Class Action and Product Insights for Your Business
March 22, 2016 - CPSC

CPSC Pledges Higher Penalties

Earlier this month, CPSC Chair Elliot Kaye told regulators, industry, and lawyers about the CPSC’s priorities for the coming year. At the top of the list were increased civil penalties for failure to report potentially hazardous products.

Kaye stressed the need for more severe consequences where there are genuine safety concerns. He repeatedly mentioned “bad intent” as a determining factor in penalties. Last year at the same meeting, Kaye voiced his desire to see penalties come closer to the statutory limit of $15 million for a series of related violations. This year, he reported that the halfway mark had not yet been reached, and that he hoped to see penalties in the double-digit million range in 2016.

The authority to levy penalties comes from 15 U.S.C. § 2069, which makes failure-to-report a civil violation. The penalty is up to $100,000 per violation, with a maximum of $15 million “for any related series of violations.” CPSC interprets the duty to report extremely broadly. Under federal regulations, CPSC “impute[s] to the subject firm knowledge of product safety related information received by an official or employee of a subject firm capable of appreciating the significance of the information.” 16 C.F.R. § 1115.14(b). While companies have 10 days to conduct an investigation, CPSC’s pattern of charging penalties indicates that companies have a duty to report even when the investigations are inconclusive regarding the role of a product in a reported incident.

Kaye also announced an enhanced corrective action plan (CAP) policy. For any CAP addressing a product involved in a death, a company’s CAP must be approved at the commissioner level, rather than by a compliance officer.

Kaye’s statements come as no surprise, as throughout his tenure he has voiced his passion for consumer safety. Last year he promised to make penalties amount to more than the cost of doing business, and he appears determined to follow through on that pledge.