By Kevin M. Young, Karl A. Bekeny, and Chelsea R. Mikula, Tucker Ellis LLP
The rapidly changing world of consumer product safety is increasingly fraught with pitfalls for both retailers and manufacturers. The U.S. Consumer Product Safety Improvement Act of 2008 (CPSIA) made several significant changes to the law by instituting more onerous reporting obligations, heavier fines for failing to report, and prohibiting the sale of a recalled product, just to name a few. But the news isn’t all bad. Saferproducts.gov, the new publicly available consumer product safety information database, can help retailers stay up to date on safety concerns related to their products.
Saferproducts.gov has been a source of concern for manufacturers and retailers, but if used properly, it can also be a valuable tool. Perhaps best known for allowing consumers to report health and safety problems associated with consumer products, it can also help retailers stay in compliance with the CPSIA, as it provides a record of all recalls and other corrective actions that have been instituted by the manufacturer and/or the CPSC. Retailers can monitor its publicly searchable database to ensure that an unsafe or recalled product is not sitting on their shelves. Retailers can also sign up for one of the CPSC’s email, text message, or app services on recalls and receive daily notifications of recalls.
Under the CPSIA, retailers are required to report within 24 hours a consumer product that:
1. Fails to comply with an applicable consumer product safety rule;
2. Contains a defect that could create a “substantial product hazard”; or
3. Contains a defect that creates an unreasonable risk of serious injury or death.
Retailers must report to the CPSC any information they receive regarding a product that poses a health or safety risk unless they have actual knowledge that the CPSC is already aware of the risk. A retailer may contact the manufacturer, importer, distributor, private labeler, or anyone else in the supply chain to determine whether this incident has already been reported to the CPSC, or, since time is of the essence, the retailer may choose to report directly to the CPSC. Timely reporting is critical to avoiding significant fines.
The CPSC’s response to a violation of the law varies depending on the specific facts, including the nature of the product defect, number of products sold, and severity of the risk of injury associated with the product. Penalties under the CPSIA carry maximum civil fines of $100,000 per violation and $15 million for a series of violations. Six- and seven-figure fines were not unusual in 2011, including one fine as high as $1.3 million.
And these fines are not limited to manufacturers. In October 2009, a large retailer paid $600,000 for knowingly importing and selling various toys with paint or other surface coatings that contained lead levels above the legal limits. The CPSC alleged that the retailer failed to take adequate action to ensure that its products were in compliance with the law. Similarly, in July 2011, another large retailer paid $750,000 for knowingly selling children’s outerwear with drawstrings in the neck that posed an obvious choking hazard, as alleged by the CPSC.
In addition to instituting more onerous reporting obligations and fines, the CPSIA also made it a violation of the act for retailers to sell recalled products, making it imperative for them to stay up to date on product recalls. If a manufacturer fails to inform its retailers of a recall and the retailers do not remove the product from their shelves, then the retailers could face civil and/or criminal penalties.
Retailers should also know that recalls are not limited to manufacturers. Retailers may face situations where they have to recall their own private-brand products. Moreover, when a manufacturer went out of business in May 2012, five retailers, working in conjunction with the CPSC, initiated a recall of the manufacturer’s crib and play yard tents. The retailers stepped in to make sure the recall proceeded as required and that they complied with the CPSC regulations. In dealing with that type of situation, it is important that retailers understand the processes and procedures required by the CPSC.
- Retailers would be wise to put processes in place now to stay ahead of future reporting obligations, instead of beating back civil penalties and reacting to claims and litigation.
- Keep open communication with the manufacturers of your products so you are aware of any recalls.
- In the event that you recall a product or assist a manufacturer in a recall, make sure notifications are targeted and communicated quickly and accurately.
- Monitor Saferproducts.gov for recalls and reports of harm and/or sign up for one of the recall notification systems regarding products you sell.
- Make sure that all employees from sales to management are trained on the obligations under the CPSIA so they know who to contact in the event they are notified about an incident involving one of your products.
- Create an incident response team that includes members from all company departments that have an interest in how you, as a retailer, will respond if you receive notification of an incident or in the event you need to initiate a recall. Establishing this team will help expedite your investigation and make it easier for you to make informed decisions in the short period of time provided. This team should be tailored for the specific needs of each retailer. Implementing these proactive measures will help retailers avoid pitfalls and will go a long way toward preventing future liability.
Kevin M. Young is a partner at Tucker Ellis LLP, a full-service, 160+ attorney law firm with offices in Cleveland, Columbus, Denver, Los Angeles, and San Francisco. He heads the Tucker Ellis CPSC task force that closely monitors consumer product safety issues around the world. He can be reached at email@example.com.
Karl A. Bekeny is counsel with Tucker Ellis LLP. As a member of the Tucker Ellis CPSC task force, Karl advises clients on developing consumer product safety issues around the world. He can be reached at firstname.lastname@example.org.
Chelsea R. Mikula is an associate with Tucker Ellis LLP where she practices commercial litigation and counsels businesses on the Consumer Product Safety Commission Database and the implications of new laws around the world. She can be reached at email@example.com.