This 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. Earlier this 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 did not admit to 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.