Recent news reports about the Consumer Product Safety Improvement Act of 2008 (the "Act"), PL 110-314, 2008 HR 4040 (August 14, 2008) (Westlaw), have focused heavily on significant new rules for manufacturers and importers of toys and children's products, such as the phase-out of lead used in children's toys. These provisions are important, but for most manufacturers the lasting and significant impact of the Act may lie elsewhere. Under the headings of "Administrative Improvements" and "Enhanced Enforcement Authority," the Act heralds an era of substantially increased government regulation of consumer product design, distribution and warnings. Many of the Act's new provisions have immediate and direct implications for manufacturers of consumer products.
Decisions Made By Fewer Commissioners
Frustrated by the Consumer Product Safety Commission's ("CPSC") persistent inability to act due to failures to obtain a quorum, Congress included Section 202(a), allowing any two commissioners of different political parties to constitute a quorum for a year after the Act's August 14, 2008 effective date. 2008 H.R. 4040 at *3039-40. This provision allows just two members of the five-person Commission to initiate and implement potentially far-reaching product regulations for the next year.
Heightening the significance of this change, the Committee of Conference that reconciled House and Senate versions of H.R. 4040 to facilitate its passage specifically directed the CPSC to address a series of "special issues" involving particular categories of products within this same twelve-month period. H.R. Rep. 110-787, 2008 WL 2951367 at *74. Those product categories include portable generators, charcoal briquettes, carbon monoxide detectors, residential smoke alarms, cigarette lighters, equestrian helmets, garage doors, ceramic products containing lead, toys intended for use by household pets "that could become children's play things," all-terrain vehicles, products manufactured using formaldehyde, and large appliances and furniture that pose a tipping danger to small children. Id. at *74-75; 57-61.
Manufacturers of these – and all – consumer products would be well advised to pay close attention to the business of the CPSC over the next twelve months. The decrease in the Commission's quorum may allow it to reach decisions on proposed product safety rules without the benefit of the breadth of perspective a larger quorum should provide. Moreover, manufacturers should be aware that proposed rules which have been stalled for lack of a quorum may now move forward.
Shorter Decision Times
Congress's amended Section 204 of the Act, 2008 HR 4040 at *3040-43, eases the pre-existing requirement that all proceedings for the development of a product safety rule be initiated by an Advance Notice of Proposed Rulemaking (ANPR). While an ANPR may still be used, the Commission now may move directly into rulemaking without Advance Notice. Further, the Act eliminates the requirement that the CPSC publish the text of a proposed product safety rule in the Federal Register at least 60 days before the Commission moves forward with a decision. These changes effectively eliminate one round of public comment on a proposed rule and significantly shorten the time for its decision.
Fewer Restrictions On Release of Confidential Information
The original Consumer Safety Product Act allowed manufacturers to designate certain information as confidential, thereby keeping it from being publicly disclosed. In contrast, Section 207 of the Act, 2008 HR 4040 at *3044-46, now allows the Commission to make previously confidential information available to "any Federal, State, local, or foreign government agency" for "official law enforcement or consumer protection purposes," including investigations concerning or enforcement of "laws regulating the manufacture, importation, distribution, or sale of defective or unsafe consumer products". Id. at *3044. At the same time, the CPSC is prohibited from disclosing to manufacturers or others product safety-related information provided by a foreign government agency or from a foreign-sourced consumer complaint conditioned on its confidentiality. The Act's only exceptions provide that the Commission may not withhold information from Congress and may comply with a court order "in an action commenced by the United States or the Commission." Id. at *3045. Thus, the Act appears to allow the CPSC to share confidential product safety information with, for example, the European Commission on Consumer Affairs, and to receive similar information from such foreign sources. Yet, the CPSC is not required to share information received from foreign sources with the manufacturer or third parties – unless subpoenaed in an action commenced by the CPSC or United States. Manufacturers may not be aware, therefore, of certain foreign-sourced product safety complaints.
Product Safety Database As An Alternative "Complaint" Mechanism
Section 212 of the Act creates the much-vaunted consumer product safety database to which consumers, government agencies, health care professionals, child care providers and "public safety entities" may provide reports of "harm relating to the use of consumer products." 2008 HR 4040 at *3048-52. This broad provision may capture substantially more communications than Congress intended. Injuries sustained by the intentional use of a baseball bat to assault another can be construed as "harm relating to the use of [a] consumer product", but this is patently not the kind of information that the CPSC intended to collect in the absence of a product defect. Beyond this problem, Section 212 creates an apparent alternative consumer complaint mechanism which may complicate, confuse or inappropriately be substituted for manufacturers' existing hot-lines and other consumer complaint mechanisms. Consumers who report complaints to the CPSC may perceive this as a substitute for informing the company directly. However, the Commission may not disclose the complaining consumer's identity to the product manufacturer without the complainant's express written consent. Id. at *3050. As a result, manufacturers will not be able to either capture or respond to such complaints.
Expanded Enforcement Powers
In addition to the CPSC's pre-existing authority to regulate notification about and recalls of products that do not conform to its product safety rules, Section 214 now authorizes the Commission to order manufacturers, distributors and retailers to cease distributing a product deemed to violate consumer product safety rules, and to notify all other participants in the supply chain – including those who store, transport or "otherwise handle" a product to cease its distribution. 2008 HR 4040 at *3052-55. Section 214 also requires the CPSC to develop "guidelines establishing a uniform class of information to be included in any [recall] notice," and specifies information that must be included. Id. at *3055. Thus, the CPSC has been given increased authority to dictate the nature of recalls and to require a substantially uniform notification of recall to consumers.
Penalties available to the CPSC have likewise been expanded significantly. Civil penalties for each violation of 15 USC § 2068 have increased from $5,000 to $100,000 and the maximum civil penalty has been raised from $1.25 million to $15 million. 2008 HR 4040 at *3058. Criminal penalties are also increased and the requirement that directors, officers and agents be aware of violations before criminal charges can be brought against them has been removed. Id.
State Attorneys General Have A New Civil Right Of Action
Notwithstanding all of the changes above, Congress also used the Act to create potentially sweeping and relatively undefined authority for State Attorneys General to act on perceived product safety concerns, largely independent of the CPSC. Section 218 of the Act amends 15 U.S. § 2073 in significant ways. 2008 HR 4040 at *3060-62. With 30 days notice to the CPSC, Attorneys General may seek to enjoin the manufacture, distribution or sale of consumer products which do not conform to product safety standards enforced by the CPSC, if those violations affect or may affect the state or its residents. The Attorney General may also seek injunctive relief to prevent the sale of any product that is subject to a voluntary corrective action, to correct a failure to comply with certain Commission orders and to prevent the sale of products bearing an unauthorized safety certification mark. Id. at *3060-61.
Moreover, "immediately after notifying the Commission," Attorneys General may file suit on behalf of the residents of their states to enjoin the manufacture and sale of products they determine present a "substantial product hazard" to the residents of their State. Id. at *3061. Under the pre-existing Consumer Product Safety Act, a "substantial product hazard" includes:
- a failure to comply with an applicable consumer product safety rule which creates a substantial risk of injury to the public; or
- a product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of the risk, or otherwise) creates a substantial risk of injury to the public.
15 U.S.C. § 2064(1) (Reuters/West 2008).
Although the CPSC may intervene in suits brought by the Attorneys General under Section 218, it need not do so. This effectively allows each individual State Attorney General to enforce product safety rules that are federal in scope and the enforcement of which should likewise be federal in scope. Since it is fair to assume that not all Attorneys General or courts will agree whether a particular product safety rule has been violated in any given instance, a patchwork of inconsistent state-based product-specific rules could result. Moreover, Section 218 does not require that an Attorney General pursue the CPSC's viewpoint or position in regard to a consumer product. The provision could, in sum, undermine both the uniformity of product safety standards as applied across the country, and the CPSC's role in providing centralized regulation and guidance to industry and consumers alike.
The September 1, 2008 electronic edition of Forbes magazine reports that the National Association of Attorneys General has amassed a war chest of $140 million dollars, much of it from settlements with tobacco companies. Daniel Fisher, "The House Tobacco Built," Forbes (Sept. 1, 2008), available at www.forbes.com/business/forbes/2008/0901/098.html (accessed August 14, 2008). Forbes further reports that NAAG uses some of those funds to help individual State Attorneys General investigate alleged wrongdoing and to pay for expert consultants. One can hardly be blamed for wondering whether the new powers accorded Attorneys General by the Act, combined with this kind of funding, present the next challenge to the survival of American consumer product innovation and manufacturing.
Preemption Expressly Disavowed
Section 2075 of the original Consumer Product Safety Act prohibits, except in limited circumstances, States from establishing a consumer product safety standard different from the CPSC's. However, Section 231 of the new Act limits the effecet of Section 2075 by expressly disavow any preemptive intent or effect. 2008 HR 4040 at *3070.
In accordance with the provisions of [the Consumer Product Safety Act (15 U.S.C. 2074 and 2075, respectively), section 18 of the Federal Hazardous Substances Act (15 U.S.C. 1261 note), section 16 of the Flammable Fabrics Act (15 U.S.C. 1203), and section 7 of the Poison Packaging Prevention Act of 1970 (15 U.S.C. 1476)], the Commission may not construe any such Act as preempting any cause of action under State or local common law or State statutory law regarding damage claims.
2007 Cong. US HR 4040 § 231 at *57. Section 231 appears to prohibit the CPSC from asserting that the law of any State establishing a disparate product safety standard cannot be enforced. It does not appear, however, that Section 231 addresses the preemptive effect of specific consumer product safety rules established by the CPSC.
Notwithstanding the laudable goal of improved product safety, all of these administrative and enforcement enhancements further complicate the design, manufacture, distribution and sale of consumer products. Prudent manufacturers would be well advised to take the time now to develop affirmative measures to minimize the risks created by the Act.