ince its inception in the early 1970s, the U.S. Consumer Product Safety Commission (CPSC) has encouraged companies to implement active product safety management programs. This article will examine the CPSC’s previous guidances on safety programs, describe the requirements imposed on companies, and discuss what they might mean.
These guidances and mandates are important since they can help a company determine if its safety program would be deemed sufficient by the CPSC or even by a jury in a product liability case and help identify areas where its program could be improved.
The text of the Handbook begins by stating:
In addition, the CPSC’s Recall Handbook, in existence for many years but last updated in March 2012, includes sections on the appointment of a Recall Coordinator, development of a company recall policy and plan, and extensive suggestions for the creation and retention of records to support a recall.
The safety processes advocated in these handbooks are just suggestions and not legal requirements. In addition, they are similar to those procedures employed by companies that have a well-functioning safety effort. So, there is nothing particularly onerous here that a company shouldn’t already be doing.
More recently, the CPSC’s Small Business Ombudsman posted a list of recommendations and links to safety-related resources on how to make safe products.1 It is a concise yet informative list with links to CPSC and other documents that can be helpful to small business owners who don’t have the resources for full-time safety and compliance personnel.
And, in November of 2018, the CPSC hosted a Compliance Program Seminar featuring four separate panel discussions. There was a good discussion of the CPSC’s list of ten steps to developing an effective compliance program. Slides from the Seminar are available at https://www.slideshare.net/USCPSC/compliance-program-seminar-panel-1-develop-a-compliance-program.
First, on March 31, 2010, the CPSC published in the Federal Register a final rule laying out the factors that the CPSC staff will consider when deciding whether the CPSC should seek civil penalties. The rule (16 CFR §1119.4(b)(1)) clearly states that product safety programs are one of the factors to be considered by the staff in assessing civil penalties:
Then, in September 2015, the CPSC issued a Staff Guidance on enforcement of civil penalties. This guidance states that:
Therefore, the CPSC has made it clear that a compliance program is important and will be considered in determining whether civil penalties are appropriate. This is very important since the CPSC has great discretion over whether to levy civil penalties and, if so, how much. In addition, if there is product liability litigation, the existence of a comprehensive product safety program can help to lessen the chances that the plaintiff’s attorney might seek punitive damages.
The consent decree required Daiso to hire a product safety coordinator, who would then be charged with taking the following actions:
- Create a comprehensive product safety program;
- Conduct a product audit to determine which of Defendants’ merchandise requires testing and certification of compliance with the FHSA, the CPSA, and any other Act enforced by the CPSC;
- Establish and implement an effective and reasonable product safety testing program in compliance with the FHSA, the CPSA, and any other Act enforced by the CPSC;
- Create guidance manuals for managers and employees on how to comply with product safety requirements;
- Establish procedures to conduct product recalls; and
- Establish systems to investigate all reports of consumer incidents, property damage, injuries, warranty claims, insurance claims, and court complaints regarding products under the jurisdiction of the CPSC that the Defendants imported into the United States.
Then Chairman Tenenbaum and then Commissioner Adler issued a joint statement in connection with this agreement, stating that they were concerned that Kolcraft had had a dozen recalls since 1989 and that further action was required. They said:
The commissioners also made it clear in their statement that having an adequate safety program does not exonerate a company for failing to timely report a safety problem.
Since May 2013, every settlement agreement for civil penalties has included at least some compliance requirements. This includes the Gree civil penalty in 2016, the Polaris civil penalty in 2018, the Cybex civil penalty in 2021, and the Core Health & Fitness civil penalty in 2022. These compliance requirements include:
- Programs designed to ensure compliance with CPSC requirements including written standards, policies, and procedures; and
- A system of internal controls and procedures concerning documentation, reporting to the CPSC, and reporting to management.
Finally, in 2021, Gree Appliance agreed to a plea deal, thereby deferring prosecution for criminal charges. This agreement included requirements for establishing and maintaining written standards, policies, and procedures to ensure compliance with the CPSA, including UL certification or listing and whether testing to confirm compliance has been conducted. Under the plea deal, Gree also agreed to implement, maintain, and enforce an effective system of internal controls and procedures addressing the reporting of safety issues to the company’s management.
The Gree plea agreement also included requirements in the areas of confidential employee reporting, training and enforcement, management responsibility and accountability, and record retention. And last, Gree was required to retain a compliance expert to help set up these programs and to report to the government concerning the company’s progress in completing them.
Based on this history, it is virtually certain that future settlement agreements in civil penalty matters will contain some type of requirement for the establishment of more robust safety compliance programs. It is still an open question as to how compliance will be audited and monitored and when the CPSC will require that additional processes and procedures be established. In addition, it is unknown what the CPSC would do if a firm never fully complies with these requirements or complies with all of these requirements but still has a problem with safety and reporting to the CPSC.
It will be interesting to see in the future whether companies that have good safety programs are able to keep these provisions out of their settlement agreements and corrective action plans and whether these programs will enable them to escape all civil penalties or negotiate lower civil penalties.
In this context, manufacturers should consider all of these requirements and evaluate their own programs. They should also consider the best practices detailed in ISO 10377, “Consumer product safety – Guidelines for suppliers,” which sets forth practical guidance in safety management, as well as other studies and reports on what constitutes an effective product safety management program. (See articles at http://www.productliabilityprevention.com discussing the ISO standard and other product safety management best practices.)
Most companies don’t do a good enough job of safety management, especially as they begin to sell globally and have to monitor safety issues and incidents around the world. Therefore, it is prudent for every company to take a fresh look at its current safety program and evaluate what changes could be made to improve its effectiveness.
Being proactive about complying with these requirements before you have a safety problem is the prudent and responsible thing to do. Dealing with these issues after a problem arises increases the risk of it turning into a huge problem for your products and your company anywhere your products are sold.