This past week, on March 25, 2016, the US Consumer Product Safety Commission announced that Gree Electric Appliances Inc. of Zhuhai, China, and its associated companies Hong Kong Gree Electric Appliances Sales Co. Ltd., and Gree USA Sales Ltd., have agreed to pay a record civil penalty of $15.45 million to settle charges that Gree failed to report to CPSC, in a timely and truthful fashion, numerous problems with its dehumidifiers.
The dehumidifiers are estimated to have caused $4.5 million in property damage. CPSC’s penalty is the highest currently permitted by law and is the first time the Commission has ever obtained a penalty even close to this amount. A copy of the Gree/CPSC Settlement Agreement can be found here.
According to the Settlement Agreement, CPSC charged Gree with:
- Knowingly failed to report a defect and unreasonable risk of serious injury to CPSC;
- Knowingly made material misrepresentations to CPSC staff during its investigation of the matter; and
- Selling dehumidifiers bearing fraudulent UL safety certification marks.
According to the Settlement Agreement, Gree began receiving incident reports of dehumidifiers overheating and catching fire beginning in July 2012. CPSC alleged that Gree made design changes to the dehumidifiers to remedy the problem but failed to report the alleged problem, incident reports, or design changes to the Commission. Gree recalled the dehumidifiers in September 2013 and expanded the recall to cover additional units in January 2014 (the recall was later reannounced by CPSC in May 2014). Approximately 2.5 million units were covered under the two recalls.
Gree’s settlement was accepted by CPSC’s Commissioners on a 4-1 vote, with Commissioner Ann Marie Buerkle casting the “no” vote. Further, CPSC Chairman Elliot Kaye responded to the settlement by noting that CPSC is "sending a message" with its record settlement that “this type of conduct will not be tolerated...companies behaving similarly should be prepared to pay similarly.” The CPSIA raised CPSC's maximum penalty amount to $15 million beginning in 2009, and the amount has since been adjusted upward to account for inflation.
In addition to paying a record civil penalty, Gree must also, at a minimum, implement and maintain a Consumer Product Safety Act (CPSA) compliance program that includes the following elements:
- Written standards and policies;
- Written procedures for forwarding complaint information to compliance personnel;
- A mechanism for the confidential reporting of compliance concerns to management with the authority to act, as needed;
- Effective communication and training of compliance activities for applicable employees;
- Senior management responsibility/accountability for ensuring CPSC compliance;
- Senior management oversight of CPSA compliance;
- Retention of compliance related records for at least five years; and
- Implementation, maintenance and enforcement of internal controls to ensure that: (a) information required to be disclosed to the Commission is recorded, processed, and reported as required by law; (b) all reporting to the Commission is timely, truthful, complete and accurate; and (c) prompt disclosure is made to Gree management of any significant problems with its internal controls that could adversely affect reporting to CPSC as required by law.
Gree's settlement with CPSC continues the Commission’s stated objective of imposing larger civil penalties for statutory violations.