A recent penalty imposed by the Consumer Product Safety Commission has highlighted differences among agency leaders about when and why such penalties should be utilized and whether other tools might be more effective.

The CPSC said recently it has provisionally accepted a settlement agreement under which a U.S. company would pay a $15.8 million civil penalty to resolve charges that for more than two years it failed to report defects in 32 models of its products, which were both imported and manufactured in the U.S., despite several reports of consumer injury.

The agreement also requires the company to (1) implement and maintain a compliance program and system of internal controls and procedures designed to ensure compliance with the Consumer Product Safety Act and (2) file three annual reports on its compliance program and internal controls and its internal audits of their effectiveness.

One CPSC commissioner said that while he approved the settlement he remains concerned that the agency does not have a consistent methodology for calculating penalty amounts. He pointed out that in this case the CPSC imposed “a near-maximum civil penalty” even though there were no fatalities, the company was a first-time offender, and “a reasonable reading of the evidence” could support a conclusion that the company’s delay in reporting the defects “was born out of a failure to appreciate the nature of the hazard rather than a concealment of the problem.” He also said the CPSC may be more effective “using some of the other compliance tools at its disposal, such as requiring firms to employ third-party monitors.”

However, another commissioner said he believes that using maximum civil penalties, “and, where warranted, criminal referrals,” is “deterring bad actors and providing a tremendous return on investment for the American taxpayer.” A third commissioner agreed, adding that increasing the maximum penalties allowable by law should be “high on the agenda of the consumer protection community.”

For more information on ensuring that your company is in compliance with product safety laws and regulations, please contact Beth Ring at (212) 549-0133 or Ned Steiner at (202) 730-4970.

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