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CPSIA – How We Were Forced to Deal with A Misleading Database Entry

As you may recall from yesterday, we were confronted with a false, misleading and inaccurate complaint submitted to the CPSIA database in its “soft launch”. We submitted definitive information to the CPSC attesting to the error (or whatever) by the filer and were REJECTED. We were told by a senior staff person at the agency (who should know better) that the complaint needed to be posted based on the facts (the filer THOUGHT she spotted a safety issue). Our evidence that the anonymous filer’s musings were flat-out WRONG were not persuasive because this is a “consumer database” and as such, our evidence did not reflect on how the anonymous filer felt. As far as I can tell, that’s all that matters, unless they misidentify our product. That seems to be the only “out” (although I can’t find that sentence in the law).

Get it? I wish I did.

In some respects, this controversy didn’t add up to much because the complaint won’t go into the database. No filings made during the “soft launch” will go into the database. It’s all practice (until tomorrow morning). However, the CPSC made a policy decision in our case. Don’t say you weren’t warned. NEXT TIME THIS COMPLAINT WILL GO INTO THE DATABASE.

Because everyone’s “practicing” now, we decided to practice by filing a “comment” to this complaint even though it won’t be published either. This will no doubt become a standard approach for most people. There’s little point and maybe even some downside to pushing back on a complaint. [What if the CPSC takes a look and makes a call that THERE IS A RISK OF HARM? It all seems so innocuous until they lower that boom on you . . . .] The soundest practice is probably to not protest these filings at all (feel the shaft yet?) and simply publish your own comments to be juxtaposed with the complaint.

To craft this “comment”, we consulted our lawyer. Cha-ching! Don’t worry, we’re used to legal fees at this point. I would note that this took two person’s time at our office and we had to drop everything to process this baloney complaint as if it were the most pressing matter in our little universe. Consider the cumulative waste of resources and the cost of distraction and disruption across the entire economy all owing to this database. Sounds grrrrrreat!

Our comment is reproduced here for your interest:

“The Smart Snacks Sweet Heart Sayings product has been tested for compliance with ASTM F963, the federally mandated safety standard for small parts and has passed all applicable tests with an independent test lab. The company believes this product incident report is materially inaccurate because the product does not present a small parts hazard and the complainant has provided no evidence to the contrary. As such this allegation is completely unsubstantiated.”

I wonder if Congress and the CPSC can come up with even more effective ways to piss me off. Chances are they are working on it right now! I can’t wait to raise more money for Republicans in the next election cycle . . . .

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CPSIA – How We Were Forced to Deal with A Misleading Database Entry

CPSIA – Washington Times Lashes Out at Database

In an editorial in today’s Washington Times, the paper railed against the CPSIA database. Says the Washington Times:

“The Republican-led House of Representatives is fighting back against big-money plaintiffs’ attorneys who use campaign cash to control congressional Democrats. . . . [The database is] an open invitation for competitors or interest groups to destroy a product’s reputation – and sales – without proof. It’s also a major come-on to trial lawyers eager to file class-action suits. Attorneys could tell juries that publication on an official government website is evidence that allegations have weight.”

Perhaps the Washington Times should talk to Cheryl Falvey. She’d tell them not to worry, it’s just a “complaints” database . . . but that’s the rub, isn’t it?

The paper carries on: “Previous bogus consumer scares . . . show the dangers of letting unsubstantiated allegations gain premature credibility. The CPSC database would add to the mischief trial lawyers could cause with spurious lawsuits.”

The big question is – will the Dems abandon their plaintiff lawyer patrons when faced with the LEGITIMATE CONCERNS of industry – or will they sell American business down the river and kill yet more jobs with a further expansion of the government’s reach into our lives?

Please write your Senators and demand their support to de-fund the database!

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CPSIA – Washington Times Lashes Out at Database

CPSIA – House Hearing Testimony of Jolie Fay and Wayne Morris

Testimony of Jolie Fay, HTA Board Member:

Testimony of Wayne Morris, Association of Home Appliance Manufacturers (AHAM):

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CPSIA – House Hearing Testimony of Jolie Fay and Wayne Morris

CPSIA – ICPHSO Mock Civil Penalty Jury Exercise

There has been only ONE court decision relating to late reporting penalties, and it was a resounding victory for the government. A juice company lost a case in California in federal court. Since there is no little law on the subject, the presenters today assert that there is no way to predict how a future case might be decided.

The panel today:

  • Eric Rubel, Arnold & Porter LLP
  • Cheryl Falvey, GC of CPSC
  • Sean Laane, Arnold & Porter LLP
  • Richard Levie, retired Judge and current arbitrator/mediator
  • Mary Murphy, Asst GC, Div. of Compliance, CPSC

The panel presentation was designed as a mock trial. Both sides of the case will be presented, and you can clearly how both sides will portray this incident and both are compelling.

First to present was Mary Murphy on behalf of the government. She emphasized the facts of the injury to the child. This is clearly how you and your company will be made to look worst. This is no surprise and is standard fare for a plaintiff in a lawsuit. She likewise related the prior reporting of the risk or incidents (to the company and to the CPSC) that suggested the hazard.

Needless to say, this is the reason that consumer groups want the database. They want to create a body of evidence to coerce product changes ahead of injuries. Of course, any responsible company monitors market data (such as consumer reports) to do just that sort of thing. The database, however, is fodder for lawsuits and facilitates this kind argument. The likely impact is that the cases of plaintiffs will be strengthened and awards will grow.

Shall we take a trip down memory lane and remind ourselves of the principal source of funding for the consumer groups active in children’s product safety? Are you surprised to know that it is trial lawyers and the plaintiffs bar?

Back to the presentation of Ms. Murphy. She’s doing a good job making the manufacturer look bad, almost venal. She links the injury back to a failure to report. This is because of the asserted critical role of the CPSC in keeping America safe. She poses the question “would this injury have occurred but for the failure to report?” She argues that ten reports from consumers (of the hazard, loose beads on a high chair, not injuries) created an obligation to report based on a substantial risk of injury or death. She likewise anticipates that the defense will be that the manufacturer had no duty to report. She says that the late reporting only took place when the manufacturer’s back was “up against the wall”. Again, Murphy emphasizes her story about the motivation or mental state of the company.

More evidence used against the company included multiple written reports by the CPSC to them of consumer complaints. Ms. Murphy is painting a clear picture of a company that is not acting on a known safety issue. She indicates that the company ignored this information based on poor advice, despite internal admissions that “this was an accident waiting to happen”.

You can see that the facts of this hypothetical case opens manufacturers up to bad behavior portrayals. I applaud the effort to make this clear – you need to take this on board. The facts of this case appear extreme and objectionable. Media and political over-reaction to this kind of corporate behavior sent the REST OF US down the river under the CPSIA.

The defense was offered by Sean Laane. He noted the responsible behavior of the company by repeatedly testing the goods using CPSC standards and CPSC-accredited independent labs. Noted that the CPSC tested the product TWICE after reports of incidents from consumers – and the products passed! [Note that any safety system that overly depends on testing will ALWAYS expose a company to risk if it is distracted from or chooses to ignore contrary information from the market. This is a basic flaw in the reasoning of the consumer groups and the folks behind the CPSIA.] He goes on to note that the CPSC can’t have it both ways, since it never concluded that action was required based on the incidents it was aware of. After all, the CPSC had several reports and did nothing. Claims the CPSC takes a “gotcha” approach because although it claims “late reporting”, it was well-aware of the issue long before the injury – and did nothing.

Laane notes the extensive investment of this company in safety. He questions whether there was a reasonable basis to conclude that there was an unreasonable risk of injury or death. Clearly the CPSC didn’t feel it was an unreasonable risk itself! Also notes that you don’t have to tell the CPSC about information the agency already possesses. Notes repeatedly that the CPSC’s actions or inaction are based on their expertise and fact findings, thus confirming the reasonableness of the company’s approach. Notes that companies have no obligation to make products utterly indestructible.

Laane noted that the person inside the company who called the condition “an accident waiting to happen” was not a QC person or responsible manager. Instead, he was a customer service rep, and relayed that message to the QC department for their evaluation. Child who was injured later fully recovered, and the company chose to immediately initiate a Fast Track recall.

An interesting point made by Levie is that the company’s awareness of similar issues in similar products can be held against them. If they knew or SHOULD HAVE KNOWN about other recalls or notorious injury incidents reflects on their later decisions or inaction. [I am glad I don't make baby monitors . . . . This is a good lesson on the reality of the problem of "emerging hazards". Note that you are going to be judged not just on what you know, but also on what they assert you SHOULD have known.]

CF: One of the most persuasive arguments made by defendants is a track record of reporting to the CPSC. This shows a commitment to safety and cooperation with the CPSC, demonstrating trust that the CPSC will not recall product everytime.

Levie agreed that this fact pattern will also be persuasive to a judge.

All market participants need to think about this kind of issue and how they might fare if they face a similar dilemma.

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CPSIA – ICPHSO Mock Civil Penalty Jury Exercise

CPSIA – Save "Lost Souls", Vote for the Slanderbase!

The semi-religious mission of the safety zealots was on full display in today’s New York Times. In an article entitled “Deep Divisions as Vote Nears on Product Safety Database“, the Times profiled the controversy of the pending public database final rule approval (due on November 24th in a rubber stamp Commission session), highlighting on the idealist objectives of the database supporters. As per its typical leftist slant, the Times article gives scant credence to the legitimate concerns of manufacturers or the demonstrable consequences of the unrealistic Utopian vision underlying the CPSIA. After all, we manufacturers only care about money, right?

Every drama needs a hero, villain and victim. The public database controversy has all the right elements – manufacturers and Republicans as “villains”, consumer groups and Democrats as “heroes” and consumers as “victims”. Positioned this way, why would anyone ever support manufacturers? Who would want to even listen to the black hats? Hmmm. Good strategy, Naderites!

Consider the illustration used in the article – Michele Witte suffered the unspeakable horror of losing her child in a crib death. She asserts that the database might have saved her child. Perhaps that is true, perhaps it is not. Nothing can salve the wounds she has suffered . . . but that does not make the database a good idea. [I might feel differently about the database if, for instance, it was limited to deaths.]

The implication that the database is necessary to protect consumers is not a well-examined assertion. There is already a lot of data available to consumers. For instance, the CPSC maintains a massive national injury database called NEISS. A search of crib injuries on the NEISS database for 2009 (classes 1543-1545) reveals 572 reports which extrapolates into a national injury estimate (for 2009 ALONE) of 16,537 incidents.

Here are a few representative NEISS entries (the first five in the above sample):

- CHILD FELL 3 FEET OUT OF CRIB AND LANDED ON TILE FLOOR. CRIED IMMEDIATELY. D:CHI, FOREHEAD HEMATOMA.
- PT FELL WHILE TRYING TO CLIMB FROM HIS CRIB. LANDED ON L SHOULDER ON THE FLOOR. FELL 4 FT. CRIES WHEN PICKED UP UNDER ARM.
- PT FELL OUT OF HER CRIB AND STRUCK HER HEAD. NO LOC. CRIED IMMED. NOW ACTING NORMALLY.
- FELL OUT OF CRIB. DX HEAD INJURY
- PT STANDING UP IN CRIB, FELL BACKWARD AND HIT HEAD ON CRIB, NO LOC BUT MOM STATES PT HAD DAZED LOOK AND HAS BEEN LETHARGIC; HEAD INJURY

Did you learn a lot from this information? Can you verify that it’s true? Can you see ANY issues with attaching (unverified) product identities to this unverified and uninvestigated data? Are you a plaintiff’s attorney?

What are the zealots saying to justify their support of the database in the face of persistent and rational criticism of its design? Commissioner Bob Adler, former Henry Waxman staffer and longtime board member of Consumers Union, sums it up:

Some folks are worried more about lost sales and not worried enough about lost souls.

So, in other words, Adler condescendingly asserts that people like me are only concerned with MONEY. Instead, he claims that what’s really at stake here are “lost souls”. What is Adler talking about? Here’s what Wikipedia says about “souls”:

A soul, in certain spiritual, philosophical, and psychological traditions, is the incorporeal essence of a person or living thing. Many philosophical and spiritual systems teach that humans are souls; some attribute souls to all living things and even to inanimate objects (such as rivers); this belief is commonly called animism. The soul is often believed to exit the body and live on after a person’s death, and some religions posit that God creates souls.” [Emphasis added]

Mr. Adler’s POV makes the question of having a federal database a moral imperative. Wow, now that’s a heavy decision – souls are at stake! Furthermore, Mr. Adler positions those who support the database as moral people and those who oppose it as immoral money-grubbers who prize financial well-being over the safety of consumers. Ugh. I would hate to be a Republican Commissioner voting against the final public database rule with Mr. Adler’s curse hanging over my head! Ouch.

Catching on to the theme, Ami Gadhia of Consumers Union, chimes in: “It’s a slow death . . . . [The] information never gets out in the public.” [Emphasis added] Death . . . souls . . . database! Do I hear a new slogan???

CPSC Chairman Inez Tenenbaum, ever sensitive to criticism, archly defends the agency’s effort to dialogue with people like me. Please recall that part of their “outreach” was to ask me to spend our company’s money to fly to Washington, D.C. to give testimony on the public database. Matt Howsare, Tenenbaum’s then Counsel and now Chief of Staff, told me that they needed more perspective from manufacturers and kindly asked me to prepare testimony. As previously noted, NOTHING that I said in my testimony was adopted or used in any way apparent to me. The NYT notes:

“The commission chairwoman, Inez Tenenbaum, disputed the idea that manufacturers’ concerns had not been properly considered. She said the agency offered numerous forums for comment and some of those ideas were incorporated into the final proposal. ‘We have been abundantly fair,’ Ms. Tenenbaum said.” [Emphasis added]

Apparently, testimony at a CPSC hearing is meant as an outlet for venting, not for listening. That’s “abundantly fair”, we are assured. Makes you wonder what “unfair” might look like . . . .

[A Senate Commerce Committee CPSC oversight hearing is said to be in the offing for next week. One fantasizes that they may take an interest in this issue, but the Senate is still a Dem stronghold. Don't hold your breath. Expect self-congratulatory positioning by the self-serving and deaf Dems.]

Consumer groups are portraying manufacturers demands for Constitutionally-guaranteed due process and other appropriate procedural safeguards as a grab for “advantage”. In other words, procedural safeguards for manufacturers are not legitimate protectible interests in light of the POSSIBILITY that consumers may glean some useful information among the garbage that will accumulate in the “post-it-and-forget-it” slanderbase being put up by the agency. Again, the NYT provides the bully pulpit for the zealots:

“Consumer advocates suggested the opponents were trying to weaken the database to protect business interests. ‘They have a great deal now, and I think they are trying to maintain the status quo by levying these unfounded arguments,’ said Rachel Weintraub, director of product safety for the Consumer Federation of America.” [Emphasis added]

If ever-disingenuous Rachel Weintraub is saying that we Americans have a “great deal” because we enjoy the protections of the Bill of Rights and other Constitutionally-guaranteed rights protecting groups and individuals against persecution and excessive governmental power, I agree. I agree heartilyand don’t want to lose those essential legal protections that form an important basis for our investments. Please REMEMBER, everyone loses something when ANYONE loses their legitimate legal protections. Btw, Bob Adler is a lawyer and a former Scholar in Ethics and Law at the business school at UNC Chapel Hill . . . .

Mr. Adler plays a little fast and loose with his database concepts. Apparently, it’s okay to put garbage into the database because the government “disclaims” its accuracy:

“Mr. Adler, the Democratic commissioner, said the database was not meant to be a legal forum like a court but more like a catalog of consumer experiences. He noted that a disclaimer on the database said the commission did not guarantee its accuracy. ‘”I put my baby in a diaper and my baby developed a rash.” That goes up. It’s an early warning system to alert other consumers,’ Mr. Adler said.”

Ahem: “But Ms. Nord said the proposal remained far too vague. She cited the recent case of Pampers Dry Max, made by Procter & Gamble, in which thousands of parents asserted that the diapers were causing their babies to get a rash. A commission investigation found no link between the diapers and the rashes. ‘We would have posted all these complaints about them even though they proved to be wrong,’ Ms. Nord said.”

Any idea why the CPSC “must” put up such a controversial database? The zealots know that there is legal risk in hosting a database that may include erroneous information or information that might slander manufacturers or tortiously interfere with commerce. They know this might violate manufacturers’ legal rights and could lead to lawsuits – and don’t want the legal liability or the hassle. How to get the data and avoid the legal problems? Get the government to host the legally-dubious information! Clever – but not necessarily in the interests of consumers or American markets.

Is the CPSC supposed to provide Mr. Adler’s catalog of “consumer experiences”? Is that part of its mission? [Readers of my blog know that] I realize we have a right of Freedom of Speech (check out the Bill of Rights), but is the federal government really supposed to foster that Freedom of Speech? I appreciate that Mr. Adler thinks a consumer “experiences” database is a really good idea (I disagree) but since when do our tax dollars need to be used to provide it? Is that the only option that makes sense? And that goes double for such a dangerous proposal that presents the realistic prospect of discouraging investment and other economic activity.

So many words wasted on people who won’t listen. Expect a “spirited” debate on the database as foreplay followed by the 3-2 partisan screwing that masquerades as safety administration these days. The song plays on . . . .

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CPSIA – Save "Lost Souls", Vote for the Slanderbase!

CPSIA – Dear President Obama

An Open Letter to President Obama:

Dear President Obama,

Tuesday’s election results were a message to your administration. The “shellacking” you experienced was a referendum on your economic policies as well as a passionate call for smaller government.

Readers of my blog have heard all about these issues for two years. It is frustrating to me that you and your administration remain in the dark. You weren’t listening.

My industry, children’s products, suffered mightily at the hands of your administration. Admittedly the problem began on Mr. Bush’s watch but it was your Democrats who refused to relent or admit their errors. Since passage of the Consumer Product Safety “Improvement” Act in 2008, your party has refused to consider our industry’s increasingly pathetic pleas for mercy. The result has been utter market chaos and dramatic financial loss. This regulatory “railroad job” has driven many of us into politics against you and your party out of desperation and profound anger over this undeserved and insensitive treatment.

If you take the midterm election results seriously, you must reexamine the impact of this law on our industry and promptly offer sensible relief.

The problems with the CPSIA can be divided into four categories – Cost, Complexity, Risk and Intrusion. Please give up the idea that these problems can be overcome with tax relief or some sort of economic incentive. If you break my leg, I won’t be able to get up and run like an Olympic champion no matter how many carrots you dangle in front of my nose. It’s time to be accountable for the damage that the CPSIA wrought – and then directly address it.

Cost: The many ridiculous new rules in the CPSIA dramatically raise the cost of operating our businesses. It goes far beyond the asphyxiating testing costs that the CPSIA imposes. Wasteful administrative costs are skyrocketing in every direction. For instance, tracking labels do not magically appear on our products – we must hire people to redesign each of our products and our manufacturing processes, and we must hire yet more people to make sure we don’t screw up these tasks. We sell or manufacture literally thousands of skus (items) – but have had only one tiny recall in the last 26 years. This is PURE UNADULTERATED WASTE. We nevertheless must incur these costs to keep the CPSC happy.

These well-documented costs come from somewhere. You may wonder why we’re not hiring. [In fact, I have previously disclosed in this space that our head count continues to decline, an uninterrupted trend since 2007 to this very day.] Well, we must fund these unproductive costs from productive activities – sales, marketing, product development – you know, activities that produce new revenue. [Please note: your proposed tax increases will be paid from the same kitty.] Unlike you, we can’t solve our money problems by printing more dollar bills – we have to EARN them. If you make us waste our money, we must shrink our business to pay these new costs. WE GIVE UP GROWTH TO PAY THESE WASTEFUL COSTS.

I find it exasperating to have to explain this to you.

Complexity: We now face perhaps 3,000 pages of new safety rules and laws applicable to our business. I have never included rules on childcare or infant items in this total. For those miserable companies who stubbornly persist in making this kind of item, their total is probably well in excess of 3,000 pages. Each word of those pages is a possible felony.

The pre-CPSIA total was about 100 pages of rules, most of which were inapplicable to our business. There was very little to remember – which made it easy for us to administer our business. We could teach the rules, we could remember the rules, we could follow the rules, we could set up sensible priorities oriented around safety (not merely compliance). This is no longer the case.

Face it, President Obama, NO ONE understands these new rules. I include the CPSC on that list. There are just too many rules, and they are riddled with inconsistencies, flaws and head scratchers. The rules are also a mess, existing in many forms, in many places, never correlated or conformed, and are certainly not indexed. The rules have no underlying logic, so it is not possible to anticipate how any rule should work or does work – you have to find the rule and study it, preferably with an expensive lawyer helping you. Even finding a particular rule is quite a treasure hunt.

We are pretty busy – this does not enhance our productivity.

I believe that unless one is a rabbinic scholar or some kind of savant, it is not possible to master 3,000 pages of dense and inconsistent rules. The CPSC has done little to make sense of these rules.

Consider the paradox of musical instruments – full-sized musical instruments are not considered “Children’s Products” even if marketed EXCLUSIVELY to children. Does that make ANY sense to you? Remember, these are SAFETY rules so if musical instruments are unsafe for some reason, wouldn’t logic suggest that we should not let children interact with them? And if they’re safe, then they shouldn’t be regulated at all. Right? Interestingly, the CPSC says that if you shrink the same instruments down for children, they WOULD BE considered “Children’s Products” and subject to the CPSIA, even if marketed side-by-side with slightly larger, full-sized instruments which are not regulated. This makes absolutely no sense, is completely indefensible as public policy and creates a terrible quandary for any business attempting to interpret and apply these rules.

The complexity and opacity of the rules outstrips EVERYBODY’S abilities. We are completely stymied – and it’s your fault. You and your team refused our advice on how to resolve these issues.

Risk: The CPSIA is a tort lawyers’ dream. With the coming public database, our industry will be a feeding trough for these vipers. To say the least, you have permitted the government to set up a system DESIGNED to be gamed by lawyers and litigants.

How do you think business people will react to this massive expansion of the tort system? Please note that NO ONE contends that there are more injuries to address – it is absolutely clear that the effect of the CPSIA is to create many more claims of action. More cost, more risk – and as a result, there WILL be less economic activity.

Good job, guys!

Add to this misery the current practice of this CPSC to press for recalls that do not meet the CPSA’s legal standards for recalls (substantial risk of injury or death) and to impose huge vindictive penalties. The agency is on the war path, trying with all its might to scare us to death. This is an especially powerful economic depressant for small businesses which typically lack the resources to resist these pressures. Small businesses are more conservative and tolerate risk less comfortably as they manage their own money and see themselves as having more to lose than mass market companies or public companies.

The aggression of the new CPSC is out of control. The current Chairman likes to BRAG about her big penalties. Trust has been utterly destroyed in the manufacturing community. In two short years, the CPSC squandered its reputation as a partner in safety, someone to be trusted. Who in their right mind would trust this CPSC? If you doubt me, ask McDonald’s how they feel about being pressured to recall 12 million acknowledged safe Shrek glasses (and the ensuing media frenzy over cadmium – all without ANY documented injuries from cadmium in children’s products EVER). Or ask Schylling Associates or Daiso how they feel about penalties imposed on them for rule violations without any injuries. By all appearances, those penalties reflected regulatory anger, not endangered public safety.

[While you're at it, ask the CSPC why they never completed their FOIA disclosure to me on the Schylling penalty.]

Seemingly, almost any violation of these rules can be twisted into a felony charge now. We joke in our office about visiting each other in jail – but it’s not really funny at all. I simply cannot fathom conducting my affairs in a way that risks being charged with a felony. As a lawyer, the criminal risk imposed by the CPSIA is completely unacceptable to me and highly offensive. I often say that felonies cannot be committed accidentally – except in the Children’s Product industry. The unavoidable accumulation of trivial infractions with heavy penalty risk gives the CPSC winning leverage in any negotiation. The game is FIXED. Everyone knows it, too.

This is no stimulus plan, by the way.

Intrusion: It’s this simple – we have a new partner who showed up two years ago – the U.S. government. They don’t know anything about our business and have never run any operation similar to ours but they now reserve the right to check all our work and to second-guess us. Mother May I? That’s the new game in our business.

Could we live without ANY of this? Yes, most definitely. While the zealots behind this self-destructive law like to emphasize the POSSIBILITY of injury from lead and love to repeat the simple-minded chestnut that there is “no safe level of lead”, they FAIL utterly to tie these claims of POSSIBLE injury to data of ACTUAL injury. There is no “nexus”. Lead may be “bad” but it has no history of causing injury in children’s products. Leaded gasoline, house paint and industrial pollution are the culprits that caused blood lead levels to rise materially – that’s undeniably true. Congress missed the boat entirely with the CPSIA – it’s all cost, no benefit.

Lead injuries from children’s products are virtually unknown. My study of CPSC recalls in 1999-2010 totals one death (from a piece of jewelry) and three unverified injuries from lead in 11 years. Given the truly massive size of our industry and the children’s marketplace, and the literally trillions of interactions with our industry’s products each year, this injury total is statistically equivalent to ZERO. Instead of punishing our industry, you should give us a good citizenship award. We have earned the trust of U.S. consumers.

The path forward is clear but frankly, I Still don’t think you get it. Trust has been broken. Until you and your administration DEMONSTRATE that you are taking a DIFFERENT path, we will continue to conduct a war against the CPSC and Congress. This defective law deserves a FULL repeal. It is misconceived and has cost countless jobs. I hope you and your associates will not continue to deny the obvious, to fly in the face of data and reason. The voters are on to this scam. They voted many Democrats out of work in midterm elections. If you and your team don’t wise up quickly, in the over-regulation of our industry and other industries, they’ll vote the rest of you out in two years.

The problem was never the law. Before Congress “improved” it, the CPSA was a powerful law that enabled the CPSC to closely supervise children’s markets. Let’s not forget that the recalls in 2007/8 were conducted under PRIOR law – the unamended CPSA had plenty of teeth. The recalls in 2007/8 were clearly a COMPLIANCE problem, not a problem with the rules themselves. For various reasons, some people weren’t following the law closely enough. As objectionable as that may be, it is also important to remember that the 2007/8 recalls were associated with virtually NO injuries. So what should we have done, in lieu of all the tough new standards and venal penalty provisions in the CPSIA?

The agency should have been reorganized to work on compliance more effectively. The agency needed to invest in education, outreach to industry and more effective partnership with industry. This idea that we in the business community can’t be trusted is revolting and completely untrue – it is a populist idea you and your allies flogged to get elected. If you want to keep your jobs for much longer, you need to drop this caustic idea. We are not bad people or incompetent people – we can be trusted and can be good partners (as our record proves). No, not everyone will be good or conscientious. Bad people and incompetent organizations cannot be legislated away (at a reasonable cost). Still, the data indicates that a lower cost approach of partnership and education will produce very good results.

Fixing this law will be a stimulus plan that creates JOBS. Please give us back control of our financial statements and we will find a good way to spend our own money to grow our businesses. We don’t need your help – we need you to GET OUT OF THE WAY.

Yours sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.
Vernon Hills, Illinois

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CPSIA – Dear President Obama

CPSIA – ICPHSO Update – Remarks of Gib Mullan, Head of CPSC Enforcement

Gib Mullan’s remarks on enforcement:

  • Import surveillance staff is now up to 18 people.
  • Using Commercial Targeting Analysis Center (CTAC) to stop things at the port. Can see what’s coming in before it arrives.
  • Is working with the International Trade Commission, the folks responsible for HTS Codes (Harmonized Tariff Schedule). The CPSC is trying to “piggyback” on HTS code to identify the products of interest to the agency. Making “significant headway”.
  • Imports samples rising at a rapid rate. Only about half of the samples fail.
  • Use of XRF is one of the agency’s “secrets for success”. Will use for cadmium, too. Only one-tenth of items scanned are being sampled. This implies that less than 5% of items scanned fail. Most items are not inspected, which is just a numbers game.
  • Field Investigation Division is back to a “growth mode”, in 55 locations with 89 investigators. Expanding to Internet surveillance. They have seen a surge in eBay sales of recalled items after recalls are announced. Interesting!
  • Created email address for the public to report sales of recalled products. Now everyone can be on a cop on the beat, how wonderful. Hope I can still trust my kids. . . .
  • Retailer reports are rising. Participants in this program include WalMart, Sears, Amazon and others. 20,000 reports a year. Also reports by email and on the hot line 800 number are jumping. The total number of reports is cresting at 50,000 per year. All of this is BEFORE the public database. [Soon a system will be fully constructed that will make doing business in the U.S. children's product industry impossible, something to look forward to (this is my thought, not Gib's remarks).]
  • Field “blitzes” are increasing. Examples are pool and spas, drywall, drawstrings, cribs. This is a new activity although blitzes at the port are old hat, in my experience.
  • Defect Investigations Division has 19 compliance officers.
  • Recalls in 2009 DECLINED from 563 to 466. Number of units went up to an all-time high, 229 million units. Lots of big recalls in 2009. Should we feel safer now? I wonder . . . . Gib himself questions whether this is “good or bad”.
  • Fast Track recalls are pretty steady. “Fast tracks” are recalls initiated by companies and brought to the CPSC’s attention by the company itself. CPSC-initiated recalls are steady in the 50-60 range. Cases stemming from regulatory violations declined from 167 to 47.
  • Early warning system relating to cribs, bassinets and play yards is resulting in faster recalls. [No info on the availability of cribs and so on was provided, or the cost of those goods now.]
  • Joint recalls with Canada was done first on February 19, 2009 (that fills in a hole!). Total of 13 joint recalls in 2009 and 16 in 2010 to date. Expects more joint recalls in the future, broadening to other countries. Gib thinks this makes it simpler for companies going through recalls. Again, not sure how I feel about this but am not opposed in principle.
  • Regulatory Enforcement Division has 18 Compliance Officers now. This includes Chemical, Children’s, Flammability and Mechanical hazards. Letters of Advice (“LOAs”) fell a bit in 2009 by perhaps 12%. Only a small percentage result in recalls. In 2009, found 338 lead content violations and 118 lead in paint violations, mainly at the port. Recalls have come down considerably, almost to zero. Stops at the port are higher than that, but don’t result in recalls necessarily. Those are declining, too.
  • Compliance Division now has 14 of its own attorneys
  • Civil penalties rose a lot in 2009. Gib specifically noted that he was not being “gleeful” about penalties but simply noting that penalties are a more serious risk now. I am okay with this tone, it is common sense. Penalties totalled nearly $9 million. I just hope that penalties moderate and become more purposeful, rather than political.
  • Made a STRONG point about fraudulent testing. The CPSC caught fraud in lighter testing and it led to criminal charges. They are working on another case now. This is great news as far as I am concerned. Cheating is a REAL problem (an actual problem, not an imaginary problem). The CPSC should find the bad guys and punish them. The resources of the agency are well-served if focused on removing these unscrupulous people from the market.
  • The agency is forging new alliances with the State AGs. They have a monthly conference call with this group. This is the CPSC’s proactive effort to reign in the State AGs by making them part of the process. If this works, great. Again, we need to watch out for the lowest common denominator risk.
  • Working with China on implementing “best practices”. Getting better, faster. China recalls went DOWN in 2009 and he anticipates improved safety in Chinese products. This, too, is a good use of agency resources. If we really are getting better, faster, Gib and his team should take a bow. Safety benefits everyone. Next up, consideration of the relationship between these initiatives and cost. Safety is an inherently economic subject. We need recognition of this basic fact.

I have omitted all reference to drywall here. This is a one-of-a-kind problem that seems unrelated to the CPSIA as far as I can tell. Likewise, I have not attempted to summarize the issues relating to ATVs and other tangential product/safety issues brought up by Gib. [He did say that repairs to the Rhino seem to be working well, btw.]

To Gib’s credit, I found his presentation quite balanced with no particular effort to frighten. I appreciate the choice of tone for what could be a quite intimidating topic.

Gib’s presentation was one of the few I can recall in the last two years on the topic of enforcement that did not materially raise my blood pressure or make me think dark thoughts about the future. Let’s hope that the CPSC can build on this base to restore trust among the business community. Safety and fear mongering is an unholy alliance. The CPSC needs the cooperation and trust of the manufacturing base.

Read more here:
CPSIA – ICPHSO Update – Remarks of Gib Mullan, Head of CPSC Enforcement

CPSIA – Are Toys Supposed To Be Fun Anymore?

In a wonderful Op-Ed last week, Windsor Mann lampoons the ridiculous CPSIA by announcing his intent to not give any presents this year. His plan is as simple as the subtitle of his essay: “Giving children what they need most – nothing”. Mr. Mann expands: “As someone who loves to be a wonderful person for a brief period of time, I enjoy this season of temporary giving. I am obsessed with helping people, especially children, and the best way to help children is by not giving them Christmas presents.”

Sadly, Mr. Mann observes that “toys are not something to play around with”, noting the recent recall of toy darts because an 8-year-old almost choked on a dart that he was chewing. This is a real case. [This recall is eerily similar to a life-imitates-art spoof on The Onion entitled "Fun Toy Banned Because Of Three Stupid Dead Kids".]

Mr. Mann recounts in hilarious fashion various recent recalls illustrating the fact that we seem to have lost sight of what constitutes safety. [He even mentions the unfortunate Timberland ankle-high boots recalled for the lead-in-paint logo on their insoles.] To make his point, Mr. Mann notes the useful instructions provided by the CPSC in its “The Super Sitter” manual for babysitters. Here’s some tips the government felt the need to give babysitters:

• “Keep the youngsters safe by preventing accidents.”
• “Running or horseplay on [stairs] can lead to falls.”
• “In the event of accidental choking, apply first aid measures to clear the child’s airway.”

He quips: “(In the event of intentional choking, do not apply first aid measures.)”

The fear of everything, railed at in this essay, is the philosophical underpinning of the misconceived CPSIA. There is no solution to this disease short of changing the law. In a world dominated by the fear of everything, nothing is safe and everything must be feared. Mr. Mann’s strategy of not giving gifts seems to be an appropriate response in this environment.

It’s a funny article, but it’s not a funny problem for those of us stubborn enough to remain in the children’s product market. I don’t know how it comes as a surprise to anyone that misuse of products or the absence of individual responsibility may result in injuries, but that plague has descended on our industries. The issues inherent in this shift away from common sense are many:

  • Fear of liability creates a perception of COST that deters investment in products and markets. Random costs feed the fear.
  • Unjustified fear of injury by consumers translates into lower sales or higher costs in making sales. Markets shrink. Consumer needs become difficult to meet.
  • An atmosphere of fear affects regulators, who tend to recall more often and to assess more penalties (even if non-monetary) because it’s politically-expedient or follows the trend. In other words, it’s “safer” for regulators to err on the side of caution – but that cost is borne by somebody . . . businesspeople.
  • Rules tighten illogically, diverting attention from real issues, increasing the cost of participating in the market. All parties suffer from the consequences of complexity, including regulators.
  • Misallocation of resources (expending too much energy on unimportant things) leads eventually to true crisis, fueling the fire of the original proponents of the legislation. The obvious solution – even MORE government.

And the joke will be on you and on us, if we don’t do something about it. Mr. Mann takes a lighthearted swipe at the silliness of your Congress, but it’s really no laughing matter.

Read more here:
CPSIA – Are Toys Supposed To Be Fun Anymore?

CPSIA – The Votes Are In . . . (The Stay Was Extended)

The CPSC Commission ballot votes were announced today with the five Commissioners’ statements released as well (Adler, Moore, Nord, Northup, Tenenbaum). The Commission made three decisions:

  1. Adopted the interim enforcement policy allowing the use of component tests (5-0)
  2. Lifted the stay on testing for bike helmets, dive sticks, bunk beds, and rattles (5-0)
  3. Extended the stay on testing for lead content to February 10, 2011 “date certain” (4-1, Adler dissenting)

These votes reflect a considerable effort by the Commission to pull together. Other than Mr. Adler’s principled decision to opt out of the endorsement of a longer extension of the stay on lead content, the Commission managed to find common ground. The unification of the Commission, if it sticks, would be a positive development. I hope this is a sign of recognition that safety is not inherently political and therefore Democrats and Republicans can work cooperatively and productively together.

The extended stay (“Stay”) will be of value to manufacturers without endangering consumers. This is helpful . . . but is not a complete solution. It’s a compromise and may have to be revisited again. I believe the Commission was not able to agree on Ms. Northup’s formulation of the extension (six months after the issuance of the so-called “15 Month Rule”) because Mr. Adler’s objected to it as too open-ended and expressed a concern that it might be pushed out indefinitely. So now we have a stay expiring on a “date certain” and an agency with another artificial deadline to meet. The 15 Month Rule was not made an explicit condition of the decision, which means that more market chaos is probable.

Let’s step back at this point and think about the issues that this vote raises:

A. The notion that another year will be enough to tidy up the details on lead content is probably a pipe dream. A few points of reference:

  • Today is the one year anniversary of my first comment letter on civil penalty factors. When they finally came out in September, I sent in a second comment letter. To date, the new penalty factors have not been announced. We are in our second year of waiting.
  • The phthalate test standards are also in limbo. The agency has had two cracks at that one. The first one allowed testing of the entire product as a single part (based on statutory interpretation) and after a storm of protest from among others the CA AG, the CPSC reversed course and reissued the test standard requiring that each component, even internal inaccessible ones, be individually tested. No doubt this pleased Jerry Brown, candidate for governor of California, but it created (brace for it . . . ) another storm of protest. Yet more comment letters were submitted. And . . . nothing. Please NOTE that the phthalate ban was SO urgent that the CPSC allowed it to become effective RETROACTIVELY with exactly TWO BUSINESS DAYS NOTICE. Obviously, phthalates must be a serious problem right??? Well, the CPSC has twice investigated phthalates and given them a pass both times. A third CHAP is currently grinding away. You get the picture. Hurry up and wait – just like the Army.
  • On January 30, Nancy Nord issued her statement in support of the original stay. In that letter, she called for the issuance of the component testing rule. Have you seen it yet? The interim enforcement policy is the closest thing we have to a component testing rule. The birthday party for Ms. Nord’s call to action is about a month away. Get the cake ready.

I am skeptical that the “15 Month Rule” will come out anytime soon. As Ms. Northup notes, it is going to be wickedly complicated. EVERY such rule when issued has been a major speed bump in the implementation process. See above . . . . The CPSC is also not without its other challenges or little projects. There is, of course, the day-to-day business of the agency like hunting for shoes with lead-infused insoles. There are also unexpected emergencies like Chinese drywall. And then there’s that endless time sink, the CPSIA, with its many unfolding requirements. Why just today, the CPSC announced yet another two-day workshop on the public database. Didn’t we just have a hearing on this? Perhaps I should buy a condo in Washington . . . . Anyhow, these other obligations will get in the way of the master plan here. That’s a certainty.

The consequences of these artificial deadlines for businesses are pretty severe. Our problems are largely with the “regulatory compliance exuberance” of our larger and more risk-averse dealers/retailers. This risk-aversion is principally driven by the excessive liability of the new law and the apparent predilection of the CPSC to hand out whopping fines. It is also related to speculation that it is only a matter of time before the agency or one of the State AGs decides to give the felony provisions a road test. Who will be first in line? Our larger customers have no interest in finding out. This may be why we have one customer who insists on testing EVERY item for lead-in-paint . . . even if it has no paint on it. And another customer who wants us to test EVERY item for flammability, even if the products are exempt (like paper-based items).

How do you think these customers will react to a “hard” deadline on testing? With little sympathy and a great deal of advanced planning. They will not want to speculate on whether we will get relief if the CPSC runs late on something important. Likewise, they will not want to stop and start. Some companies are ALREADY incorporating the August 2011 100 ppm lead standard into their requirements NOW – even though the CPSC has made NO determination that it will impose that (ridiculous) standard yet. A one year extension of the Stay means that the testing requirements will take form for us much sooner than February 10, 2011, and once started, will be hard to stop.

B. Some of the remarks of Commissioners at the hearing and in their statements seem detached from market realities. This is worrisome. The denial by certain Commissioners of information they have been provided (Adler: “While there will be some disruption in the marketplace no matter which date is chosen, no hard evidence has been brought to my attention that would require an even longer extension of this stay than two years from the passage of this landmark legislation”) and the misconstruction of the impact of their decisions (Adler: “I know of no company that has indicated that it will withhold production until the 15-month rule becomes effective.”) erodes confidence.

It’s time to abandon pretense and role-playing. The decisions being made have very serious consequences for many people (perhaps this is why I am still up at 1 AM writing this blog) and must be handled with the utmost sensitivity. If the Commissioners seem to be stuck in a tunnel with no end, believe me, so are manufacturers. Let’s not make the situation worse – particularly since there is NO crisis to resolve right now.

C. Of particular concern to me is that the agency seems to have lost its ability to determine what is safe and what is not. Today’s recall of Timberland scuffproof boots is just an illustration of our broken compass. The CPSIA’s famous “precautionary principle” holds that we cannot trust anything until it is proven safe upfront. Thus, the CPSIA subjects every product and every component in every children’s industry to new regulation, and requires the CPSC to carve out exceptions. This MAXIMIZES workload, chaos and confusion because it requires in-depth inquiries into EVERYTHING. This approach multiplies complexity as regulations devolve from common sense guidelines into endless lists of exceptions. Look around you – this entire mess, the last 18 months of misery and the coming months of new misery, is the inevitable outcome of this defective way to regulate our markets.

The mounting exceptions are only part of the mess. Then there are the interpretations. There is simply no way to catalog all of these decisions. Every nuance needs a regulator’s okay. Ms. Northup highlights the determination that a children’s water slide is NOT a “children’s product” because it must be designed to withstand the weight of an adult. Very good, quite a helpful decision, but HOW are manufacturers supposed to replicate that reasoning without taking undue liability risk? Isn’t it obvious that such determinations are quirky and hard to apply? The trend to greater opacity is unstoppable under this regime.

As long as we ignore this fundamental problem, we will face a worsening environment at the CPSC. The cohesiveness of this Commission today will degenerate quickly. The morale of CPSC staff will decline further. The rules and interpretations will pile high into the sky and manufacturers will start to ignore them – or just leave the marketplace for sunnier climes. Ridiculous demands of retailers for testing will drive more companies from the market or just cripple the ability of U.S. companies to compete internationally. The flaws in the CPSIA will also likely spark a consolidation trend toward bigger and bigger companies as this kind of environment is deadly to small businesses and entrepreneurs.

Not a pretty picture. Thanks Congress!

So with this stay decision, I conclude that little has been accomplished to address the basic problems. We kicked the can down the road, which is fine, but the fundamental issues remain and will pop up again in short order. Until we put them to rest, the fighting will intensify, the agency will descend into gridlock and personal reputations and legacies will be harmed.

There is no need to stand idly by and let this carnage happen. As has been pointed out by many in recent days, the CPSC needs to tell Congress honestly what needs to be done to fix the law. Mr. Waxman has conceded a fix is necessary. We need now must tell Congress where they went wrong. I disagree with Ms. Northup that the CPSIA’s flaws were mysterious in July 2008 – but whether or not that’s true, they are pretty obvious now.

I wish the Commissioners and all my readers a restful holiday season, but after you have had a nice nap and a chance to catch up with the relatives, it’s back to work. We need to put together the list of fixes and march over to the Hill.

Read more here:
CPSIA – The Votes Are In . . . (The Stay Was Extended)

CPSIA – Crain’s Says We’re About to Get Sued

In this week’s Crain’s Chicago Business, the news periodical speculate on which mass tort action could succeed asbestos as the next gravy train for plaintiff’s attorneys. And guess who makes a guest appearance??? Asbestos and the legal black hole By: Steven R. Strahler September 28, 2009 Asbestos has lived up to its Greek origin — “inextinguishable” — on legal and medical landscapes alike: Mass tort actions involving asbestos have bankrupted more than 60 makers and users of the once-widespread insulating material, starting with Johns-Manville Corp. in 1982 and claiming Chicago’s USG Corp. in 2001. Odds are, corporate defendants won’t see another mass tort topic like it: more than 700,000 claims pending against 8,000-plus defendants and estimated costs exceeding $250 billion. Because asbestos-related symptoms can take 30 years or more to manifest, the litigation is expected to last until mid-century. . . . . “No, there is no asbestos-like gravy train pulling up in front of the American Bar Assn.,” says Robert Hartwig, president of the Insurance Information Institute. Still, he says, “there are great unknowns, like climate change and latent manifestation of occupational disease.” Among the most likely post-asbestos targets for plaintiffs’ attorneys: . . . . Product liability The Consumer Product Safety Improvement Act of 2008 requires independent testing of children’s products, including cribs and metal jewelry, empowers state attorneys general to file federal actions and increases penalties, all of which will boost opportunities for mass-tort suits.

See the rest here:
CPSIA – Crain’s Says We’re About to Get Sued

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