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$3 Million Penalty for Failure to Timely Report Defective Goods

Tuesday, August 18, 2015
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission reports that companies from Taiwan and Wisconsin have agreed to pay a $3 million civil penalty to settle charges that they failed to immediately report a defect and an unreasonable risk of serious injury with certain fitness equipment.

In addition, the Wisconsin company has agreed that it has, and will maintain, a compliance program to ensure compliance with the Consumer Product Safety Act and a related system of internal controls and procedures. The compliance program requires written standards, policies and procedures to ensure that all information regarding the firm’s compliance with the CPSA, including reports and complaints, is conveyed to the firm’s responsible employees, whether an injury is referenced or not. The compliance program also must address confidential employee reporting of compliance concerns to a senior manager; effective communication of compliance policies and procedures, including training; senior management responsibility for, and board oversight of, compliance; and requirements for record retention.

The defect involved a build-up of moisture in the machines’ power sockets from perspiration or cleaning liquids that caused the machines to short circuit. The company received multiple reports of smoking, sparking or melted power components as well as fires, but despite these reports and two design changes to fix the problem the company failed to report any of these things within the statutorily required 24 hours.

This settlement agreement has been provisionally accepted by the CPSC. Any interested person may ask the Commission not to accept this agreement or otherwise comment on its contents by submitting a request no later than Sept. 1.

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