While the dollar amounts of the civil pen- alties issued by Consumer Product Safety Commission (CPSC) enforcement cases may be eye-popping, don’t let them distract you. The requirements of recent CPSC-imposed compliance undertakings are the real story.
Enforcement activity, which has brought affirmative litigation from the Department of Justice (DOJ), has typically
involved allegations that a company violated Section 15(b)
reporting requirements. Historically, these enforcement cases
result in the imposition of civil penalties. However, a new
trend is emerging: in addition to imposing a penalty, DOJ and
the CPSC have targeted companies’ improper or inadequate
compliance controls and mechanisms, and have imposed requirements to modify internal operations.
The prevalent thinking among CPSC watchers is that
past practice with respect to civil penalties will change as
the Commission undergoes leadership changes. Ann Marie
Buerkle, acting chairwoman of the CPSC, has been vocal in
her skepticism toward the effectiveness of high civil penalty
amounts in increasing product safety.
Given this, required compliance measures gain in significance for at least three reasons. First, penalty amounts may
pale in comparison to the resources needed to assess, revise,
and implement appropriate compliance polices and internal
controls. Second, the measures required in recent cases were
substantially similar, suggesting the CPSC is settling on a
policy that it will regularly impose going forward. And, third,
there does not appear to be the same level of skepticism
toward these measures as has been expressed toward civil
To design an effective compliance program, companies
should look to some of the enhanced measures that the
CPSC has required, including:
; Maintaining written standards, policies, and procedures designed to ensure that relevant
product safety information is conveyed effectively to personnel responsible for reporting to the CPSC.
; Assigning oversight of the company’s Consumer Product Safety Act
(CPSA) compliance and accountability to a senior management position.
; Communicating compliance policies
and procedures to all applicable em-
ployees in risk management, legal,
regulatory, or compliance related
; Providing a mechanism for confidential employee reporting of CP-SA-related questions or concerns
to chief compliance, regulatory
compliance, or other officers.
; Tracking product safety information
and evaluating it to see if it reflects on
product quality and safety issues.
; Documenting calls and written communications regarding incidents and injury information.
; Collecting products that are the subject of reports of
safety issues, analyzing them, and bringing the results to
the attention of the relevant senior company officials.
; Implementing a formal “request for corrective action”
procedure whereby quality engineers and product safety managers can make a request to change a product
based on various factors.
; Maintaining a “product hold process” through which
the manufacture and distribution of products can be
placed on hold for reasons of design, manufacture, performance, or safety.
; Providing for the retention of relevant records for at
least five years and the forwarding to CPSC’s Office of
Compliance records related to the company’s compliance.
It is also important to note a recent development in ongoing litigation involving Spectrum Brands Inc., which is on
appeal. Under the terms of the order, Spectrum is now required to retain, at its own expense, “an independent expert”
to review and recommend changes, as necessary, to “Spec-
trum’s comprehensive safety program for CPSA compliance.”
In an unprecedented move, the court agreed to the govern-
ment’s request for an independent expert to
ensure Spectrum’s adequate implementation
of enhanced compliance measures.
Manufacturers, importers, and retailers
of consumer products are now on notice. In
light of CPSC’s recent activity, companies
under CPSC jurisdiction should review and
correct their internal compliance programs
and mechanisms related to consumer product safety.
CPSC Fines Are Big, but There’s More to the Story
BY MICHAEL S. BLUME, HEATHER CAPELL BRAMBLE, AND
SAMEER P. SHEIKH