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$725,000 Penalty, Compliance Steps Required for Failure to Report Product Hazards

Wednesday, July 09, 2014
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission has provisionally accepted a settlement agreement under which an Ohio-based company will pay a civil penalty of $725,000 (with $325,000 suspended) to settle charges that it failed to properly report defects in certain models of its floor cleaners. The company will also be required to implement and maintain a product safety compliance program that includes specified elements and to maintain and enforce a system of internal controls and procedures designed to correct the problems identified.

The CPSC states that these items are defective because their wiring can overheat, causing electrical arcing and melting. The company received hundreds of reports of electrical arcing, sparking and fire between 2005 and 2008, the CPSC states, during which time it implemented four separate design changes to alleviate the hazard and distributed product information notices alerting consumers to it. Throughout this period the company also paid out claims filed by consumers who reported that the product failed and caused fires and/or property damage.

The company is charged with failing to immediately notify the CPSC of the defects and of underreporting the scale of the problem once notification was made. The Commission states that the company did not file its full report until February 2009 despite having received reports of approximately 2,000 incidents by that time, which constitutes a “knowing” violation of U.S. product safety law. In addition, when the full report was submitted, it said the company knew of only 40 consumer complaints, a knowing and material misrepresentation.

Any interested person may ask the CPSC not to accept this agreement or otherwise comment on its contents by filing a written request no later than July 23.

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