Background

Importers, manufacturers, and others are being warned that failures to timely report product defects may be met with higher civil penalties and other enforcement measures.

The Consumer Product Safety Commission announced July 7 that a U.S. company has agreed to settle charges that it failed to immediately report that one of its products contained a defect or created an unreasonable risk of serious injury. The company allegedly had information about this problem for years before reporting to the CPSC and initiating a recall. The company’s predecessor was fined $500,000 in 2008 for similar violations.

As part of the settlement the company will pay a $7.5 million civil penalty; maintain a compliance program to ensure that it complies with the Consumer Product Safety Act; maintain internal controls designed to ensure timely, complete, and accurate reporting to the CPSC; and file annual reports regarding its compliance program and system of internal controls for three years.

However, CPSC Chair Alex Hoehn-Saric said companies should be on notice that the Commission “will be even more aggressive in the future,” including by pursuing “significant civil and potentially criminal penalties.” Importers, manufacturers, retailers, and others in the consumer product industry have an obligation to immediately report potential defects, he said, and the CPSC “will not hesitate to use all of the tools at our disposal to hold firms responsible who choose to put anything other than safety first when selling consumer products.”  

Commissioner Peter Feldman was even more forceful, calling the settlement at issue “woefully inadequate” given the “”particularly egregious” nature of the violation, including that the company is a “repeat offender,” knew about the defect for years before initiating a recall, and “may have actively concealed this information” from the CPSC. Feldman said that as a result he opposes the settlement and “will continue to support higher penalties for the worst conduct,” including “other forms of relief when our monetary civil penalty authority isn’t enough.”

Commissioner Richard Trumka agreed, saying that “no company that behaves as [this company] has should expect to get away with a $7.5 million fine” and that he expects future penalties to be “multiples higher than they have been in the past.” He also called for a criminal investigation into the company at issue and its responsible officials.

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