October 1, 2013

More Power to the CPSC Staff?

Seller Beware: Consumer Protection Insights for Industry,

During a September 25, 2013 open meeting and in a September 24, 2013 written briefing, the staff of the Consumer Product Safety Commission (CPSC) recommended that the Commission adopt an interpretive rule that would enhance the staff's powers in negotiating corrective action plans (CAPs) with firms that conduct "voluntary" recalls.

As a key feature of its proposed rule, the staff asked the Commission to expand the elements of voluntary CAPs to include a compliance program, should the staff determine the circumstances warrant. Such circumstances might include the following, according to the staff:

  • Multiple previous recalls and/or violations of CPSC requirements over a relatively short period of time;
  • Failure to timely report substantial product hazards on previous occasions; or
  • Evidence of insufficient or ineffectual procedures and controls for preventing the manufacturing, importation, and/or distribution of dangerously defective or violative products.

The staff's move to include compliance program requirements in voluntary CAPs follows three recent civil penalty settlements through which the settling companies agreed to "implement and maintain" compliance programs in addition to paying penalties. Those settlement provisions have garnered attention not only because of their novelty for CPSC, but also because of the breadth of the required compliance programs. During the September 25 open meeting, Commissioners Nancy Nord and Robert Adler expressed opposing views as to the propriety of including these requirements in voluntary CAPS, just as they have disagreed in the past about whether compliance provisions should be included in settlement agreements.

Other aspects of the staff's proposed interpretative rule are also noteworthy. The contents of the proposed rule largely mirror's CPSC's 2010 rule on mandatory recall notices (i.e., the rare recall that is ordered after litigation rather than conducted "voluntarily"), as well as the staff's current practices, as substantially reflected in the staff's Recall Handbook and templates the staff provides to firms. However, the proposed rule would go beyond the staff's published practices in several ways, including:

  • Adding compliance programs in appropriate circumstances (as described above), which may be publicized in the recall notice, "as appropriate";
  • Using social media more extensively to provide notice;
  • Providing that firms should update their websites after announcing recalls upon receipt of a significant number of additional incidents or any fatalities and "immediately" notify the Commission of injuries and/or fatalities that may necessitate the issuance of an updated voluntary recall notice;
  • Providing that firms should notify CPSC if they plan to change the recall process or remedy, that the firms and CPSC should update the voluntary recall notices on their websites to reflect the changes, and that firms otherwise should provide such updates in the same manner as the original notices.

The staff's proposed interpretive rule purports to provide "principles" about the forms of voluntary recall notices and "guidelines" for their content. In the staff's view, the rule would set baseline expectations for firms in proposing recall communications. However, during the September 25 open meeting, several Commissioners questioned the extent to which the staff would have flexibility and/or whether firms would continue to be able to negotiate on topics covered by the proposed rule.

The outcome of the staff's proposal is uncertain and worth watching closely.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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