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Retailer Fined $2 Million, Required to Implement Compliance Program for Distributing Recalled Products

Friday, September 19, 2014
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission announced Sept. 17 that a Michigan-based retailer has agreed to pay a $2 million civil penalty to settle charges that it knowingly sold and distributed about 1,700 units of 12 different recalled consumer products. The company has also agreed to implement and maintain a reverse logistics compliance program designed to prevent similar violations in the future. This program will contain (i) written standards, policies and procedures for the appropriate disposition of recalled goods; (ii) mechanisms to communicate to all applicable company employees, through training programs or otherwise, company policies and procedures to prevent similar violations; (iii) management oversight of a reverse logistics program, including a mechanism for company employees to confidentially report to a company official with the authority to act as necessary; (iv) a policy to retain company reverse logistics records related to the recalled product collection and disposition for at least five years from the date of the recall; and (v) the availability of such records to CPSC staff upon reasonable request.

CPSC staff charged that the retailer distributed recalled products through a reverse logistics system it operated with a third-party contractor and that it received information from the contractor regarding the sale of all products handled by the contractor but failed to take action to prevent the distribution of recalled products. Federal law prohibits the sale or distribution in commerce of a consumer product that is subject to voluntary corrective action, such as a recall, that has been publicly announced and taken in consultation with CPSC. The company neither admitted nor denied the charges, asserting that it reasonably relied on the reverse logistics system operated through an independent third party it hired to handle its disposition of the recalled products, that it believed adequate safeguards were in place to prevent recalled products from being distributed into commerce, and that any distribution of the recalled products was inadvertent and occurred without its knowledge.

The CPSC has provisionally accepted this settlement agreement but any interested person may ask the Commission not to accept the agreement or otherwise comment on its contents no later than Oct. 6.

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