Archive for the 'regulatory reform' Category

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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Regulatory Tools Are Only As Good As The Craftsmen Who Use Them

There has been a great deal of discussion, and in some circles much hand-wringing, measure twiceabout President Trump’s regulatory reform initiatives and how they will impact independent agencies like the CPSC. The Office of Information and Regulatory Affairs (OIRA) within OMB is a key player in the debate since OIRA reviews and can influence changes in the significant regulations coming out of cabinet agencies. Whether OIRA should have that same authority over rules issued by independent agencies is the subject of “hot” debate in administrative law circles. Neomi Rao, a law professor from George Mason University, is the President’s pick to lead OIRA. Professor Rao has made known her views that OIRA should have greater control over independent agencies.

This coming week, the CPSC is about to hand those who wish to see greater control and oversight of independent agencies by OIRA at major argument to use in that debate. The CPSC is scheduled to vote on whether to issue a notice of proposed rulemaking (NPR) to require that all table saws (including bench saws, contractor saws and cabinet saws) have what is known as “active injury mitigation (AIM) systems” – that is, saws should be able to sense when a user’s finger is coming close to the blade and automatically shut itself off, preventing injury. While superficially this may sound like a good idea, and, at the end of the day, perhaps may even be one, there are a number of reasons why the agency’s actions to start the last stage of rulemaking to require this technology should draw the attention of OIRA.

First, this rule will be a major rule—the type that OIRA usually examines. The CPSC estimates table saw injuries costs the U.S. economy $4 billion annually. It estimates that costs of the rule to manufacturers will be between $170 million and $345 million annually. The CPSC issues very few major rules so both the benefits and the costs the agency proposes are eye-popping.

Second, the AIM technology is patented by an inventor who is now marketing table saws equipped with it. His network of patents is quite extensive and he recently successfully challenged the only other company that had tried to develop a version of this technology. He has stated his willingness to license the technology to the industry should the CPSC mandate it, and the agency estimates that this will result in approximately $35 million coming his way each year in annual licensing fees. The CPSC staff, by its own admission, does not know how extensive his patent network may be and, hence, does not know if it is possible to develop AIM technology without infringing on his patents.

Third, and most important, the agency has not done its homework properly and therefore, issuing an NPR is premature. In 2007 the Commission directed agency staff to study the types and severity of injury associated with types of table saws. In addition to the ’07-’08 study, in 2014, the agency staff looked at injuries reported directly to the agency. As was discussed extensively at its briefing last month, both of these studies are seriously and critically flawed and would not support the rule, if the Commission were to issue it. So the agency is now proposing a rule and asking for public comment even though it does not know such basic information as what type of saw causes injury or whether certain saws can be eliminated from the requirement of the proposed rule. The agency has no information on injury patterns from different types of saws and has little information on whether new safeguards on saws are being used or are working.

The agency proposes to close this embarrassing data gap by doing a study throughout 2017 to develop the missing information, even while it has the proposed rule out for public comment. However, if it proposes a rule and asks the public for comment without providing this vital data, it defeats the purpose of public comment. It may well need to seek further comment or risk a successful court challenge.

It is curious why a majority of the commissioners are so eager to advance a proposal that is missing critical information to make the public comment period useful and that would allow both the agency and the public to better assess the competing issues the rule presents. It suggests that the real purpose of the 2017 study is merely to augment an administrative record that is currently too weak to support the proposed rule and not to influence the direction of the proceeding. And that suggests minds may already be made up. If so, then OIRA is right to take a look at this activity since that is not how rules should be made.

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!

 

Regulating through the Front Door

Last week, the Hill newspaper published my article supporting a regulatory reform bill, S. 2006, recently introduced by arrows clip art Senator Portman and a bipartisan group of Senators.  Among other things, the bill sets out Congressional expectations for balancing the costs and benefits of rulemaking and directs agencies to adopt the least burdensome rule that addresses the issue in the proceeding.  As I stated in my article, “Regulating is not, and should not be, easy.  Requiring agencies to do the needed up-front hard work before issuing rules, as these reform bills direct, will result in better rules.”

Critics have pointed to these kinds of requirements as regulatory roadblocks—mere ploys designed to slow down the process.  I see them not as roadblocks but as speed bumps–useful tools to assure that the agency gets it right when it regulates. And unless the agency is actually required both to do the work, and then to regulate based on the results of that work, the temptation is to look at these requirements as “check-the-box” exercises that must be done on the way to a rule, often with a predetermined result.

I do have one concern about potential unintended consequences from reform of the rulemaking process.  To the extent that agencies perceive it to be harder to issue rules going forward, they may look for other ways to achieve desired results, thereby circumventing the protections and procedures of the reform bills.  I saw this operating first hand at the CPSC where “backdoor rulemaking” is not only accepted but embraced. Backdoor rulemaking involves taking enforcement or other action on a category- wide or product- class basis to achieve results that one would normally expect to achieve through rulemaking.  So if a product with a particular attribute is deemed to be substantial product hazard and recalled, then that action may, de facto, set the bar for all other products with similar attributes.  Transparency and due process are out the door.

Regulators regulate—that is what they do.  But category-wide enforcement should not be used as a subterfuge to avoid the regulatory process.  As these reform bills advance, Congress will need to be alert to this concern.


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