News
Print PDF

Practice Areas

CPSC Officials Reject Criticism on Civil Penalties

Wednesday, July 27, 2016
Sandler, Travis & Rosenberg Trade Report

Consumer Product Safety Commission Chairman Elliot Kay and Commissioner Robert Adler recently responded to criticisms by two other commissioners and some members of the regulated community about the civil penalties the CPSC has issued in recent months. They defended the size of these penalties as consistent with congressional intent and designed to improve product safety, and they rejected accusations that they have been accompanied by a lack of transparency or due process. Instead, they countered, the protests “are really just calls for lower civil penalties and a decreased responsibility on behalf of companies to report unsafe products in a timely manner.”

In late May CPSC Commissioner Ann Marie Buerkle raised concerns about an increase in the CPSC’s civil penalties over the last two years, the fact that they are largely being imposed for violations of a “remarkably vague” defect reporting requirement that companies have difficulty complying with, and the lack of consistency in how the CPSC considers various factors in determining penalty amounts. Buerkle also noted her “discomfort” with Kaye’s statements “that the CPSC should be seeking higher penalties” and said the CPSC should focus instead on trying to help firms understand and comply with the reporting requirements. A few days later Commissioner Joe Mohorovic expressed similar sentiments and said the recent trend toward higher penalties and lower transparency threatens to create distrust between the CPSC and its stakeholders.

Kaye and Adler acknowledged and defended the higher penalties, pointing out that in the Consumer Product Safety Improvement Act of 2008 Congress raised the maximum amount of civil penalties the CPSC may seek for any related series of violations from $1.825 million to $15 million because the previous amounts were insufficient to motivate compliance and a more effective deterrent to violations was needed. With that increase, they said, it is reasonable that “facts similar to those in cases before the enactment of CPSIA should now result in higher penalties.” They rejected assertions that the CPSC has employed higher penalties “simply for the sake of having higher penalties” and said that instead they are designed to protect the public from dangerous consumer products by ensuring that “the costs of violating the law are to be strongly avoided rather than willingly embraced.” They supported Buerkle’s “wish to live in a world of zero penalties because all companies subject to CPSA reporting requirements comply with the law” but said they “have an even stronger wish for a world in which there are zero serious injuries, especially to children, because companies focus on catching risks of injury (and reporting them to CPSC) rather than waiting for injuries to accumulate.”

The two officials also rejected allegations of a lack of transparency in assessing penalties. Critics have called for the CPSC to share more information about the facts and factors that enter into its evaluation of civil penalties, saying this information is needed to permit the regulated community to better understand the agency’s rationale in penalty cases, but these calls “ring hollow when contrasted with [critics’] refusal to release such information when they are the party involved in a civil penalty case.” The commissioners added that when the CPSC adopted the current rule interpreting the factors to be considered in penalty cases “many industry groups … advocated against a matrix or formulaic approach to interpreting the factors, presumably because they understood that both CPSC and the respondent must have flexibility when negotiating civil penalty settlements on a case-by-case basis.” Moreover, they said, rules about when companies should file defect reports have been on the books for nearly 40 years “without significant complaints regarding their clarity” until the increase in the civil penalty cap. The officials said they are willing to consider “proposals to make public additional facts underlying specific settlement agreements” but are “unwilling to agree to any methodology that will simply depress civil penalty settlement amounts.”

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines