CPSC to Industry: Talk to Our Lawyers

Frequently the U.S. Consumer Product Safety Commission (CPSC) shares big news at the annual meeting of the International Consumer Product Health & Safety Organization (ICPHSO), the body that brings together all stakeholders in the product safety space, from consumer advocates to industry to regulators. A few years ago, then-Chairman Elliot Kaye shared his desire to see penalties in the “double-digit millions.” That statement preceded – by mere weeks – the announcement of a $15.45 million penalty against Gree Electric Appliances, Inc., the maximum penalty allowed by CPSC’s statutes.

This year was no exception, as the agency dropped two bits of news of interest to regulated industry, both related to the agency’s approach to investigating and acting on potential product safety hazards but that may be in tension with each other. First, the CPSC announced that it is tweaking its Fast Track recall program, with the goal of speeding recalls up. Second, the agency announced a significant reorganization of its Office of Compliance and Field Operations (EXC) that may slow recalls down. The second announcement may be designed to show the agency’s force—like Kaye’s call for higher penalties was.

Faster Fast Track?

For the Fast Track changes, the CPSC will revamp the Internet portal that companies use to submit Fast Track reports to ask more standardized questions and elicit more standardized information when a company files. The idea is that, if Fast Track reports take a more consistent form from the outset, Fast Track recalls will require less work and less back-and-forth communication and they will get out more quickly.

As the Fast Track program skips the traditional formal CPSC hazard determination where a company commits to a recall up front, it makes sense that there would be less need for particularized inquiry from case to case and more opportunity for standardization and efficiency. Particularly if the website changes are designed to make submission more user-friendly, it seems likely industry will welcome the updates.

CPSC Lawyering Up

For the broader Compliance overhaul, we expect industry reaction to be more negative. Before the reorganization, the attorneys involved in defect investigations were in the CPSC’s Office of General Counsel (OGC). Now those attorneys have been transferred to EXC, and they will now be not just advising on but also leading investigations. Their work will filter up through at least three layers of attorney supervision.

The prior organizational structure – with the compliance lawyers in OGC – reflected the fact that defect investigations are not really legal matters. Companies do not violate a statute by selling a product that may later present a hazardous defect.  Further, the CPSC determines whether a defect exists based on its engineering, statistics, human factors, and other technical expertise —fields unrelated to the practice of law. Where a defect investigation raised potential legal questions, like the applicability of a specific standard, compliance officers historically could refer those questions to their supporting lawyers, but the investigation’s focus was on understanding and, as needed, acting on hazards as quickly as practicable. If the investigation uncovered potential violations, such as late reporting, EXC could refer the matter to OGC for further inquiry but EXC would answer the recall question first.

Under the new structure, the same attorneys within the same reporting chain will be responsible both for investigating potential defects and for seeking potential penalties. Their work will seek to answer questions of hazard patterns and reporting timeliness simultaneously, with, as Product Safety Letter reported, the stated goal of “facilitat[ing] strong case development . . . from case inception to resolution.”

More Lawyer Talk, Less Recall Action?

CPSC’s shift will likely raise the stakes and the temperature of each exchange. Moreover, the lawyerly tendency to compile and record more information rather than less may lead the CPSC to request information that is not essential to its hazard determination. These clearly more adversarial dynamics will likely drive reporting companies to take a similar posture, resulting in exchanges of information that will be more protracted and less free. In short, the change seems likely to slow down the recall process.

Notably, at least for now, Fast Track will live in a separate reporting structure. Lawyers will still be at the top,[1] but the day-to-day work and much of the decision-making for routine matters will stay with non-lawyer compliance officers. Particularly if the Fast Track changes noted above speed up the program, the diverging trend lines between Fast Track and non-Fast Track cases may encourage companies to report marginal issues through Fast Track when they would prefer to collaborate in deeper analysis alongside the CPSC’s experts. While this may sound like a good thing – more recalls with less work for the agency – it would likely result in even more recalls for minor issues that do not meet or even approach the statutory threshold for corrective action. “Recall fatigue” – the tendency of consumers to tune out recalls because they hear about too many that are irrelevant to them or concern minor hazards – may increase, driving down response rates for all but the highest-profile recalls.

If the reorganization leads to slower recalls and more unproductive tension between the CPSC and industry, the Commission may be compelled to revisit the issue. Until then, companies should make sure they consult with experienced counsel in their interactions with the agency. Given the nuances of CPSC law and policy, that was always a good idea, but the reorganization underscores the need for seasoned advice.

[1] Indeed, because of a statutory oddity, the Director of the Office of Compliance and Field Operations must be an attorney. 15 U.S.C. § 2053(g)(1).


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