CPSC Levies A Record $15.4 Million Penalty

On March 25, the U.S. Consumer Product Safety Commission (CPSC) announced that Gree Electric Appliances  Inc., of Zhuhai, China; Hong Kong Gree Electric Appliances Sales Co. Ltd., of Hong Kong; and Gree USA Sales Ltd., of City of Industry, California, have agreed to pay a record civil penalty of $15.45 million. The fine is the largest the CPSC has levied and is near the maximum penalty the commission can issue.

Gree Electric’s dehumidifiers had a defect that caused them to overheat and catch fire. Despite receiving multiple reports of incidents, and despite making design changes to fix the problem, Gree failed to report the defect to the CPSC immediately (within 24 hours). Gree also failed to immediately report the incidents or the design changes to CPSC immediately. These incidents began in July 2012 and caused nearly $4.5 million in property damage.

The CPSC’s penalty is due to the company’s knowing failure to report a defect and unreasonable risk of serious injury to CPSC immediately regarding the dehumidifiers, which were sold under 13 different brand names including Frigidaire, GE, Gree, Kenmore and Soleus Air, as required by federal law. It also knowingly made misrepresentations to CPSC staff during its investigation and sold dehumidifiers bearing the UL safety certification mark knowing that the dehumidifiers did not meet UL flammability standards.

“This maximum civil penalty, while massive and stunning in comparison to historical penalties from CPSC, comes as no surprise to industry professionals who have attended PPAI’s Product Safety and Product Responsibility Summits,” says Rick Brenner, MAS+, a member of PPAI’s Product Responsibility Advisory Group. “Chairman Elliott Kaye, one of our keynote speakers, has repeatedly stated publicly his belief that Congress intended CPSC to levy the larger civil penalties authorized in CPSIA to act as a deterrent and to penalize companies who knowingly and willfully violate the Consumer Product Safety Improvement Act, in this case by failing to report product safety defects in a timely matter. To put this in context, this maximum penalty is an extreme situation in which CPSC is alleging that Gree, the company involved, was a classic ‘bad actor’ who knowingly committed egregious acts. The important takeaway for any company that manufactures, distributes or retails consumer products is to be familiar with the reporting requirements of CPSIA and to take them very seriously.”

The dehumidifiers were recalled in September 2013. The recall was expanded in January 2014, and reannounced in May 2014. Gree manufactured, imported and sold more than 2.5 million units nationwide. The humidifiers were sold by AAFES, HH Gregg, Home Depot, Kmart, Lowe’s, Menards, Mills Fleet Farm, Sam’s Club, Sears, Walmart and other stores nationwide and in Canada, and online at Amazon.com and Ebay.com, from January 2005 through August 2013 for $110 to $400 each.

While Gree does not admit to CPSC staff’s charges, the company has agreed to implement a program to ensure compliance with the Consumer Product Safety Act (CPSA) and a related system of internal controls and procedures, in addition to the civil penalty. The compliance program requires written standards and policies, and written procedures to ensure that all information regarding the firm’s compliance with the CPSIA, including reports and complaints, whether an injury is referenced or not, is conveyed to the firm’s responsible employees.

Check out the most up-to-date list of recalled products in every issue of PPB Newslink by clicking on the link, Recent CPSC Recalls, located to the bottom right.

filed under industry-news | march-2016
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