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$5.8 Million Penalty for Failure to Timely Notify Product Defects

Wednesday, February 22, 2017
Sandler, Travis & Rosenberg Trade Report

A U.S. company has agreed to pay a $5.8 million civil penalty to settle charges that it knowingly failed to immediately notify the Consumer Product Safety Commission of product defects that could create a substantial product hazard and an unreasonable risk of serious injury. Any interested person may ask the CPSC not to accept this settlement agreement or otherwise comment on its contents by filing a written request by March 9.

The CPSC states that the company received about 200 incident reports over a four-year period but did not begin an investigation until late in that period. While CPSC regulations provide that investigations undertaken to evaluate reporting obligations should normally not exceed ten days, this company’s investigation took more than four months, after which the company finally filed a full report.

In addition to paying the civil penalty the company will be required to develop, implement, and maintain a compliance program designed to ensure compliance with the Consumer Product Safety Act with respect to any consumer product it imports, manufactures, distributes, or sells. The company will also be required to maintain and enforce a system of internal controls and procedures designed to ensure the following with respect to all such products: (1) information required to be disclosed to the CPSC is recorded, processed, and reported in accordance with applicable law, (2) all reporting made to the CPSC is timely, truthful, complete, accurate, and in accordance with applicable law, and (3) prompt disclosure is made to company management of any significant deficiencies or material weaknesses in the design or operation of such internal controls that are reasonably likely to adversely affect, in any material respect, the company’s ability to record, process, and report to the CPSC in accordance with applicable law.

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