Tag: cpsc

CPSC Sues Amazon to Force Recall of Hazardous Products Sold on Amazon.com

The U.S. Consumer Product Safety Commission (CPSC) announced on July 14, 2021, that it filed an administrative complaint against Amazon.com, “the world’s largest retailer, to force Amazon to accept responsibility for recalling potentially hazardous products sold on Amazon.com.” CPSC claims that the specified products sold through Amazon’s “fulfilled by Amazon” (FBA) program are defective and pose a risk of serious injury or death to consumers and that Amazon is legally responsible to recall them. According to the complaint, the products include “24,000 faulty carbon monoxide detectors that fail to alarm, numerous children’s sleepwear garments that are in violation of the flammable fabric safety standard risking burn injuries to children, and nearly 400,000 hair dryers sold without the required immersion protection devices that protect consumers against shock and electrocution.”

CPSC filed the complaint under the Consumer Product Safety Act (CPSA). According to the complaint, Amazon acts as a “distributor,” as defined by CPSA, of its FBA products by: (a) receiving delivery of FBA consumer products from a merchant with the intent to distribute the product further; (b) holding, storing, sorting, and preparing for shipment FBA products in its warehouses and fulfillment centers; and (c) distributing FBA consumer products into commerce by delivering FBA products directly to consumers or to common carriers for delivery to consumers.

The complaint states that after CPSC notified Amazon about the hazards presented by the specified products, Amazon took “several unilateral actions,” including:

  • Removing the Amazon Standard Identification Numbers (ASIN) for certain of the specified products; and
  • Notifying consumers who purchased certain of the specified products that they could present a hazard. Amazon also offered a refund to these consumers in the form of an Amazon gift card credited to their account.

According to the complaint, these actions “are insufficient to remediate the hazards posed by the Subject Products and do not constitute a fully effectuated Section 15 mandatory corrective action ordered by” CPSC. The complaint states that “[a] Section 15 order requiring Amazon to take additional actions in conjunction with the CPSC as a distributor is necessary for public safety.” The complaint asks CPSC to:

  1. Determine that Amazon is a distributor of consumer products in commerce, as those terms are defined in the CPSA;
  2. Determine that the specified products are substantial product hazards under CPSA Sections 15(a)(1), 15(a)(2), and 15(j);
  3. Determine that public notification in consultation with CPSC is required to protect the public adequately from substantial products hazards created by the specified products, and order Amazon to take actions set out in CPSA Section 15(c)(1), including but not limited to:
    1. Cease distribution of the specified products, including removal of the ASINs and any other listings of the specified products and functionally identical products, from Amazon’s online marketplace and identifying such ASINs to CPSC;
    2. Issue a CPSC-approved direct notice to all consumers who purchased the specified products that includes a particularized description of the hazard presented by each specified product and encourage the return of the specified product;
    3. Issue a CPSC-approved press release, as well as any other public notice documents or postings required by CPSC staff, that inform consumers of the hazard posed by the specified products and encourage the return or destruction of the specified products;
  4. Order that Amazon facilitate the return and destruction of the specified products, at no cost to consumers, to protect the public adequately from the substantial product hazard posed by the specified products, and order Amazon to take actions set out in CPSA Section 15(d)(1), including but not limited to:
    1. Refund the full the purchase price to all consumers who purchased the specified products and, to the extent not already completed, conditioning such refunds on consumers returning the specified products or providing proof of destruction;
    2. Destroy the specified products that are returned to Amazon by consumers or that remain in Amazon’s inventory, with proof of such destruction via a certificate of destruction or other acceptable documentation provided to CPSC staff;
    3. Provide monthly progress reports to reflect, among other things, the number of specified products located in Amazon’s inventory, returned by consumers, and destroyed;
    4. Provide monthly progress reports identifying all functionally equivalent products removed by Amazon from amazon.com pursuant to the CPSC Order, including the ASIN, the number distributed prior to removal, and the platform through which the products were sold;
  5. Provide monthly reports summarizing the incident data submitted to CPSC through the Retailer Reporting Program;
  6. Order that Amazon is prohibited from distributing in commerce the specified products, including any functionally identical products; and
  7. Order that Amazon take other and further actions as CPSC deems necessary to protect the public health and safety and to comply with CPSA and the Flammable Fabrics Act (FFA).

CPSC “urges consumers to visit SaferProducts.gov to check for recalls prior to purchasing products and to report any incidents or injuries to the CPSC.” CPSC published the complaint in the July 21, 2021, Federal Register. 86 Fed. Reg. 38450.

Commentary

In CPSC’s July 14, 2021, press release, Acting Chair Robert Adler states that the decision to file an administrative complaint is “a huge step across a vast desert — we must grapple with how to deal with these massive third-party platforms more efficiently, and how best to protect the American consumers who rely on them.” According to The Washington Post, CPSC issued the administrative complaint “after months of behind-the-scenes negotiations between regulators and Amazon as the agency tried to persuade the company to follow the CPSC’s rules for getting dangerous products off the market, according to a senior agency official who spoke on the condition of anonymity to comment on internal discussions.” This same official stated that “Amazon officials refused to acknowledge that the CPSC has the authority to compel the company to remove unsafe products.”

As reported in our February 16, 2018, blog item, “EPA Settles with Amazon on Distribution of Unregistered Pesticides,” the U.S. Environmental Protection Agency (EPA) and Amazon entered into a Consent Agreement and Final Order (CAFO) whereby Amazon agreed to pay $1,215,700 in civil penalties for approximately 4,000 alleged violations under Section 3 of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) for the distribution of unregistered pesticide products. EPA later issued stop sale, use, or removal orders (SSURO) to Amazon and eBay for selling certain pesticide products that EPA claims are unregistered, misbranded, or restricted-use pesticides, and pesticide devices that EPA asserts make false or misleading claims. More information on the SSURO is available in our June 17, 2020, blog item, “EPA Issues Stop Sale, Use, or Removal Orders to Amazon and eBay for Unregistered and Misbranded Pesticides and Devices, Including Products with Claims Related to COVID-19.”

As reported in our October 9, 2020, blog item, Representatives Frank Pallone, Jr. (D-NJ), Chair of the House Committee on Energy and Commerce, and Jan Schakowsky (D-IL), Chair of the House Energy and Commerce Subcommittee on Consumer Protection and Commerce, requested that Amazon Chief Executive Officer (CEO) and Chair Jeff Bezos launch an investigation into the safety of Amazon’s product line, AmazonBasics, and answer a series of questions pertaining to the company’s product safety and recall practices. The Committee’s October 7, 2020, press release notes that the request comes after a CNN investigation found that many of AmazonBasics’ electronic products “have exploded, caught fire, sparked, melted, or otherwise created hazardous situations at rates well above comparable products.” According to the press release, many of these products were never recalled and continue to be sold.

CPSC’s administrative complaint is just the latest indication of the pressure on Amazon to ensure the safety of the products the platform hosts. These federal agency and Congressional efforts will almost certainly cause more pressure on product manufacturers to ensure the products they offer for sale on Amazon are compliant with the relevant regulations.

©2021 Bergeson & Campbell, P.C.

Article By Lynn L. Bergeson, Lisa M. Campbell and Carla N. Hutton at Bergeson & Campbell, P.C. For more CPSC news, see the Consumer Protection section of the National Law Review.

Consumer Product Safety Advocates Pen Memorandum to Biden Transition Team Foreshadowing Push for More Active and Aggressive CPSC

For years consumer product safety advocate groups have bemoaned the seeming lack of aggressiveness from the Consumer Product Safety Commission (“CPSC”). As an example, they complain that the CPSC levied no civil penalties on companies in 2020, 2 in 2019, and only 1 in 2018, penalties being a surrogate in their minds for enforcement. As counsel for many companies, we know that this is not the case and CPSC compliance activity has remained vigorous. But perhaps the ongoing criticisms led Acting Chairman Robert Adler to publicly announce in mid-November the CPSC’s recent vote to refer a case to the DOJ for prosecution of a civil penalty.

With the Commission evenly split 2-2 between Democrats and Republicans, and the incoming Biden administration only one month away, in early November seven industry groups penned a memorandum to the Biden Transition Team to advocate for greater power for, and greater use of existing power, by the agency. This is an important message because these leading advocates may well populate the Commission at high levels in the next few years.

The people who signed the document are capable and well intentioned. We share their goals for a strong, more effective CPSC but we question their proposed remedies. The Agency has a wealth of statutory authorities at its disposal. It just needs the resources, financial and technological, to better use them as well as a greater focus on priority areas. In this post, we will focus on the general, non product-specific proposals except to note that furniture and juvenile products are top of the list.

The memorandum, published on November 11th, was signed by leaders of the American Academy of Pediatrics, Consumer Federation of America, Consumer Reports, Cuneo Gilbert & LaDuca, Kids In Danger, Public Citizen, and U.S. Public Interest Research Group (PIRG). Among the many actions advocated in the memo, the groups included a plea to the Biden Administration to utilize the CPSC to:

  • File more formal administrative or legal complaints to seek recalls (although we note that the  voluntary approach is far more effective and less resource intensive);
  • Make more frequent public preliminary determinations that corrective action will be warranted (without recognizing the legal requirements for findings and due process to justify this commercially devastating action);
  • “[R]everse the current trend and go back to imposing meaningful civil penalties on corporate violations of consumer product safety law” (without recognizing the real world deterrent effect of the threat of any penalties for public-facing companies.)

Section 6(b) still the Misunderstood Villain Subject to Much False News

Perhaps one of the most controversial CPSC-related statutory provisions is Section 6(b) of the Consumer Product Safety Act (“CPSA”). The section requires the CPSC to take reasonable steps to ensure that disclosure of information identifying a specific product, manufacturer, or private labeler, is accurate, fair in the circumstances, and reasonably related to effectuating the purpose of the CPSA and related laws. Information voluntarily submitted to the Commission under Section 15 (reports of potentially defective or unsafe products) is shielded from disclosure, even from FOIA requests, without the agency first going through procedural mechanisms to ensure release of the information doesn’t run afoul of 6(b). This provision resulted from unfair and devastating harm to companies from unjustified public condemnations and announcements by CPSC.

There is no known evidence to support the claim that the CPSC has been prevented by law from disclosing important information about unsafe products. The law provides for accelerated disclosures where justified. Nevertheless, consumer advocates have for years put forward the rallying cry that manufacturers have a veto over CPSC’s release of information that harms the public. The advocates’ memo calls for Congress to repeal Section 6(b). Absent such a bill, the advocates call for clarification that Section 6(b) does not extend to records released under FOIA, which currently runs contra to Supreme Court precedent from 1980.1

The memorandum also calls for significantly less reliance on consensus standards as both the basis for compliance action and regulatory action. Cost-benefit analysis would be downgraded (even though it is a hallmark of the Clinton and Obama Administrations.) These proposals are fraught with problems and fail to recognize that globally the product safety system has as its essential underpinning consensus standards, which results in a very safe consumer product ecosystem in the United States.

Finally, the advocates state that CPSC is woefully underfunded, given the incredibly important mission of consumer protection. Many CPSC observers share this sentiment. The memo calls for a drastic expansion of the agency, and increased budget for the CPSC.2 In fact, the memo advocates for a doubling of CPSC appropriations, an impractical request.

What This Means: Aggressive Advocacy and Activity Inside and Outside the Agency  

For those regularly following the CPSC, the issues discussed in the advocates’ memorandum with great passion are nothing new. What changes, however, is the context. While Senate Leadership has been unable to confirm a third Republican commissioner nominee or a Chairman nominee with the failed attempts to confirm Ann Marie Buerkle and Nancy Beck (thus far), the Commission sits at a 2-2 position. Bob Adler, an Obama appointee, has been acting Chairman for over one year, allowing for an essentially Democratic-controlled agency under a Republican administration except for the deadlock on most regulatory actions. We will eventually see who gets nominated by the Biden administration and whether eventual new leadership will implement and advocate on the inside for the positions advocated to the Transition Team.

One can safely presume that the CPSC will be far more aggressive in the coming years. Companies would be well-served to protect themselves by ensuring their houses are in order—effective safety procedures in place up and down the supply chain.

1 Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102 (1980).

2 CPSC requested a budget of $135 million for FY 2021.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more articles on the CPSC, visit the National Law Review Consumer Protection section.

CPSC Issues COVID-19 Consumer Products Guidance, Further Muddying the Regulatory Waters and Increasing Scrutiny of COVID-19 Products

As the COVID-19 pandemic continues, and with an incoming Biden administration that is expected to step up efforts to control the spread of the virus, use of personal protective equipment (“PPE”) and cleaning/disinfectant products has never been more important or widespread among the public.  However, in late October, the Consumer Product Safety Commission (“CPSC”) issued guidance on its website asserting that certain consumer protection rules within its jurisdiction apply to PPE, and reminding consumers of the CPSC laws that apply to cleaning/disinfectant products (the “COVID Guidance”).

The CPSC commissioners disagree about the import or official applicability of the COVID Guidance, and questions abound as to how it interplays with FDA regulations issued by the U.S. Food and Drug Administration (“FDA”), including Emergency Use Authorizations (“EUA”), as well as EPA regulations on disinfectant products – not to mention how or whether the COVID Guidance impacts the protections afforded by the Public Readiness and Emergency Preparedness Act (the “PREP Act”).  But in any case, the guidance unquestionably heightens scrutiny around COVID-related products, and likely will give consumer plaintiffs’ attorneys additional lawsuit fodder – so manufacturers should understand it.

Broadly, the COVID Guidance covers two broad categories of products: face coverings, gowns, gloves (i.e., PPE), and cleaning/disinfectant products.

Face Coverings, Gowns, and Gloves

Under the COVID Guidance, face coverings, gowns, and gloves designed for consumer use are considered “articles of wearing apparel” and therefore must (1) comply with the flammability requirements of the Flammable Fabrics Act; and (2) be tested to either 16 C.F.R. Part 1610 (Standard for the Flammability of Clothing Textiles) or Part 1611 (Standard for the Flammability of Vinyl Plastic Film), depending on the materials used for construction.  Further, U.S. manufacturers and importers of these products must issue a General Certificate of Conformity (“GCC”) certifying that these clothing articles meet all applicable requirements.

The COVID Guidance imposes additional requirements for PPE apparel designed specifically for children’s use (i.e., ages 12 and under).  Under the Consumer Product Safety Act (“CPSA”), all children’s products must bear permanent tracking information, meet total lead content limits, and meet lead in paint or similar surface coating limits (if either a paint or surface coating is present on the product).  Product testing must take place at a CPSC-accepted testing lab, and U.S. manufacturers/importers of these products must also issue a Children’s Product Certificate.

Cleaning Solutions

Household cleaning solutions – for example, hand sanitizers and soaps – are primarily regulated by the FDA, but also fall under the jurisdiction of the CPSC if they constitute a “hazardous substance” under the Federal Hazardous Substances Act (“FHSA”).  Generally, the FHSA defines a “hazardous substance” as (1) a substance (or mixture of substances) that may cause substantial personal injury or substantial illness during customary or reasonably foreseeable handling or use, including reasonably foreseeable ingestion by children; and (2) the substance (or mixture of substances) is toxic, corrosive, an irritant, a strong sensitizer, is flammable or combustible, or generates pressure through decomposition, heat, or other means.  The FHSA requires that hazardous substances bear prominent warnings on their labels – for example, “KEEP OUT OF REACH OF CHILDREN,” “DANGER”, and “HARMFUL OR FATAL IF SWALLOWED,” among others.

© 2020 Foley & Lardner LLP
For more articles on the CPSC, visit the National Law Review Consumer Protection section.

Clash of Consumer Protection Goals: Does the Text of the TCPA Frustrate the Purposes of the CPSA?

“Hello.  This is an automated call from Acme Manufacturing. Our records indicate that you purchased Product X between December 2019 and January 2020. We wanted to let you know that we are recalling Product X because of a potential fire risk. Please call us or visit our website for important information on how to participate in this recall.”

When companies recall products, they do so to protect consumers.  In fact, various federal laws, including the Consumer Product Safety Act (CPSA), the Federal Food, Drug, and Cosmetic Act (FDCA), and National Highway and Motor Vehicle Safety Act (MVSA), encourage (and may require) recalls. And the agencies that enforce these statutes would likely approve of the hypothetical automated call above because direct notification is the best way to motivate consumer responses to recalls.[1]

But automated calls to protect consumers can run into a problem: the Telephone Consumer Protection Act (TCPA).

Are Recall Calls a Nuisance or an Emergency?

The TCPA seeks to protect consumers from the “nuisance and privacy invasion” of unwanted automated marketing calls.[2] The TCPA prohibits any person from making marketing calls to landlines, or any non-emergency calls or text messages[3] to wireless lines, using automated dialers or recorded messages unless the recipient has given prior written consent. The Act includes a private right of action and statutory per-violation damages – $500, trebled to $1,500 if a court finds the violation willful and knowing.[4] These penalties can add up quickly: In one case, a jury found that a company violated the TCPA nearly two million times, exposing the company to minimum statutory damages totaling almost $1,000,000,000.[5]

There is an important exception to the TCPA’s prohibition on automated calls. The TCPA allows autodialed calls for emergency purposes,[6] but the Act does not define that phrase. While the FCC has interpreted emergency purposes to mean “calls made necessary in any situation affecting the health and safety of consumers,”[7] recalls are not explicitly identified within this definition. As a result, aggressive plaintiffs have demanded millions in damages from companies that use automatic dialers to disseminate recall messages.[8]

For example, a grocery chain – Kroger – made automated calls to some purchasers of ground beef as part of a recall stemming from salmonella concerns. A plaintiff responded with a purported class action that did not mention the recall [9] but was based on consumers alleging that they had received “annoying” “automated call[s] from Kroger.”

Moving to dismiss, Kroger observed that the plaintiff – who had not listened to the call beyond its initial greeting[10] and thus could not comment on the call’s text – had “cherry-picked”[11] portions of consumers’ online comments to support the case, omitting text that clearly demonstrated that the calls were made for health and safety purposes.[12] Kroger argued that the online comments did not support the plaintiff’s allegations that Kroger had made any marketing calls.

The court granted Kroger’s motion and dismissed the complaint without leave to amend. Even so, Kroger was compelled to spend time and money defending the claim.

In light of this type of lawsuit, one communications firm involved in automotive recalls has petitioned the FCC to “clarify . . . that motor vehicle safety recall-related calls and texts are ‘made for emergency purposes.’”[13] The Association of Global Automakers and the Alliance of Automobile Manufacturers commented in support of the petition, arguing that the “[l]ack of clarity regarding TCPA liability for vehicle safety recall messages has had a chilling effect on these important communications.”[14] The Settlement Special Administrator for the Takata airbag settlements also wrote in support, commenting that automated “recall-related calls and texts serve an easily recognizable public safety purpose.”[15]

The TCPA’s emergency exception offers protection in litigation. The FCC’s definition – “calls made necessary in any situation affecting the health and safety of consumers” – neatly encapsulates the entire function of a recall, namely acting to protect consumers’ health and safety. Moreover, in developing the emergency exception, Congress broadened initial language that excepted calls made by a “public school or other governmental entity” to the enacted “emergency purposes” phrasing precisely to ensure the exception encompassed automated emergency calls by private entities.[16] One of the seminal emergency purposes for which a private entity might seek to make automated calls is a product recall.

Even with such sound arguments that TCPA claims related to recall calls are without merit within the statute, however, aggressive plaintiffs have brought such claims. These efforts compel companies to spend finite resources defending claims that should not be brought in the first place. An express statutory or regulatory statement that recalls are squarely within the definition of emergency purposes would give companies greater confidence that not only would they be able to successfully defend against any effort to pit the TCPA against consumer-protection values, but that the claims are so unlikely to be brought that the companies need not even fear to have to defend.

Protecting Against Recall-Call Complaints

Until the FCC or Congress expressly instructs plaintiff’s counsel not to try to litigate against automated recall calls, there are steps companies that want to use automated dialers to drive recall responses can take to minimize any risk of a court misinterpreting their calls or finding TCPA liability where it should not attach.

For example, companies may (as some already do) ask for customers’ consent to be autodialed in connection with the products they have purchased – e.g., by including consent language on product warranty cards or registration forms. In fact, the Consumer Product Safety Improvement Act of 2008 (CPSIA)[17] already requires manufacturers of durable infant and toddler products to include registration cards for recall-communication purposes.[18] Companies in some other industries (like the on- and off-road motor vehicle industries) typically have robust registration systems that can incorporate auto dialing consent, and more companies in other spaces may want to consider using registration to facilitate recalls.

Further, automated recall calls should focus on the recall. If calls extend to marketing messaging, that could undermine both a future TCPA defense and the efficacy of that and future recall communications.

Optimally, companies would be less likely to need these defenses if the statute more clearly signaled to would-be litigants that they should not even bother. If the FCC grants the pending petition and plainly states that product recalls are emergencies for TCPA purposes, courts’ deference to agency interpretations might deter at least some complaints. A statutory amendment would be the surest guarantee, though, and manufacturers may wish to ask Congress to amend the TCPA to clarify that recall messages are emergency messages.

[1] See, e.g., Joseph F. Williams, U.S. Consumer Prod. Safety Comm’n, Recall Effectiveness Workshop Report, 5 (Feb. 22, 2018).

[2] Pub. L. No. 102-243, § 2(12), 105 Stat. 2394, 2395 (Dec. 20, 1991).

[3] Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, Report and Order, 18 FCC Rcd 14014, 14115, para. 165 (2003)

[4] TCPA at § 3(a), 105 Stat. at 2399 (codified at 47 U.S.C. § 227(c)(5)).

[5] Wakefield v. ViSalus, Inc., No. 3:15-cv-1857-SI (D. Or.).

[6] See, e.g., TCPA at § 3(a), 105 Stat. at 2395-96 (codified at 47 U.S.C. § 227(b)(1)(A)).

[7] 47 C.F.R. § 64.1200(f)(4).

[8] See, e.g., Compl., Ibrahim v. Am. Honda Motor Co., Inc., No. 1:16-cv-04294, Dkt. #1 (N.D. Ill. Apr. 14, 2016).

[9] Compl., Brooks v. Kroger Co., No. 3:19-cv-00106-AJB-MDD, Dkt. #1 (S.D. Cal. Jan. 15, 2019) (“Brooks”).

[10] Pl. Opp. to Mot. to Dismiss at 5, Brooks, Dkt. #9 (Apr. 4, 2019).

[11] Reply in Supp. of Mot. to Dismiss at 7, Brooks, Dkt. #10 (Apr. 11, 2019).

[12] The plaintiff quoted one complaint as “Automated call from Kroger.” Compl. at 3-4, Brooks. As the defense noted, that complaint continued, “requesting that you return ground beef . . . due to the threat of salmonella.” Mem. in Supp. of Mot. to Dismiss at 6, Brooks Dkt. #7 (Mar. 21, 2019).

[13] IHS Markit Ltd. Petition for Emergency Declaratory Ruling, CG Docket No. 02-278, Petition, ii (Sept. 21, 2018).

[14] IHS Markit Ltd. Petition for Emergency Declaratory Ruling, CG Docket No. 02-278, Comments of Association of Global Automakers, Inc. and Alliance of Automobile Manufacturers, 9 (Nov. 5, 2018).

[15] IHS Markit Ltd. Petition for Emergency Declaratory Ruling, CG Docket No. 02-278, Comments of Patrick A. Juneau, 3 (Nov. 5, 2018).

[16] S. Rep. No. 102-178, 5 (Oct. 8, 1991).

[17] Pub. L. No. 110-314, 122 Stat. 3016 (Aug. 14, 2008) (codified as amended at 15 U.S.C. § 2056a).

[18] 15 U.S.C. § 2056a(d).

© 2020 Schiff Hardin LLP

For more on CPSA, FDCA, MVSA & other recalls, see the National Law Review Consumer Protection law section.

CPSC Staff Addresses IoT 2018 Hearing Feedback, IoT Project Plans in New Report

Connected products can make the world a safer place: electronic sensors in the home can detect problems and send smartphone notifications to the homeowner; smart alert devices can notify family members or home help companies that an elderly person has fallen and needs assistance. But with over 64 billion connected products in the marketplace, there is a concern that connected devices could introduce hazards that might lead to a risk of injury due to problems with software updates or customization, faulty connections, and even consumer modifications.

As the body charged with overseeing consumer product safety in the U.S., over the last few years, the Consumer Product Safety Commission (CPSC) has shown an increasing interest in defining its role with regard to connected products. In May 2018, the CPSC held a public hearing on IoT, obtaining feedback from a range of stakeholders on potential risks of connected consumer products and the agency’s role. In late September, CPSC staff submitted to the Commission a status report outlining the CPSC’s work on consumer product IoT issues since the public hearing. The report also outlines how CPSC staff understands the agency’s role, which is safeguarding consumers from potential physical product risks, as well as how its work intersects with the jurisdiction of other agencies as they oversee connected products.

The report notes that this is an ongoing process, stating that CPSC staff is working on “how to define consumer product safety in terms of the IoT, the intersection of, and interdependencies among, consumer product safety, data security and privacy, and how our traditional risk management approaches apply to connected products.” The report acknowledges that privacy and data security are not within CPSC’s jurisdiction, but noted that at least one participant in CPSC’s 2018 hearing warned that “CPSC should pay attention to certain cybersecurity threats that create opportunities for physical harm, a risk not previously considered, and resist creating any prescriptive rules for IoT devices.”

To increase institutional knowledge of IoT benefits and challenges, CPSC has dedicated resources to develop its staff’s expertise. CPSC has also participated in developing voluntary standards, has taken a leadership role in establishing an interagency IoT working group, and has been developing its capability to simulate home networks at its laboratory.

The staff report outlines three ongoing internal projects relating to IoT. The first involves developing a methodology for assessing safety-related implications arising out of software and firmware updates to connected products. This project is at what CPSC views as the intersection of product safety and data security and potential “hazardization” of connected products as a result of data vulnerabilities. CPSC is also looking at connected heating appliances and the risks associated with their remote activation. Finally, CPSC is studying smart toys “in an effort to identify physical safety hazards.” It is surprising that CPSC staff would dedicate resources to toys as opposed to other products, like in-home safety devices, since the physical safety of toys is strictly regulated by the mandatory toy safety standard, ASTM F-963. The likelihood of physical hazardization of toys is far lower than, for example, connected home security devices and sensors. In those categories, connectivity, and thus security breaches that affect the operation of those devices, may be directly related to both safety risks and advantages. Indeed, home safety devices is a category where we have actually seen CPSC recall activity.

The report notes that CSPC is engaging in product safety assessments of connected& shared e-scooters. This is likely in response to reports of e-scooters that were vulnerable to hacking. The emerging hazards of micro-mobility devices such as shared e-scooters are also a focus of CPSC’s Operating Plan for Fiscal Year 2020 and represent another product category that appears to be more vulnerable to hazardization than connected toys.

CPSC staff intended to develop a best practices guide for industry and consumers on connected products, which was an enumerated project in the proposed Operating Plan for Fiscal Year 2020. However, an amendment introduced by Commissioner Feldman focuses CPSC’s resources on IoT intergovernmental work instead. Given the report’s acknowledgment that the agency is still working to develop staff expertise in IoT, attempting to create such a guide appears premature at this juncture.

The sharp increase in the number of connected devices in the market means it is necessary and appropriate for CPSC to continue to build expertise on IoT issues, even though very few examples of actual product safety hazards attributable to some type of connectivity failures exist. It would be useful for CPSC to focus its efforts and resources on product categories that pose a higher potential risk to the physical safety of consumers through hazardization or failure as a result of connectivity, without overstating potential risks. It is encouraging that through the intergovernmental initiatives a variety of federal agencies are working collaboratively to better understand the various consumer protection issues potentially raised by connected products that fit within their respective jurisdictions.

© 2019 Keller and Heckman LLP

For more CSPC regulation, see the National Law Review Consumer Protection law page.

Is Electric Scooter Safety Next on the Regulatory Menu?

A few years ago, hoverboards drew a lot of attention from the U.S. Consumer Product Safety Commission (CPSC). Formally known as self-balancing electric scooters, hoverboards became an instant success because they combined practical mobility and enjoyment. But that success was not without some setbacks. When news stories in 2015 linked hoverboards to fires (which we wrote about here), the same popularity that drove sales also attracted public and government scrutiny.

While the CPSC typically does not discuss ongoing investigations, in January 2016, the attention around hoverboards drove then-Chairman Elliot Kaye to make public statements about the agency’s inquiries. And in February 2016, then-Acting Director of Compliance Robert Howell issued a public letter to manufacturers, urging them to test their products according to Underwriters Laboratories (UL) 2272, which would not become a formal voluntary consensus standard for another nine months. These statements were unusual. The public and congressional attention on alleged hoverboard fires drove the CPSC to be more public in its efforts.

Poised for the Next New Thing

With the hoverboard memory fresh in its mind, the CPSC is likely to get ahead of future potential emerging technology issues. One product that the agency may see as ripe for early intervention is a cousin of hoverboards: electric scooters. We last wrote about how scooter manufacturers have provided a roadmap for other technology companies to respond to complaints. Scooters share some features of regulatory interest with hoverboards – they’re both powered by lithium ion batteries, for instance – but they also have some unique features. Specifically, the wildly popular scooter-sharing rental model means scooters carry riders with varying levels of ability and knowledge about the product, presenting companies with the challenge of addressing rider safety without a readily available opportunity to warn or instruct them on scooters’ use.

Scooters are everywhere in many cities, creating both opportunities and litigation challenges for companies. States and municipalities have struggled to figure out how they can address the safety of riders and others, including pedestrians, cyclists, and motorists. They have set a variety of rules on issues like how many scooters can operate, where they can go, and how fast they can move. Some cities are testing the waters carefully, using pilot programs to see how scooters could integrate with other modes of transport. These debates are usually about how scooter riders should ride – the rules of the road/sidewalk – but not about how scooters should be designed and built.

The CPSC has the authority to regulate the safety of scooters. In addition to the question of battery safety, CPSC staff and commissioners have expressed concerns about falls or other mechanical hazards, such as the consequences of potential structural failures. And while the agency is engaged, so far its activities have been modest. CPSC staff have collaborated on UL 2272 since it was issued in 2016. The standard now includes electric scooters under the term “Light Electric Vehicles,” but the standards committee has not adopted any scooter-specific provisions.

However, consumer advocacy groups are asking the government to pay more attention to allegations of injuries associated with scooters, which may pressure the CPSC to be more assertive. The Consumer Federation of America (CFA) has urged the agency to conduct more research and seek recalls of scooters associated with injuries. The CFA has also asked Congress to give the CPSC a nudge. So far, groups like the CFA have not called for a mandatory product safety standard, but that possibility always exists.

How Scooter Companies Can Engage the CPSC

What’s going on in Washington presents scooter companies with the opportunity to ensure their voices are heard in these conversations. As with any CPSC-regulated industry, companies should comply with their obligations to report potential hazards and, as appropriate, recall products. Some companies have already conducted recalls, though seemingly without the CPSC’s public involvement. Companies should also continue to go beyond these case-by-case actions and ensure product safety issues are on their policy agenda in conversations with the CPSC, Congress, and other stakeholders.

For example, companies may want to set up introductory meetings with CPSC commissioners to build positive working relationships long before commissioners have a vote on a recall or a rule. Scooter companies may also want to engage at safety-related events to present themselves as thoughtful, responsible innovators.

Companies should also maintain their active involvement in voluntary standards bodies, namely with UL with respect to its 2272 standard on hoverboard and scooter electrical systems. Voluntary standards both help protect consumers and protect responsible companies against undercutting by less safety-minded market players. Currently, safety practices vary between companies. More uniformity can build consumer confidence and help establish the kind of “reasonably prudent company” benchmark that is key to litigation defense. Moreover, when companies work alongside the CPSC’s technical experts on the voluntary standards, they can build trust and rapport that can help future discussions.

Electric scooters are not going away. Their enormous potential in urban transportation is too valuable. But discussions about how to regulate scooters are just getting started. Scooter companies should make sure they are seated at the table; that is, as always, the best way to avoid being on the menu.

 

© 2019 Schiff Hardin LLP
More on CPSC regulation in the National Law Review Consumer Protection page.

Massive Consumer Product Safety Commission IKEA Recall Leaked to Press by “CPSC Source” Prior to Official Agency Announcement

IKEA recallToday the U.S. Consumer Product Safety Commission (“CPSC”) and Health Canada announced a massive joint recall with IKEA involving over 35 million pieces of furniture that can pose a tip over hazard to small children. While we would normally write about the recall itself, a troubling development has caught our attention.  A CPSC employee prematurely leaked the recall to staff reporter Tricia Nadolny at the Philadelphia Enquirer.

The CPSC and IKEA officially announced the recall this morning, but the Philadelphia Enquirer prematurely broke the story yesterday afternoon. The reporter confirmed in the story that her source works for the CPSC and did not have clearance to discuss the recall publicly. Additionally, the story included quotes from consumer advocates and other interested parties reacting to the recall—indicating that the reporter had the information for a decent amount of time prior to publishing the story.

After the Enquirer article was published, multiple other media outlets began reporting the recall. This likely put IKEA (and the CPSC) in an incredibly difficult situation of having to quickly make decisions about the release of information about the recall. For companies and legal counsel negotiating a recall—especially one of this magnitude—this is a nightmare scenario.

Even if a company has a contingency plan in the event a recall is leaked early (something we usually recommend for higher profile recalls), the carefully negotiated messaging and CPSC agreed rollout of the recall will have been thrown out the window and replaced by the leaked information. The company will be forced to scramble to respond to media questions while also not spoiling the originally planned announcement.

Additionally, and even more problematic, consumers who may have recalled units will start calling and emailing the company before they know the company’s official 800 number to call and before the company has sufficient staff to start fielding those calls. With over 29 million units involved in this specific recall, that could add up to quite a lot of phone calls and emails.

There are many compelling reasons why the CPSC and companies agree to not only the content of a recall, but also its timing. For a recall of this magnitude to be leaked to the media is a very troublesome precedent and cause for concern to companies negotiating higher profile recalls with the CPSC. Companies have not historically had much to fear in terms of recall information leaking from the agency, but this development potentially calls that into question.

Not only is it a violation of CPSC’s own statutes and regulations for recall information to be prematurely leaked to the press (and potentially could lead to employee sanctions), but it is also potentially disruptive to the effectiveness of the recall itself. The CPSC should take steps to ensure such leaks do not occur in the future.

ARTICLE BY Matthew R. Howsare & Charles A. Samuels of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Breaking: CPSC Obtains Record $15.45 Million Civil Penalty in Settlement Agreement with Gree

Consumer Product Safety Commission SealThis morning, the U.S. Consumer Product Safety Commission (CPSC) announced that it has obtained a record-breaking $15.45 million civil penalty in a settlement agreement with Gree Electric Appliances of China, Hong Kong Gree Electric Appliances Sales Co. of Hong Kong, and Gree USA Sales of California (Gree) over dehumidifiers sold under 13 different brand names.  This civil penalty amount shatters the largest previous amount levied by the CPSC against a company, $4.3 million.

The amount of this civil penalty—the maximum permitted under the Consumer Product Safety Act (CPSA)—is consistent with a series of recent remarks made by CPSC Chairman Elliot Kaye.  In 2015, Kaye remarked at the annual ICPHSO product safety conference that he was directing staff to seek significantly higher civil penalties against companies for violations of the CPSA.  Last month, at the 2016 ICPHSO conference in Washington, D.C., Kaye doubled down (literally) by stating that he wanted to see “double digit” civil penalties based on certain fact patterns as that is what Congress intended when it increased the civil penalty ceiling in the Consumer Product Safety Improvement Act of 2008 (CPSIA).

According to the settlement agreement, the CPSC alleged that Gree did the following: (1) knowingly failed to report a defect and unreasonable risk of serious injury to the CPSC immediately with dehumidifiers sold under thirteen brand names; (2) knowingly made misrepresentations to the CPSC; (3) sold dehumidifiers bearing the UL safety certification mark knowing that the dehumidifiers did not meet UL flammability standards.  The CPSC alleged further that Gree’s subject dehumidifiers had a defect that caused them to overheat, and, on occasion, catch fire, causing a purported $4.5 million in property damage.

Gree denied the CPSC’s allegations and also set forth in the settlement agreement that it voluntarily notified the Commission in connection with the dehumidifiers, carried out a voluntary recall in cooperation with the Commission and acted to reduce the potential risk of injury.

In addition to paying the $15.4 million civil penalty to settle the CPSC’s charges, Gree has agreed to implement a stringent compliance program to ensure future compliance with the CPSA.  Such compliance programs have become common elements in civil penalty settlement agreements.

The vote to approve the settlement agreement was 4-1 in favor, with Commissioner Ann Marie Buerkle voting against.   Although voting in favor of the agreement, Commissioner Joe Mohorovic issued a statement expressing reservation that the public facing documents do not reveal enough detail (in Mohorovic’s words the “compelling facts”) for the regulated community to draw lessons.   Mohorovic has expressed these same concerns previously.

Article By Matthew Cohen & Matthew R. Howsare of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Oh What Fun It Is To Ride . . . A Hoverboard? This Year’s Must-Have Holiday Gift Poses Potential Litigation Risks for Manufacturers

back to the future hoverboardIn 1989, the Back to the Future franchise made several fanciful predictions about 2015.  One prediction may now be coming true: hoverboards have hit the streets — sort of.  The currently-available hoverboards, as opposed to the Hollywood fantasy ones, are more properly described as hands-free, self-balancing scooters.  Fueled by viral videos and celebrity social media posts, these battery-powered scooters are quickly becoming the must-have gift of the holiday season.

As the popularity of these hoverboards increases, however, so too does the potential for claims against manufacturers and sellers.  Over the last three months, the Consumer Product Safety Commission (“CPSC”) has reportedly learned about nearly 20 separate injuries from hoverboard-related accidents, ranging from sprains and contusions to broken bones and at least one head injury.

While the CPSC has not taken any formal action in response to any of these injury reports, that could change based on recent news reports. In the past two weeks, there have been two separate reports of hoverboards spontaneously igniting and causing a fire. This type of potential hazard could capture the attention of consumers, manufacturers, and regulators alike.

In Louisiana, a family reportedly has sued a hoverboard manufacturer claiming that the hoverboard burst into flames while charging, destroying their home.  In Alabama, a man recently posted a video showing his hoverboard engulfed in flames after it allegedly caught fire while in use.   Although the CPSC has said that it has not yet received any reports of injuries due to hoverboard fires, it has reportedly announced that it is investigating the product line based on these fire-related complaints.

Despite these reports, the market for hoverboards shows no signs of slowing, particularly as children make their wish lists for the holiday season.   As manufacturers, distributors, and sellers rise to meet that growing demand, they also should plan to meet the accompanying regulatory and litigation risks that follow.

Article By Stephen M. Copenhaver & Amy M. Rubenstein of Schiff Hardin LLP

© 2015 Schiff Hardin LLP

CPSC & DOJ Sue Michaels Stores for Failing to Report Product Safety Hazard and Filing Misleading Information

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

For the first time in recent memory, the Department of Justice (DOJ) and Consumer Product Safety Commission (CPSC) jointly announced the filing of a lawsuit in federal court for the imposition of a civil penalty and injunctive relief for violation of the Consumer Product Safety Act (CPSA). The lawsuit is against arts and crafts retailer Michaels Stores and its subsidiary Michaels Stores Procurement Co. Inc. (collectively, “Michaels” or “the Company”)  for failing to timely report a potential product safety hazard to the CPSC. Unlike other CPSC civil penalty actions involving DOJ, this penalty does not already have a negotiated consent decree in place and it appears that the case could be fully litigated.

The complaint alleges that Michaels knowingly violated the CPSA by failing to timely report to the CPSC that the glass walls of certain vases were too thin to withstand normal handling, thereby posing a laceration hazard to consumers.  According to the complaint, multiple consumers suffered injuries, including nerve damage and hand surgeries, from 2007 to late 2009.

Michaels allegedly did not report the potential defect to the Commission until February 2010.  Of course, we only know one side of the allegations, and Michaels will respond to those allegations in the coming weeks. The Company did state that “it believes the facts will show it acted promptly and appropriately.”

WaterNotably, the complaint also alleges that when Michaels filed an initial report with the CPSC in 2010, it provided “only the limited information required to be furnished by distributors and retailers” under the CPSA.  However, and critically, as the complaint sets forth in more detail, manufacturers—whose definition under the CPSA includes importers of record—are required to provide more information to the Commission than retailers.

According to the government, Michaels’ report conveyed the false impression that the Company did not import the vases, even though the Company was the importer of record and thus was required to submit significantly more information as themanufacturer of the vases.  The lawsuit alleges that Michaels made this misrepresentation in order to avoid the responsibility of undertaking a product recall.

As for the remedy, the government is seeking a civil penalty (in an unidentified amount) and various forms of injunctive relief, including the enactment of a stringent compliance program to ensure future compliance with CPSC reporting obligations.  This requested relief is similar to what the CPSC has required in almost all civil penalty agreements with other companies over the past few years.

What makes this complaint so newsworthy is that the government and Michaels plan to litigate the imposition of a civil penalty.  As noted above, this is not a frequent occurrence because companies tend to settle civil penalty claims rather than litigate. Given how infrequently civil penalties are litigated and the lack of any legal precedent guiding civil penalty negotiations under the heightened $15 million penalty limits, any judgment likely would have a wide-ranging impact on all future civil penalty negotiations between companies and the CPSC.

As we have previously stated, we expect the Commission to remain active in 2015 in bringing enforcement actions against companies for violations of the CPSA and other safety statutes.

We will watch this case closely and update our readers on any noteworthy developments.

ARTICLE BY

Matthew Cohen
Matthew R. Howsare
Charles A. Samuels
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Consumer Product Matters Blog