Archive for the 'Penalties' Category



Does the CPSC See You as a “Bad Guy” or a “Good Guy”?

I believe that it was Albert Einstein who said “What you see depends on where you stand.”  The stands taken by senior managers of the CPSC on a number of topics have changed and that leaves those of us who care both about the agency and consumer safety seeing some concerning developments.

A good example is the way in which the agency seeks to impose and assess penalties.  At one point (dare I say the “good old days”) civil penalties were assessed after an honest negotiation between lawyers for the agency and the company. Only with the most intransigent company did the negotiation break down so that the agency was forced to refer the case to the Department of Justice for resolution.  And in the very rare instances when this happened, it was viewed not as a positive development but as a failure of the process to work well.

Things have changed.  Based on comments made by agency lawyers at a meeting in Washington this past week, what was once viewed as a failure now is viewed, if not quite as a positive development, as at least routine SOP. This conclusion is based on several developments.  First, look at the Enforcement Guidance recently published by the CPSC Office of General Counsel.  It suggests that any penalty negotiation is not a negotiation at all but almost a take it or leave it proposition.  When they say that you should anticipate getting only one meeting to make your case and then they will lock down their decision, how can you infer anything else?  Add to this statements that the penalty initially demanded by the agency already has been vetted with the DOJ and one has to wonder if arguments supporting a differing view will be listened to and considered.

This concern is exacerbated by statements made by senior officials at the same meeting that the agency is exploring ways to publicize referrals to the DOJ, likening them to “grand jury indictments.”   And what to think when another agency official states that penalties are justified because they always are imposed on the “bad guys” and not in “instances where good guys made honest mistakes. . . “.   Add to this a call by the agency chairman for civil penalties in the eight figures during the next year, and what you see is an agency that appears to be punitive rather than collaborative.

It is unfortunate that those regulated by the agency are being lumped into “good guy” and “bad guy” categories. From my experience in the private sector, in different capacities in government and now in private law practice, the vast majority of companies do care about making sure the products they sell are safe and they want clear rules so that they can stay on the right side of the legal line.  They also want a government that will work with them to solve problems when they come up, not just question their judgment and consider them “bad guys” when they protest.  But from my recent conversations, from where many are standing, that is what they are seeing.  For those of us concerned about product safety, that is not a positive development.

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Penalty Factors Ought to Mean Something

For some time the product safety bar has been concerned about the apparently arbitrary manner in which penalties are assessed at the CPSC.  In 2010 the Commission adopted a rule that set forth the factors that must be considered in determining how penalties are assessed.  Unfortunately, since then, the agency has given only the slightest head-nod to these factors and has not applied them in any kind of rigorous, disciplined, or transparent manner.  Yet such transparency is important in helping the regulated community better understand how the agency defines the concept of “substantial product hazard” which is at the center of most penalty matters.

The problem with the Commission’s approach is well-illustrated by the $3.4 million settlement recently negotiated with Office Depot.  This case involved 1.4 million office chairs sold by the retailer over a ten year period.  Over those ten years, the company received 153 incident reports with 25 reported injuries only some of which required medical attention.  Commissioner Mohorovic has written a thoughtful statement in which he does apply the Commission’s penalty factors to this case.  His conclusion is that had the penalty factors actually been properly applied, the resulting penalty should have been much lower.  His statement is well worth reading.

The current chairman and former acting chairman have made public statements that penalties should, as a matter of course, increase across the board to reflect their view of Congressional intent in increasing the agency’s penalty authorities.  If it is going to be agency policy to push for increased penalties, then the agency owes it to the public to have a more transparent process for imposing penalties.  As Commission Mohorovic notes, currently there is little coherence in the agency’s approach to penalties. As a consequence, parties before the agency are left to struggle with an opaque process where the rules are written after the fact.  Such a result is bad public policy.

Listening to Constructive Criticism

Yesterday, I met with representatives of the National Association of Manufacturers Product Safety Coalition. Participants at the meeting represented a broad spectrum of businesses that make and sell consumer products, and so are under the jurisdiction of the CPSC, and they shared their concerns over the direction the agency is headed. Here is a summary of some concerns expressed at the meeting:

  • A perceived breakdown in communications between the agency and business stakeholders is causing great frustration among those trying to comply with CPSC requirements.
  • The proposed rule setting out voluntary recall procedures was labeled as “a solution in search of a problem.” Great concern was expressed that this rule could make the process more time-consuming and resource intensive, both for the companies and the agency.
  • The move to mandate corporate compliance programs as a part of a penalty settlement or as part of a voluntary recall is viewed as excessively intrusive. If the agency insists on these programs as part of recall corrective action plans (as allowed by the proposed voluntary recall rule), this insistence will slow down the recall process greatly.
  • There seems to be no logic or systematic rationale about how penalties are being assessed so that past penalties are not predictive of future penalty demands. The process for referring cases to the Department of Justice is opaque.
  • While agency participation in the voluntary standards process is welcome and helpful, there is concern that technical discussions need to be held in an environment that fosters and encourages full participation from corporate technical experts. There is also concern that voluntary standards are becoming de facto mandatory standards.
  • Questions were raised about why the agency is moving forward with a wholesale change to the certification requirements (as proposed in the rule changes to 16 CFR 1110).  Companies have already set up systems to implement existing certification requirements and changing those systems will be resource intensive and is not justified.
  • There is ongoing concern that the agency is not moving forward with addressing the burdens that are associated with its testing and certification regime. There is a great deal of unnecessary testing being done, especially with respect to phthalates. A plea was made for aligning our standards with other international standards.

While a number of other issues were raised, the participants also reaffirmed their underlying support for the agency and its important safety mission. The message I took away is that we need to interact with our business stakeholders in a more collaborative and cooperative manner. Obviously, the range of issues we deal with is so broad that without this collaboration, we will not succeed in carrying out our mission to protect consumers.

To Interpret or Not to Interpret? That is the Question…

Today the agency issued its final rule to define children’s products.  While the final rule is miles ahead of the rule we received in late August (read my previous blog about the rule here), it is still miles behind where we should have been.  After hours and hours of staff time in an attempt to come to an agreement on certain issues within the rule, we were still left scratching our heads and nowhere close to being together. 

What we put out today is neither helpful, nor clear.  Our attempt to define what is and is not a children’s product has left a vast expanse of ambiguity.  This rule was not required by the CPSIA, instead we took it upon ourselves to provide guidance.  It was put out with the best of intentions, but in my opinion, may cause more harm than good, confusing an already confused public.  Safety was not advanced today.  This rule should not have been adopted.

Read my statement on the vote here.

“Carrots and Sticks”

This morning the Commission adopted a rule setting out things we will consider when imposing penalties for those who violate the law. This rule is important because in the Consumer Product Safety Improvement Act the Congress authorized penalties up to $15 million for violations and made many more things illegal. In other words, it will be a lot easier to find yourself in violation and if you are, it will probably cost you a lot more.

We all want to ensure compliance with the law but I believe that this needs to be both a “carrot and a stick” process. My concern with the original proposal was that it had only ‘sticks’ and no ‘carrots’ in it. I am pleased that the Commission agreed to a series of amendments that I offered to make the final rule a more balanced one. While this rule is not an ideal example of clarity, from my perspective it is much better than what was originally proposed.

To avoid penalties, industry needs to comply with the law. Manufacturers need to make sure that they have in place effective quality assurance and safety compliance programs. They need to know what goes into the components they are using and have appropriate processes to assure that they are in compliance with all relevant standards.

Experience Counts

I received the following comment  on my recent blog “Conversations FOR Consumers”.   The commenter brings an interesting, real-life perspective to the discussion about third party testing, and I appreciate his taking time to comment. I would really like to hear from others who have real-life insights to share like this one. This kind of conversation is exactly why I started blogging. As Commissioners we don’t get to hear enough about how things like the third party testing requirement are working.  

One of my fellow commissioners, in a recent statement, dismissed the value of such anecdotal experience, stating that “the plural of anecdote is not data.”  I disagree with this attitude—it’s critical for us to hear from those who make and sell  products,  live with the regulations and laws coming out of Washington, and  who have to meet a weekly payroll to support jobs and families.  We need to hear your experiences and suggestions.  

Commissioner Nord,

I am a quality & compliance engineer for a small to mid sized family owned business in Virginia. We sell products in all of the major retail outlets in the US and Canada. Having experience working for a 3rd party consumer product safety laboratory and in the manufacturing sector, there are difficulties with the testing certification requirements in CPSIA, that certainly don’t add up.

Although my company has policies and processes in place, and relationships with factories that date back decades, our situation isn’t like most importers of Chinese produced goods. I am not one to point the finger at China and declare that all factories there produce hazardous products, because I know this isn’t true. However, I do understand the Chinese manufacturing culture and know first hand from past positions I have held, that if given the opportunity, many factories will “roll the dice” and ship merchandise that contains chemicals and elements regulated by CPSIA and other consumer product Act’s. Fortunately for me, I have a close knit group of factories, whose interest is in shipping safe and fully compliant products. It goes way beyond financial investment.

Where I do see the confusion is in the testing certification. On one side, components are allowed to be tested and proof of compliance available upon request. The other hand, full products are tested and proof of compliance available upon request. Either way, a test report from a CPSC approved 3rd party lab is only as good as the samples the lab received; it doesn’t always reflect what was actually shipped. Those factories willing to roll the dice will ship what they have or what is cheapest, if no one is looking. If there is no market enforcement, they will continue to do so until they are caught. This is precisely what happened with Mattel. Their factories weren’t policed prior, during or after production. They probably got away with shipping this merchandise with lead for years before the recalls.

I dont think 3rd party testing is necessarily the answer or proof that either the CPSC or Congress expects. The theory is a good one, but the execution and reliability of that theory aren’t a true reality. Of course, CPSC product procurement and testing, which results in recalls (mandatory or voluntary) and civil penalties, will have everyone scrambling to ensure a compliant product is shipped.

I think the mandates for compliance are possible; they can be met in every consumer product category, but the responsibility lies with the owner of that product; the person who imports and brands the product. They are responsible for implementing the proper systems and procedures far in advance of a production run, to ensure that no product is contaminated. No 3rd party test lab report will identify what “truly” goes on in a factory. Testing is not necessary to ship product, because it doesn’t always reflect what is actually inside of the container.

I appreciate the work you have done with the commission and I contiually look for your blog updates and have been present at several of your speaking engagements over the past several years. Keep up the good work Mrs. Nord, we appreciate you!


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