Navigating An Unmarked Channel

 

Last week, Commissioners Buerkle and Mohorovic each issued a statement on a civil penalty settlement involving glass tumblers manufactured by Teavana.  Each is a thoughtful statement and both should be read by anyone interested in how the agency does its work.  They can be found here and here.  Both Commissioners address, in somewhat different ways, the subjective nature of the Consumer Product Safety Act’s reporting requirements and the opaqueness of the agency’s process for determining penalty amounts for violations of provisions of the Act that require product sellers to report potential safety issues to the agency.  Both are concerned about the secrecy of the criteria, if any, applied in assessing penalties by an agency that used to pride itself on its openness and transparency.

Commissioner Buerkle points out that–given the subjective nature of the statute– the regulations defining, first, what factors will affect a penalty amount and, second, how those factors will be applied, become critically important.  As one who was directly involved in developing that regulation, I agree that it is probably too general in nature, given that the agency has done little to flesh out its applicability in real cases.  Instead the agency has just nodded its head in the regulation’s direction to justify what appear to be arbitrary penalty amounts. The publicly-stated desire of Commission leadership for higher penalties leaves one thinking that the penalty policy of this commission is “get as much as you can” and not that “the punishment should fit the crime.” Consequently, one can only conclude that the penalty factors in the regulation are window dressing to justify whatever the enforcement staff demands.

Commissioner Mohorovic stated that the agency is falling down in its consumer protection duties by not putting out clear buoys to mark the legal channel.  As I have written before, the simplistic agency mantra—“when in doubt, report”—does not work so easily with today’s commission, which is more intent on punishment than on true safety.  Commissioner Mohorovic makes a persuasive case that the company did not have any obligation to report in the first place.  The products in question are glass tumblers and there is always a risk that glass will break, especially when holding hot liquids.  Apparently there were only minor injuries. There is no reason to believe the glass was inordinately thin or fragile.  Based on all this, Commissioner Mohorovic concludes that the company had no obligation to report, but agency enforcement staff reached a decidedly different conclusion.  The result was a $3.75 million penalty against the company, and we are left with no understanding as to how the agency got to that figure.

The agency has announced that it will hold a hearing this summer to consider its priorities for the upcoming fiscal year.  Here is a suggestion:  given the growing concern over the secrecy surrounding how penalties in ever-increasing amounts are assessed, a review of the agency’s penalty factors regulation is warranted.  The clarity the agency was seeking in 2010 when this regulation was issued has not happened; instead the process has become much less clear.  Perhaps it is time to consider a matrix approach to civil penalties—that is, putting a value on, and applying that value to different types of violations.  The practices of other agencies may also provide some learning here.  There are probably many ways to make the situation better and the agency should spend some time trying to figure this out.

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