Print PDF

Practice Areas

Another CPSC Commissioner Criticizes Penalties, Lack of Transparency

Friday, June 03, 2016
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission announced June 1 a $3.75 million civil penalty to resolve charges that a company knowingly failed to report hazards associated with its goods. However, one CPSC commissioner was critical of the settlement, saying it is part of a worrying trend toward higher penalties and lower transparency that threatens to create distrust between the CPSC and its stakeholders.

Settlement Agreement. The penalty was assessed against a company that imported glass tumblers designed to hold hot or cold beverages that unexpectedly exploded, shattered or broke during normal use. The CPSC alleged that the company did not report this problem for more than three years after first becoming aware of it despite numerous complaints. The tumblers were later recalled after the company had imported about 445,000 of them.

As part of the settlement the company has agreed to comply with and maintain the compliance program of its parent company. That program includes written standards, policies and procedures to ensure that relevant reports and complaints are sent to compliance personnel, recalled goods are properly disposed of, employees have a confidential process to report compliance-related issues to officials with authority to act, compliance responsibility is exercised with due care by senior management, company policies are communicated to applicable personnel, records are retained for five years, and compliance program documents will be made available upon reasonable request.

The company has also agreed to comply with and maintain the comprehensive system of internal controls and procedures of its parent corporation, which are designed to ensure that the company discloses information to the CPSC in accordance with applicable law; reports information in a timely, truthful, complete and accurate manner; and periodically evaluates these controls and procedures to ensure they are adequate. Comments on the settlement agreement are due no later than June 20.

Mohorovic Concerns. In a statement opposing this settlement, CPSC Commissioner Joe Mohorovic became the second commissioner in recent days to express concern that the agency is not doing enough to use settlements to help improve product safety. Each settlement is “an opportunity to help the regulated community understand which actions are in-bounds and which are out, as well as the level of sanction they can expect if they stray outside the lines,” Mohorovic said. For instance, the CPSC “could issue settlement documents that analyze – point-by-point – the facts of each case” to provide “at least some indication of how the Commission balances the multiple penalty factors and interprets the intricacies of each case.”

In the case at hand, Mohorovic said, not only does the settlement provide no such analysis, it also does not provide sufficient facts for outside readers to “connect the dots” themselves. There is no discussion of how the breakage of the tumblers happened, how severe the injuries were, how many reports there actually were, or when the reports came in. “Whether or not a product presents a substantial product hazard is hard enough to determine,” Mohorovic said. “Figuring out whether or not a particular piece of information could reasonably support that conclusion is even more difficult.”

More importantly, Mohorovic added, there is no indication of the date by which the CPSC felt confident that the company had information that reasonably supported the conclusion that it had a product safety problem that needed to be reported. For his part, Mohorovic does not believe such information existed, stating that even if the tumblers contained a defect it did not create a substantial product hazard that presented an unreasonable risk of serious injury or death.

Mohorovic acknowledged that “another reasonable person could look at [the] facts and come to the opposite conclusion” but said this only demonstrates that “rather than having a clear obligation to report, [the company] was, at most, in a very gray area” and therefore should not be penalized. The reporting obligation “is intended to admonish companies who knowingly withhold information that could have helped us keep consumers safe,” he said, not a tool “to exact vengeance for reasonable judgments that, with the benefit of hindsight, we might have made differently.”

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

Customs & International Headlines