July 24, 2015

I voted against the settlement in this case because I disagree with the approach the CPSC is taking, not only in this case, but on civil penalty matters in general.  The publicly stated objective at CPSC is to pursue higher civil penalties, so that penalties are not regarded as “a cost of doing business.”   

This supposition is misguided.  I have not seen any evidence that companies are taking their reporting obligations lightly because civil penalties are too small. 

There is a more fundamental issue with civil penalties: CPSC’s reporting requirement is infamously vague and subjective.  Companies must report when their product “could present a substantial product hazard” but reasonable people will often disagree about when that murky threshold is reached.

In this case, the settlement is for the highest amount ($1.85 million) that could lawfully be imposed under the pre-2008 penalty cap.  This is not a case involving any fatality; although a significant number of fires were attributed to the defective product, the result was almost always limited to property damage with only a few exceptions (3 cases of smoke inhalation).  This is not a “repeat offender” case; the companies involved have never before paid a penalty.  Under these circumstances, to insist on the maximum penalty suggests to me that we have may have lost our way.  It suggests a failure of the system for which we must share some of the blame.

Rather than seeking higher penalties, the Commission should focus on helping companies understand their reporting obligations.  If we are unable to provide clear guidance, maybe it’s time to approach Congress to modify the reporting requirement so that a company’s obligation to report is better defined.