Penalty Factors Ought to Mean Something

For some time the product safety bar has been concerned about the apparently arbitrary manner in which penalties are assessed at the CPSC.  In 2010 the Commission adopted a rule that set forth the factors that must be considered in determining how penalties are assessed.  Unfortunately, since then, the agency has given only the slightest head-nod to these factors and has not applied them in any kind of rigorous, disciplined, or transparent manner.  Yet such transparency is important in helping the regulated community better understand how the agency defines the concept of “substantial product hazard” which is at the center of most penalty matters.

The problem with the Commission’s approach is well-illustrated by the $3.4 million settlement recently negotiated with Office Depot.  This case involved 1.4 million office chairs sold by the retailer over a ten year period.  Over those ten years, the company received 153 incident reports with 25 reported injuries only some of which required medical attention.  Commissioner Mohorovic has written a thoughtful statement in which he does apply the Commission’s penalty factors to this case.  His conclusion is that had the penalty factors actually been properly applied, the resulting penalty should have been much lower.  His statement is well worth reading.

The current chairman and former acting chairman have made public statements that penalties should, as a matter of course, increase across the board to reflect their view of Congressional intent in increasing the agency’s penalty authorities.  If it is going to be agency policy to push for increased penalties, then the agency owes it to the public to have a more transparent process for imposing penalties.  As Commission Mohorovic notes, currently there is little coherence in the agency’s approach to penalties. As a consequence, parties before the agency are left to struggle with an opaque process where the rules are written after the fact.  Such a result is bad public policy.

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