the agency did not prove its case that such penalties were warranted.

Now comes the settlement in the Michaels Stores case.  Here the agency alleged that Michaels did not report in a timely manner the fact that nine glass vases, out of almost 300,000 in inventory, over the course of a year, broke causing lacerations.[1]  The agency demanded $7.1 million as an appropriate penalty and the company countered with an offer to pay $ 1.5 million to settle the case.  When the company did not cave to the agency’s insistent demands, the Commissioners agreed to send the matter to the Department of Justice to begin litigation.  After several years of hearings, discovery and the expenditure of who-knows-how-much resource by both the government and the company, the parties have now agreed to a settlement—of $1.5 million.

Both the Michaels settlement and the court’s decision in the Spectrum case illustrate the need for the CPSC to reassess how it imposes penalties.  The arrogant posture of demanding the maximum (or close to it) and curtailing negotiations when a company objects needs to change.  Trying to peg the amount demanded to the seriousness of the conduct would be a good place to start and is what the statute and the regulations demand.

The CPSC plays a critical and central role in assuring that American consumers are not harmed by the products they use every day. The CPSC staff does important and very hard work to carry out the agency’s safety mission.  Unfortunately, the agency’s political leadership has made this job more difficult by imposing policies that are often arbitrary and seem to be motivated by headlines to be garnered or records to be broken.  The agency’s mission cannot be realized without the cooperation of all parties in the marketplace, including product manufacturers.  Marquis penalties, imposed for their own sake, in the end do not engender the collaboration needed for effective compliance and, instead, consign the agency to more Groundhog Days.

 

[1] The agency also alleged that Michaels mislead it by not acknowledging it was the importer of the vases even though the supplier of the vases publicly agreed that it was the importer, labeled the vases with its name as the importer and agreed to recall the vases.

A Wish for the Holidays

 

I have been reading with growing dismay articles that question the commitment of CPSC Acting Chairman Ann Marie Buerkle to protect consumer safety.  Those articles are ill-informed, mean-spirited personal attacks that push an agenda that has more to do with partisan politics than it has to do with consumer safety.

What is especially distressing is that some of this is coming from within the Commission itself.  Consumer safety has always—and it should—engender deep emotion and strong commitment. However, it is critical to the formation of good public policy that differences in points of view are listened to and respected.  Civil and respectful debate must be a part of our process for formulating public policy.  I worry that some, in their zeal to push a position, have forgotten that civil discourse and honest disagreement are the foundation of our government.

Some have accused Acting Chairman Buerkle of being an “extreme outlier” and “very extreme”.  They say that she represents a “radical departure” from the agency’s safety mission.  They also accused her of voting with industry 100% of the time. What silliness!

An analysis of her votes and the statements explaining them shows that she has taken principled positions that are fully appropriate. Most of her votes diverging from her colleagues have been on procedural and process grounds.  For example, she has opposed certain civil penalties, not because she believed the company should get a pass but because of the lack of rigor and consistency in the way the agency imposes penalties. She has been critical of the commission’s penalty policy that seems to be based only on “bigger is better” and not on helping regulated entities understand how to comply with a statue that is judgement-laden and whose interpretation it seems changes with the political winds.   In no way can her positions be equated with “dismantling consumer protection,” but that is what critics say.  She criticized the commission’s rule on phthalates not because she wants to support chemical companies (oh, come on. . .) but because she is rightly concerned by the direction and willingness of earlier political leadership to ignore current data.  The portable generator rule raises real questions of jurisdiction and resources.  If a majority of commissioners wish to ignore these issues, so be it, but why is it wrong to point out the problem? Her critics have either not read her statements or do not wish to hear facts that get in the way of predetermined political views.

Acting Chairman Buerkle is perhaps the most qualified person ever to be nominated to be chairman of the CPSC.  While she brings solid legal skills to the office, notably, she is also a trained health professional—a skill set never before on the commission—and so brings a point of view that is essential to the important issues the agency must deal with.  Finally, she is the mom of six kids.  If there was ever a real consumer—as opposed to a political partisan—it is her.

My holiday wish is that the debate over the direction of the CPSC can be conducted honestly at a policy level.  Questioning the character of a dedicated public servant in order to advance a political agenda is dispiriting.  With respect to the CPSC, many have deserved coal in their stockings for too long.  It’s time to say these tactics are not right.

 

 

 

 

 

 

 


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