Posts Tagged 'penalies'

Let’s Play Penalty Roulette

630139-casino-20-9-2004

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.

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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.


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