Archive for the 'CPSC' Category

Closing the Books on 2016

This is a time for reflection.  Looking back on the past year, it really was not a great
one for the CPSC. And, sadly, many of the agency’s problems closing-bookswere of its own making. While many of the initiatives that are either ongoing or started in 2016 will continue into 2017, others will be consigned to the dustbin of bad ideas.  And most importantly, 2017 will bring new leadership and with it fresh ideas and perspectives to address the important and complex issues with which the agency must struggle as it works to fulfill its mission to protect consumers from unreasonable risks.
From my perspective, as a past regulator and now as a practitioner trying to help those in the regulated community who sincerely want to stay on the right side of the compliance line but who find that line often moves or disappears altogether, here are some areas where the agency fell down and one hopes could do better next year.

  • A penalty policy that hardly qualifies as any kind of rational “policy” at all. The agency rewrote the regulation dealing with the factors to be considered when applying penalties back in 2009 to give more transparency to the process. Instead, the process has become anything but transparent. Agency enforcement staff has made clear that it has little interest in negotiations over penalty amounts, which is where the application of the penalty factors would come in.  Current agency leadership has stated that its penalty policy is “more is better.” In trying to appear as a tough cop, the agency instead comes across as a bully.  While that result may be an effective scare tactic, it serves to drive away companies who might otherwise seek out the agency when potential problems arise and does not help to advance collaborative problem solving which the agency needs to advance its mission.  Much has been written about the agency’s shortcomings in this area and let’s hope that 2017 brings about needed change here.
  • An “ends justifies means” mentality that allows for skirting regulatory fairness and due process. Or put another way, government always knows best. What better illustration of this attitude than the agency’s attempts to regulate small rare earth magnets (SREM’s). Even though the industry leaders proposed a collaborative effort to regulate warnings and packaging of the product back in 2011, the agency rejected that offer and instead, through recalls and regulation, acted to ban the product.  The last hold-out, a tiny U.S. company in Colorado—Zen Magnets–has consistently been prevailing in court against the full force of the U.S. Government.  In the meantime, Chinese imports of SREM’s are being sold without any effort by the CPSC to crack down.  I guess that the CPSC thinks that only magnets sold by U.S. companies are dangerous. Certainly magnets present a hazard if swallowed.  However, they can be used safely in many different art, science, educational and recreational applications.  Perhaps in 2017, the agency could consider how to step back from a ban to a regulation that allows the product into the market while providing the kind of warnings and child-proof packaging that alerts parents to the hazards the product presents if swallowed by small children.
  • Will the agency consider applying modern regulatory concepts to rule writing to assure they are effective? In a recent statement, Commissioner Mohorovic is critical of the agency’s purported effort review its standard dealing with mattress flammability.  This review is required by the Regulatory Flexibility Act which mandates review of significant rules every 10 years and the mattress rule falls into that definition.  Even though the staff found that the rule was not as effective in protecting the public as the agency had predicted when it was issued 10 years ago, it did not recommend changes.  This is just one example of the agency’s reluctance to go back to see if what it is doing is really working to protect consumers.  Commissioner Mohorovic’s suggestion that a retrospective review plan be built into rules as they are being developed is a good one and would help assure that the rules the agency writes actually provide the protection the agency says they will.  To date, agency leadership has only given lip-service to the suggestion but has done nothing real to effectuate such a plan.  Perhaps in 2017, this will change.
  • Will 2017 bring some closure to the never-ending dithering on upholstered furniture flammability regulation? For a while in 2016, it looked like Commissioner Buerkle had found a path forward for addressing upholstered furniture smoldering hazard, but that was not to be. Instead, a majority of the commissioners decided that virtually every flammability hazard needed to be regulated so are now looking at how to address the hazard of large open flame fires  where upholstered furniture is not necessarily the first ignition source but could possibly be the second or even the third source of ignition.  To do this, commercial grade materials, expensive barriers and flame retardants will necessarily be part of the equation. In the meantime, pending before the agency is a petition to ban flame retardants.  Boy, what a mess! A consumer rebellion may be on the way!
  • We started the year with flaming hover boards and ended it with flaming cell phones—both caused by lithium ion batteries. Rather than looking at the application first, would it not be better to start by looking at the batteries? The agency seems to be going about this from the wrong direction.
  • A continual point of concern for agency stakeholders is a communications and press office that makes policy rather than communicates it. In the meantime, complaints are common about press releases that contain inaccuracies or are held up for trivial reasons, thereby delaying recalls. This result directly impacts consumer safety, cannot be defended, and yet is occurring.  Again, room for improvement in 2017.

I could go on and on but 2017 is just around the corner.  Change will not happen immediately but is inevitable.  Working together and in a spirit of support for the agency, 2017 can be a great year for the CPSC. What a happy thought to take us all through the holidays and into next year!

 

Court to CPSC: Your Magnet Rule’s a Turkey

Zen Magnets, the tiny Colorado company that has challenged the CPSC’s actions turkeyregulating 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.

Steps Forward; Steps Back

Now that August is over and Labor Day is but a memory, it is time to focus on how the twostepsforwardCPSC spent the closing days of summer.  On a positive note, the agency was able to push forward helpful initiatives that ease compliance costs without diluting safety.  Then they had to put a damper on this positive glow with threats of resurrecting the discredited and flawed proposals dealing with voluntary recalls and public information (the §6(b) rule).

Forward Steps

The recently published NPR interpreting the fireworks rule is one of those steps forward.  The fireworks regulation has been on the books for several decades and is sorely in need of updating.  Among many other things, the regulation is designed to address overloaded fireworks but does so in a less-than-straight-forward manner.  It bans fireworks “intended to produce audible effects” if those “audible effects” are produced by using more than 2 grains of pyrotechnic composition.  Rather than measure the pyrotechnic materials in the fireworks device to determine compliance, for years the staff has listened for the intensity of the sound produced by the device to determine if it was intended to produce audible effects or whether the sound produced was merely incidental to the operation of the device.  The staff’s determination as to how loud the device was, based on what a staffer heard, was hardly either objective or measurable and has resulted in compliance actions that have been criticized for lack of objectivity.

The American Pyrotechnic Association has a standard that actually measures the presence of materials that may be used to produce an audible effect.  The APA standard has been adopted by the Department of Transportation regulations that deal with the shipment of fireworks.  The proposal, which has been pushed by Commissioners Robinson and Mohorovic in particular, would adopt the APA standard as the testing measure for the CPSC as well. An objective standard would add clarity both for the staff who must make compliance decisions, and the industry which can stop worrying that compliance is dependent on a staffer’s ear.

Another example of a “step forward” is a proposal determining that four types of plastics used extensively in children’s products do not need to be tested for the presence of phthalates.  This proposal would put into action what product manufacturers have been telling the agency for some time—phthalates are not added to these substances and so testing for them both is unnecessary from the standpoint of safety and is costly and burdensome.  This proposal, which has been a long time in the making, compliments the flexibility found in the 2009 statement of policy on phthalates testing and, hopefully, should provide some relief to a number of manufacturers and importers.

Backward Steps

However, the Commissioners could not end the summer on a positive note.  Instead, on the last day of August, the Commissioners met to talk about their regulatory priorities for the upcoming fiscal year.  Observers of the agency are well aware of the controversy engendered by the agency proposal to significantly change the way voluntary recalls are negotiated and agreed to.  Similarly the proposed changes to §6(b) dealing with how information about individual products is made public would distort the statute and surely subject the agency to needless litigation. I have discussed the problems with these proposals in detail, and the Congress has told the agency to cease and desist.

Chairman Kaye has repeatedly expressed his lack of interest in moving forward with these two troublesome proposals.  However, each time he has been given the opportunity to vote to remove them from the agency’s regulatory priorities list, he has refused to do that.  At the recent priorities hearing he was given yet another chance to do that and he did not step up.  Instead, Commissioner Adler, a staunch foe of §6(b) and a supporter of the voluntary recall rule, announced that he would be trying to draft a “compromise” to offer at some unknown point in the future (and not specifying if that would be before or after the elections).  For those who thought that perhaps these two ill-conceived proposals were behind you, do not be so sure.  Commissioner Adler’s gambit may provide the excuse 3 Commissioners need to defy logic, good public policy and the Congress to promulgate these divisive and poorly thought-through rules.

Saying It’s a Recall Doesn’t Make It So

With the CPSC’s blessing, a large furniture company recently sent out wall anchors for its children’s dressers to address a tipping hazard and the accompanying CPSC press release did not refer to the activity as a recall. Subsequently a child was killed when one of the dressers fell. Chaffing under criticism from its decision to allow the company to do a “non-recall recall”, the powers-that-be at the CPSC have now apparently decided that every corrective action or other announcement about a product must be labeled a “recall.”  Commissioner Buerkle has pointed out why this rigid adherence to labels is bad policy.  And this past week we have seen why her concerns are well-founded.

The issue involves the agency’s investigation of flooring made in China and sold by Lumber Liquidators, which allegedly emitted dangerous levels of formaldehyde. After the issue was described in a 60 Minutes segment in March, 2015, the company responded by agreeing not to sell the Chinese flooring and to test the flooring of those consumers who so requested. After over a year of extensive study, testing and investigation by several different agencies, no formaldehyde emissions above government guidelines were found.

Rather than announce this good news and put consumers’ minds at ease, last week the CPSC instead chose to cast the announcement in terms of a “recall.”  The “recall” that the agency announced is a first ever “recall to test”, with the company agreeing to continue what it has been doing from the beginning–that is, test for formaldehyde emissions the flooring of consumers who request that.  No promises of a refund, a repair or return of the flooring are made (although the release does hint that a consumer maybe, possibly could get some replacement flooring under undescribed circumstances at the company’s discretion). Buried in the press release is the admonition that consumers are not to pull up flooring they may be concerned about because that action could be dangerous.

I saw many press stories reporting that the investigation did not find a problem with the company’s product.  I did not see stories that discussed the fact that the company was doing a “recall” (although perhaps I may have missed some). This is a good thing since, by trying to unnaturally shoehorn the announcement of the investigation results into the concept of a recall, the release is both confusing and misleading to consumers.   And it belies the agency’s oft-stated notion that the press will ignore releases that do not include “recall” in the headline. It is an example of what happens when, like a myrmidon, the agency insists on rigid adherence to rules without concern as to appropriateness under the circumstances.  As Commissioner Buerkle notes, the CPSC should never say never.

Let’s Play Penalty Roulette

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Playing games at the CPSC

Commissioner Mohorovic has just issued a thoughtful statement discussing the black hole that the CPSC calls its civil penalty policy.  This statement follows another he filed this week discussing the $4.5 million penalty lodged against Sunbeam for a single-brew coffee maker that squirted out hot water when not used properly.

The Commissioner’s most recent statement precedes next week’s agency hearing on priorities for the upcoming year.  He outlines a number of ways to address the process for assessing penalties—a process that, at best, can be called veiled and perplexing and, at worst, seems like penalty roulette.  Those concerned about public policy and consumer protection should carefully review his suggestions for putting more discipline into an arbitrary process.

The CPSC Chairman has publicly stated his desire to see penalties increased.  While disagreeing with that view, I do believe that it could be achieved more effectively if the agency were up-front about how they calculate penalties.  It is not sufficient to say that this calculation is determined by applying the various factors set out in the regulation dealing with civil penalties.  The settlement agreements over the past several years have been decidedly uninformative about how various factors were applied.  As one who was directly involved in crafting that regulation, and as I have written before, I believe that the current practice is at odds with the underlying intent of the regulation—that is, to add more transparency to the process.

Commissioner Mohorovic is to be applauded for his persistence in highlighting the problem.  Not only has he accurately described the problem, he has come up with creative suggestions for solving it.  While Commissioner Buerkle has repeatedly expressed her dismay for the manner in which penalties are assessed, it will be interesting to see if the other commissioners pay any attention.

Last week it was $3.75 million for glass tumblers that can break. This week it is $4.5 million for coffee makers that can spill out hot water if not used according to instructions.  Can’t wait to see what next week brings—but, for sure, it will be a crap shoot.

Such a Tiny Product; Such a Large Issue

On a recent overseas trip, in one of the trendiest shops in one of the trendiest Western European capitals, I saw a display of tiny spherical rare earth magnets (SREM’s) with signs extolling the coolness of the product.  I almost bought up the entire display but thought about the possibility, when I got back to the States, of CPSC investigators confiscating the whole batch and hauling me off as an importer of deadly banned products.  If only I were kidding.

Remember that, here in the U.S., SREM’s were once a very popular product, intended as an adult desk toy or for making remarkable sculptures and art works.  However, if children swallowed the tiny magnets, they could cause serious internal injury.  Therefore, the CPSC set out to force the product off the market–through a series of recalls aimed at individual importers together with strong pressure on retailers not to sell the product. The agency also issued a rule banning the sale of tiny powerful magnets when used as a manipulative.  Only one company—little Zen Magnets in Boulder, CO, whose CEO is not yet 30 years old—refused to knuckle under and decided to fight the government.

This past weekend, in a battle of David v. Goliath proportions, Zen finally got a win.  Here’s what happened.  When Zen refused to voluntarily recall the SREM’s he was importing and selling, the CPSC filed a lawsuit to force a mandatory recall.  A trial was held before an Administrative Law Judge (ALJ) to determine if the magnets, when sold, were defective and constituted a substantial product hazard and therefore must be recalled. After a long trial and much deliberation, the ALJ found what most of us, except the CPSC, already knew:  that ingesting SREM’s can create a risk of injury but that proper use of the magnets pose no threat and that, when sold with appropriate warnings and proper age recommendations, the magnets do not pose a substantial product hazard.  The ALJ rejected the agency’s argument that warnings cannot be effective because the spheres can become separated.  He also rejected the agency argument that the product was so inherently dangerous to children that proper use by adults must give way.  Significantly, this is the first judge to examine the underlying theory of the agency’s actions forcing recalls and he found the agency’s proof to be wanting.

Even though Zen won this battle, it has not won the war. The agency lawyers now have ten days to appeal the ALJ’s decision.  That appeal will be heard and decided by the five members of the CPSC—the same group who voted to sue Zen, who voted to issue the related rule banning the product, and several of whom have made public statements that suggest where they will come out on the appeal.  In other words, Zen doesn’t stand a chance before the Commission.  The Commission’s decision can then be appealed to the appropriate Court of Appeals.   If Zen has the resources and is scrappy enough to continue the fight, it will be a long one indeed.

Solving At Least One Magnet Issue

On a related matter, the Commission has stepped up to address a flaw in its rules governing trials before ALJ’s.  When the agency was trying to force the recall of SREM’s sold under the name “Buckyballs”, and when the company had the “hutzpah” to say “no” to the agency’s demand that it recall its magnet product, the agency voted to sue Buckyballs as well.  After the Commissioners voted to bring the action against the company, the agency staff took it upon itself to expand the complaint to sue the CEO of the company in his personal capacity.  While this case was ultimately settled, the settlement did not address whether the staff acted properly in expanding the complaint without an affirmative vote of the Commission.

The agency is currently updating its rules of practice for adjudicative proceedings and those proposed rules are now out for public comment.  Commissioner Mohorovic was able to get into the proposal – unanimously – an amendment that expressly requires the ALJ to refer to the Commission “any proposed amendment [that] would have the effect of adding or removing any person as a respondent to the complaint or adding or removing any count.” Just in case an ALJ tried to reason in such a way that an amendment that should come to the Commission didn’t actually add a party (by, say, reasoning that the CEO of a company is de facto on the complaint already, so it’s fine to add him by name) and thus could be done without Commission approval, the proposal also creates an interlocutory appeal right for any ruling on an amendment made without a Commission decision.

Admittedly, this language is overly broad since one would not want to capture situations where staff needs to add a DBA, for instance, nor should the agency give an interlocutory appeal for amendments that clearly are within staff’s administrative authority, but, for the handful of times in a decade that the agency actually litigates something, the burden of work from overbreadth seems to be insignificant compared to the risk to Commission authority from being too narrow. The staff’s action with respect to the Buckyballs situation demonstrates the need for this kind of correction.  Since the proposed amendments make a number of other changes to the adjudicative procedures, they should be carefully reviewed and comments provided the agency.

The proposed changes to the agency’s adjudicative proceedings are now out for public comment.  Those who practice before the agency and other interested parties should read them carefully and take the time to comment.  As we have seen from the Zen case, this stuff matters.

It’s Not Just Size That Counts

Today, the CPSC announced a civil penalty settlement agreement for an eye-popping $15.45 million.  The settlement involved dehumidifiers sold by Gree Electrical Appliances Inc.  The penalty is the statutory maximum that could be imposed and is well beyond any penalty imposed by the agency at any time in its history.

CPSC alleged that Gree:

  • knowingly failed to report a defect and unreasonable risk of serious injury to CPSC  with dehumidifiers sold under 13 different brand names (the dehumidifiers were recalled in 2013);
  • knowingly made misrepresentations to CPSC staff during its investigation; and
  • sold dehumidifiers bearing the UL safety certification mark knowing that the dehumidifiers did not meet UL flammability standards.

Given the size of the penalty, one should expect that the alleged misconduct to be off-the-charts in terms of the severity of injury to consumers.    Yet, even though the earlier related recall involved well over 2 million items and significant property damage from fires caused by the defective product, there are no reports of injury.  In fact, there is little to distinguish this hazard pattern from others involving defective appliances posing serious fire hazards where penalties have been fractions of the amount imposed in this case. Certainly there was potential for serious injury but the fact remains that there were no injuries.  While there was substantial property damage, presumably this was covered by insurance and it is not the purpose of the CPSC to protect insurance companies.

There is nothing in the agency’s press release or the settlement agreement itself to tell us why this case was so more egregious than other cases involving violations of the requirement to report hazards to the agency.  One has to assume then that it was the alleged misrepresentations to the government and the unauthorized use of the UL mark that bumped the penalty up to the limit.  But other than these general statements and based on what has been made public, it is not clear what actual conduct triggered such a huge penalty.  For those trying to stay on the right side of the law, the government has an obligation to be more transparent in describing the activity that warrants this type of penalty.

Certainly the allegations in the settlement agreement are very serious and, if true, warrant a significant penalty.  But it would be helpful to know whether this penalty is unique to a particular set of circumstances or is just a very large scalp from another “failure-to-report” case. As Commissioner Mohorovic points out in his statement, if the agency wants to change behavior through its penalties, it is important to more fully describe the behavior those regulated should avoid.

While this is a significant case because of the size of the penalty, its importance diminishes because of the agency’s opaqueness in describing the bad acts that occurred.  If you are not confused and troubled by all this, then I suggest you are not paying attention.

 


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