Saw Hearing Shows Need to Sharpen CPSC Regulatory Tools

 

Last week the CPSC held a hearing to address its pending proposed rule to require active injury mitigation (“AIM”) technology on table saws.  In recent years, too often CPSC hearings have devolved into little more than theater, obviously intended to generate press but little understanding of the complex issues the agency is so often called upon to decide. Last week’s hearing was different.  For much of the hearing, the Commissioners were actually discussing the complex regulatory issues the NPR presents and doing it in a knowledgeable, engaged and interested manner.

To recap, the proposed rule would require that all table saws use the AIM technology to help prevent the 33,000 injuries that occur each year from use of these saws. Such technology can detect human contact with the saw blade and stop the saw before that contact occurs.  However, the only available technology that meets the standard is owned, patented and being sold by one table saw producer, a company called Saw Stop.  Because Saw Stop has so many patents, the agency recognizes that it is unlikely that other technology that would not violate those patents could be developed to meet the proposed standard. While the technology owner states that he is willing to license it to the rest of the industry, he is unwilling to enter into a legally-enforceable commitment to do so either with a voluntary standards organization or before a mandatory rule is finalized.  By mandating AIM, the agency will both create a monopoly and significantly increase the price of the saws.  The agency recognizes that both will occur.

The agency has to grapple with a number of important issues.  Obviously, the AIM technology would reduce the number of serious injuries associated with the product and addressing those injuries is a priority for the agency.  However, the technology is currently in the marketplace and available to consumers who wish to pay for it. Is it the proper government role to require people to buy technology that they have determined they do not wish to pay for?  Should the CPSC, a safety agency, be concerned about the market distortions its rules may bring about?  Everyone, including the CPSC, anticipates that the rule will result in significant price increases. Will those increases create disincentives for consumers to buy new  AIM-equipped saws, with the result that old saws will stay in use longer than expected and injuries will increase, at least in the short run? Has the agency’s analysis of the costs and benefits of the rule correctly considered these issues?

These are all serious questions and it is good that the agency is giving them serious thought.  The agency has now received comments from the George Washington University Regulatory Studies Center. These comments to the proposed rule look at the way the agency did its required cost-benefit analysis and finds that there is room for improvement.  The methodology the agency uses for such analyses has not changed in years; nor has it received much critical review.  Since both analyzing regulatory costs and benefits and regulating in the least burdensome way that effectively addresses safety concerns are mandated by the law, this analysis should be a more important regulatory tool than it has been in practice.

The GW comments show sufficient weaknesses in the analysis to raise questions about the validity of the conclusions the agency reaches.  For example, the agency may be overstating the benefits of the rule given the lack of detail in the injury incident data the agency relies on.  (The shortcoming in the data has also been recognized by the Commissioners who have directed the staff to develop more data.)  The agency’s estimates of the societal costs are also predicated on suspect data and open to challenge, as the report points out. The GW study not only finds fault with the agency’s analysis of potential benefits of the proposed rule but also its disregard for the negative impact market distortions may have on consumers.  It concludes that if the “CPSC finalizes these standards it is more likely to produce a market failure by creating a monopoly than to address an existing one.”

Given the concerns raised by the GW comments and by others, one can rightly ask whether it is good policy for the agency to create a monopoly on the basis of flawed data.  And even if the data is good, one still must ask whether creating a monopoly is appropriate government regulatory behavior. Considering the serious and important policy questions this proposed rule presents, the Commissioners are right to give it a more thorough evaluation than what has occurred to date.

 

 

 

 

 

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