When consumer complaints or external reports raise questions regarding the safety of a particular product, pressures on in-house counsel can be intense. This article provides a brief overview of the workings of the key federal agency with jurisdiction in this area, the Consumer Product Safety Commission (CPSC). Over 15,000 types of consumer products fall under the agency's jurisdiction.
The pace of CPSC activity and enforcement is increasing. During fiscal 2006, CPSC conducted a decade-high 471 voluntary product recalls. It also collected $2.3 million in civil penalties. The commission imposed over $1 million in penalties during January 2007 alone.
CPSC administers five statutes. The Consumer Product Safety Act (CPSA) addresses reporting obligations for the vast majority of consumer products. The Federal Hazardous Substances Act requires warning labels on the containers of certain household products deemed hazardous. The Flammable Fabrics Act sets standards for the flammability of clothing textiles, vinyl plastic film (used in clothing), carpets and rugs, children's sleepwear and mattresses and mattress pads. The Poison Prevention Packaging Act mandates child-resistant, senior-friendly packaging for hazardous household substances to prevent the risk of child poisoning. The Refrigerator Safety Act requires a mechanism (usually a magnetic latch) that enables any refrigerator door to be opened from the inside in the event of accidental entrapment.
Scope of the Consumer Product Safety Act
The vast majority of reportable events fall under the CPSA. It applies to the manufacturer, distributor and retailer of any "consumer product." That term includes any item or component part that is: (1) for sale to a consumer for use in or around the home, school, in recreation or otherwise; or (2) for the personal use, consumption and enjoyment of a consumer in or around such places.
There are a number of statutory exemptions—on-road motor vehicles, boats, aircraft, food, drugs, cosmetics, pesticides, alcohol, tobacco, firearms and medical devices—but many of these products are covered by other statutes administered by CPSC or other federal agencies. (For example, the Poison Prevention Packaging Act applies to prescription and certain non-prescription drugs.)
Section 15(b) Reporting
The CPSA's primary reporting obligations are defined in Section 15(b). It requires a manufacturer to notify the commission immediately if it obtains information that "reasonably supports" the conclusion that a product: (1) fails to meet a CPSC product safety standard or banning regulation; (2) contains a defect that could create a substantial product hazard to consumers; (3) creates an unreasonable risk of serious injury or death; or (4) fails to comply with a voluntary standard which the commission has specifically relied on in its regulations.
CPSC Product Safety Standards/Banning Regulations
CPSC has promulgated a number of product-specific safety standards and regulations that cover everything from toxic chemicals to bicycle helmets to children's toys. A full list of the products covered by those standards and regulations appears at www.cpsc.gov/businfo/reg1.html.
Defect/Substantial Product Hazard
In determining whether a defect may exist, CPSC looks to the following factors:
- The utility and necessity of the product involved;
- The nature of the risk of injury presented by the product;
- The population exposed to the product and the risk of injury;
- The obviousness of the risk of injury;
- The adequacy of warnings and instructions accompanying the product; and
- The role of consumer misuse in the risk and the foreseeability of such misuse.
CPSC also relies on its own staff's experience and existing public health and product liability case law. In evaluating whether a potential defect gives rise to a substantial product hazard, CPSC evaluates, among other things:
- The pattern of defect;
- The number of defective products distributed in commerce;
- The number of defective products remaining with consumers;
- The severity of risk; and
- The likelihood of injury that has or could occur.
This evaluation includes consideration of reasonably foreseeable use or
misuse of the product and the population exposed to the product. Special sensitivities are raised by products for children or other vulnerable populations.
Compliance with voluntary standards set by recognized standard-setting organizations (e.g., ASTM, ISO) is also relevant to the determination of whether a product presents a substantial product hazard. Such compliance, standing alone, does not negate an obligation to report under the CPSA, but is one piece of information to be taken into consideration in making that determination and may influence any subsequent corrective action.
Unreasonable Risk of Serious Injury or Death
The factors for determining whether a risk is unreasonable largely track the factors for determining a substantial product hazard. CPSC gives as examples of "serious injury" hospitalization, fractures, injuries requiring suturing, concussions, and injuries requiring an absence from work or school of more than one day. However, such level of severity is not necessarily required for a product to present a substantial product hazard; specific circumstances must be considered.
Section 37 Reporting
Section 37 of the CPSA requires manufacturers to report on settled or adjudicated lawsuits alleging death or grievous bodily injury. A report is required if:
- A single model of the product is the subject of at least three civil actions filed in federal or state court;
- Each suit alleges the involvement of that model in death or grievous bodily injury, i.e., mutilation or disfigurement, dismemberment or amputation, the loss of important bodily functions or debilitating internal disorder, injuries likely to require extended hospitalization, severe burns, severe electric shock or other injuries of similar severity;
- During a single two-year period, each of the three actions results in either a final settlement involving the manufacturer, or in a court judgment in favor of the plaintiff; and
- The manufacturer is involved in the defense of or has notice of each action prior to the entry of the final order, and is involved in discharging any obligation owed to the plaintiff as a result of the settlement or judgment.
Reporting to CPSC should occur within 24 hours of receipt of sufficient information by an employee or official of the firm who may reasonably be expected to be capable of appreciating its significance. CPSC assumes that five working days is the maximum reasonable time for reportable information to reach such a person. However, a firm also may conduct a reasonably expeditious investigation to evaluate the reportability of information it has received. CPSC presumes that 10 days is the maximum time necessary for such investigation.
An initial report is usually made by telephone or e-mail, and typically includes basic information as to the product, the manufacturer, the nature of the possible hazard, the number of products in commerce, the number of incidents and injuries, and the status of the company's investigation and evaluation of the possible hazard and the corrective action to be taken. Where a company has decided to repair, replace or refund a product, CPSC's Fast Track program allows the company to initiate a Corrective Action Program (targeted for 20 working days from reporting) without CPSC making a preliminary determination of hazard. If the company chooses to forego the Fast Track program and have CPSC make a preliminary determination of hazard, CPSC will initiate a broader investigation, including requests for all testing records, complaints, warranty records and other product information, and will evaluate that information in determining whether a substantial product hazard exists.
Corrective Action Plan
The CPSA makes it the manufacturer's choice whether to repair, replace or refund a product that constitutes a substantial product hazard. In most cases, there are four components to the communication of the Corrective Action Plan to the public: (1) a CPSC press release; (2) in-store posters sent to retailers; (3) a website notice; and (4) direct mail letters to customers known to the manufacturer. In cases that are viewed as posing a substantial risk to public health, CPSC may seek additional notice through paid media or video press releases.
Incorporating CPSC into Your Risk Management Program
All consumer product manufacturers should be aware of their responsibilities for CPSC reporting and incorporate those responsibilities into their risk management programs. At a minimum, manufacturers should consider the following:
- Implementing and frequently reviewing their systems for the receipt, identification, investigation, internal dissemination of and response to consumer complaints asserting safety issues;
- Establishing a system for immediate evaluation of any third-party information that may raise a safety concern, i.e., reports from retailers or independent consumer agencies;
- Designating a person or persons responsible for evaluating and acting upon any information that might be reportable to CPSC;
- Establishing a system for the regular testing of the company's products for compliance with all applicable voluntary and mandatory standards;
- Establishing a system for ensuring that suppliers and vendors conform with all specifications; and
- Responding quickly and thoroughly to any communications or inquiries from CPSC regarding the company's products.
Having these systems in place will reduce the possibility of future recalls and allow the company to respond quickly and efficiently should one be required