Consumer Product Safety

On November 29, 2016, the Consumer Product Safety Commission (CPSC) published guidance for private litigants when drafting protective orders, confidentiality agreements, and settlement agreements in litigation related to consumer products within the CPSC’s jurisdiction.  The guidance encourages parties to include a provision in their protective order or settlement agreement that allows for disclosure of relevant consumer product safety information to the CPSC and other authorities.  As the Commission makes clear, the guidance is not a binding or enforceable rule and therefore does not change parties’ rights, duties, or obligations under applicable federal regulations.

The guidance was initiated by Commissioner Marietta S. Robinson after hearing from private litigators representing consumers whose injuries or deaths were caused by a product.  These litigators apparently had been barred from disclosing critical information to the CPSC because of protective orders and settlement agreements entered in their cases.  According to the CPSC, when litigation orders and agreements shield relevant and actionable safety information behind nondisclosure provisions, they violate the good-cause requirement of Rule 26 of the Federal Rules of Civil Procedure, its state corollaries, and public policy favoring the protection of public health and safety.  The Commission cites to similar guidance issued recently by the National Highway Transportation Safety Administration.

The guidance contains the following sample language to be inserted in litigation agreements:

Nothing herein shall be construed to prohibit any party from disclosing relevant consumer product safety information to the Consumer Product Safety Commission.

Nothing herein shall be construed to prohibit any party from disclosing relevant safety information to a regulatory agency or government entity that has an interest in the subject matter of the underlying suit.

This guidance was published without notice and comment in a 3-2 vote by the Commission.  Commissioner Ann Marie Buerkle issued a statement on November 22, explaining that she dissented because the guidance had not been made available for public comment.  In a statement issued that same day, Commissioner Robinson explained that the guidance was published without notice and comment because there was no such requirement for guidance documents under the Administrative Procedures Act.  The guidance simply provides tools to the public to ensure that information discovered in private litigation can be disclosed to the CPSC when appropriate.  Likewise, parties are “free to read it, consider it, and decide whether to adopt its recommendations.”  Time will tell whether and, if so, how a failure to incorporate the guidance will affect a company’s interactions with the Commission.

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Earlier this month, the Australian Competition & Consumer Commission (ACCC) reminded businesses that, in February, the Federal Court of Australia ordered Woolworths to pay $3.057 million AUD for several violations of the Competition and Consumer Act 2010 (CCA). Specifically, the court found that Woolworths:

  • Over the course of three years, made false or misleading representations about the safety of its deep fryer, drain cleaner, safety matches, padded flop chair, and folding stool products; and
  • On eight occasions failed to report, within the required two days, that the products may have caused serious injuries.

According to the court, the products caused several serious injuries, including hot oil and chemical burns. Woolworths, however, did not remove the products from sale or recall them after becoming aware of these injuries and defects. In addition to the penalties, Woolworths is required (1) to implement an upgraded dedicated product safety compliance program; (2) to publish a notice on its website of the product safety requirements to which it is subject, how to report an incident, and recalls undertaken within the past year; and (3) to publish on its app the details of all products recalled within the last 12 months.

It is important to remember that businesses offering products for sale in Australia must comply with the CCA, which prohibits false or misleading representations about the safety of consumer goods, and requires reporting to the ACCC within two days any incidents of serious illness or injury caused by such goods. To that end, businesses should make sure that they have a working compliance program and reporting policy, worldwide.

Good Friday was not so good for Gree Electric Appliances, Inc., because the CPSC announced that it had reached a record-setting $15.45 million settlement with the company regarding dehumidifiers it manufactured and imported.  The CPSC alleged that the company delayed in reporting potential safety hazards, which is typical for CPSC civil penalty actions, but also alleged that the company knowingly made misrepresentations to CPSC staff and sold dehumidifiers bearing the UL safety certification mark knowing that the products did not meet UL flammability standards.  The penalty reflects the maximum amount the CPSC can obtain and is over 3.5 times higher than the previous record holder. 

The agreement provides minimal details that could instruct regulated companies about the basis for the unusually high amount.  Regarding the timeliness of Gree’s report to the Commission, the Commission alleges that in July 2012 the company “began receiving reports of smoking, sparking and fires” and “received reports of property damage due to these fires,” without quantifying the number of reports.  The incidents caused nearly $4.5 million in property damage.  The CPSC further alleges that the company implemented design changes to address the issue and failed to report “immediately.”  The settlement does not disclose when the company reported, but a recall of the products was announced in September 2013.  Similarly, the agreement provides few details about the alleged misrepresentations, stating generally that the company made misrepresentations to the staff and to the public that the products complied with voluntary UL flammability standards and knowingly misrepresented to the staff the date when the company learned that the products were not compliant. 

Consistent with other recent civil penalty announcements, Gree must establish a compliance program containing elements identified in the agreement.  This announcement comes on the heels of recent statements by CPSC Chairman Elliot Kaye calling for higher civil penalty amounts. 

With this mission to add names at the top of the penalty list, if your company makes, imports, or sells consumer products, you should immediately evaluate existing measures to evaluate the safety of those products, both during the manufacturing process and once they are in consumer hands.

At the International Consumer Product Health and Safety Organization (ICPHSO) conference in D.C. last week, Chairman Elliot Kaye and other CPSC representatives raised eyebrows with an active agenda, which included proposed and recent changes to the civil penalty investigation and corrective action plan status quo. Specifically, the agenda includes:

  • Publication of DOJ Referrals – The Chairman explained that he is exploring procedural avenues that would allow the CPSC to announce when it had referred a civil penalty case to the Department of Justice – a significant departure from the Commission’s current practice, as well as that of other government agencies.download
  • Higher Civil Penalties – Despite industry concerns about the increase in civil penalty amounts over the past year, the Chairman stated that he hopes to seek “double digit” (i.e., at least $10 million) civil penalties when supported by the facts.
  • Commission Review of Certain Corrective Action Plans – Commissioners Marietta Robinson and Ann Marie Buerkle discussed the Commission’s recent 4-1 vote to require Commission review and approval of corrective action plans for products that were involved in any way in a death. It’s unclear, though, exactly how Commission review could expedite the CAP process, or whether the Commission would seek to deviate from the standard notice methods and language.

Additionally, representatives from the General Counsel’s Office, including General Counsel Stephanie Tsacoumis, explained that, in Section 15(b) reporting, the emphasis should be on what the company knew and when they knew it. Arguments that the company subsequently determined that the product did not present a defect and should not have been reported, they noted, are not helpful.

As this agenda demonstrates, businesses can expect the CPSC to remain active – particularly when pursuing civil penalties – and should make sure that they have a dependable CPSC compliance program in place.

Hoverboards have skyrocketed as a top gift this holiday season, dominating retail shelves and website banners. Many manufacturers make the products, at a range of price points. If your company is selling these Segway-esque self-balancing boards, think closely about potential safety issues. The Consumer Product Safety Commission (“CPSC”) reportedly has initiated an investigation into claims that the products, typically powered by a lithium battery, have caught on fire. Although the CPSC does not enforce a mandatory standard governing the products, companies that do not adhere to the CPSC’s general guidance for compliance programs and requirements for reporting potential safety issues could quickly appear on the agency’s naughty list. Here are some tips to avoid getting coal in your company’s stocking:

  • Conduct due diligence. Ensure that the company making the product has incorporated safety considerations into the design and manufacturing of the product.
  • Obtain contractual representations from the manufacturer or distributor. Although written assurances do not negate a retailer’s obligations with the CPSC, requiring them often can help identify gaps in the vendor’s compliance efforts that can be filled before problems develop.
  • Train employees. The company should have written product safety compliance policies and train employees at all levels on how to comply with them.
  • Monitor and respond to consumer reports. If your company does not participate in the manufacturing or distribution of the product, the first indicator of a safety issue may come from your customers. Companies should track the range of sources, including warranty claims, complaints, comments to customer service, phone calls, emails, saferproducts.gov, and posts to social media. If something goes wrong with a product, consumers often turn to social media to share their story, especially if they think the problem relates to safety or if they have not received a response from the company.
  • Communicate with the CPSC. Section 15(b) of the Consumer Product Safety Act requires companies that manufacture, import, distribute, or sell a consumer product that could present a “substantial product hazard” or “unreasonable risk of serious injury or death” to report the potential issue to the CPSC. This can be a low threshold, and the CPSC regularly advises companies, “When in doubt, report.” If the CPSC staff is already investigating reports of fire associated with hoverboards, they will certainly take significant interest in other similar reports and in unrelated reports (such as failures in the braking functionality) involving the product.

Any company selling hoverboards should follow the above tips and keep in mind that the CPSC can impose civil penalties against companies that fail to report potential safety issues in a timely manner. Like the sales of hoverboards, civil penalty amounts continue to rise. Happy Holidays.

 

This week the Consumer Product Safety Commission voted to approve a test program to assess the electronic filing of certificates of compliance at entry in coordination with U.S. Customs and Border Protection.  With the idea of better coordination among partner government agencies to facilitate electronic data collection and sharing of import data, the CPSC endorsed the test program to begin sometime after July, 2016 and run for approximately six months.

Currently Section 14(a) of the Consumer Product Safety Act, as amended by section 102(b) of the Consumer Product Safety Improvement Act of 2008 requires manufacturers (including importers) and private labelers of regulated consumer products manufactured outside of the U.S. to test and certify such products are compliant with all regulations prior to importation.  The CPSC also voted to extend the test program to certain products that do not currently require certificates, but are considered substantial product hazards.  The products added are hand-supported hair dryers, extension cords, and seasonal and decorative lighting products.

The test program will assess two options for the electronic filing of the certificates at entry.  An importer will have the option of either fling the data elements at time of entry or filing a reference to data stored in a registry maintained by CPSC.  Use of the Data Registry is voluntary. Once in effect, CPSC will have targeting and enforcement data available for validation, risk assessment and admissibility determinations at entry.  The goal is to review the data for earlier risk based admissibility decisions.

Notable and a change from the proposed rule on the test program is that the CPSC voted to require five data elements rather than the proposed ten.  Those data elements are the following:

  • Identification of the finished product
  • Each consumer product safety rule to which the finished product has been certified
  • Place where the finished product was manufactured including the name and address of the manufacturer
  • Parties on whose testing the certificate depends
  • A check box indicating that a required certificate currently exists for the finished product.

Should you have any questions, please do not hesitate to contact us.

Recently, Health Canada released guidance to help companies understand their reporting obligations under section 14 of the Canada Consumer Product Safety Act, which requires that sellers, distributors, importers, and manufacturers report after becoming aware of any health or safety incident involving a consumer product. Notably, the guidance clarifies (1) what constitutes a reportable “incident,” (2) at what point a company is “aware” of an incident, (3) when a company must report, (4) what information each report must include, and (5) how Health Canada will treat confidential business information and private information.

What Constitutes an “Incident”?

Section 14 of the Act defines an “incident” as an occurrence; defect; characteristic; or incorrect, inadequate, or an absence of information on a label or instructions that resulted or may reasonably have been expected to result in death or serious negative impacts on health. In addition, an “incident” occurs when the company undertakes a recall or other action, whether or not in Canada, based on concerns about human health or safety.

The guidance explains that a serious health impact includes harmful effects that bring about a temporary or permanent change to health, including, for example, external physical harm, poisoning, and loss of sight or hearing. Whether an injury is serious, however, will depend on other factors such as the age of the consumer and the part of the body that is harmed, and should be considered from the viewpoint of the consumer. Regardless, if a company decides not to report, it must be prepared to justify its decision if questioned by a Health Canada Product Safety Officer.

When Is a Company “Aware” of an Incident, and When and What Must It Report?

Under the Act, a company has an obligation to report as soon as it becomes “aware” of an incident, even if it does not have details on all aspects of the incident, as the obligation to report occurs as soon as the company has awareness that an incident could lead to a recall. As a result, Health Canada states that a company should not wait for further details or absolute certainty – i.e., a formal risk assessment – to report and, if it is not certain that an incident has occurred, should report on a precautionary basis.

Within two days of awareness, the company must provide all information about the incident to Health Canada and to the person from whom the company received the product – i.e., up the supply chain. The initial report must include:

  • All information about the product (name, model number, UPC, serial number),
  • A description of how the incident happened,
  • Details of injuries, such as the body part, age of the victim, and kind of treatment needed,
  • Details on where the product is sold,
  • The complete name and contact information of the manufacturer or importer, as it appears on the product label,
  • Information on any other known events related to the product,
  • Information on any other known incidents reported to Health Canada in the past, and
  • Information on products that share the same parts as those involved in the incident.

Furthermore, within 10 days of awareness, manufacturers must submit a written report with additional information about the product, including new details about the incident, the number of products distributed, the standards to which the product is certified, any test reports, the steps taken (or that will be taken) to ensure safety, and the proposed corrective action.

How Will Health Canada Handle Confidential Business Information and Personal Information?

Sections 16 and 17 of the Act allow Health Canada to disclose confidential business information to protect human health or safety or the environment, and with or without consent or notice to (1) a person or government that carries out functions relating to the protection of human health or safety or the environment, or (2) the public if the product poses a serious and imminent danger to human health or safety or the environment. Health Canada notes, however, that it is often possible to deal with health or safety concerns without disclosing confidential business information, and the agency will consider relevant factors when determining whether to make a disclosure in a particular case.

Regarding personal information, Health Canada explains that it does not routinely require personal information when it assesses incident reports and recommends that companies omit consumer personal information from them. The Canadian Privacy Act will govern Health Canada’s management – and disclosure – of personal information.

California state law bill SB 763 has stayed relatively under the radar since its introduction in February 2015.  However, with recent traction in the state legislature – including passage in the Senate in June and passage in three Assembly Committees in July – this bill is definitely worth a second look.

SB 763 would require manufacturers of “juvenile products” sold in California to include a statement on the product’s label whether or not the product contains added flame retardant chemicals.  A “juvenile product” would be defined as a product subject to California’s Home Furnishings and Thermal Insulation Act,[1] and intended for use by infants and children under 12.  Covered products would include not only bassinets, floor play mats, crib mattresses, infant bouncers, and infant and booster seats which are used by infants and children, but also products intended for use by adults which the child or infant may come in contact with.  This includes, for example, nursing pads, nursing pillows, infant carriers, and changing table pads.

The bill would require manufacturers to affix the following lengthy labeling statement on covered juvenile products sold in California, and indicate the absence or presence of added flame retardant chemicals by marking a “X” in the applicable space below:

The State of California has determined that this product does not pose a serious fire hazard. The state has identified many flame retardant chemicals as being known to, or strongly suspected of, adversely impacting human health or development.
The fabric, filling, and plastic parts of this product:
_____contains added flame retardant chemicals
_____contains NO added flame retardant chemicals

Additionally, the bill imposes recordkeeping requirements, allows the CA Department of Toxic Substances Control to test products labeled as containing no added flame retardant chemicals for compliance, and permits fines ranging from $2,500 to $15,000 for mislabeling and other violations.

In the past few years, flame retardant chemicals have been highly scrutinized by consumer advocates.  According to the bill’s author, “[g]rowing evidence show(s) that many fire retardant chemicals have serious human and environmental health impacts, including cancer, decreased fertility, hormone disruption, lower IQ, and hyperactivity.”

Although the bill’s intentions are honorable – i.e., to provide parents with information needed to choose safe and healthy products for their children – the reality is that the bill would impose additional requirements on products already regulated by the CPSC, impose costly and burdensome labeling requirements on businesses, and may actually undermine consumer confidence in covered products.

As noted by Anne Northup, Former Congresswoman and Former U.S. CPSC Commissioner, “[i]magine the confusion from expectant parents shopping for needed items when they see that the high chair is labeled as being free of flame-retardants and the crib mattress being labeled as containing them. What are they to conclude about which product is safe?”

Continue Reading California Bill Would Complicate Labeling Requirements for Children’s Products

On May 27th, the Consumer Product Safety Commission (“CPSC”) announced that Office Depot agreed to pay a $3.4 million civil penalty for allegedly failing to report potential safety issues for two models of office chairs. According to the CPSC, Office Depot received 33 reports concerning the Quantum model and 153 concerning the Gibson model, with reports alleging that the backs of the chairs would break off.  There were a total of 39 reported injuries, some of which required medical attention.  Office Depot sold roughly 150,000 units of the Quantum chairs and 1.4 million units of the Gibson chairs during the relevant period.  The CPSC alleges that Office Depot never reported any issues with the Quantum model and only reported issues with the Gibson model after receiving a request for such information from CPSC staff, although the Consumer Product Safety Act requires companies to report product defects that could create a substantial product hazard or serious risk of injury within 24 hours.

In a colorful dissenting statement, Commissioner Mohorovic took issue with the civil penalty amount.  The Commissioner referenced the 2008 Consumer Product Safety Improvement Act (“CPSIA”), which provided a ten-fold increase in the size of the maximum penalties the CPSC can impose.  Paraphrasing the Spider-Man comics, he observed that “[W]ith great power comes great responsibility.  The CPSIA gave us more power, but we have not fulfilled our responsibility to use it prudently… [which] led to … an inappropriate penalty demand, resulting in an excessive settlement.”  Commissioner Mohorovic believed that the penalty was disproportionately large in light of the relatively small number of reported injuries, the lack of severity of most of the reported injuries, and the general audience that uses the product (the chairs are not specifically used by vulnerable populations such as children or the elderly).  He also noted that “there is little coherence in our approach to penalties.”

This settlement is the latest in a series of CPSC settlements imposing significantly higher penalty amounts. Although Commissioner Mohorovic’s statement indicates some recognition at the Commission of disparities among those amounts, companies should expect the trend of higher amounts to continue and consider reviewing existing compliance programs and reporting policies.