On November 13, 2013, the Commissioners of the U.S. Consumer Product Safety Commission (CPSC) voted three-to-one in favor of issuing a proposed interpretive rule concerning corrective action plans for “voluntary” recalls. Two of the most significant proposals—to make voluntary recall agreements that companies negotiate with CPSC legally binding and to permit the staff to include compliance programs in such agreements—are highlighted below.
Legally Binding Voluntary Recalls: Under the current regulation (16 C.F.R. § 1115.20(a)), such agreements—which identify the remedial actions a company intends to take to implement a product recall—have “no legally binding effect.” That would no longer be true under the proposed rule.
Commissioner Anne Marie Buerkle, who voted against the proposal, characterized it as a “momentous shift.” According to Commissioner Buerkle, the rule could cause companies to be more cautious in negotiating agreements with the staff, and could subject CPSC and companies to the pace of the judicial process in the event of an enforcement suit, thereby slowing down the recall process in a way that harms public safety.
By contrast, Commissioner Robert Adler—one of the three Commissioners voting in favor of the rule—described the rule as a “minor tweak” to existing policy. He and other Commissioners disagreed that the rule would slow the recall process. Commissioner Adler also explained that, “when only one firm fails to live up to its word, that may leave hundreds and hundreds and hundreds of thousands of consumers at risk of a defective product.”
Compliance Programs: As another significant amendment, the proposed rule would allow voluntary recall agreements to include compliance programs. This proposal follows on the heels of recent CPSC civil penalty settlements through which settling companies agreed to “implement and maintain” compliance programs in addition to paying penalties. The proposed rule provides examples of circumstances that might warrant a compliance program, as well as examples of requirements that may be included in a compliance program. The proposed rule also sets forth enforcement measures CPSC may take to remedy violations, including seeking injunctive relief, specific performance, and sanctions.
Open issues include whether CPSC will include the above provisions in the final rule, and, if so, how CPSC staff will apply them in negotiating recalls, how CPSC will enforce them if companies decline to enter recall agreements that include CPSC’s proposed terms, and whether the provisions can withstand any legal challenge.
The proposed rule is open for public comment until February 4, 2014.