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CPSC Commissioner Concerned About Growing Civil Penalty Settlements

Thursday, June 02, 2016
Sandler, Travis & Rosenberg Trade Report

In comments released May 25, Consumer Product Safety Commissioner Ann Marie Buerkle raised concerns about an increase in the CPSC’s civil penalty settlements over the last two years. Buerkle said that for a variety of reasons she has opposed 9 of the 12 such settlements that the CPSC has considered and approved during that time.

One reason, Buerkle said, is that virtually all of these settlements have arisen from enforcement of “a remarkably vague” requirement for reporting defects in consumer goods. The law requires companies to report to the CPSC when a product they make or sell contains a defect that could present a substantial product hazard, but Buerkle said that this is an “inherently subjective” determination and that “there is no standard one can rely on in making that judgment.”

Further, the law requires companies to report such defects “immediately.” Buerkle noted that in many of the 12 settlement cases the company did not fail to report entirely but instead was found by the CPSC to have taken too long to report, a judgment made “only after reviewing voluminous materials over a period of years” and thus, unlike the company, with the benefit of “20/20 hindsight.”

Another problem, Buerkle said, is the difficulty of evaluating the appropriate penalty amount for failure to report immediately. While the law and the regulations set out a number of factors to be considered (e.g., the gravity of the violation and the severity of the risk of injury), they give little indication about how these factors will affect a penalty. There appears to be little or no consistency on how factors are treated from case to case, she said, and in fact “it often seems” that the aggravating factors that support a higher penalty amount are highlighted while the mitigating factors are ignored or downplayed.

Buerkle also noted her “discomfort” with Chairman Elliott Kaye’s statements “that the CPSC should be seeking higher penalties” and “that he was ‘hoping to see’ some penalties in the seven figure range.” Buerkle countered that “we should not be hoping for multi-million dollar penalties” but instead “should be hoping for zero penalties—that is, a world in which every company subject to the CPSA reporting requirements understands its reporting obligations and complies with them.” To that end, she said, the CPSC should focus on trying to help firms understand how it interprets the reporting requirements “rather than celebrating marquee penalties.”

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