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While many today returned to work after the Holiday season, things remained quieter than usual here in the nation’s capital – with many federal workers furloughed until further notice as the federal government continues to be in a partial shutdown.  President Trump is reportedly meeting with congressional leaders today ahead of Thursday’s start to a new congressional session but, at least for now, there’s no immediate end to the shutdown in sight.

Here’s how the shutdown is affecting federal agencies responsible for overseeing and enforcing advertising and privacy laws:

  • The FTC closed as of midnight December 28, 2018.  All events are postponed and website information and social media will not be updated until further notice.  While some FTC online services are available, others are not.  More information here.
  • The CPSC is also closed, although a December 18, 2018 CPSC memorandum summarizing shutdown procedures indicates that certain employees “necessary to protect against imminent threats to human safety” will be excepted employees and continue work during the shutdown.  The CPSC consumer hotline also continues to operate. Companies should remember that obligations to report potential safety hazards are not furloughed, so the mantra of “when in doubt, report” still applies, even if public announcement of a recall may be delayed.
  • Roughly 40% of FDA is furloughed according to numbers released by its parent agency, the Department of Health and Human Services.  In a post on its website, the agency explained that it will be continuing vital activities, to the extent permitted by law, including monitoring for and responding to public health issues related to the food and medical product supply.  The agency is also continuing work on activities funded by carryover user fee balances, although it is unable to accept any regulatory submissions for FY 2019 that require a fee payment.
  • Because the CFPB is funded through the Federal Reserve and not Congress, it remains in operation.

The Senate today confirmed Kathleen Kraninger as CFPB Director by a party-line, 50-49 vote, with Sen. Tillis abstaining.  Kraninger will replace current Acting Director Mick Mulvaney, who also currently oversees Kraninger at the Office of Management Budget (OMB) where she is associate director of general government and Mulvaney is Director. Kraninger is expected to continue deregulatory initiatives launched during Mulvaney’s tenure as Acting Director at the CFPB. 

Kraninger is set to serve a five-year term pursuant to the Dodd-Frank Act.  However, current litigation challenging the constitutionality of the CFPB’s structure raises questions as to whether Kraninger will ultimately serve the full five-year term, particularly if a Democratic president is elected in 2020.  As we previously discussed here, the D.C. Circuit initially ruled that the CFPB was unconstitutionally structured because its single director can only be removed for “inefficiency, neglect of duty, or malfeasance in office,” but subsequently reversed the holding in an en banc decision.  The constitutionality of the CFPB’s structure is also being challenged in the Second and Fifth Circuits – increasing the likelihood that the Supreme Court will take up the issue at some point soon.

 

On Tuesday, in an 80 to 19 vote, the Senate confirmed Peter Feldman as CPSC Commissioner – to finish Commissioner Mohorovic’s term ending October 26, 2019. Today, in a narrow 51 to 49 vote, the Senate confirmed him to a full, seven-year term. As we discussed here, Mr. Feldman previously served as Senior Counsel to the Senate Commerce Committee, which has oversight of the CPSC. During his June confirmation hearing, he indicated that his focus as Commissioner would be on modernizing the agency and its increasing its transparency.

Once Mr. Feldman is sworn in, the five-member Commission will have a Republican majority for the first time since 2006, although Acting Chairman Ann Marie Buerkle’s (R) nomination to become Chairman is still pending. Despite this delay, with the Commission back to full strength, we will watch for policy and enforcement developments, particularly as the Commission votes on the FY 2019 Operating Plan next month.

On June 21, the Senate Committee on Commerce, Science, and Transportation held a hearing on Peter Feldman’s nomination for Commissioner of the Consumer Product Safety Commission (CPSC). Mr. Feldman was initially nominated on June 4th only to finish Commissioner Mohorovic’s term, which ends in October 2019, but was re-nominated on June 7th for a separate term to end in 2026. At the hearing, Mr. Feldman stated his intent to focus on “modernizing the agency and increasing its transparency.” He specifically addressed the need to modernize CPSC’s data capabilities, especially in regards to identifying emerging hazards, determining the CPSC’s role in evolving e-commerce distribution models, and improving outreach and transparency to stakeholders.

If he is confirmed, the Republicans will return to the majority after almost 12 years. Senator Jerry Moran (R-Kan.), Chairman of the Subcommittee on Consumer Protection, Product Safety, Insurance and Data Security, has stated that he hopes the Committee will move “expeditiously” with Feldman’s confirmation and that his “expertise in regards to the issues before the Commission and extensive qualifications will be an asset as the Commission gets back on track in advancing product safety policies that reflect the principles of sound regulation.” Similarly, Congressman Bob Latta (R-OH), Chairman of the Digital Commerce and Consumer Protection Subcommittee, has urged the Commerce Committee to move forward with not only Feldman’s confirmation, but also Acting Chair Ann Marie Buerkle’s confirmation. Buerkle’s (R) nomination to become Chairman has been pending for 10 months with no indication of when a vote will be scheduled. Continue Reading Peter Feldman’s Confirmation Hearing for the CPSC Commissioner Spot Puts the CPSC a Step Closer to a Republican Majority

If you follow our blog, you know that we often write about issues involving the FTC and the CPSC, but we usually do not write about both in the same post. Now those worlds have collided. The staff of the FTC’s Bureau of Consumer Protection (“BCP”), a prominent voice in the Internet of Things dialogue, recently filed comments in response to a CPSC request for information about the potential safety hazards linked to internet-connected products. The request follows a May 16 hearing that included speakers representing a variety of industries and organizations, such as Retail Industry Leaders Association, Underwriters Laboratories Inc., Consumer Reports, and the Electronic Privacy Information Center. The BCP staff’s comments specifically address the following topics:

  • Best practices for mitigating against safety hazards. The BCP staff’s comments placed security and safety hand in hand with the following recommendations for companies offering connected devices: (1) risk assessments to evaluate their security programs and pinpoint possible threats before launching a product; and (2) oversight of service providers, including the incorporation of security standards into contracts and ensuring that the providers are complying with applicable security standards.
  • Registration for safety alerts and information related to recalls. The BCP staff recommended implementing a process similar to the CPSC’s current protocol for alerts related to infant and toddler products, wherein manufacturers and retailers are required to provide a safety registration card with the product. Instead of requiring the consumer to mail-in a registration, however, a URL could be included for online registration.
  • The role of government in regulating IoT security. The BCP staff did not take a position on whether the CPSC should implement regulations specific to IoT device hazards, but suggested that, if the CPSC considers such regulation, it should take a technology-neutral approach so that any such regulation does not quickly become obsolete.

The CPSC continues to evaluate these issues while coordinating with other federal entities like the FTC and NIST, tracking state legislative developments, and exploring the role of voluntary standards. Any company that makes, imports, distributes, or sells a connected product should continue to watch for developments.

Months after she was initially nominated, today the U.S. Senate confirmed Dana Baiocco (R) as the next CPSC Commissioner in a 50-45 vote, replacing Marietta Robinson (D), whose term expired in October 2017. Ms. Baiocco’s confirmation brings the Commission to two Republicans and two Democrats. Ms. Baiocco was originally approved by the Senate Committee on Commerce, Science, and Transportation in November, but her nomination, along with almost 100 others, was returned to the President at the end of the year as that Congressional session ended. Ms. Baiocco was re-nominated in January. There had been no movement on this confirmation hearing until late last week when Senate Majority Leader McConnell filed cloture to end debate and proceed to a vote.

Prior to this nomination, Baiocco was a litigator at Jones Day who counseled clients on CPSC recalls and class-action lawsuits. Concerns have been raised as to her potential conflicts of interest stemming from her representation of companies such as Mattel and Yamaha, but she has committed to assess the need for possible recusal on matters on a case-by-case basis. Ms. Baiocco attended Duquesne University School of Law and clerked for The Honorable Gustave Diamond of the U.S. District Court for the Western District of Pennsylvania. Based on testimony during her confirmation hearing, Ms. Baiocco can be expected to focus on emerging technology, including Internet of Things issues, and the subsequent hazards. She will serve a 7-year term to end on October 27, 2024.

Ann Marie Buerkle (R) continues as Acting Chairman, and her nomination to become Chairman is still pending.

 

Manufacture, import, or sell a connected device?  In addition to the potential hazards associated with the physical performance of the product, you also need to consider the potential hazards associated with the product’s connectivity.  The Consumer Product Safety Commission (“CPSC”) is considering the Internet of Things and will hold a public hearing on May 16 for interested stakeholders to discuss the potential safety issues with connected products and the CPSC’s role in addressing these issues, along with industry best practices and current standards development.  Privacy and personal data security issues in the IoT environment do not fall under the CPSC’s jurisdiction, but the agency has the authority to cover consumer hazards resulting from IoT products, which could include fire, burn, shock, tripping or falling, laceration, contusion, and chemical exposure.  

The CPSC has identified two product safety challenges associated with IoT products: (1) preventing or eliminating hazardous conditions designed into products intentionally or without sufficient consideration; and (2) preventing and addressing incidents of hazardization.  While the former falls into the CPSC’s wheelhouse of preventing and correcting consumer product issues, the latter is a non-traditional area of product safety activity and could pose some challenges with the high rate of growth of connected products.   The CPSC defines hazardization as “the situation created when a product that was safe when obtained by a consumer, but which, when connected to a network, becomes hazardous through malicious, incorrect, or careless changes to operational code.”  Examples include a connected cooktop with a software glitch that ignites without the consumer’s knowledge and starts a fire or an integrated home security system that fails to download a software update and the default condition is to deactivate the system, disabling the smoke alarms without the consumer’s knowledge. Continue Reading CPSC to Hear About the Safety Consequences If a Smart Device Isn’t So Smart

Last Friday, the CPSC voted to sue Britax Child Safety, Inc. to force the company to recall various models of single and double B.O.B. jogging strollers. The one-count administrative complaint alleges that the strollers present a substantial product hazard under Section 15(a)(2) of the Consumer Product Safety Act because they contain a product defect that presents a substantial risk of injury to the public.

The CPSC claims that the three-wheel strollers’ quick release mechanism can fail to secure the front wheel to the fork, allowing that front wheel to detach during use. Furthermore, due to the design of the stroller, consumers are allegedly likely to believe that the wheel is secured when it is not. The CPSC states that it has received over 200 reports of incidents since January 2012 – 97 of which resulted in injuries, some severe, to 50 children and 47 adults. In a press release on the B.O.B. website, Britax counters that the strollers are safe when used as instructed and do not contain a defect. The company points out that the QR mechanism is “widely-used” in bicycles and strollers, and front wheel detachments only occur when wheels are installed improperly – and contrary to available written and video instructions.

The complaint requests a finding that the strollers present a “substantial product hazard” under the CPSA and an order Britax that implement a corrective action plan that includes initiating a stop-sale, notifying consumers and the public of the recall, and providing a remedy. The Commissioners voted to approve the complaint along party lines, with Acting Chairman Ann Marie Buerkle opposing the filing. As we have previously reported, the Commission’s priorities could shift if she and Republican nominee Dana Baiocco are confirmed.

Under the CPSA, manufacturers, distributors, and retailers have an obligation to report to the CPSC as soon as they obtain information that reasonably supports the conclusion that a consumer product contains a defect that could create a substantial product hazard, or creates an unreasonable risk of serious injury or death. The CPSC takes this reporting obligation very seriously, and staff do not hesitate to reach out to companies after receiving a number of consumer complaints related to a single consumer product (or set of products).

Last week, the Department of Justice (“DOJ”) announced that Michaels Stores Inc. has agreed to pay $1.5 million in civil penalties to settle allegations that Michaels failed to file a timely report about a safety hazard associated with a large glass vase that Michaels sold. In 2015, DOJ filed a complaint on behalf of the Consumer Product Safety Commission (“CPSC”) against Michaels, an arts and crafts retailer, with charges that the company knew of multiple consumer injuries for over a year before reporting to the CPSC. Section 15(b) of the Consumer Product Safety Act requires manufacturers, importers, distributors, and retailers to report immediately, which is defined as “within 24 hours of obtaining reportable information,” if a product has the potential to create a substantial hazard due to a defect, presents an unreasonable risk of serious injury or death, or fails to adhere to a consumer product safety rule or standard. If a company is unsure whether or not a report is required, it may investigate for up to ten working days.

Michaels sold about 200,000 vases, and the CPSC and DOJ alleged that the products could shatter in consumers’ hands because they were too thin to withstand the pressure of normal handling. Injuries reportedly associated with the breaking glass included permanent nerve damage and lacerations requiring stitches. Michaels, as the complaint asserts, “possessed information that the vases had injured one consumer in 2007 and at least four customers in the first half of 2009,” but did not report to the CPSC until February 2010.

In an unusual move for DOJ and CPSC, the original complaint alleged that, once Michaels notified the CPSC, it falsely conveyed how the glass vases were acquired, so DOJ also brought a material representation count. Specifically, the report Michaels submitted to CPSC stated that the vases were purchased from a vendor, but records identified Michaels as the importer. In April 2017, dropped the material misrepresentation claim to focus on the civil penalties and injunctive relief.

In addition to paying the civil penalty, consistent with previous civil penalties, Michaels must implement a compliance program to ensure timely and accurate reporting to the CPSC in the future.

To avoid similar consequences, companies should remember the very low bar for what triggers a Section 15(b) Report to the CPSC, even for products like glass vases that have inherent properties that could cause an injury.

Most Popular Ad Law Access Posts of 2017

As reported in our Ad Law News and Views newsletter, Kelley Drye’s Advertising Law practice posted 106 updates on consumer protection trends, issues, and developments to this blog in 2017. Here are some of the most popular:

Ad Law News and Views is produced every two weeks to help you stay current on advertising law and privacy matters. You can subscribe to it and other Kelley Drye Publications here and the Ad Law Access blog by email or RSS feed.

2018 Advertising and Privacy Law Webinar Series 

Please join Kelley Drye in 2018 as we continue our well attended Advertising and Privacy Law Webinar Series. Like our in-person events, this series gives key updates and provides practical tips to address issues faced by counsel as well as CLE credit. This webinar series will start again in February 2018. Please revisit the 2017 webinars here.