Which of the following acts prohibits the marketing of defective or unreasonably dangerous toys?

Introduction

The Consumer Product Safety Commission (CPSC or Commission) was established in 1972 by the Consumer Product Safety Act (CPSA)1 "to protect the public against unreasonable risks of injury associated with consumer products,"2 primarily after they have entered the stream of commerce.3 The CPSC is empowered to meet this objective through a blend of consumer monitoring, research, investigations, safety standard-setting, and enforcement powers.4 Although the CPSC has the authority to issue mandatory consumer product safety rules under some circumstances, in most instances, the CPSA requires the Commission to defer to "voluntary consumer product safety standards" that are predominately drafted and developed by private industry.5 In light of this mandate, the CPSC provides technical assistance and otherwise helps industry groups develop voluntary standards more frequently than it issues mandatory safety standards through rulemakings.6 Additionally, although the Commission has authority to order companies to engage in various corrective actions, which the CPSC collectively refers to as "recalls,"7 it generally may only exercise this authority after it conducts an administrative hearing on the subject.8 Furthermore, any entity that is adversely affected by such an order can challenge the action in federal court.9 Consequently, in most circumstances, the Commission generally attempts to negotiate voluntary actions with companies to correct product hazards upon mutually acceptable terms before initiating an involuntary recall order.10

Courts have stated that because the CPSA is a "[r]emedial safety" law, it "should be broadly construed to effectuate its purpose."11 Courts have applied this judicial principle when interpreting the term "consumer product," which largely defines the scope of the CSPC's jurisdiction under the CPSA.12 As is discussed in detail below, the term "consumer product" generally covers thousands13 of products that are manufactured or used for consumer purposes, with the exception of those products that are carved out by statute.14 The term "consumer products" includes products that are manufactured domestically, as well as hundreds of billions of dollars' worth of products that are manufactured outside of the U.S. and imported into the country each year.15 The CPSC estimates that covered consumer products play a role in over $1 trillion of costs to the country annually in the form of deaths, illnesses, injuries, and property damage.16

Given this broad statutory mandate and the impact consumer products have on the day-to-day lives of the general public, the CPSC has been of perennial interest to Congress. Congress conducts oversight hearings on the Commission,17 and bills that would affect the CPSC are introduced in virtually every Congress. In the 115th Congress, for example, bills have been introduced that would expand the Commission's regulatory jurisdiction18 and require the Commission to promulgate mandatory safety rules involving certain products.19

The CPSA has been amended a number of times. As is discussed below, Congress made a number of notable changes to the Commission's rulemaking process via legislation enacted in 1981.20 The last major legislative amendment to the CPSA occurred in 2008, with the enactment of the Consumer Product Safety Improvement Act of 2008 (CPSIA).21 Congress passed the CPSIA, in large part, to respond to what became known as the "Year of the Recall," when millions of consumer products, many of them children's toys imported from China, were recalled in 2007.22 The CPSIA, among other things,

• required the CPSC to change several existing voluntary standards into mandatory consumer safety rules23 utilizing a more streamlined rulemaking process than that with which the Commission must normally comply;24
• required the Commission to create a publicly available and searchable consumer product safety database;25 and
• enhanced the CPSC's enforcement powers.26

This report provides a legal overview of the CPSC's structure, jurisdiction, and statutory powers under the CPSA, as amended. First, the report discusses the CPSC's structure and the scope of its jurisdiction and general powers. The report next discusses the CPSC's authority to engage in consumer monitoring, research, and investigations that inform the type of rules the Commission will issue and the enforcement actions it takes. The report then distinguishes between the types of standards the Commission may set, examining its authority to issue mandatory product safety rules and product bans on the one hand, which are seldom issued in practice, and the CPSA's intent that the Commission defer to voluntary, industry-developed safety standards on the other. Finally, the report analyzes the Commission's enforcement powers, including the requirement under the CPSA that companies self-report certain product risks to the Commission; the Commission's ability to inspect products for compliance with the CPSA; the various corrective actions the Commission may either initiate or agree to as part of a negotiation with a company; the Commission's rarely used authority to designate a product an "Imminently Hazardous Consumer Product"; and the civil and criminal penalties to which violators of the CPSA may be subject.

CPSC Structure

The CPSC is comprised of a maximum of five commissioners who are appointed by the President, subject to the advice and consent of the Senate, to serve seven-year terms.27 No more than three commissioners may be of the same political party.28 CPSC commissioners "may [only] be removed by the President for neglect of duty or malfeasance in office but for no other cause."29 This removal protection arguably allows the Commission to operate with a degree of independence from the Administration beyond that of a typical executive agency that is headed by officials who serve at the pleasure of the President.30

One of the CPSC commissioners is selected by the President, subject to the advice and consent of the Senate, to be the Commission's Chairman.31 The Chairman is empowered with the executive and administrative responsibilities of the CPSC, which includes hiring personnel, expending appropriations, and delegating duties among the other commissioners and CPSC staff.32

The Commission has six main offices: Communications; Legislative Affairs; Inspector General; Executive Director; Equal Employment Opportunity and Minority Enterprise; and General Counsel.33 It also has a number of sub-offices, including offices of Hazard Identification and Reduction, Import Surveillance, International Programs, and Compliance and Field Operations.34 In FY2017, the Commission employed approximately 560 employees and received $126 million in appropriations.35

Scope of Jurisdiction Under the CPSA

As noted above, the Commission's jurisdiction under the CPSA is largely governed by the definition of "consumer product."36 The term is multifaceted and broad in scope, although a number of products that generally are regulated by other federal agencies are explicitly carved out of the definition.37

A "consumer product" is defined, in relevant part, as

1. [A]ny article, or component part thereof,

2. produced or distributed

a. for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or

b. for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise.38

The CPSA further provides that, to meet the definition, a product must be "customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer."39

Courts have stated that the definition of "consumer product" should be "liberally construed in accordance with the stated purposes of [the CPSA], i.e., the protection of consumers from injury due to unsafe products."40

The U.S. Court of Appeals for the District of Columbia (D.C. Circuit) interpreted the phrase "any article or component thereof" of the consumer product definition to mean either "a distinct article of commerce" or "a component part of such a distinct article."41 The language "for sale to the consumer" applies to products that are purchased directly by a consumer, while the phrase "for the personal use, consumption or enjoyment of a consumer" encompasses products that a consumer obtains through other means, such as "through lease, promotional gift, or purchase by an institution for consumer use."42 The D.C. Circuit has explained that, to comport with the phrase "customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer,"43 a product does not have to be primarily sold or distributed to consumers, but those sales or distributions must be more than "occasional" and "there must be a significant marketing of the product as a distinct article of commerce for sale to consumers or for the use of consumers."44

Congress expressly carved out a handful of items from the broad definition of consumer product.45 These items, which are largely outside the scope of the CPSC's jurisdiction, include tobacco and tobacco products;46 motor vehicles;47 pesticides;48 firearms;49 aircrafts;50 boats;51 food;52 and drugs, medical devices, and cosmetics.53 Generally, these products are regulated primarily by other federal agencies, and thus likely excluded from the CPSC's jurisdiction to avoid duplicative regulation.54

The CPSC, thus, has jurisdiction over approximately 10,00055 types of products from baby strollers,56 cribs,57 and bath seats,58 to cigarette lighters59 and matchbooks,60 to lawn mowers,61 garage door openers,62 and television antennas,63 to name a few.

General Powers Under the CPSA

The legislative objectives of the CPSA are

1. [T]o protect the public against unreasonable risks of injury associated with consumer products;

2. [T]o assist consumers in evaluating the comparative safety of consumer products;

3. [T]o develop uniform safety standards for consumer products and to minimize conflicting State and local regulations; and

4. [T]o promote research and investigation into the causes and prevention of product-related deaths, illnesses, and injuries.64

To meet these legislative ends, the CPSC is empowered to monitor consumer markets, study and investigate dangers associated with consumer products,65 and develop safety regulations for the manufacture, sale, and distribution of products.66 Notably, Congress statutorily requires the CPSC to defer to industry-developed voluntary safety standards and only authorizes the Commission to implement mandatory safety standards through rulemakings under the limited circumstances discussed below.67 Additionally, the Commission generally relies on manufacturers, distributers, and sellers to take voluntary steps to rectify product defects, voluntary safety standard compliance issues, and mandatory safety rule violations.68 The Commission will generally only exercise its authority to impose mandatory recalls, product bans, and other corrective measures, and to seek civil and criminal penalties, when expressly mandated by Congress or when the Commission determines voluntary steps are insufficient, product dangers are particularly acute, or safety standard violations are egregious.69

Consumer Monitoring, Research, & Investigations

One of the primary means by which the Commission addresses its mission of protecting consumers is by monitoring and evaluating deaths, injuries, illnesses, and other harms associated with consumer products.70 In accordance with the CPSA,71 the Commission maintains a publicly searchable database—called the National Electronic Injury Surveillance System (NEISS)—of injury reports derived from dozens of emergency rooms across the country.72 These reports form the basis of a statistically significant sampling of the consumer product-related injuries that occur in the United States and allow the CPSC to estimate the total number of these injuries that occur each year, as well as the societal costs that flow from these injuries.73 The Commission describes the NEISS as "the foundation for many CPSC activities," as it informs the CPSC's investigations, research, and enforcement and remedial actions discussed further below.74

In addition, the Commission also contracts with all 50 states and the District of Columbia to receive and track information on accidental deaths connected to consumer products.75 The Commission purchases and reviews thousands of "death certificates that have a high probability of consumer product involvement."76 The CSPC distills and disseminates this consumer product injury-related information in its annual reports to Congress.77 The Commission typically aggregates the death, injury, and societal cost data by age groups and consumer product types.78

Utilizing this trove of data, the CPSC performs studies, conducts investigations, and engages in other research79 "to identify hazardous products and design effective strategies to reduce product hazards."80 In FY2016, for example, the Commission issued reports on consumer harms related to ATVs and carbon monoxide poisonings, studied the impact that exposure to flame retardants and crumb rubber have on human health, and engaged in a number of research activities involving nanotechnology.81 The CPSA authorizes the Commission, through contracts and grants, to team up with both governmental and nongovernmental entities to advance its research activities, and generally requires the research from these collaborative efforts to be made publicly available, free of charge.82 This research provides data that can help the CPSC develop measures to detect and eliminate consumer product hazards utilizing its safety standard-setting authorities and enforcement powers, which are discussed in the next two sections.83

Voluntary Safety Standards, Mandatory Safety Rules, & Product Bans

Many of the thousands of consumer products in the CPSC's jurisdiction are subject to either voluntary safety standards developed primarily by private industry, mandatory safety rules issued by the CPSC, or a combination of both.84 These standards and rules detail labeling, packaging, and performance measures that are designed to promote product conformity and reduce safety risks associated with the use of the products.85

In a few instances, Congress has expressly required the CPSC to promulgate mandatory consumer safety rules. For example, pursuant to the CPSIA, the Commission promulgated mandatory consumer safety rules for "durable infant or toddler product[s],"86 certain kids' toys,87 and all-terrain vehicles.88 Absent such an express legislative mandate, the CPSC, in accordance with amendments made to the CPSA in 1981,89 is generally required to defer to industry-developed voluntary safety standards.90 The CPSC is statutorily restricted from issuing mandatory consumer safety rules except in instances in which voluntary standards would not "eliminate or adequately reduce the risk of injury" and where it is unlikely there "will be substantial compliance with such voluntary standards."91 The 1981 amendments to the CPSA also added a number of procedural steps that the Commission must follow in order to issue mandatory consumer safety rules.92 These rulemaking procedures, which are codified in CPSA Section 2058 and discussed below, arguably enhance CPSC accountability and the procedural rights of interested parties, but also potentially make it more costly, time-consuming,93 and difficult for the CPSC to promulgate mandatory safety rules.94 Accordingly, the Commission participates in the development of voluntary standards more frequently than it issues mandatory consumer product safety rules.95 Nevertheless, because finalizing voluntary standards generally requires building consensus among consumers, industry, and other interested parties, it also is not uncommon for the process to finalize voluntary safety standards to span multiple years.96

In addition to issuing mandatory safety rules, the CPSC also has authority to promulgate rules that ban products from the stream of commerce if it determines that "no feasible consumer product safety standard . . . would adequately protect the public from the unreasonable risk of injury associated with such product."97 In order to promulgate a rule banning consumer products, the CPSC must follow the rulemaking procedures provided in CPSA Section 2058.98

The next section further discusses the CPSC's authority to issue mandatory safety rules and product bans, as well as the CPSC's more commonly used authority to participate in the development of voluntary safety standards.

Mandatory Consumer Product Safety Rules & Product Bans

The Commission has promulgated approximately 40 mandatory safety rules and product bans pursuant to CPSA authorities since it was established in 1972.99 Most of these rules were implemented prior to the 1981 amendments that generally required the Commission to defer to voluntary safety standards and added certain procedural steps to the rulemaking procedures under CPSA Section 2058.100 Four of the rules were promulgated pursuant to express legislative authorization under the CPSIA to follow the notice-and-comment rulemaking procedures of the Administrative Procedure Act (APA) that typically apply to federal agency rulemakings, rather than the more arduous procedures of CPSA Section 2058 with which the CPSC usually must comply.101

CPSA Section 2058 requires the CPSC to take certain procedural steps when issuing rules that go beyond the typical APA notice-and-comment procedures.102 For example, prior to implementing a mandatory consumer safety rule or product ban, the Commission must issue a detailed "final regulatory analysis."103 This regulatory analysis requires the Commission to engage in a cost-benefit analysis and assess "reasonable alternatives" to the final rule, as well as justify why these alternatives were not adopted.104 In addition, the Commission must substantiate a number of factual findings.105 For example, the CPSC must document "that the rule (including its effective date) is reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with such product,"106 "that the rule imposes the least burdensome requirement which prevents or adequately reduces the risk of injury for which the rule is being promulgated,"107 and "that the benefits expected from the rule bear a reasonable relationship to its costs."108 Similarly, the CPSC is permitted to issue a rule banning a product only if "no feasible consumer product safety standard under this chapter would adequately protect the public from the unreasonable risk of injury associated with such product."109

The CPSA expressly authorizes any party that is or would be impacted by a mandatory consumer safety rule or product ban to file a lawsuit challenging the rule in a U.S. Court of Appeals.110 In such cases, courts review the rule in accordance with the APA,111 under which the court can set aside the rule if it finds that the CPSC acted unlawfully, abused its discretion, or otherwise acted in an arbitrary or capricious manner.112 The CPSA also provides that neither a product ban nor a "consumer product safety rule shall [] be affirmed unless the Commission's [final regulatory analysis' factual] findings . . . are supported by substantial evidence on the record taken as a whole."113 In addition to setting aside a mandatory safety or product ban rule promulgated by the CPSC, the court may issue other forms of relief to a party challenging such a rule, including ordering the CPSC to cover the prevailing party's attorney's fees.114

The CPSA provides that, when the CPSC issues a consumer product safety or product ban rule, states and localities are generally barred from implementing any other "safety standard or regulation which prescribes any requirements as to the performance, composition, contents, design, finish, construction, packaging, or labeling of such product which are designed to deal with the same risk of injury."115 However, courts have disagreed over how broadly to interpret this preemption provision in light of the savings clause of CPSA Section 2074, which provides that "[c]ompliance with consumer product safety rules or other rules or orders under this chapter shall not relieve any person from liability at common law or under State statutory law to any other person."116 One commentator has explained:

Although a few courts have found state-law claims to be preempted by the CPSA, the majority of the courts have followed the Supreme Court of the United States' decision in Geier v. American Honda Motor Co., Inc., 529 U.S. 861 (2000), in which the Court addressed the dilemma posed by inclusion of an express preemption provision and a savings clause in the National Traffic and Motor Vehicle Safety Act and held that the presence of the savings clause prohibits a broad reading of the preemption provision to include common-law claims. In light of the Geier decision, many courts have found that the CPSA forms only a minimum safety standard and that its provisions are not intended to completely replace or preempt state law.117

The CPSA's preemption provisions generally do not apply to voluntary safety standards.118

The CPSA generally requires manufacturers of consumer products that are subject to CPSC-issued rules to have such products tested and certified for "compli[ance] with all rules, bans, standards, or regulations applicable to the product" before the products enter the marketplace.119 Furthermore, the CPSA subjects heightened standards on manufacturers of children's products covered by a CPSC-issued rule.120 Manufacturers of these products generally must have covered products tested and certified by third parties that are accredited by either the Commission or an accreditation body approved by the Commission.121

Voluntary Safety Standards

As discussed, the CPSC more frequently defers to voluntary safety standards covering a consumer product rather than issue its own mandatory rule establishing a specific safety rule for that product. These voluntary standards are largely developed by private industry "standards development organizations," such as the American National Standards Institute (ANSI), Underwriters Laboratories (UL), and ASTM International, which generally consist of trade groups, research bodies, consumer advocates, and similar entities.122 Interested parties typically volunteer to participate in the development of voluntary standards in accordance with the relevant standards development organization's own written policies and procedures.123 The policies and procedures generally allow for divergent views to be expressed and consensus to develop as to the final safety standards.124

The CPSC often participates in the development of voluntary safety standards by, for instance, providing standards development organizations recommendations on standards that should be implemented and technical assistance during the standard development process.125 The CPSC issues semi-annual reports on its involvement in the creation of voluntary standards.126 The CPSC does not have legal authority to enforce voluntary standards by initiating an enforcement action against entities for failing to comply with voluntary safety standards.127 However, as discussed in more detail in the following section, the failure of an entity to comply with voluntary safety standards can play a role in the Commission's determination to exercise its enforcement powers.128

Enforcement Powers

The Commission has at its disposal a number of tools to enforce compliance with the CPSA. The CPSA authorizes the Commission, under circumstances described below, to order companies to halt the distribution of products in the stream of commerce, provide refunds and replacement products, and take other corrective actions.129 The Commission130 also may seek injunctive relief and civil penalties from federal district courts131 and may request the Department of Justice to pursue criminal penalties132 to prevent violations of the CPSA.133 To help identify instances that warrant the exercise of these enforcement powers, the CPSA requires industry to notify the Commission of certain product hazards134 and authorizes the Commission to conduct compliance inspections of facilities where the consumer products are produced, stored, or distributed.135 The Commission also works with other federal agencies, as well as state and local governments, to inspect products for compliance with safety standards and corrective actions.136 To address hazards more quickly, however, the Commission often attempts to negotiate corrective actions on terms agreeable to both the CPSC and the affected companies prior to initiating formal enforcement actions.137

The reporting requirements mandated by the CPSA, as well as the Commission's authorities to inspect consumer products, negotiate corrective actions, order mandatory corrective actions, and seek civil and criminal penalties are addressed in the next section of the report.

Mandatory Risk Reporting

The CPSA generally requires consumer product manufacturers, distributors, importers, and sellers to file a report with the CPSC "immediately"138 upon "obtain[ing] information which reasonably supports the conclusion that [a] product" poses a "substantial product hazard."139 The failure to comply with this reporting requirement is unlawful and can result in civil and criminal penalties.140 These reports,141 along with the Commission's monitoring, investigation, and research activities discussed above, help the CPSC identify products that warrant the imposition of voluntary safety standards, mandatory safety rules, bans, recalls, or other enforcement or corrective action.142

A product poses a Substantial Product Hazard when it does not conform to voluntary safety standards, mandatory safety rules, product bans, or other CPSC-issued rules. A product may also pose a Substantial Product Hazard when a defect143 in the product "creates a substantial risk of injury to the public," in light of factors such as the severity of the injury it could cause and the quantity of affected products that are in the market.144 A defect in a consumer product can occur at any stage of commerce—when it was designed, manufactured, finished, or packaged.145 A product also could be defective due to its labeling, instructions, construction, and contents.146 The CPSC does not consider a product to be defective simply because it poses the risk of harm to consumers.147 For example, a hammer is not defective simply because an errant swing could result in a broken finger.148 Rather, the CPSA and its implementing regulations outline a number of factors that should be weighed by an industry party making a determination of whether a product needs to be reported to the CPSC as a potential Substantial Product Hazard and by the CPSC when making a determination of whether the product actually poses a Substantial Product Hazard.149 These factors include: the product's usefulness; the product's propensity for and potential severity of harm; the types of individuals who are most likely to be injured by the product (e.g., children, adults); and whether the risks of the product are readily apparent or can be sufficiently diminished through warning labels or instructions.150

Substantial Product Hazard reports should include

• a product description;
• contact information of all known manufacturers, distributors, importers, and sellers of the product;
• an explanation of the product's nonconformance with relevant safety standards or other rules; and
• an explanation of the product's potential dangers.

With the exception of trade secrets and certain other confidential types of information, the Commission may publicly release information included in these reports, but generally only after giving the manufacturer or other affected party an opportunity to contest the disclosure with the Commission or seek a court order staying the disclosure because it is confidential, inaccurate, or misleading.151

Compliance Inspections

The CPSA authorizes the Commission "to enter [and inspect], at reasonable times, [] any factory, warehouse, or establishment in which consumer products are manufactured or held, in connection with distribution in commerce" for the purpose of ensuring that regulated products comply with mandatory safety rules, recalls and other corrective actions, and other aspects of the CPSA.152 The CPSA also authorizes the CPSC to obtain, through the Secretary of the Treasury, "a reasonable number of samples of consumer products being offered for import" for inspection.153 The Commission may request that Secretary of the Treasury deny entry into the country any imported product that fails to comply with a consumer product safety rule, poses a Substantial Product Hazard, or fails to meet various other requirements.154

The CPSC lacks the resources to inspect every one of the millions of consumer products manufactured domestically or imported into the country before these products reach American consumers.155 As a result, the Commission tends to focus its inspection efforts on foreign products that are imported into the country because they historically are more likely to be subject to corrective actions than products manufactured in the United States.156 According to a 2014 GAO report, four out of five of CPSC's product recalls in the United States involved an imported product.157 The CPSC utilizes a risk-based system, called the Risk Assessment Methodology, as well as data from the U.S. Customs and Border Protection, to help the Commission prioritize and select which imported shipments of consumer products to inspect.158

The Commission coordinates compliance inspection activities with state and local governments.159 In in FY2016, the Commission directed nearly 1,800 compliance inspections conducted by states and local governmental entities.160 The CPSC also provides training and technical support for its state and local partners, as well as importers of foreign products, to improve compliance with the Act.161

Corrective Actions to Address Substantial Product Hazards

If the CPSC, after conducting an administrative proceeding,162 concludes that a consumer product that has entered the stream of commerce constitutes a Substantial Product Hazard and that public disclosure of the hazard is necessary for public protection, the Commission may order relevant manufacturers, distributors, or sellers to address the hazard by implementing a corrective action,163 which the CPSC generally refers to as a "recall."164 The administrative process to formally designate a product as a Substantial Product Hazard and to impose a mandatory corrective action can be time consuming, in large part, because, as is discussed below, the CPSC generally is required to conduct an administrative hearing on the matter.165 Moreover, even when the Commission goes through this administrative process, the CPCS's Substantial Product Hazard determination and ordered corrective action can be challenged in federal court by adversely affected parties.166 Consequently, the CPSC infrequently initiates administrative proceedings.167 In many instances, rather, relevant companies work in cooperation with the CPSC and negotiate mutually agreeable plans for correcting potential hazards.168

Negotiated Corrective Actions

In instances in which parties cooperate with the Commission to reach a negotiated corrective action agreement, CPSC staff generally will review industry-issued product hazard reports and conduct an investigation to determine whether the product poses a Substantial Product Hazard under the CPSA.169 If warranted, CPSC staff will make a preliminary determination170 as to whether the product is a substantial hazard and assign the hazard as either Class A, B, or C based on its potential for consumer harm.171 Class A hazards are likely to result in death, grievous injury or sickness, or are very likely to result in serious injury or sickness.172 Class B hazards could, but are unlikely to, result in death or grievous injury or sickness, or are likely to result in serious injury/sickness, or are very likely to result in moderate injury/sickness.173 Class C hazards could but are not likely to result in serious or moderate injury/sickness.174 Once the preliminary determination has been made and the hazard has been classified, the Commission's staff then works with the relevant companies to develop an appropriate corrective action.175

In lieu of this process, companies can choose to utilize the Commission's Fast Track Product Recall Program, in which the company begins working almost immediately with Commission staff to implement a voluntary corrective action without the CPSC making a preliminary determination that the product is a Substantial Product Hazard.176 The CPSC developed this program for the purpose of speeding up the process by which potentially dangerous products can be pulled from retailers and the reach of consumers.177

Corrective Actions Through Administrative Proceedings

When the CPSC believes that negotiations with a company have come to an impasse or it determines it otherwise warranted or necessary, the Commission can formally vote to designate a product a Substantial Product Hazard and order a mandatory corrective action plan.178 Before the CPSC may take these formal steps, however, it generally must conduct a hearing, presided by an independent "presiding officer"179 such as an Administrative Law Judge. At such a hearing, interested parties may, among other things, express their views on the subject, offer evidence, and submit statements orally and in writing.180 When the Commission initiates a proceeding to issue a mandatory Substantial Product Hazard corrective action plan, it may seek a preliminary injunction from a federal district court to prevent the continued distribution of the product during the pendency of the proceeding.181 The CPSC also may seek judicial enforcement of its mandatory corrective action plans.182 Parties that are adversely affected by a CPSC order designating a product a Substantial Product Hazard may challenge the order in a federal district court in accordance with CPSA Section 2073.183

Available Corrective Actions

Regardless of the process utilized, the Commission, often in conjunction with the relevant parties, will ordinarily develop a corrective action plan that is designed to be tailored to the unique characteristics of the hazardous product.184 The primary goals of corrective action plans are to identify all defective products, get them out of the hands of consumers and the stream of commerce, and inform the public of the product's potential harm and the plan to correct it.185 Corrective actions can include

• halting the product's distribution;186
• notifying public health officials and the general public of the hazard;187
• issuing written notices of the hazard to all known purchasers, sellers, distributors, and manufacturers of the product;188
• rectifying the defect;189
• modifying the product so that it is compliant with relevant safety standards or rules;190
• replacing the noncompliant product with one that is compliant with safety standards and rules;191 and
• providing consumer refunds to cover some or all of the defective item's purchase price.192

The Commission has indicated that a communication strategy to inform consumers, retailers, and other members of the public of the potential hazards associated with a product is an integral aspect of every corrective action plan.193 The Commission generally must review and approve all communications related to a corrective action plan.194

Imminently Hazardous Consumer Products

In addition to its authority to designate Substantial Product Hazards, the Commission also may seek court-ordered relief to address an "imminently hazardous consumer product."195 The CPSA defines an Imminently Hazardous Consumer Product to "mean[] a consumer product which presents imminent and unreasonable risk of death, serious illness, or severe personal injury."196 If a reviewing court determines that a product constitutes an Imminently Hazardous Consumer Product,197 the CPSA authorizes the court "to grant . . . such temporary or permanent relief as may be necessary to protect the public from such risk."198 The court-issued relief can range from the issuance of public notice to the condemnation and seizure of the product.199 While the proceeding is pending, the CPSC also can issue an order requiring corrective actions—such as halting the distribution of the products and providing public notification of the products' hazards200—in accordance with CPSA Section 2064(c).201 However, any such CPSC issued corrective action order must be rescinded if the court ultimately concludes that the product does not constitute an Imminently Hazardous Consumer Product.202

It is unclear exactly how many times the Commission has attempted to exercise its Imminently Hazardous Consumer Product authority, but its use appears to be rare.203 The exercise of this authority might be uncommon because it is more difficult to prove to a court that a product is an Imminently Hazardous Consumer Product than a Substantial Product Hazard. Furthermore, the Commission can obtain similar relief for Substantial Hazard Products as it can for Imminently Hazardous Consumer Products.204

Civil & Criminal Penalties

Section 2068 of the CPSA makes unlawful a series of activities,205 violations of which can result in civil206 and criminal penalties.207 Among other activities, Section 2068 makes it unlawful to

(1) sell, offer for sale, manufacture for sale, distribute in commerce, or import into the United States any consumer product . . . that is not in conformity with an applicable consumer product safety rule under this chapter, or any similar rule, regulation, standard, or ban;208

(2) sell, offer for sale, manufacture for sale, distribute in commerce, or import into the United States any consumer product . . . that is—

(B) subject to voluntary [i.e., negotiated] corrective action taken by the manufacturer, in consultation with the Commission, of which action the Commission has notified the public or if the seller, distributor, or manufacturer knew or should have known of such voluntary corrective action;

(C) subject to an order issued under section 2061 [Imminently Hazardous Consumer Product] or 2064 [Substantial Hazard Product] of this title;209 . . .

(13) misrepresent to any officer or employee of the Commission the scope of consumer products subject to an action required under section 2061 or 2064 of this title, or to make a material misrepresentation to such an officer or employee in the course of an investigation under this chapter ;210 [or] . . .

(15) export from the United States for purpose of sale any consumer product211 . . . that—

(A) is subject to an order issued under section 2061 or 2064 of this title . . .; or

(B) is subject to a voluntary corrective action taken by the manufacturer, in consultation with the Commission, of which action the Commission has notified the public.212

The CPSC has authority to enter into settlement agreements with parties that include the payment of civil penalties,213 or it can file an action with a federal district court to seek the assessment of civil penalties.214 Each knowing215 violation of Section 2068 is subject to as much as a $100,000 civil penalty, and individuals or organizations that engage in multiple, related knowing violations could be assessed as much as a $15,000,000 civil penalty.216 When calculating the size of civil penalties, the CPSC and reviewing courts take into account various factors, including the size of the violator's business and the severity of the violation.217

Violators of Section 2068 also can be subject to criminal fines, calculated pursuant to guidelines established by Section 3571 of the federal Criminal Code.218 The CPSC may solicit the Department of Justice if it determines that it is appropriate to seek criminal penalties for Section 2068 violations in accordance with CPSA Section 2070.219 Individuals who knowingly and willfully violate Section 2068 can be sentenced to a maximum five-year prison term.220 Officers, directors, and other corporate representatives can be subject to the same criminal penalties and prison sentence in their individual capacity for "knowingly and willfully authoriz[ing] [or] order[ing]" others to violate Section 2068.221 The CPSA also authorizes "the forfeiture of assets associated with [a] violation" of the CPSA "for which the violator is sentenced to pay a fine, be imprisoned, or both."222

The CPSA authorizes individuals to sue persons who commit knowing and willful violations of CSPC-issued rules for damages and attorneys' fees for.223 Under certain circumstances, individuals and state Attorneys General also may seek injunctive relief through federal district courts against a violator of consumer product safety rules and Substantial Product Hazard orders.224

Footnotes

What is the purpose of the Consumer Product Safety Act?

What is regulated by the CPSC?

What are the objectives of the consumer Act of the Philippines?

What does CPSC stand for?