Posts Tagged 'regulation'

A Few More Bites at the Apple

Next week the CPSC Commissioners will hold a hearing on whether to grant a petition to ban a wide range of consumer products containing organohalogen flame retardants (OFRs).  The petition, filed in 2015, is overly board and seeks to treat in the same way a wide class of chemicals that differ one from another. It seeks to ban a broad range of consumer products with OFRs that vary in use and exposure patterns. It seeks a ban in spite of the fact that the scientific data to justify this action is, charitably, sketchy at best. For these and many other reasons, the petition, on its face, presents sufficient reason for denial.  (See here.)

Nevertheless, the agency held a hearing on the petition in late 2015, put it out for public comment, and has devoted a considerable amount of staff resource to considering the issues presented by the petition.  After a thorough examination of the data in the petition, the hearing record and the public comments, in May the agency staff recommended that the petition be denied for a variety of reasons.  In spite of all this, the Commissioners apparently do not believe that they have sufficient information to make up their minds on the matter and so are having yet another hearing.

It is not clear what this hearing is intended to accomplish, other than to give the petitioners another chance to explain why the agency staff was in error in its conclusions. Presumably some Commissioners will offer helpful hints on how to recast the petition to avoid the shortcomings identified.  Perhaps there will be some conversation about why the petitioners brought the issue to the CPSC when it is more properly before the EPA.  No doubt some on the dais will decry the statutory requirement to balance risks with costs, a requirement the petitioners cannot come close to meeting.

While the hearing will be interesting, one wonders why the agency has devoted such a significant level of resource to this activity.  If the Commissioners vote to overrule their staff and grant the petition, then the level of activity required for rulemaking would have the agency busy for years to come.  If the Commissioners agree with the staff and vote to deny the petition, then what was the point of the hearing?  Among other things, it certainly raises questions about the stewardship of public resources.

 

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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.

 

 

 

 

 

Tell CPSC What You Think

One of the very positive hallmarks of the new leadership at the CPSC is a desire to hear from all interested stakeholders on how to more effectively push forward the agency’s safety mission. The agency has offered several opportunities for input and for those of us who share that goal, these opportunities should not be ignored.

First, the agency will be conducting a workshop on ways to improve the recall process, including the effectiveness of recalls.  Recall effectiveness is a perennial topic of conversation at the agency so it is gratifying that the agency is again looking at this topic, but hopefully from a new perspective.  Both as a Commissioner and now, in private law practice, I often hear complaints about the opaqueness of the process. Participation in the workshop offers an opportunity to give real suggestions on how to make the recall process work better.  The workshop will be held on July 26, 2017 at the agency headquarters in Bethesda.  Those interested in participating must sign up with the agency no later than July 3.  Here is more information about the workshop.

Second, the agency is requesting comments on ways to reduce the regulatory burden imposed by agency rules in ways that do not diminish safety.  This effort is especially welcome since many of the regulations issued by the agency over the past eight years did not consider ways to accomplish safety goals in less burdensome ways.  When Congress told the agency to try to find ways to reduce the burden of testing, the agency went through a fantasy effort to comply and, not surprisingly, came up with very little.  Indeed, about the best it could do was exempt from testing toys made entirely from untreated wood from the trunks of trees (but not the branches—who knows what could be in branches!).  (See here.)

Reducing unnecessary regulatory burden is important since this engenders respect and support for the agency. Rules that are outdated, overly complex, or impose requirements without regard to real and measurable safety results should be identified and either changed or repealed.  The agency’s effort to collect information on burdens imposed by its regulations is a welcome first step in this process.

 

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.

Welcoming New Leadership at the CPSC

Although it took a while, new leadership has come to the Consumer Product Safety Commission.  After a flurry of last minute activity—and a rejection of the Administration’s direction concerning new regulations—earlier this week, Elliot Kaye stepped down as agency chairman. He has announced that he plans to remain as a commissioner. Commissioner Ann Marie Buerkle, who was recently elected as agency vice chairman, now takes over as Acting Chairman of the agency until a permanent chairman is nominated by the President.

Trained as both a nurse and lawyer, Chairman Buerkle brings the type of experience the statute contemplated when it directed that commissioners be appointed by reason of “background and expertise in areas related to consumer products and protection of the public. . . .”  Having a former medical professional lead the agency will be an interesting and useful change of perspective.  And as a former Member of Congress from New York (where she served on the Committee on Oversight and Government Reform), she can work to mend the current strained relationship the agency has with the Hill.

Chairman Buerkle will not have a working majority as she seeks to reorient the agency.  For readers who keep score, here is the commissioner line-up:

  • Commissioner Marietta Robinson (D) – term ending October 2017
  • Acting Chair Ann Marie Buerkle (R) – term ending October 2018
  • Commissioner Joe Mohorovic (R) – term ending October 2019
  • Commissioner Elliot Kaye (D) – term ending October 2020
  • Commissioner Bob Adler (D) – term ending October 2021

Nevertheless, Chairman Buerkle can make incremental changes even without a working majority of commissioners.  Perhaps the most significant will be to let all stakeholders—consumers groups and industry alike—know that their perspectives are valued.  Changing the current philosophy with respect to product sellers from “us v. them” could go a long way to bringing the agency back to a collaborative relationship that focuses first and foremost on solving safety problems and less on punishment and distrust.

It was a real pleasure to have Chairman Buerkle as a colleague when I was a member of the commission.  She is thoughtful, listens carefully and truly wants to understand how agency actions impact folks outside the Washington beltway. As we have heard before, change is good.

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.


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