On March 16, 2010, the U.S. Consumer Product Safety Commission (“CPSC”) approved
, by a 4-1 vote, additional factors that the Commission must consider when determining a civil penalty amount for knowing violations of CPSC laws.
Prior to this amendment, the Commission considered the following factors in its determination of the amount of a civil penalty: “the severity of the risk of injury; the occurrence or absence of injury; and the number of defective products or the amount of substance distributed.” Now, the Commission is required to consider the following additional factors:
(1) the nature, circumstances, extent and gravity of the violation, including the nature of the product defect or the substance; (2) the appropriateness of the penalty in relation to the size of the business or of the person charged, including how to mitigate undue adverse economic impacts on small businesses; and (3) other factors as appropriate.
Of interest is not that the Commission now has additional factors to consider but some of the reasons that this was not a unanimous vote of approval. Chairman Inez M. Tenenbaum, Commissioner Robert S. Adler, Commissioner Thomas H. Moore, and Commissioner Nancy Nord voted to approve this rule. Chairman Tenenbaum, along with Commissioners Adler and Moore filed a joint statement of approval, and Commissioner Nord filed an independent statement of approval. [PDF]. Commissioner Anne M. Northup, on the other hand, “voted against the proposed Final Rule Interpreting Civil Penalty Factors because it fail[ed] to take the agency where [she] believe[d] it should arrive five years from now.” [PDF].
Commissioner Northup explained that in her view “[t]he [Consumer Product Safety Improvement Act (“CPSIA”)] imposes so many new requirements all at once–including arbitrary lead and phthalates limits (not based on risk), third-party testing, certification, tracking labels, etc.–that it challenges the capacity of both small and large consumer product companies to comply.” Commissioner Northup is concerned that the CPSIA increases the cost to introduce products into the market to an extent that enforcement and regulation will cause market exit, job loss, and reduction in product variety.
Specifically with respect to the proposed amendments to the rules, Commissioner Northup found that the new rules should have specifically stated that the Commission will treat technical violations differently than substantive violations. Without this explanation, there is room to consider technical violations differently but people are still guessing. Further, she did not approve of the fact that the rule did not give “credit to companies for their good faith in following compliance policies and good efforts in reacting to the occasional problems that will inevitably arise.” Finally, Commissioner Northup criticized the language of the rules as “too vague and flexible to reliably sort the good from the bad and instead catches everyone in the same net and tests to presume that anyone caught in the net is bad.”
As we reported in two prior posts–“Manufacturers, Importers, Distributors, and Retailers Beware: Unilateral Recall for Lead Violations may not be Enough
” and “Lead and Now Cadmium: More Trouble for American Retailers
“–the CPSC is imposing large civil penalties upon manufacturers, importers, distributors, and retailers for violations of the CPSIA. Commissioner Northup’s criticisms and concerns are important as the CPSIA develops and if not addressed, as she warned, could result in market exist, job loss, and reduction in product variety. The development of the CPSIA is important for all product dealers and all corporate counsel to follow.