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.