CPSIA – Listening but Disagreeing – or Not Listening At All?

We know that the CPSC plunged ahead with the database on Friday despite the outcry of many industry stakeholders. Among the protesters was the National Association of Manufacturers, not exactly a lightweight organization. Industry protests fell on deaf ears. It goes without saying that the resistance of the two Republican Commissioners (who drafted their own database rule) aligned with industry objections. None of this apparently mattered.

As if to make the point that the CPSIA database will be misunderstood, misused and dangerous, the New York Times announced the arrival of the database in an article entitled “Consumer Agency to Post a Database of Unsafe Products“. Nice work, New York Times! The information in the database is unverified and in many cases will NOT be true. There is simply no way to conclude that the products referenced in the database are “unsafe”. Good luck convincing anyone of that now.

It is embittering and frustrating to be so flagrantly disregarded. There seems to be so much at stake, and the fix was seemingly so simple. No one asked to kill the database, just protect innocent businesses from damaging inaccurate postings on a website enjoying the prestige of a federal safety agency. Even the Pompeo Amendment was promoted as “hitting the pause button”. It is hard to fathom why dialogue was so impossible to start. Actually, after a few years of this war, it is not hard to fathom at all.

I know we were rejected – it is hard not to conclude we were ignored completely from the beginning.

My involvement in this issue began when I was asked to testify before the Commission on the issues relating to a searchable database of product incidents. Actually, I had been on record of objecting to the database even before the CPSIA became law (you can see excerpts of letters I sent in my response to Slate). I was called by Matt Howsare, then counsel to Inez Tenenbaum (now her Chief of Staff) who asked me to fly to Washington to testify. He told me that they “needed” me. Wanting to be helpful and to pitch in when asked by the agency (I was charmingly naive at that time), I agreed. I posted video of my testimony in this space, and as you will see, I was cut off by Ms. Tenenbaum. Get it? I was asked by her staff to present because they needed industry testimony, and when I gave my remarks, they cut me off – one suspects they had heard enough . . . .

This experience left me disgusted in a way that, frankly, hasn’t worn off.

Later, the agency called for a two-day workshop on the database. Owing to the discourtesy of my treatment at the hearing and because of their apparent utter disinterest in my views, I declined the opportunity to continue banging my head against the wall by attending their database confab. Later, as we know, the Democrats released a 248-page rule that greatly expanded the database rule from Congressional intent. Written as though edited by Consumer Federation of America, the rule produced howls of protest, but as has been the case thusfar in this CPSIA saga, it mattered not. The three Dems voted as they would have in the absence of any protests and the defective rule was adopted.

I continue to believe that the criticisms of the rule were (and remain) legitimate. That is, they were rational and reasonable, and lent themselves to reasonable and understandable resolution. The Dems did not make any effort to address these reasonable concerns, rejecting them out of hand.

This pattern of ignoring stakeholders while calling for comments and participation has been a hallmark of the Tenenbaum era. I am trying not to take it personally but wonder how we can be so consistently “wrong”. The Dems barely pause to discuss industry objections other than to simply reiterate that their policy objectives are more pressing. Are we so obviously wrong that our objections don’t merit an answer?

I have trouble reaching that conclusion. I have made the same points consistently over and over, yet I cannot put my finger on a single response to my objections other than outright rejection. There is a question of good faith here. The rejection of my company’s PROOF of a material error in the one filing made against one of our products in the soft launch of the database seems to call into question whether the agency can ever be trusted under this group of administrators. The response by SENIOR STAFF at the agency that the consumer in question had stated a “risk of harm” when his/her accusation was PLAINLY WRONG means that even the English language is being corrupted in service of the database. How can trust exist in an environment like this?

Ask around among industry stakeholders. Trust is GONE. No one trusts the CPSC these days.

Looking back on the database saga, it makes me all the more certain that I am doing the right thing pushing back against these people. They are not operating in good faith and have no apparent concern for the well-being of our company, our employees or the countless companies, schools, families and children who depend on us. This cancer on our markets must be stopped. We have another election coming up and I will be working hard to put more Democrats OUT OF WORK. They have no one to blame but themselves. They won’t listen . . . .

So we need to get rid of them.

Read more here:
CPSIA – Listening but Disagreeing – or Not Listening At All?

CPSIA – Last Ditch and Pointless Comments on Public Database

The CPSC Commission will be voting on a final rule governing the new public database for product safety complaints on Wednesday. The final rule tips the scales at 248 pages.

I know I am a public utility. . . but it’s confession time – I didn’t read it. I know what’s in there and the Powers-That-Be don’t care what I think anyhow.

Commissioners Nord and Northup have published their own alternate rule. It must be worse than the CPSC’s proposed final rule because it’s much shorter, only 27 pages long. I read the Nord/Northup rule – they asked for comments and I believe they will actually listen. It won’t matter because the Commission now votes on party lines, so our comments are irrelevant. The Dems already know what they intend to do. Adler, Tenenbaum and the out-of-office Moore vote as a pack and do as they collectively please. Perhaps this time they won’t even bother to make a pretense of listening to Nord or Northup. I picture the meeting going quickly as the Dems all put on their iPods and ear buds while Nord and Northup have their say. Might as well bop to iTunes, Commissioner communication is at a standstill anyhow.

Relax and enjoy it, kids! You’ll love it. What could possibly go wrong???

Before I tell you all the reasons why I detest the public database, I want to give you my comments on the Nord/Northup draft:

1. I greatly appreciate the effort and the gesture. They didn’t have to do this, and made a game effort to help out. Their rule has as much of a future as the 2010 Cubs but nonetheless, I admire their commitment to their job responsibilities and to the market the CPSC regulates. Nord and Northup recognize the many risks implicit in the database idea and attempt to fix as much as they can within the context of the deeply-flawed CPSIA, the law of the land. Thank you for trying.
2. The proposal commendably attempts to limit who can post in the database by narrowly interpreting the CPSIA. This is an appropriate regulatory agency response to an excessive law, something a well-run federal agency would do to keep the trains moving on time. Naturally, the agency has not opted for that courageous route over the past two years.
3. Much of the proposed rule involves what can be disclosed, how to protest inaccurate information and the disclosure of confidential information. It is highly technical – your eyes will glaze over. It’s all necessary to make the best of a bad situation.

The basic concept of the database is that the government must set up coercive rules to make “bad” companies do the right thing. Apparently, the geniuses behind the database assumed that we cartoonish corporate bad guys would never exercise good judgment without the pressure of the public database. Many steps backward resulted. For instance, the Nord/Northup proposal says that manufacturers will not be provided the name or contact information of the submitter of the complaint or the injured party. We also won’t receive photographs of the injury. And this is for what purpose? Apparently by withholding this information, the CPSC enhances the ability of manufacturers to do their job. I believe this is a reversal of current practice.

There are many consumer “advocates” out there who are telling misleading stories about the database. A good example is “Wallet Pop” who provided an update on the database on November 12th. Here’s how he portrays the situation:

a. “Trying to keep your family safe from dangerous products is extraordinarily challenging.”

RW – Is that really true? What is the evidence that we are all “in danger”? This is not an exaggeration – this is a LIE.

b. “As much energy as the U.S. Consumer Product Safety Commission spends trying to alert consumers to hazardous products, an alarming amount of the information it possesses is kept secret.”

RW – Enforcement investigations and enforcements themselves are very closely associated with litigation. Confidentiality is absolutely ESSENTIAL for any semblance of due process, a Constitutionally-guaranteed right, even for corporations. The Rule of Law protects us all, even if we must tolerate some sacrifices, such as the sanctity of confidential investigations.

That DARNED Constitution, so inconvenient.

c. “Releasing all this information is a frightening and annoying prospect to many companies, who fear tarnished reputations.”

RW – There’s a lot more to fear in the database than just tarnished reputations. Let’s not overlook that the Internet exists. We manufacturers live in a world where the consumer is KING – our reputations are on the line every day already. There are already many websites ready and willing to let you bash away at us, as long as you let them sell ads. So it MUST be something more than “tarnished reputations” that is causing all that fear. Could it be . . . heightened litigation and liability risk???

d. “Nancy Nord and Anne Northup want further restrictions on such things as whose reports can be included in the database (no lawyers acting on a victim’s behalf, thank you) . . . . Traditionally, Nord and Northup are on the losing side of 3-2 votes, but they’re not going down quietly.”

RW – Safety is now PARTISAN at the CPSC. In other words, in their spin machine, Democrats CARE deeply about kids and Republicans are heartless money-grubbers. These days the caring Dems run the show and money-grubbers are always outvoted.

I know you like a good story at bedtime! Bad Republicans, good Democrats. Sweet dreams.

e. “Companies will still make huge profits after this database is made public. Is it wrong for a handful of large and powerful corporations to perhaps take complaints a bit more seriously when they come in instead of choosing to dismiss them until hundreds are hurt or innocent children lose their lives?” [Emphasis added]

RW – The CLASSIC mischaracterization of our market that it’s all about big companies. This guy has Mattel and Graco on the mind. The irony is that the mass market companies could care less. The ones who will be CRUSHED are the small businesses. Let’s not forget that Mattel gets to test its own products – and when it LATER had a recall of 11 million units of its merchandise, no one asked any questions about testing. The rules are hardly even a blip to those guys. The cost to Mattel from that massive recall: ONE PENNY PER SHARE. The database is just anothe sidelight to those guys. The story is rather different for small businesses, however.

Not that the CPSC cares . . . .

So why do I hate the database?

1. There is a big difference between restaurant reviews and “United Breaks Guitars”, and product liability. The database is all about litigation and liability risk. Reputational reviews are about goodwill, but the database has to do with systemic risk for our businesses. It is a pro-plaintiff distortion in an already out-of-control tort system. Fundamentally, reputation is about consumer as king. Liability is about bloodsucking lawyers as king. This database is not designed to inform consumers well – the information is not certified. So why have a garbage in-garbage out database. It’s intended to foster more vexatious litigation. Read the WalletPop article again – it’s clear that the database is intended to be coercive. How do you suppose it will be coercive?

2. The government has no business lending a hand to tort lawyers. The tort system which provides the “little guy” with a way to seek redress functions just fine. The New York Times just published a study on hedge fund investing in tort lawsuits. Must be quite the cash cow if those guys are getting into it. The database gives them a new target – you. Why is it appropriate for the CPSC to oversee the disbursement of this information?

Do you think this will raise our standard of living? Create jobs? Increase capital available for investment?

It is worth noting that the database will create an expansion of the role of government in our markets. This is classic government bureaucratic creep where the government attempts to compete with the open market. Yes, there is that Internet thing. All those new tedious jobs, those eyes-glaze-over procedures must be administered by freshly-minted bureaucrats. The database must be built and maintained on government servers. Decisions will need to be made, filings and “transmittals” processed, deadlines watched, complaints followed up. This is PURE overhead. [And there is also the even larger devotion of resources that will need to be deployed by manufacturers.] Read the rules and ask yourself – will the world be better with all the new rules? With this expansion of our government? Isn’t this what you read about in the papers every day?

I am so, so sick of it. When will it end?

3. There is no economic justification for the excessive risk that the government is forcing on the market. The children’s market has not been killing or maiming kids in large numbers. Let’s not forget that we are a country of 300 million and it is not a utopia – some injuries will happen. [My apologies, I don't mean to burst your bubble.] Far more kids are killed or maimed in swimming pools than in any other children’s product activity. Apparently those kinds of deaths and injuries are not as troubling as other kinds of childhood deaths and injuries – there is no database on swimming pools.

4. The database is definitely subject to manipulation by competitors and other agents of corporate extortion and destruction (like bloodsucking lawyers). That is, under the proposal that Tenenbaum and Co. will pass when they take off their ear buds on Wednesday. For myself, I am particularly apprehensive about the stress that the database will place on our company. We will get notice in five days and have ten days to reply. Since the agency is going to launch a publicity campaign to convince the public to report every nit in the database, I expect MANY such postings. Now every broken toy will be a potential liability for our company, and trivial incidents will become our top priority. Forget about growing out business – it’s catering to the exigencies of the database that will matter. Still, I cannot imagine making the database the centerpiece of my business life. I also don’t know how we are supposed to answer a lawyer who asks how we monitor this database if we ignore it. Damned if you do and damned if don’t.

Not that the CPSC cares.

I can hear the advocates now – “This is what we want companies to do. They need to be ‘responsible’ and pay attention to their products and their customers.” Well, that presumes that we weren’t doing that already. In any event, we choose what we do every day. If you make us miserable enough, we’ll get out of this market fast. And that’s what the CPSC seems committed to do.

I think the database will quickly supplant the old way of finding out that there was a problem with our products – namely that our customers would call or write us. So they will place this information anonymously in a database and we will not be able to interview them or see their product. This puts us more in the dark and makes our job much harder. Or impossible. Brave new world . . . .

The whole subject depresses me. Be prepared for more fireworks and then the expected outcome on Wednesday. Our opinions will not sway the Majority (remember, Adler told us that anecdotes aren’t evidence, so they are free to ignore us and our amusing anecdotes).

And after this ugly business is concluded, you know what’s next . . . the 15 Month Rule. Then we’re goners, once and for all. Eric Cantor, where are you???

Read more here:
CPSIA – Last Ditch and Pointless Comments on Public Database

CPSIA – Hey Sucker!

801 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 9 days left until Election Day.

Consider this note I received today from a friend:

“Thought you’d like to know that i received a check in the mail today from Uncle Sam’s new Affordable Care Act to help cover the cost of my Medicare drugs in the amount of $250. Mind you, this one-time gift arrived just eleven days prior to election and, to me, an obvious bribe to receive my endorsement of their plan. Hope this backfires on them as I am immediately turning this check back to Joel Pollak in the form of my contribution in the same amount. Hope it helps the last few days of his successful campaign.” [Emphasis added.]

The Affordable Care Act is Dem-sponsored legislation designed to ameliorate the “donut hole” that Seniors experience in drug coverage under Medicare. I am sure this is a real problem. That said, the arrival of this check magically two weeks before the election is just one more bit of evidence of the privilege taken by Congress and the White House to award themselves gifts in even-numbered years to ensure reelection. The real question is “how dumb are we?”

Please note that the CPSIA was just such a gift. Passed almost unanimously on August 14, 2008 right ahead of the 2008 election season, the CPSIA allowed every member of Congress to blunt accusations that they were “soft” on Chinese toys. Not unlike so many other pieces of complex legislation passed by Nancy Pelosi’s Congress, our esteemed members of Congress apparently never read the bill which covered soup-to-nuts in Children’s Products, not just toys. Even today, you can find Congressmen expressing surprise and alarm that the law covered anything other than toys.

Duping members of Congress must seem like child’s play to devious staffers. After all, they know the members can’t or won’t read their handiwork. We call that the “political process”.

Some people ask me why I cut the Republicans such a “break” by attacking only Democrats on this law. Didn’t all the Republicans vote for the law, too? By and large, that’s true. However, since passage of the CPSIA, many Republicans have stood up and tried to help us. They have allied with my efforts and have gone to considerable effort, not to mention taken political risk, to address a Congressional screw-up that imperils Small Business without any corresponding safety benefit for consumers. Has every Republican member of Congress helped us? No. However, ZERO Democrats have lifted a finger to help us and most have scorned us publicly and privately. The Democrats who were put in charge of the CPSC are perhaps the MOST insensitive and the most strident in their political posturing.

Until the Democrats DEMONSTRATE that they can be trusted, which for me will take quite a bit of work on their part, I have NO interest in giving them a pass. The Republicans have EARNED my support. I hope you are not susceptible to bribes or other trickery by the party in control. Your business and your markets hang in the balance. Assess the situation clearly and pick sides. It’s now or never!

Read more here:
CPSIA – Hey Sucker!

CPSIA – Recall the CPSC

778 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 32 days left until Election Day.

In a remarkable demonstration of the anti-business bias of the current CPSC, Chairman Inez Tenenbaum took to the air today to bash toys and to take our old friend Mattel to task for four recalls of more than eleven million units.

Uh-oh, Mattel’s at it again. Hope this doesn’t mean it’s time for another CPSIA. It is Election time, after all.

Some background:

The CPSC Commission hosed us on Wednesday with its decision on the definition of “Children’s Products”. [Here is the approved definition (link to follow).] I will write about this in the next few days. In typical Tenenbaum fashion, rather than face intense and negative media attention on the bungled decision in which the agency knowingly effectively banned hands-on science education in the United States (see The New York Times and Associated Press on this issue), announced several high profile recalls and a scary “warning” about popular but apparently deadly infant products to distract the media and possibly you, too.

The four recalls and the warning are each prominently displayed on the CPSC website. Each was announced by press release so as to garner maximum attention. The new definition of “Children’s Products” was not announced, although there are two Commissioner’s Statements currently up on the website (Adler and Nord; Northup’s is done but the link isn’t up yet – here is her blog on the topic). The draft of the new rule is nowhere to be found on the CPSC website. There was no press release for the decision and no reference to the decision on the website other than the buried statements of the two (warring) Commissioners. Hmmm.

Probably just a little oversight, right Scott??? More on this later.

The five matters released to distract you were:

a. A warning to stop using Infant positioners in cribs. Twelve babies died in 13 years.

b. Fisher-Price recall of 2.925 million inflatables for choking hazard. Sold over NINE YEARS, 14 small parts found in kids’ mouths, three kids were “beginning to choke”, no injuries.

c. Fisher-Price recall of 1.075 million high chairs for laceration risk. Sold over NINE YEARS, seven injuries requiring stitches and one “tooth injury”.

d. Fisher-Price recall of 120,000 “Wheelies” for choking hazard. Each set includes four cars, so the universe of affected “Wheelies” is actually 480,000. Two broken toys discovered among the half million out in the marketplace (wheels fell off). No injuries.

e. Fisher-Price recall of 7.15 million Children’s Tricycles for risk of “serious injury”. Sold over FOURTEEN YEARS, ten injuries with six requiring medical attention (cuts).

Interestingly, when these recalls were brought to my attention this morning, the CPSC website simply listed the four Fisher-Price recalls as it normally does for recalls. However, by midday the marketing of the “crisis” had begun with a screaming headline in large print on the home page reading “Fisher-Price Recalls More than 10 Million Products“. No doubt the presentation was changed as a public service (these products are sooooo dangerous) . . . . The link under the headline leads to a blogpost about the four “grisly” recalls noting the following “information”:

“Fisher-Price did the right thing in agreeing to provide consumers with free remedies for these products. But all companies must do better. They must give more attention to building safety into their products. They must work to ensure that they are adhering to safety standards. And if any company finds itself with a defective product or one that is causing injuries, it must report the problem to CPSC immediately. Meanwhile, as moms, dads and caregivers, you, too, have a role. We thank the dozens of you who reported these incidents. Thanks to you, CPSC was able to investigate, work with Fisher-Price on a remedy and recall these products. If a toy breaks in your child’s hands or if your child suffers an injury from a product, tell us so that we can investigate. And if you own one of these recalled products, stop using it and contact Fisher-Price for free repair kits and replacement products.” [Emphasis added]

Is this about Fisher-Price (Mattel) or about you and me? Did we do something wrong? Apparently we must have. We were spanked in this blogpost. Was it a “teachable moment” for you? Was it as good for you as it was for me?

There is so much more to say about this:

1. I find it shocking that the CPSC would so shamelessly try to cover its tracks on the approval of the final “Children’s Product” definition. It’s not only an embarrassment to the agency, but it’s an insult to your intelligence. How this reflects the agency’s view of the media, I will leave it to you to divine. It ain’t a compliment.

2. Inez Tenenbaum went on TV today to stoke fear of toys. She did this on what is essentially the kick-off day for the Xmas toy season, September 30. Yes, our government sent its top official on national TV to scare the crap out of consumers and to warn them not to trust the companies making toys right as they were going out to the store to buy Xmas presents. This is a Barack Obama stimulus plan in action! Thanks for ALL the help, guys. Doin’ the Lord’s work every day . . . .

Here are a few quotes from Tenenbaum’s ABC News interview:

ABC: “It’s a major recall involving four different products.”
ABC: [Re High Chairs] “The problem with the high chair, I understand, is these pegs. What’s the problem there?”
Tenenbaum: “There pegs stick out and children have fallen on these pegs. Several have been injured and seven have required stitches.”

[Tenenbaum smirks as she neglects to advise that the seven injuries requiring stitches took place over NINE YEARS and were all minor injuries.]

ABC: [Re Trikes] “The hazard is a fake key that protrudes from the bike frame.”
Tenenbaum: “These tricycles have this key which sticks up and little girls have jumped on this key and have had serious cuts.”
ABC: “Serious injuries.”
Tenenbaum: “Serious injuries.”

[Another minor omission - Tenenbaum neglects to mention that the six injuries requiring medical attention affected six children among more than seven million users, took place over 14 years and involved toddlers that were supposed to be under parental supervision. Do you think she was helpful enough to the ambitious reporter who wanted a scary story? At least she took the hint and characterized the injuries as "serious injuries".]

. . . .

ABC: “There’s a message in this for all manufacturers.”
Tenenbaum: “Manufacturers need to build safety into the product from the very beginning so that we don’t have to recall on the back end.” [Emphasis added]

[This is my Xmas gift from Tenenbaum. Mattel is the cause of this, and it's Mattel that screwed up if ANYONE screwed up. Still, Ms. Tenenbaum can't miss the opportunity to use TV to tell MY customers to not trust ME. Thanks so much. And this Administration is MYSTIFIED about why we can't get our job market going again. I'm stumped, too. . . .]

ABC: “In a statement this morning, Fisher-Price said it wanted to reassure parents that its products are ‘overwhelmingly safe’. But if you have any of THESE products, you SHOULD call the company. They will offer a fix for some of them . . . others will be replaced outright.” [Emphasis added]

[Lest anyone mistake this for yet another idiotic and reactive series of recalls, ABC tries to portray Mattel as untrustworthy with the quote about the overwhelming safety of the 11 million recalled toys . . . then tells you to get them out of your house pronto.]

3. The Wall Street Journal was able to put a happy face on this sorry episode. Mattel’s 2010 earnings will only shrink by a penny a share because of the massive recalls. Anyone want to organize a telethon to help out a buddy in distress? How will Mattel make up that penny? Oh, the horror of it. . . .

4. I would be remiss if I didn’t remind you that Mattel has succeeded in certifying about ten of its corporate labs to test its products. I call on the CPSC to release the Mattel test reports behind these recalled items. I can’t wait to see the first recall of a Mattel item tested in a CPSC-certified Mattel lab. You’ll never know about it, because the CPSC and Mattel will move heaven and earth to keep you from finding out.

5. The recall of the Mattel “Wheelies” will be known as the original “broken toy standard” recall. Please consider the ominous nature of this development. The Mattel toy cars were reported by eager and enthusiastic consumers because they found a broken toy. The CPSC is calling for this kind of “help” so you can expect a LOT more of this in the future. To be precise, two broken toys were found in this case. No one was hurt. No allegation has been made public that any child was even possibly in danger. No disclosure was made about how the toys broke.

The CPSC apparently intervened to “investigate”. These investigations often begin with a warning to the manufactuerer – you can participate in the CPSC’s Fast Track Voluntary Recall program and avoid a formal investigation and possible penalty, or you can take your chances on what determination we will make months or years later. This kind “offer” is generally a short-lived one, possibly allowing only a few hours to decide. [This dirty secret is certainly true - ask around . . . or wait for the call.] The facts may be just like this one – a broken toy has been discovered (horrors), do you want to recall (today)? Mattel decided to recall in the case of the “Wheelies”, based on two broken toys and perhaps on a conversation with the kind folks at the CPSC.

Do you get this one? If a consumer reports a single broken toy to the CPSC, the agency may investigate you and you may be forced to recall the item immediately. No injuries are required, just the POSSIBILITY of injury. Do you see ANY problems with that standard? Do you think the possibility of injury is the same as the certainty of injury??? Are your products indestructible? Is this a standard for recalls you are prepared to meet? And how do you plan to blunt this regulatory attack?

Having fun yet?

You heard it here first. The “broken toy” standard – that’s the rule now. I’m not kidding.

For those of us idiots who persist in making children’s products, these recalls are chilling, particularly in light of the decision on “Children’s Products”. The CPSC is busily engaged in shrinking our market through scare tactics and reactive regulation of the markets. They are also building barriers to entry that protect mass market companies and ensure the demise of small business. How many of you can withstand the cost, damage and disruption of a 11 million piece recall? None of you. This will cost Mattel ONE PENNY. Aw, poor Mattel. Who will be left to compete with them? Hasbro. And you? You’re screwed. The CPSC doesn’t even bother with lip service on this one anymore.

The new definition of what constitutes a ” substantial product hazard” under the CPSA is now . . . everything. Anything that might possibly cause injuries is implicitly an “imminent threat” and must be recalled. There is no defense to the possibility of injury. Heaven forbid that there may have been injuries of any kind. Then you are dead. You’ll find out your penalties in a few years but right now, the recalls must proceed. Doesn’t matter what percentage of the items cause injury. Doesn’t matter how many years it took to accumulate the injuries. Doesn’t matter if the consumer was at fault or if there was dereliction of duty on the part of adults. The company is always at fault.

We are aiming for a Utopian society now, guys. Do you doubt this? Read this article carefully from the top a second time. The message is clear: Manufacturers, get out of Dodge, unless you are Mattel.

RECALL THE CPSC! This madness will kill us all. This is all about a mania and political leadership hired to foment this change in approach. There is little reason to believe these people will change – it’s time to start over.

Read more here:
CPSIA – Recall the CPSC

CPSIA – Lowest Common Denominator Government

We saw a display of Mr. Obama’s team in action this past week as McDonald’s was cornered into a national recall of a safe product. How did it happen? Did our government rise to the occasion, or simply resume its descent into the abyss?

“Americans want to be safe. And they expect their federal government to protect them. So that is what I’m here to do.” Chairman Inez Tenenbaum, NPR Report “Under Obama, Agencies Step Up Rule-Making”

Last week in a coordinated media extravaganza, an anonymous caller alerted Rep. Jackie Speier (D-CA) to the trace presence of cadmium in Shrek glasses being sold by McDonald’s. In a rapid fire series of events, McDonald’s announced a voluntary recall of the offending Made-in-America glasses “at the urging of the [CPSC] commission ”. The CPSC apparently pushed for the recall of the glasses by McDonald’s after quickly testing the glasses.

[It turns out that there were two "anonymous tipsters", one of whom is Jennifer Taggart, a regular reader of this blog. Ms. Taggart has acknowledged that cadmium levels on the McDonald's glasses are well within California's Proposition 65 restrictions. Prop. 65 is easily the most restrictive and challenging of the myriad local safety regulations.]

Rep. Speier seized the election year opportunity to lecture McDonald’s on safety: “’Our children’s health should not depend on the consciences of anonymous sources. Although McDonald’s did the right thing by recalling these products, we need stronger testing standards to ensure that all children’s products are proven safe before they hit the shelves,’ said Speier. ‘Cadmium is a toxic substance that is extremely dangerous to the developmental health of children. . . . Thanks to this anonymous tip received by my office, the proper agencies were alerted, necessary action was taken by McDonald’s, and the long-term health of millions of children is no longer at risk.’”

Jackie Speier is a Democrat representing the San Francisco area.

A media deluge followed the recall. Typical of the hyperbole is this article from NJ.com: “McDonald’s announced the voluntary recall after small amounts of cadmium were found in the enamel with which character images were painted on the glasses . . . . Long-term exposure to low levels of cadmium from those glasses can cause various health problems, including cancer, bone softening and severe kidney problems. [NJ State Assemblyman Paul] Moriarty, in a news release, demanded an investigation . . . . ‘It’s stunning that in this day and age our children can still come into contact with toxic materials just by using a glass featuring a cartoon character,’ Moriarty said in the release. . . . ” [Emphasis added] AP could not resist the McDonald’s cadmium frenzy that it helped to create: “A recall of 12 million cadmium-tainted ”Shrek” drinking glasses sold by McDonald’s raises questions about the safety of millions of similar cheap promotional products that have been sitting in Americans’ kitchen cabinets for years.”

It all boils down to trust, right? After all, it’s McDonald’s. McDonald’s is America, McDonald’s is children. If you can’t trust McDonald’s, who can you trust?

I will attempt to answer that question.

First – Can you trust McDonald’s?

Yes, absolutely, without reservation. McDonald’s (not a customer of ours, never was) has the best reputation of any company in the toy industry (in my humble opinion) for safety, conscientiousness and attention to detail. McDonald’s is HARDLY asleep at the wheel. Rep. Speier’s remarks are outrageous but for the fact that she is a California Democrat from San Francisco. Consider the source. I believe McDonald’s ten times out of ten against Rep. Speier.

On the other hand, if McDonald’s is so wonderful, why on Earth did they recall these glasses? Okay, you be the CEO of McDonald’s for a moment – what would you do? Fight for the right to sell cadmium-laced glasses? Argue that the glasses are “safe”, that toxic cadmium isn’t harmful? Please, McDonald’s had no choice because it has to protect its brand. Listen to the Moms in the video above. If they don’t trust McDonald’s, they will walk across the street to Wendy’s. McDonald’s has NO CHOICE but to “do the right thing”. The cost of the recall is a secondary concern. Burn, baby, burn.

Second – Can you trust an anonymous tipster?

Why be anonymous if you are acting “heroically”? Well, for one thing, being anonymous means you aren’t accountable if you are wrong. The two tipsters were using XRF guns, acknowledged by the CPSC to be imperfect and best used to screen for possible faults. It might be embarrassing – or expensive – to start a public panic and then be proven wrong. This mess might be seen as your fault and somebody might want you to pay for the expenses. Hmmm.

What if the caller had reason to hide his/her identity? This is the very worrisome scenario. There are many people who might want to rat out a McDonald’s. How about a competitor? Or a spurned supplier? A disgruntled employee or spouse of an employee? This is one of the primary objections I made to the public database – the potential for abuse is rampant. An anonymous tipster very well might be up to no good. McDonald’s loss could be the tipster’s gain – an ill-intentioned tipster in partnership with a self-promoting fear monger in election season (like Jackie Speier) could be a powder keg. [Ed. Note: It is worth noting for clarity's sake that Jennifer Taggart has identified herself so this discussion does not apply to her.]

This could happen to you, too. The CPSIA encourages this kind of rat-me-out frenzy. How many businesses will close or sell out because of this shameful law? Time will tell. In the meantime, the sport of trashing trademarks and company reputations will thrive at the hands of the “anonymous tipsters”.

Third – Can you trust the CPSC?

We ought to be able to trust them. Have they earned this trust?

Here’s a June 4th tweet from Scott Wolfson, Director of Public Affairs: “Scott_Wolfson: Note to reporters: the recalled McDonald’s glasses are not toxic.” Interesting – the CPSC apparently pushed for the recall of safe products. Wolfson is also responsible for the press release detailing this recall: “The designs on the glasses contain cadmium. Long term exposure to cadmium can cause adverse health effects.” Same guy. And Wolfson offered these calming words of reassurance to the AP: “Wolfson said the recalled glasses have ‘far less cadmium’ than the [recently] recalled jewelry. He would not say how much cadmium leached from the glasses in tests, only that it was ‘slightly above the protective level currently being developed by the agency.’”

I believe Mr. Wolfson is the author of the CPSC’s OnSafety blog – here’s how he counseled consumers about the McDonald’s glasses in a recent post: “If you bought these “Shrek Forever After 3D” glasses at McDonald’s – millions of you did – stop using them immediately. . . . The glasses contain low-levels of cadmium. . . . The company has stepped up to do the right thing [in issuing a recall].” [Emphasis added] He also justified the recall of non-toxic glasses in the New York Times as follows: “Both C.P.S.C. and McDonald’s are being highly protective of children in announcing this recall.”

Scott has a way with words, doesn’t he? Makes you wonder what his job is, exactly.

So the CPSC admits that the glasses were safe. Yet the “commission” urged McDonald’s to recall the glasses. Why? Wolfson says implausibly that the CPSC was being “highly protective” in recalling non-toxic glasses. Actually, “Why” may not even be the right question.

Let’s consider the question of “how”. On what legal basis did the CPSC press McDonald’s to take this step? The authority of the agency to demand a recall depends on the presence of a “substantial product hazard”. There is no other basis for the agency to take action – it cannot act on whims or because it is always crabby on Mondays. I have addressed this issue previously in this space, and noted that the authority to initiate a recall is based on the existence of “a product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of the risk, or otherwise) creates a substantial risk of injury to the public.”

If the CPSC’s Director of Public Affairs notifies the press that the product is not toxic, it is incontestably certain that the glasses don’t present a substantial product hazard in this case. For perspective, consider the views of the U.S. factory responsible for the glasses:

“[VP Ron] Biagi . . . added that [in addition to McDonald's] Durand Glass also does material safety tests. ‘We will do nothing (different) because we don’t need to,’ Biagi added. ‘You are always looking for the most healthful way to make a product. What we’re producing today, it is safe.’ Biagi said there are multiple suppliers, domestic and foreign, of the enamel used for the Shrek glasses. Other glass producers use the same product, he said. Late Friday, the company issued a short statement from its CEO for North American operations, Fred Dohn. ‘All the products, whether decorated or undecorated, that Arc International is delivering on the markets meet the highest standards of quality and safety,’ Dohn stated. ‘Arc International is a professional manufacturer that stands behind all its products. We therefore see this as an internal decision by McDonald’s and will be investigating the matter once we receive more information.’”

So what gives? By all appearances, the leadership of the agency substantially exceeded its legal authority in pressuring McDonald’s to recall these glasses. Any problem with that?

I won’t insult your intelligence with a rant about the trustworthiness of the Democrats who are running the shop these days. If you trust Jackie Speier and the like after this sorry tale, I can’t help you.

In closing, let’s recall the words of Ms. Tenenbaum: “Americans want to be safe. And they expect their federal government to protect them. So that is what I’m here to do.” By all appearances, Ms. Tenenbaum was doing exactly what she promised – her agency is wrapping you in bubble wrap whether you need it or not. She says that’s how you want it – no matter that it’s outside her legal authority, well-beyond any notion of common sense and implemented with a complete disregard to economic consequences or the impact on other market participants. It’s okay because the press eats it up . . . and it helps reelect members of Congress. Everybody’s a winner as we sink into the abyss.

Lowest Common Denominator Government. Yes We Can.

Read more here:
CPSIA – Lowest Common Denominator Government

CPSIA – Waxman Amendment Mark-Up CANCELLED for Today

In the wake of a private meeting between Henry Waxman and Joe Barton this morning, today’s mark-up of the Waxman Amendment 2.0 (Consumer Product Safety “Enhancement” Act of 2010) has been CANCELLED. It had already been pushed back to 2 PM EST for a supposed “scheduling conflict”. The content of the Waxman-Barton meeting is not known, however Mr. Waxman has been adamant that he would not proceed with this bill if there was ANY opposition. At a mark-up, the opposition has the right to introduce amendments. This is what Mr. Waxman intended to avoid. Perhaps that was not longer in his control, which may have led to the cancelled mark-up session.

What are the next steps? It’s not certain at this point. There is an agreement in place between the Dems (Waxman) and Republicans (Barton) that ALL bills will pass through mark-up and subcommittee prior to committee consideration. IF this agreement is still being observed (no exceptions), then this bill only moves forward AFTER a mark-up. If there will be no mark-up session that features amendments, then this bill may be on life support in its present form. That suggestion is based on too many assumptions to set out here, but that may be the reality.

Another possibility is that this meeting featured a much stronger push for a hearing. Believe it or not, our pain and suffering has been noted. In addition, the evidence of insanity set in motion by the noxious CPSIA is mounting. Rumors swirl that a real legislative hearing may come next. Don’t hold your breath . . . but it’s possible. Real companies telling about their real issues.

The legislation, which I strongly oppose, has garnered the support of several key corporate players, like the ATV industry, the bike folks, the mass market retailers (no need to shed a tear for them anymore, I guess) and even little HTA. Some of them have practically gushed over these meager gains, perhaps haunted by the threat (implied or otherwise) that to spurn this attempt is to get nothing. No one wants to cut their nose off despite their face. This is how we compromise ourselves to hell, frankly. I remain opposed to a defective and unworkable legislative scheme that reduces our regulators to paper pushers, our financial statements to shreds and elevates our tort lawyers and safety testers to unknown new heights – all without making a MATERIAL positive impact on children’s safety.

Please spare me the retort about falling recall rates. That really isn’t the right metric. After all, we could all go out of business and recalls would fall to zero. A squeeze induced by sabre-rattling regulators wielding big penalties can cause a lot of “reform” at huge expense – but produce no results.

The right metric is injuries and deaths. Has the handiwork of Mr. Waxman and Ms. Tenenbaum led to statistically significant lower injuries and deaths? Well, my statistical analysis of lead-in paint recalls in a 25-month period from January 2007 – January 2009 showed 125 recalls (an all-time high) . . . and one injury, no deaths. That’s what we are trying to improve upon. And if anything has actually changed since then, what did it cost? Do our markets function anymore? Under the CPSIA, there are already about 2500 pages of rules for companies like ours to master, implement and obey. Wait until I summarize the so-called “15 Month Rule” for you – the children’s market is on a death march to oblivion.

Until the CPSIA is restored to sanity, we are facing a terrible end. Everything about safety in children’s products has been fouled by the CPSIA and the pending amendment, the new “enhancement” cooked up by the Dems, is completely off the mark. We can only hope that members of Congress with the courage of their convictions and a dash of common sense will continue to push for rationality in our safety laws and regulations. That’s our only hope.

Read more here:
CPSIA – Waxman Amendment Mark-Up CANCELLED for Today

CPSIA – Why the Waxman Amendment MUST BE REJECTED

As we face the dilemma of what to do about the Waxman Amendment 2.0, I want to point out recent quotes by Sam Zell, a Chicago-based real estate entrepreneur. At a recent panel discussion of the Urban Land Institute, Mr. Zell bemoaned how our federal government governs these days: “[What's] going on now is frightening . . . Up until this administration, you knew the rules and had a very stable environment . . . If the current situation is indicative of the next half century, I think we’re screwed.”

Screwed. Mr. Zell’s words ring in my ears.

In the wake of Friday’s contentious meeting with the Waxmanis on Capitol Hill, the Dems announced that a new draft of the Waxman Amendment 2.0 would be released on Monday. In their usual bullying style, Waxman staff issued yet another ultimatum, advising this time that after release of that next draft, we all must “decide” whether or not to support the amendment. If we won’t support it, they say they have better things to do.

The meeting produced no breakthroughs. The fundamental flaws in the law remain unaddressed, and meager goodies meant to partially salve the wounds of a limited number of companies remain the focus of the legislation. The goal of this legislation is to split the group protesting this law, peeling off the ATV’rs, the book industry, the crafters and mass market retailers. None of these groups is a clear winner, either. The rest of us, namely the Small Business community, will be left as roadkill.

A request by the ranking Republican for hearings was rejected on the grounds that there has been too much “jawboning” already. We are apparently all Chatty Cathies. Shame on us.

This reasoning behind the limited intent of the legislation was on display at this week’s Senate Appropriations Committee hearing attended by Illinois’ own Senator Dick Durbin and Maine’s Senator Susan Collins with only one witness, CPSC Chairman Inez Tenenbaum. Don’t watch the hearing on a full stomach . . . . Among other things confirmed by this hearing was that the functional purpose exemption embedded in Waxman Amendment is supposed to benefit a “narrow class” of products (in the words of Ms. Tenenbaum), namely bikes, ATVs and books. Lucky them.

Sadly, the hearing also confirmed the bizarre impression held by members of Congress that the small business issues are limited to crafters, for some reason a particular source of angst. Our company happens to also be a small business, although we no longer operate out of a bedroom or a garage – and we face major issues caused by this law. While I share concern for the tiniest of enterprises, the economic problems don’t end there. In the words of the Chicago City Treasurer Stephanie Neely: “We are truly an economy of small businesses. And it’s important that they thrive. They do a lot of employing. . . on a day-to-day basis, these are people who are employing one, ten, thirty people, and and it’s important that we help them.” Oh yeah, jobs.

The Waxman Amendment should be REJECTED until comprehensive legislation to fix the law is brought to the floor. If we let them pass this law, organized resistance to this law will be greatly diminished, and any opportunity to restore a sensible rule of law may be lost . . . permanently.

Consider the consequences if this amendment is passed:

- Our national safety law has changed from risk-based to standards-based. Mindlessly focused on lines in the sand, the new law’s definition of safety has been completely rubbed out. Without this compass, the world of safety has become an unpredictable, unstable random walk. The Senate hearing included (incredibly) a rehashing of the “dangers” posed by Zhu Zhu Pets, the need for BPA recalls, the potential risk posed by triclosan and the CPSC’s ability and interest in initiating recalls for these “dangers”. Given that we no longer can figure out what’s safe and what’s not, every possible threat brings up discussion of recalls.

Try to run a business under conditions like that.

The risk of this reactive form of government CANNOT BE OVERSTATED. On April 13, Representative Edward Markey proudly sent out letters to 13 companies demanding that they stop using the antibacterial compound triclosan. The list of targets was almost certainly supplied to him by consumer groups. Mr. Markey, for all his power, is not a regulatory agency and does not have authority, resources or expertise to act as a regulator and his consumer group buddies are also not empowered to regulate our markets (thankfully). He is only a Congressman (up for reelection in November, btw). However, nowadays, that’s apparently enough to regulate. I would not want to receive such a letter. I also do not cotton to this style of government.

- The complexity and volume of safety law being spewed out is truly breathtaking and overwhelming. I literally cannot keep up anymore. i can’t read it all, watch it all, digest it all or even write comment letters. [Unfortunately, I still have job responsibilities, too.] On a recent Friday, the CPSC expelled almost 600 pages of new rules – and they were IMPORTANT. They included the new so-called 15 Month Rule – have you read it yet? This 100+ page rule has been written to control children’s products as though we were merchants of death. We are not. The April 15 hearing to review this regulatory morsel was a mere five hours long, so lengthy that the CPSC has only posted one hour of the fun so far. Ironically, this hearing wasn’t broadcast live, as it conflicted with broadcast of the first meeting of phthalates CHAP. Can’t broadcast two mega-hearings at once.

Do you get it yet?

By my reckoning, the rules applicable to generic children’s products is now nearing 2500 pages. If you take into account childcare items and other ancillary matters, the number of pages is probably well in excess of 3000 pages. We are clearly heading to a place where the rules total many thousands of pages. And WHY are there so many rules? It has nothing to do with actual safety. The injuries (one) and deaths (one) from lead in 2007/8, the highest outbreak of recalls in our history, were simply nominal for a country 300 million people.

In any event, you are going to have to know and bear the risk of ALL of those rules. And the new rules keep coming, very often overruling the rules you already mastered. For those you who are tempted to support Mr. Waxman’s Amendment, please THINK about this.

- When the CPSC is done with its rulemaking, it is going into enforcement mode. That was a clear message of Ms. Tenenbaum’s testimony in front of the Senate Appropriations Committee.
Her Compliance initiative will feature another 41 employees at a cost of $4,7 million to catch you violating rules. In addition, the resources of the existing agency will also shift to catching you. If you have read any of my writings about penalties, perhaps you can figure out what that means.

Bottom line, having divorced their mission from common sense or any notion of risk, the CPSC built an ornate and truly incomprehensible set of safety rules that even mega-corporations have admitted exceeds their capacity to manage. For small businesses, not merely the home crafters, compliance will be simply impossible. If those businesses are unable to understand the rules or afford to comply (while staying in business), they won’t be able to follow them, and if the agency is bent on catching them, well, the results will be grim.

If you can’t see this coming – my friend, you are blind.

The Testing and Certification stay ends on February 10, 2010. Don’t expect this Commission to extend it again. The meter is running.

IF you support the Waxman Amendment because you really want the meager relief they are dangling, you will be conceding that you are prepared to endure what I have described. You are not ready for that, and you know it. Support for revising the bill comprehensibly will be greatly diminished at the same time, and even our most steadfast supporters in Congress will give up on us.

As painful as it may seem, you MUST decline to support this legislation. We must, as a community, insist on a true fix, one that addresses the real problems caused by the CPSIA. Nothing short of a total fix will suffice. The ornate rules needs to be simplified and refocused on real issues. The needless self-destructive imposition of blinding costs needs to be reversed. Excessive bureaucratic processes and exemptions only for big industries and big companies must end.

NOTHING that I am suggesting will or should amount to a retrenchment in safety for children or anyone else. It is no “free pass” for industry, whatever that might mean. It is simply means a return to sanity.

That may be too much to ask for this Congress or this Commission. I am not optimistic. Make me a believer this week – REJECT THE WAXMAN AMENDMENT.

Read more here:
CPSIA – Why the Waxman Amendment MUST BE REJECTED

CPSIA – A Quick and Incomplete Analysis of New Draft Waxman Amendment 2.0

With only a few hours to look over the new draft of the Waxman Amendment 2.0 before tomorrow’s meeting, I guess the idea is that we are supposed to drop what we are doing to complete an analysis fire drill. Power trip for the Waxman staffers? Possibly. Still, what choice do we have? I thought I would outline my preliminary comments to contribute to the debate.

It goes without saying that this is entirely my own work without the benefit of discussing it with others similarly situated and without the opportunity to compare notes. It is therefore likely that I have missed something important or made other mistakes. Sorry . . . . This post is also painfully long. Again, given that Mr. Waxman hardly cares about your problems or mine, I have little choice but to post this as one essay. Again, sorry . . . .

a. Modifications to Section 101(b)(2) Exemption Process:

• The idiotic post-exemption warnings provision has been deleted.
• The three-pronged exemption test remains in place, as does the ambiguous and troubling term “practicable”. “Practicable” is a sneaky Waxman approach to providing an escape hatch for big industries with narrow product definitions like ATVs and books. You’re not supposed to know this. Our laws aren’t for the little people anymore.
• The third prong of the exemption test has been clarified from no effect on “public health or safety” to no effect on “the user’s health or safety, taking into account normal and foreseeable use and abuse by all foreseeable users.” This change seems like new belts and suspenders to make it easy to deny an exemption. The Dem zealots want to be sure no one gets an exemption but ATVs and books, wink-wink-nudge-nudge.
• Poor applicants for exemptions are still obliged to wait hungrily by the door of the CPSC for the leavings of rich supplicants. Yes, small business owners who want exemptions like the big guys but can’t afford to pay the big bucks can reuse the big guys’ consultant’s reports provided the evidence is considered non-proprietary. [Whatever that might be.] Nice . . . if someone else has already paid for it and submitted it in an exemption process, and if you have access to it (and have found it), you can use it. Noblesse oblige, I guess. Thank You, Kind Sir. I speak for all the little people . . . . Oddly, this concept reappears in a confusing provision called “Previously Denied Petitions” that only refers to previously denied petitions in its title (I don’t get it).
• In another “how closely are you watching me?” change, the grounds for decision provision now permits the Commission to consider “only” evidence presented by “interested parties”, rather than the evidence presented by the party seeking such exceptions. So if you ever get as far as an exemption hearing, this provision turns it into a town meeting. How would you like it if anyone could enter and participate in your litigation without your consent . . . like your competitors or your business enemies? I have a good idea – why not just write into the law that Rachel Weintraub will be considered a party in interest to every action at the CPSC?
• The Narrowest Scope provision has been modified to clarify that you must not only address each component but also each material. The paranoia you sense in this legislation is just the precautionary principle at work. The staffer-gnomes who have been crafting this legislation are not thinking about how our markets work or should work – they are simply obsessing over how we business people might find loopholes. Of course, it is in the nature of business people to try to avoid laws, we are all so evil. Oh yeah, I forgot . . . .
• The Limitation of Exception provision now is framed in terms of “all foreseeable users” which I can only assume is meant to make the burden of proof higher for supplicants. After all, if you can foresee a so-and-so using the product (I won’t supply the colorful example), then the Commission must limit the exception. No possibility of risk can be tolerated by the precautionary principle folks.

As the provision for exclusions has not changed much, here is my analysis of the original language for your reference.

b. Treatment of Resale Shops by the Waxman Amendment:

• The provision defining a “used children’s product” seems to now mean (a) an actual used children’s product, and (b) new goods donated for a charitable purpose. This would seem to protect resale shops from liability for sale of items violating the lead provisions (but not the phthalates ban, notably) unless the seller or the person who supplied it to the seller knew it was in violation of the lead provisions. If that seems somewhat circular, it is. In this case, the law as drafted encourages resale shops to remain as ignorant as possible. This is Waxman’s “Don’t Ask, Don’t Tell” policy. Nice.
• There has been no clarification about the application of this provision to consignment shops. Do they “obtain” goods for resale if they never take title? Something fun to speculate about!
• In a little-noticed provision, the definition of “seller” includes lenders or donators of used children’s products. Thus, for lending libraries, they will be in the clear if they lend used goods, but will be on the hook if they lend new product. Does it become “used” after one loan, and if so, what does this mean? The legal department in your local children’s library will figure this out. Sure. As to people who donate, the provision is circular again. As best I can figure out, you are not subject to the lead rules (only) if you are donating something used for charitable purposes, but if you give away something new, you are on the hook. At least, that’s how I read it. So the bottom line is – don’t give anything new to a charity, just give them junk. This is what Mr. Waxman wants. And that means this is what Congress wants.

While these changes may be an improvement, they are sadly improvements without much impact. This provision remains convoluted and hard to understand. The definition has numerous exceptions and also avoids giving the same shelter to resale shops for all the other picayune provisions of the law, like the phthalates ban. Frankly, without a clean exemption for this industry, resale stores are all going to avoid this class of goods. The complexity alone will kill this exemption except for the most sophisticated participants in an industry not known for its legal skills or resources. These stores won’t hire lawyers to check their work. They can’t afford it.

This is my original criticism of this provision, which is still applicable.

c. Prospective Application of 100 ppm Lead Limits – this provision was not changed in the new draft.

d. Low Volume Manufacturer “Exceptions”:

• Thank heavens, they changed the term of art for these small fry to Small Batch Manufacturers. This was done at the insistence of the HTA. What a victory! Someone please explain this to me.
• The “In General” provision is basically unchanged, other than the fancy new name for the supposed beneficiaries of this largess. Notably, the last sentence was clarified to make sure no one could contend that Waxman inadvertently gave the Commission the power to grant “alternative testing methodologies” for ANYONE but the small batch guys. There’s so much trust and love flowing here . . . .
• The truly non-existent “relief” of this provision remains EXACTLY the same. Here it is, bask in its wonderfulness: “The Commission . . . may, by regulation, provide alternative testing requirements for covered products manufactured by small batch manufacturers in lieu of those required under subsection (a) or (b). Any such alternative requirements shall provide for reasonable testing methodologies to assure certification based on compliance with the relevant consumer product safety standards. [Emphasis added] Standing ovation? These lucky micro-businesses must meet alternative TESTING methodologies that ASSURE compliance with the standards. In other words, they gotta test. They even added a “savings clause” to forbid any relief here (such as it is) if any foreseeable user might be foreseeably at risk. Some relief.

Notably, the reach of this section has now been limited to “covered products”. This new term, which incorporates a three-prong test (this is the second three-pronger of this amendment so far, but not the last). [See below.] Please NOTE that this new term means that the ONLY relief the CPSC can grant is to these small fry products. A product that exceeds the limits of a “covered product” will NOT enjoy any theoretical testing relief, even if made by a business qualifying for relief overall. Should you care? Well, in my view, if you have to endure the burden of full compliance with one product, you have to build the full infrastructure and bear the related liabilities. Thus, these micro-businesses supposedly being saved here are actually at substantial risk of suffocation if even ONE product sells well. Too bad for them.

The absurd and utterly inappropriate definition of a “low volume manufacturer” has been completely jumbled and incorporates the new concept of “covered products”, too. Let me try to sort out this for you.

- As noted above, only “covered product” enjoy any potential relief under this section. The “covered products” test is a three-prong test: (i) manufactured not more than 5,000 “units” of the product in the prior fiscal year, (ii) had not more than $30,000 in sales of the product in the prior fiscal year, AND (iii) had no more than $500,000 in total sales in the prior fiscal year. [Do you feel vines growing over your brain yet?] Dollars are indexed for inflation. Notably, the definition ONLY applies to the manufacture of these items, NOT importation. Too bad, importers. GOTCHA!

The implication of this definition is that if you grow to over $500,000 in total sales, all exemptions applicable to any of your low volume items goes up in smoke instantly. That last dollar is gonna HURT. You also cannot get relief for any individual product if your sales of THAT item are greater than 5,000 “units” per year or $30,000 in sales. Here’s another compliance tip: don’t grow your business! Too hard? Don’t worry, the other policies of this government should help you meet this goal . . . .

- The definition of a “small batch manufacturer” defines who should be treated with special charity by the CPSC under this marvelous section of the amendment. It’s not going be a long list. Who wants to see another three-prong test?! Okay, break out your calculator so you can figure out if they are referring to you: (a) AT LEAST TWO-THIRDS of “the manufacturer’s products” (I love that term) meets this two-part test: (i) the manufacturer manufactured or imported not more than 5,000 units of the product in the prior CALENDAR year, AND (ii) the manufacturer had not more than $30,000 in sales of the product in the prior CALENDAR year, AND (b) the manufacturer had not more than $500,000 in sales in the prior CALENDAR year.

This is getting fun! Okay, first we need to decide – is it a two-prong test with one prong having two sub-prongs, or is it a three-prong test? This is a rather metaphysical question . . . but I say it’s our third three-prong test of this short amendment. [Imagine how many three-prong tests are in the health care bill.] I welcome your insights on this question.

There are some interesting quirks in the Small Batch Manufacturer definition. First, this provision applies to imported products, but the “covered products” definition does not. Gotcha! What does this mean? Who knows. The head spins . . . . Even better, the definition of “Small Batch Manufacturer” is based on calendar year calculations and the definition of “covered products” is based on fiscal year calculations. Love it. I learn so much from Mr. Congress. Apparently, Congress wants it to work this way because there must be some sort of dangerous loophole for people who have fiscal years which are not the calendar year. Mr. Waxman is onto your game, you desperadoes! There’s no escape!

At least the Waxmanis kept it simple. Good job, guys, it’s artful!

Btw, they added a little provision to make sure that the Commission investigates the structure of your business’ “affiliations”. Clearly, the Commission needs to make SURE they correctly tote up your revenues for this ornate determination. [Little known fact: the CPSC uses clacker balls for this work.] The reach of the Obamist/Waxman government into your private affairs, in ways completely and utterly unrelated to public interest or safety, apparently knows no bounds. Get your files ready, little businesses – the CPSC wants to take a peek. Perhaps check out your tax returns and . . . oops, it appears you took a few deductions that you weren’t entitled to. We can just let our sister agency know, you don’t have to do ANYTHING, we’re just here to help.

Small business people, you should be flipping mad over this pathetic attempt to “help” you. My original criticism of this provision is still largely applicable.

e. Phthalates Ban Exception for Internal Components: This is largely intact from the prior draft although they did add a provision modifying the Commission’s right to adopt the definition of an internal component from the lead accessibility standard. The Commission must now, “as appropriate”, consider whether the component can be placed in the mouth. We are talking about internal components here.

I wish I had a laugh track for my blog . . . .

f. Removal of CPSA Section 6(b) Due Process Rights of Manufacturers: has been eliminated from the draft.

g. Voluntary Recall Standards to be Matched to Mandatory Recalls: has been eliminated from this draft.

h. Imminent Hazard Panic Attacks by the Commission: has been eliminated from this draft.

i. Subpoena Power for Underlings at the CPSC: This provision was trimmed back partially to apply only to physical and documentary evidence. This modest restructuring of this new right does not in any way address the issues I have pointed out in the past (here and here). This new subpoena power is not essential to the operation of the CPSC, regardless of their assertions, and represents a significant degradation of procedural protections that encourage business people to invest. When all trust is destroyed among the regulated community and its safety regulator, who will want to invest? Hello, Congress?

CONCLUSIONS:

The Waxman Amendment has been improved mainly by deletions of several truly awful and duplicitous provisions. Many defective provisions in the original draft survived the revisions. What’s left provides little substantive relief to the unwashed masses, but promises some sub rosa relief to the book industry and ATV’rs without giving the appearance of favoritism. There is little to cheer here for resale shops, small businesses (even micro-businesses, hello HTA, are you there?), education companies, apparel companies, you-name-it.

And many important issues are left completely unaddressed. I have previously provided my most discrete list of CRITICAL missing elements that must be part of any meaningful amendment of the CPSIA:

• Risk Assessment by the CPSC and/or the Commission.
• Changes in age limits for the lead standards and phthalates ban.
• Narrowing of the scope of “Children’s Product” to eliminate many categories of products unthinkingly pulled into this law by its overly broad language.
• True reform to protect small businesses.
• Tracking labels relief.

My full list of needed changes is found here.

More fun to follow tomorrow, I am sure.

Read more here:
CPSIA – A Quick and Incomplete Analysis of New Draft Waxman Amendment 2.0

CPSIA – Let’s Count the Reasons to be Outraged by CEH

Perhaps like me, you felt a surge of fear and loathing today over the Center for Environmental Health’s effort hand-in-hand with CA Attorney General Jerry Brown to find products with “high levels of lead”. CEH announced to great fanfare that it had found seven items that violated the law, and Jerry Brown plowed right in behind with a cease and desist order, demanding that these items be removed from shelves immediately. Several of the affected companies denied categorically that there were violations of law. I assume that Proposition 65 lawsuits are being prepared, and suitable penalties will rain down from the heavens in due course (you know, in three years) to properly punish the “scofflaws”. Nice work, CEH.

CEH justifies its actions to destroy the children’s product industry with misleading facts about lead. Here’s how they describe the dreaded danger they are “protecting us” against:

“Lead is a stunningly toxic metal. A long list of problems has been linked to lead exposure: lowered intelligence, behavior problems, cancer, strokes, high blood pressure, kidney problems, anemia, cavities, and delayed puberty. While exposure to lead paint in old houses remains the most significant source of children’s lead exposure, about 30 percent of children with high blood lead levels are exposed to other sources of lead, including toys and other children’s products.”

They go on to list a parade of horribles, such as “University of Cincinnati researchers found that arrest rates of young adults (both for violent crimes and all arrests) were linked to the blood lead levels of these adults when they were children. Higher childhood lead exposure was associated with higher arrest rates.”

The interesting thing about these assertions about lead is that they are TRUE . . . and they are also IRRELEVANT in this case. There is absolutely no way to prove or even assert in any reasonable fashion that the products cited here could EVER poison children in this way or are responsible for ANY of the cited lead horrors. The CEH is just using plain vanilla scare tactics – did it work on you? Unfortunately, some newspapers bought it, hook line and sinker.

I hardly know where to start. Here are a few reasons to be flippin’ mad about this stunt:

I. The Seven Items Present Little or No Risk. Consider this list of “frightening” product defects:

a. Disney Tinkerbell Water Lily necklace – Connector on pixie dust charm contains 22,000 parts per million lead. [I believe this connector is perhaps 3 mm in diameter.]

b. Barbie Bike Flair Accessory Kit – Pink star fabric contains 6196 parts per million lead. [This is an item used on a bicycle.]

c. Dora the Explorer Activity Tote – Orange fabric on back of tote contains 2348 parts per million lead. [I believe his fabric is not detachable and cannot be chewed.]

d. [This one's my favorite] TKS girl’s sandals – Orange insole contains 3957 parts per million lead. [To access this lead, you must lick or chew on the INSOLE of a pair of sandals. Yum!]

e. Kids poncho – Yellow fabric contains 677 parts per million lead. [Gotta chew on your poncho.]

f. [This is a close second] Faded Glory girl’s shoes – Sole contains 1331 parts per million lead. [It's like my old joke about licking the soles of your shoes after walking to school. Happens all the time . . . .]

g. Cherokee boys belt – Surface of belt contains 4270 parts per million lead. [I have no idea what the problem is here. Still, belt chewing is exceptionally rare and not foreseeable in my opinion.]

I hope you haven’t begun rioting in the streets over these tragic “violations of law”. Let’s recap – this rogue’s gallery includes a CONNECTOR, the fabric of a decorative star on a bike accessory, backing on a tote, the INSOLE OF A SHOE, the SOLE OF A SHOE, a poncho and a belt.

Let me be blunt – how brain-damaged must someone be to actually believe these things are dangerous?

II. Cassandra Here, Have I Mentioned My Concern about State AGs? Ahem, I believe I have noted my strong concerns about State AG enforcement of the CPSIA in the past (note, especially my April 4 post about Mr. Brown). In fact, I made a big point of this issue in my unread letters sent to the Congressional conferees in July 2008 . . . to no avail. Obviously, I was way off in my thinking. Worrywart . . . .

How outrageous is Mr. Brown’s enforcement action? Well, he worked in concert with CEH apparently without talking to the CPSC. CEH practically brags about this (“In collaboration with the California Attorney General the Center for Environmental Health has spent the last six weeks monitoring compliance with the new law. . . . In October and November 2009 we purchased about 250 children’s products from major retailers in the Bay Area and San Diego. . . . We provided information about all of the violations to the California attorney general for enforcement action.”). The CPSC seems to be irrelevant to CEH and Mr. Brown.

Ahem, CPSC – what do you think about being rendered irrelevant by a grandstanding State AG and an even more disruptive consumer group? Welcome to my world. Ms. Tenenbaum, in your continuing efforts to cultivate a positive relationship with the State AGs, you may wish to reflect on the behavior of Mr. Brown and his apparent commitment to you and your efforts to calm the markets and implement the new law. Yes, commitment, that’s a nice word for it, don’t you think?

Here’s a word to ponder: “preemption”.

III. Publicity-Hungry Consumer Groups Have Proven Their Own Corruption. Stirring up this kind of public shame and panic may be good for raising contributions to CEH, but it is nothing more than a shameful demonstration of anti-social behavior. REAL JOBS and REAL LIVELIHOODS are impacted by CEH grandstanding and NO possible public good was accomplished by the latest losses inflicted by the new toy safety laws. Even CEH concedes things are much better these days (on CBS News, Executive Director Michael Green noted “It is definitely a safer Christmas than it was two years ago.”). Thanks, Mike, you have really reassured the American consumer!

CEH’s grandstanding over ridiculous assertions of danger is irresponsible and in light of Green’s concession of the safety of the marketplace, morally corrupt. Consider that in a six-week effort to find something “bad”, the CEH schemers examined 250 products, and all they could find is a connector to a charm, the sole of a shoe and the INSOLE of a shoe. Wow, what a smoking gun! However, with a hepped-up State AG perhaps preparing a gubernatorial bid, even these pathetic findings are the perfect makings for a publicity event.

As if these acts of desperation, self-interest or moral degradation were not enough, both CEH and State AG Brown then attempt to convince the public that these products actually constitute a danger. “‘Private testing uncovered a number of products designed for children that contain dangerous and illegal levels of lead,’ Brown said in a prepared statement. ‘These products must be removed from store shelves at once to protect our kids from toxic lead exposure.’” In the quote above, CEH contends that the presence of lead in products like this can be connected to “lowered intelligence, behavior problems, cancer, strokes, high blood pressure, kidney problems, anemia, cavities, and delayed puberty”. Oooh, sounds AWFUL – now prove it! CEH and their merry band of anti-commerce loonies can only assert these harms – NO data exists that can link lead in these manifestations to ANY physical harm. But what’s a good consumer group publicity event without unaccountable fear mongering?

Any sane adult or experienced parent knows that all this is baloney. This sad state of affairs confirms that the consumer groups do NOT deserve a leading role in setting the rules of the road in safety. They gave up the moral high ground when they decided to sell fear rather than advocate for safety.

Final Words: I was recently sent a blogpost link written by a consumer group about my testimony at the CPSC on November 10 about the CPSIA public database. Of course, since I am apparently a force from the Heart of Darkness (as you know), the consumer group blogpost scorned my testimony and painted the usual conspiracy theories that the wingnuts tend to favor. What was particularly notable about this post was the following note at the bottom of the page: “Comments are closed.”

Get it? The consumer groups like having the last word. They like spreading the news that best suits their interests but don’t want to answer to anyone else. [We have seen this before.] The consumer groups depend on the kindness of strangers – they need your contributions to pay their salaries. What better way to do this than sell their souls for some headlines? If you are the ones paying into their coffers with the thinking that they are looking out for you, I think you should carefully ponder the “good work” of Mike Green and his gang this week. Is this good for America? Is anyone safer now or better off? Or . . . are CEH and the other aligned consumer groups a bigger part of the problem than previously recognized?

After this stunt, I certainly hope no one will stick a microphone in Mike Green’s face again.

Read more here:
CPSIA – Let’s Count the Reasons to be Outraged by CEH

CPSIA – Brace for It, Things Are About to Get WORSE

CPSIA Testing Costs . . . Tracking Labels . . . Retroactivity . . . Civil Penalties . . . Criminal Penalties . . . Phthalates ban . . . State AG enforcement . . . Market Chaos . . . It’s bad, bad, bad right now. Could it REALLY get worse? Consider Section 102(d)(2)(B) of the CPSIA, the latest horror story to smack you in the kisser: “(d) ADDITIONAL REGULATIONS FOR THIRD PARTY TESTING . . . (2) COMPLIANCE; CONTINUING TESTING.—Not later than 15 months after the date of enactment of the Consumer Product Safety Improvement Act of 2008, the Commission shall by regulation . . . (B) establish protocols and standards— (i) for ensuring that a children’s product tested for compliance with an applicable children’s product safety rule is subject to testing periodically and when there has been a material change in the product’s design or manufacturing process, including the sourcing of component parts; (ii) for the testing of random samples to ensure continued compliance . . . .” Nice and obscure, buried deep in the CPSIA. Never heard of it? Ayyy! Haven’t I told you that you must ALWAYS read the fine print??? This rulemaking, which has been giving CPSC Bar attorneys sleepless nights but has otherwise escaped the attention of the business community, is due in about seven weeks (November 14 deadline). It has the potential to be the final nail in our coffin, guys. Right now, there are no rules on frequency of safety testing. We are free to negotiate with our customers or establish our own testing plan. This has worked rather well for many, many years – after all, less than 0.01% of all children’s products are EVER recalled. But no longer. The CPSC is going to tell us how to assure safety and quality now. The premise is that we are incompetent to do so without government involvement. In our company’s case, the 130 pieces we recalled in 25 years (one incident) out of perhaps a billion pieces sold is no proof that we know what we are doing, apparently. Thank heavens we will finally have someone qualified to oversee our processes! The speculation is that the CPSC is going to specify testing every X pieces or Y lots, or at least annually. In addition, the requirement to have random testing suggests that we cannot be allowed to supply testing samples directly. The “idea”, as simple-minded and insulting as it may be, is that manufacturers might somehow pull the SWITCHEROO after a test report is issued. After all, we are SO EVIL ! The CPSC does, actually, worry about the “switcheroo”. They have mentioned it repeatedly as one of the impediments to the long-promised component testing rule that is aging like fine wine somewhere. NEVER has anyone pointed to a SINGLE recall that involved a “switcheroo” to my knowledge, but whatever – laws don’t need any basis in reality anymore. Hence the CPSIA. Math Interlude Begins Here . . . . I have submitted information to Congress on testing for one of our telescopes. We recently obtained a new quote on testing – it now costs about $11,500 all-in (including the 23-24 samples). Our annual revenue for this item before the econony crashed was about $30,000 per annum. Assuming gross margins of 33%, typical for the toy industry (and easy for illustration purposes), our annual gross profit (not NET profit) would be $10,000. The cost to test this item is MORE than our annual GROSS PROFIT. This means that the telescope dies – even IF we can set our own reasonable testing program. If testing on this item is conducted annually, our COMPANY dies, too. Let’s look at it another way. Say your testing cost (including samples and so on) is $3,000 for a particular product. How much profit do you require to make it worthwhile to sell that item? If you need a gross profit 33% to make 5% on the bottom line, presumably you cannot afford an annual testing cost of even 5% of the total revenue of the item. If you accept breakeven as the tipping point for this illustration, then the math is also simple: $3,000/5%, or $60,000 in annual revenue. Ideally, you would want more than that so you aren’t just “trading dollars”. You would be marginally profitable at $80,000 in annual revenue for this ONE item. In the specialty market, a product producing $80,000 per annum is pretty darned good. The profit you would earn on this $80,000 item would be 5% net profit or $4,000 less the testing cost of $3,000, or a grand total of $1,000. Sell $80,000 in telescopes, make a thousand bucks. Nifty, that must be how Bill Gates got so rich. Remember, this also means that the prospective revenue hurdle for any NEW item is ALSO $80,000 per annum revenue. AND you would have to front $11,500 before you sell dollar one of the new item. Hmmm, that might cut your product development pipeline down a LOT. In fact, this annual testing requirement will send many companies scurrying into other markets, such as the mass market or into other businesses, in any event far, far away from the CPSC and this law. I do not see how the education market would survive. Honestly, virtually every manufacturer serving the NSSEA market (educational dealers) is a small company. Even the bigger small companies still do insufficient revenue on the vast majority of products to justify this expense. I know that this rule ALONE could many companies to shed at least two-thirds of their product line. That’s too horrible to contemplate. Math Interlude Ends Here . . . . It is another irony of this rule that by formalizing the requirement to retest when you change components, you actually provide a negative incentive to become more efficient or more safe. There is no incentive to change factories if you save less than the new testing costs. It will take our factories about two seconds to realize that this gives them dominion over their customers. American businesses will be tied to their sources irretrievably even as costs rise, and will thus be at a cost disadvantage outside the U.S. to more efficient European and other competitors. In addition, the law punishes companies for improving their products by imposing a testing penalty on any change. Thus, your incentive to change a product to, for example, make it better or safer is greatly reduced – you will pay (literally) for your good deed. As these innovations are often voluntary, it will be impossible for the government to know how you might have improved your products had they not meddled in your business. You save money, and your products are more expensive, uncompetitive and less safe. What a great way to run an economy! Given everything that has happened to date, we shouldn’t expect a Knight in Shining Armor to emerge from the CPSC to save us. After the double-speaking phthalates standard and tracking labels guidance , plus the truly stupefying rules on exempt materials , I find it hard to believe they will do the right thing here. The lip service by Commissioners about recognizing the needs and legitimate concerns of the business community has been just that – lip service. How could disaster be averted? It would take unprecedented bravery and character by Inez Tenenbaum. Democratic leadership in Congress has thumbed its nose at the children’s product industry. It would be overly kind to call their attitude a calculated indifference to our fate. That leaves us in the hands of Chairman Tenenbaum. Thusfar, Ms. Tenenbaum has chosen to kiss the pinkie rings of Mr. Waxman and Mr. Rush and with Southern charm, coo about the “good statute”. She has done nothing to stand up for the moral, law-abiding, crucial businesses serving the children’s market despite overwhelming documentation of the senseless damage being done by the terrible CPSIA. Ms. Tenenbaum needs to have a change of heart. If she takes the route of least resistance and issues guidance requiring frequent testing and other unnecessary but expensive similar requirements, it is probably game over for everybody . On the other hand, she could rise to the call of history and tell Mr. Waxman to drop his pretense that this law is somehow workable. Frankly, there is no data available to justify Section 102(d)(2)(B). The assertion that the government must, for the first time in history, tell us how often to test to assure quality has no basis in fact. It’s just a Congressional staffer’s (or consumer group’s) lunkheaded idea. Ms. Tenenbaum, it’s your call. You can save us and be a hero, or you can send us down the river and be remembered as the one who committed this mortal sin. You won’t be afforded the opportunity to blame this one on Congress – you can act, and you know it.

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CPSIA – Brace for It, Things Are About to Get WORSE