Published November 22, 2016
Consumer Product Safety , Cost Benefit Analysis , CPSC , magnets , Nancy Nord , regulation , Risk Analysis , Zen Magnets
Tags: cost-benefit analysis, magnets, Nancy Nord, regulation, Zen Magnets
Zen Magnets, the tiny Colorado company that has challenged the CPSC’s actions regulating small, powerful magnets, will be having a very good Thanksgiving this year. That is because, once again, Zen has shown that it is possible to fight the federal government and win. Today the United States Court of Appeals for the Tenth Circuit ruled that the CPSC’s safety standard banning the magnets sold by Zen did not withstand judicial scrutiny. The court told the agency that if it wanted to regulate magnets it needed to follow the requirements of the Consumer Product Safety Act, and that it should go back to the drawing board and rethink its justifications for the rule.
The CPSA requires that the agency do a cost-benefit analysis and make findings that identify the nature and degree of the risk of injury weighted against the public’s need for the product and then regulate in the least burdensome manner possible. The Court found that the agency’s analysis was deficient. The court found that the agency overstated the number on injuries and neglected to consider the public utility of many of the uses of the product. In other words, the statutory requirement to weight the costs and benefits of a proposed action is a critical part of regulating. My experience in the last several years of my term as a CPSC Commissioner was that this statutory requirement was seen as an annoyance rather than as a tool for informed decision-making. Perhaps the Tenth Circuit’s decision will change the agency’s approach to using this statutory tool.
The agency’s approach to regulating magnets has been characterized by an “ends justifies means” mind-set. The agency worked to cut off the ability to sell the magnets through retail channels by “asking” retailers to stop selling the product. The agency sought to recall the product, knowing that consumers would not respond to the recall but also knowing that this device could stop further sales. The agency sued those few distributors who had the fortitude to challenge the agency’s action. The one company that has stayed the course is Zen, and its success rate has been quite remarkable. The administrative law judge that heard the recall action ruled in Zen’s favor. Now an appellate court has found that the rule the agency issued to ban future sales of the product is defective because it blew by statutory requirements that provide for balanced decision-making.
Zen is like a little Yorkie terrier that has grabbed ahold of the ankle of the CPSC and will not let go. Yet, through its determination to challenge what it believes is over-reach by the federal government, it has forced the agency to reexamine its approach to a serious issue. It may be that, through Zen’s actions, the CPSC will come to understand that it can protect consumer safety without disregarding basic notions of due process. What a good Thanksgiving that would be.
Published November 14, 2016
Wow! Last Tuesday was quite something! Throughout Washington, folks are now trying to figure out what the new administration means for our country. But so far I have not seen anything written about what the CPSC will look like going into 2017, so here is my take.
Unlike the cabinet officers who serve at the pleasure of the President, independent regulatory commissioners serve a term of office and can be replaced only for “cause” rather than at the will of the President. There are currently no vacancies on the Commission, nor will there be until October, 2017 unless one of the sitting commissioners decides to leave prior to the end of their term. The current chairman may or may not decide to give up that office but still remain on the Commission and it may be that one of the sitting Republican commissioners could become acting chairman until a permanent chairman is nominated. Those kinds of changes will be decided among the commissioners in the near term and speculation about such things may be a fun parlor game but nothing more. It is much more productive to think about what the agency should look like beyond 2017 and for the long term.
During my eight years as a Commissioner, I saw the agency change from one that sought collaboration with stakeholders to solve important safety issues to one that places priority on punishment; from one that sought open communication with the regulated community to one that often fosters fear and distrust. The agency enforcement philosophy changed from the “punishment should fit the crime” to “upping the ante” as high as it could go. In its proposals to change the voluntary recall process to one that is much more adversarial and to change the §6(b) regulations in a way that probably violates the statute, the agency has sought to impose a political agenda rather than address real safety issues. Over the past several years, both Commissioner Buerkle and Commissioner Mohorovic have written very thoughtful statements about the direction of the agency and these statements could, and should, serve as the outline for a new and more effective CPSC.
This would also be a good time to at least consider whether systemic change to the agency is appropriate. In an article a while back, I questioned whether having five commissioners at the top of a small agency was such top-heavy management that inefficiencies and muddled priorities have to follow. Reconsidering the agency’s place in the federal hierarchy is an appropriate analysis to undertake. Such an analysis needs to be grounded in how to provide the safety protections the public expects in the most efficient manner.
No doubt there will be some who see any change in direction as an effort to gut the agency rather than an effort to make a needed course correction. But for those of us who care deeply about consumer safety, such a course correction will serve the agency, and consumers, well in the long term.