Sometimes Good Intentions Aren’t Enough

In his “State of Product Safety” speech at the 2015 ICPHSO Annual Meeting, CPSC Chairman Elliot Kaye stated that the Consumer Product Safety Commission’s (CPSC) increase in permissible civil penalties for violations of the Consumer Product Safety Improvement Act (CPSIA) demonstrates Congress’ intent to punish, deter and make sure that civil penalties are not just the “cost of doing business.” He further noted, “I don’t think … that we are seeing civil penalties that are reflective of what Congress expected and demanded of us in the CPSIA.”

Confirming last year’s theme that increasing penalties are on the horizon, Kaye’s remarks at this year’s meeting delved further into the CPSC’s position on the size of potential civil penalty settlements, particularly for companies that fail to file timely Section 15(b) reports with the CPSC. He stated that, when justified, he would like to see “double digits” (i.e. at least $10 million) in civil penalties. Sure enough, three weeks later, the CPSC announced a record $15.45 million civil penalty settlement with a company.

Kaye also noted the CPSC would give greater scrutiny to the “bad actors,” and said there will be increased repercussions for these companies when there are problems. “The CPSC will weed out the ‘bad actors’ and direct enforcement efforts against them,” he stated.

Whoa! Exactly who is a “bad actor” in the eyes of the CPSC? Surely companies that deliberately flaunt reporting and other product safety requirements, and produce unsafe or dangerous products would be in this category. Right now you’re probably thinking, “Oh, good, my company is safe. We are not bad actors.”

What might surprise you is that companies like yours that do make good-faith efforts to comply with all product safety regulations can still wind up being perceived by the CPSC as “bad actors.” If and when your company becomes the focus of a CPSC investigation, you risk being perceived as a bad actor. This does not mean a single communication with the CPSC puts you in danger. If your company’s products and your reactions—or failure to react appropriately—have created sufficient CPSC product safety violations, this is when you may run into the bad actor perception. Maybe your product developed a problem and you failed to fix it, or you failed to report timely when required under Section 15(b) to do so—these are the kinds of matters that would motivate the CPSC to investigate. Unfortunately, this can cause the CPSC to take a “we-versus-they” approach, featuring your company as the bad guy.

What Do You Do Next?

How should your company proceed if you find yourself in this difficult situation? Your company will now need to demonstrate that it really is a good guy. It is important to remember that you still can and should shape how your company is perceived by getting into a putting-on-our-best-face mode. This includes:

• figuring out what the CPSC representative wants and providing it to the furthest extent possible;

• gaining control over internal and external communications, as inconsistency can be lethal;

• being respectful in all communications—maintain a friendly but professional demeanor, and, most importantly, don’t argue—support your position with facts and logic;

• responding timely to government requests;

• being honest—whatever you say must be true. Do not conceal the truth, and never knowingly make an incorrect statement; and

• being truthful and thorough in all communications. But never overlook the opportunity to say nothing.

How To Stay Out Of The Limelight

How can companies avoid appearing on the CPSC’s radar screen in the first place? The best way is to preemptively develop and implement an effective CPSC product safety compliance program. It is important to understand that the protection your compliance program will afford you is only as strong as your commitment to making it truly effective and functional.

Your CPSC compliance program should establish compliance policies in writing. This will enable you to document your company’s efforts to comply and provide a blueprint for employees to follow. Development and implementation of the program will require the support of the management team, so that appropriate internal controls and procedures can be established and enforced. Internal company communications should be examined and structured to enable your company’s management to quickly be informed of product safety deficiencies and determine how to respond. If reporting to the CPSC is required, the compliance program should facilitate rapid internal action so that CPSC reporting can be timely and thorough. Your compliance program should provide a mechanism to make use of feedback from multiple internal and external sources regarding the safety of your products.

If your company is importing or selling children’s products, the compliance program should encompass your company’s product testing and certification program so that compliance with all applicable children’s product safety standards is ensured.

The existence of your product safety compliance program will help protect you by minimizing product safety problems—thereby keeping your company out of sight of the CPSC—and, in the event of a problem, by demonstrating to the CPSC that you have been proactive in attempting to ensure product safety.

David P. Callet is the principal at CalletLaw in Washington, D.C., and provides comprehensive client representation on all aspects of consumer product safety compliance. Reach him at dcallet@calletlaw.com.

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