CPSIA – ICPHSO Update -Remarks of Chairman Inez Tenenbaum

Inez Tenenbaum gave a keynote address at lunch at ICPHSO today. I would have preferred to rely on the actual text of the speech before writing about it (not yet available online at the CPSC website), but wanted to give you my impressions quickly. If I took erroneous notes, I apologize and will correct errors, if any, later.

Critical points from the speech:

• The speech was tough and hostile to “uncooperative” businesses.
• She gave plugs to Consumers Union, PIRG and CEH. Draw your own conclusions. She balanced those plugs with a hearty pat on the back for RILA which she said has proposed its own uniform testing “problem”. Oops, Freudian slip . . . she corrected herself to clarify that it is actually a uniform testing program. Program, problem – these are synonyms at the new CPSC.
• She wants to dispel the “rumor” that the agency is overwhelmed by mandates and is distracted from its mission. Further to this point, with regard to Internet “rumors” like the foregoing, she recommends that you only believe websites that end in “dot gov”.

Let me repeat that last one: Tenenbaum says you should ONLY believe websites that end in “dot gov”. That means you shouldn’t believe me, just her. Don’t be cynical, guys. Speaking for myself, when a high public official tells me not to believe the media chatter, just to believe them, I always take the heartfelt advice. After all, they only mean to protect me from scurrilous gossip that I am too dumb to figure out for myself. For instance, I still believe everything John Edwards says . . . .

• Regarding recalls involving a death, Tenenbaum warned companies NOT to blame parents in the press even if they are involved in litigation with the family. If they do, Tenenbaum promised (in strong terms) to “call [them] out”. I was floored by this. Is she our mother now? Our mother government, perhaps.
• She urged us to “stop fighting old battles” and get prepared. She was referring to the new era of the Public Database. Hmmm. We are to stop fighting old battles. Okay, everyone, put down your arms!
• She reiterated that the CPSIA was the “most substantial and positive” development in the CPSC’s (recent) history. She noted her love of the tracking labels provision and the removal of lead from zippers. Apparently my many comments and objections to tracking labels were ALL wrong. Darn! I must learn to love tracking labels. Repeat five hundred times, I must learn to love . . . .
• On the subject of voluntary standards, she emphasized that if industry doesn’t move fast to do it the CPSC’s way, the agency will just put out mandatory standards more to its liking. She specifically cited the JPMA and ASTM on the crib standards. She sounds really open-minded on that one. Tenenbaum also recommends that industries proactively make their standards more stringent so the agency can make them MANDATORY. Or . . . the agency will just do it itself. Nice! I feel trust building, building, building.
• She noted that the law applies to big and small companies ALIKE “for good reason”. Hey, crafters, get the message – there will no free pass for you. Of course, this actually makes sense because product injuries should not be okay simply because the manufacturer is small. The way to fix things for small companies is to rework the definition of hazard to be limited to ACTUAL hazards only, which will focus safety efforts in a logical fashion, thereby helping out the small guys. The crafters are a victim not of fair rules that are blind to small business interests – but instead of a terrible law that is so fatally flawed that no business can deal with it.

Here’s the best part:

1. Chairman Tenenbaum said that she won’t tolerate resistance to recalls that the agency wants to make. If you do dare resist, the agency will use its many tools to force the “right” outcome. Chairman of the CPSC or Chairman of the Politburo? Individual rights and due process are apparently a secondary consideration now, to judge from Tenenbaum’s fiery speech. There’s a big incentive to invest, right?
2. Tenenbaum cited Toyota as an example of how “this government” will NOT tolerate slow recalls. Oh boy. Think of the Toyota food fight when you imagine the future of CPSIA enforcement. Recall first, ask questions later and let the media sort out the details. And be sure to bring the mighty down low. That sounds so fair!

There are many industries that are going to be victimized by this new enforcement regime. The list will be LONG.

Lots of tough talk, saber rattling and scare tactics. Of particular concern is the implicit erosion in corporate legal rights and the continuing demonization of businesses and business people. The Obamist populist rhetoric was quite recognizable, and one must wonder who Tenenbaum really intended to reach with the speech. Whoever they are, I hope they were happy. As for me, I got the willies and thought that whatever progress I sensed earlier today was an illusion.

Will the Dems ever learn?

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CPSIA – ICPHSO Update -Remarks of Chairman Inez Tenenbaum

CPSIA – It’s 2010, Our Fourth Year of Travails

I can’t believe it’s 2010. We are now entering the fourth year of the CPSIA mess. The children’s product safety fiasco began in 2007 with large scale lead-in-paint recalls by a limited number of companies. The perceived betrayal of trust was enough to set off an unstoppable legislative tsunami, giving birth to the noxious CPSIA. Today, years later, we find ourselves beleaguered by

1. An inflexible law which is especially penal to small business,
2. A deaf Congress, resolute in its refusal to hold a real, open hearing or to foster debate,
3. A paralyzed CPSC so hobbled by the problems and tasks of the new law that it cannot even meet deadlines with 15 months lead time, and
4. A demoralized manufacturer community, numbed and confused by the process.

On the bright side, Henry Waxman floated a CPSIA amendment last month, apparently publicly conceding that the law needs to be changed and that the CPSC cannot fix the problems by themselves. In addition, the CPSC will be filing its own requests and recommendations on January 15 to satisfy a requirement in its appropriations grant.

Our struggle to foster change is producing results but we are not done. This terrible, distracting journey is not at an end, and we must steel ourselves for more fighting if we want to be governed again with common sense and rationality. So with a hearty Happy New Year, I wish you strength of character and a head of steam for the fight that lays ahead.

I will close this post with a poem by Paul Eldridge published in 1945 entitled “I Bring a Sword”:

To the beasts preying upon my people
To the hyenas mocking their grief
To the hounds barring their gates
To the ostriches burying their heads
To the crocodiles shedding tears
To the snakes hissing malignities
To the monkeys chattering diplomacies
To the asses braying profundities
To the cocks crowing prophecies
To the owls hooting defeat -
I BRING A SWORD!

Let that be our motto for 2010!

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CPSIA – It’s 2010, Our Fourth Year of Travails

CPSIA – Another Big Fine for L-I-P: What Does It Mean?

The CPSC today lashed out at RC2 Corp. for significant lead-in-paint violations on its Thomas & Friends wooden toys in 2007. The fine totalled $1.25 million. The facts of the case are relatively simple – an original recall in June 2007 of 1.5 million pieces was quickly followed by an additional September 2007 recall of 200,000 units. You can read all the details in the provisional agreement between RC2 and the CPSC. The agreement, however, doesn’t mention the really famous bit, namely that the second lead-in-paint recall included some of the “bonus gifts” that RC2 sent out to people who returned items in the first recall. Not a real confidence builder, apparently . . . .

We probably owe the CPSIA to RC2 and Mattel, who together so shocked and motivated Congress (and my hometown newspaper, the Chicago Tribune) that nothing could stop that runaway train. Since Thomas the Tank Engine was such a beloved traditional toy, the public’s sense of betrayal was understandable. Unfortunately, it is hard to believe that RC2 didn’t see this coming. The law on lead-in-paint was clear and unambiguous. The righteous outrage and the perceived need for retribution eventually led not only to the awful new law but also to this fine.

Let’s try to put it in perspective.

First, RC2 Corp. is a big company and won’t feel much pain from today’s action. It has peak sales of over $500 million and peak earnings of over $80 million. It has generated over $100 million in annual cash flow at least twice. In other words, they have pretty deep pockets. This fine is basically “walking around money” for them. They are even projecting earnings this year in excess of $25 million and cash flow of over $40 million – and 2009 was an awful year for the toy industry. As if that weren’t enough evidence of the symbolic nature of the fine, RC2 recently raised almost $60 million in a stock offering. In no sense will this fine imperil or even perturb the business over at RC2 – as an official “big business”, they seem structurally exempt from the pain we ankle-biters might feel.

That said, hasn’t RC2 paid quite a bit for its folly already? According to their 2008 year end financials, they incurred recall-related costs of $28.3 million in 2007, $14.3 million in 2008 and a further $13.9 million in 2009 year-to-date. Those are total costs of $56.5 million, excluding the new CPSC fine. Arguably, the CPSC recalls induced or precipitated these costs. These costs presumably also take into account the impact of RC2’s $30 million settlement of a class action lawsuit and related legal expenses.

[According to the provisional settlement agreement, in the wake of the publicity of the recalls, RC2 was hit with a number of allegations of injuries and claims from lead-in-paint, leading to lawsuits. I have no way of estimating the financial impact of these claims on RC2. The validity of the claims is also unknown. Welcome to America.]

These losses exceed RC2’s typical annual earnings – most people would call that a pretty high price paid, something that gets your attention.

And as the CPSC slams the barn door long after the horses got out, the company must now reiterate that it learned its lesson . . . three years ago. The press, however, will frame this case as a remedy much needed: “Toymaker’s fine in lead case tops $1 million. Oak Brook-based RC2 sold Chinese-made toys that were later recalled” [Headline from print edition].

With all this as background, I think the fine looks a bit different:

a. The fine cannot be justified as punishment, as the CPSC’s previous actions induced a very high stream of costs for the company. It cannot be justified as an inducement to behavioral reform, as better safety practices at RC2 began in 2007. What is the purpose of the fine then? I think the fine is intended for political purposes, to make the CPSC look “active” and “tough”. It hardly matters that the fine is opportunistic and coercive. [CPSC fines under the CPSIA are also arbitrary and hard if not impossible to negotiate.] Apparently, the RC2 recalls were not enough to satisfy the personified “Congress” – it wanted pecuniary revenge. This allows the Chairman and her fellow Commissioners to look “tough” to Congress and it allows the RC2 company to look “contrite”. Two needs met, neither of which should be part of our law.

b. The fine (the supposed punishment for the “crime”) is so detached from the time of the infraction that it has no actual connection as a “remedy”. The passage of time sacrificed any moral high ground for the regulators – its fine is only a gratuitous penalty now.

c. By waiting three years to impose a high profile penalty like this, the CPSC deals the company a cruel blow to its market. The fine makes it look like RC2 needed more correcting three years after the fact – isn’t that what any rational person would think? Yet RC2 already paid for its failings to the tune of more than $50 million out-of-pocket. [This does not include the significant loss of goodwill from the recalls, a tangible loss to RC2 business managers.] They also changed their safety practices, presumably quite significantly. The defective goods are long off the market. Yet, with the imposition of this high fine now, the company looks like a creep, again – even though there is no sign that it is anything but a good citizen today. As a consequence of the CPSC’s action, RC2 must again counter with more PR to attempt to preserve its good name.

Even more outrageous, to squeeze in the fine under the wording of the CPSIA, the CPSC asserts that the RC2 violation was made “knowingly”. [See par. 16 of the provisional settlement agreement.] I highly doubt that it was “knowing” in the plain meaning of the word and naturally, the company denies it, too. It’s a ridiculous contention. However, the law defines “knowingly” to include imputed knowledge; if the CPSC deems that RC2 should have never let this happen (duh), they can assert the imputed knowledge of a reasonable man to convert the infraction into a “knowing” violation. Prest-o, change-o! Incompetence or organizational failure can thus be given the appearance of ill intent. Since virtually any violation can be deemed “knowing” with the aid of 20/20 hindsight under this terrible law, the CPSC now has an unwritten strict liability penalty policy at its disposal. That’s sweet for an agency that is part legislature, part judge, part jury. As for companies cited for “knowing” violations, denials ring hollow. Frankly, it’s a set-up . . . and when this happens to you, it will feel the same way.

d. The CPSC’s apparent indifference to these factors will have a chilling effect on the children’s product market. There is no question that business people tend to look at these cases as “there, but for the grace of G-d, go I”. If RC2 can be hammered this way, what will happen to us if we make a mistake? There is just no way to tell. But, the RC2 and Mattel fines make it clear that “over” isn’t “over” with the CPSC until the statute of limitations passes. This fine came more than three years after the recalls. When are you allowed to move on from your mistakes? Seems like never. The recent fines levied against Excelligence for $25,000 are of a similar vintage, so this can happen to small companies with small infractions, too. This is randomness run amok. The fact that the agency has been unable to issue final penalty factors in more than a year does not help matters.

Finally, of course, we private business people can’t just stick our palm out to Wall Street for more money whenever we need to restock the coffers. The RC2 capital raise restores 100% of their losses from the recalls. Nice for them! Small private businesses have to go to their banks or our personal bank accounts to fund remediation of these problems. And let’s hope your bank sticks with you after bad publicity. . . .

Could the CSPC be so myopic that it doesn’t know how these risks affect the thinking and planning of small businesses? I can only conclude that the answer is yes.

Let’s hope that the RC2 fine helps the agency and its leadership build up a suitably tough image. And for their sake, one can only hope that the architects of this law and the agency’s penalty strategy are long gone, onto their next glories, before the cumulative impact of the CPSIA and its implementation are felt. And for the rest of us . . . good luck!

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CPSIA – Another Big Fine for L-I-P: What Does It Mean?

CPSIA – CPSIA Casualty of the Week December 7

The Alliance for Children’s Product Safety’s “CPSIA Casualty of the Week” highlights how the Consumer Product Safety Improvement Act (CPSIA) is disrupting the U.S. marketplace in order to draw attention to the problems faced by small businesses, public institutions, consumers and others trying to comply with senseless and often contradictory provisions of the law. These provisions do nothing to improve product safety, but are driving small businesses out of the market.

Congress and the CPSC need to address the problems with CPSIA implementation to help small businesses by restoring “common sense” to our nation’s product safety laws.

CPSIA Casualty of the Week December 7

GOODGUIDE BIDS GOODBYE TO THE GOOD REPUTATION OF ZHU ZHU PETS

Cepia LLC, a small business that manufactures Zhu Zhu Pets, the hottest-selling toy of this holiday season, learned the high cost of success in the toy business last week when its reputation was smeared by an over-zealous consumer group, GoodGuide. The California-based consumer group launched a public relations attack on the “Zhu Zhu Pet” on December 5, claiming its “Mr. Squiggles” toy contained tin and antimony above federal standards outlined in the Consumer Product Safety Improvement Act (CPSIA). Word spread quickly via the media and blogosphere that Zhu Zhu Pets were “dangerous”, sending Cepia into a business and public relations nightmare through no fault of its own.

Credit the Consumer Product Safety Commission (CPSC) for acting swiftly. By Monday evening (December 7), the agency had investigated and cleared Zhu Zhu Pets and Cepia. Also on Monday, GoodGuide backtracked on its findings, acknowledging that it had inappropriately used an XRF gun to test the surface but failed to use the proper federal wet test methods.

While this product safety frenzy is soon to be forgotten by most, its cost and consequences for Cepia, a small business with fewer than 50 employees, are large. Yet this entrepreneurial shop has no recourse against GoodGuide, which clumsily seized on the wrong test data to create an illusion of toy company irresponsibility designed to scare consumers. There are no penalties under the law for unsupportable or misleading accusations by consumer groups – although manufacturers themselves are always at risk of CPSC penalties which can range as high as $15 million and which can be increased for perceived bad behavior.

Self-appointed consumer advocate attacks on children’s products have proliferated this Christmas season. This self-destructive atmosphere was, in part, created by the CPSIA and its reckless disregard for the use of risk in assessing safety. Yet Congress to date refuses to acknowledge problems with the law, and in a sad twist, these consumer groups who pushed to make the law as far-reaching possible in their zest to ‘protect our children’ now fight to keep common-sense from being written back into it. It’s time to set an example for the perpetrators of consumer group false alarms: Chairman Tenenbaum needs to tell Congress to allow CPSC to conduct risk assessment in implementing the CPSIA.

For more information, visit http://www.AmendTheCPSIA.com.

For more information, please contact Caitlin Andrews at (202) 828-7637 or e-mail caitlin.andrews@bgllp.com/

Do not accept the status quo! Tell Congress and the CPSC to restore “common sense” to our nation’s product safety laws.

Call CPSC and Congress.

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CPSIA – CPSIA Casualty of the Week December 7

CPSIA – Thoughts Ahead of Today’s CPSC Workshop

A few tidbits ahead of today’s workshop:

1. Your letters are hitting the mark. PLEASE keep the letters on the Stay coming. The CPSC continues to believe that it can fix the law piece-by-piece with more rules and interpretations, and is ignoring the practical problems that you face. They MUST delay the lifting of the Stay until they either FINISH THE JOB or get Congress to restore sanity to safety administration. I am on record that they cannot fix this WITHOUT a change in the law. You need to make yourself heard.

2. Here’s a shocker – there will be people at the workshop who are AGAINST component testing. For one, in a recent public meeting, YKK (a well-known zipper maker) has come out strongly against component testing on the grounds that it will encourage counterfeiting. To be frank, I have not seen or heard a comprehensive statement of their position and look forward to hearing it. My gut tells me that their principal concern is competition, not counterfeiting. Component testing is extremely beneficial to small businesses. Arguably, Big Business is only minimally affected by the CPSIA, at least in comparison to the impossible burdens borne by small business. Be prepared to argue your case.

3. The CPSC doesn’t want to see their workshop derailed by a complaint session about the many problems with the law. I think that’s a fair request. In any event, find the opportunity to stress the burdens that you bear and try to get them to focus on the challenges posed by COMPLEXITY. This issue is not something that the CPSC wants to fully acknowledge and seems bent on building more and more complexity into their system to compensate for the many, many flaws in the law. They need to know that it’s a real factor that will have a serious impact on the effectiveness of this safety regime. Likewise, it is a killer in the marketplace, especially in relations with dealers and retailers.

4. Finally, don’t forget to ask yourself today about SAFETY. This workshop is about RULES divorced from reality. As we argue endlessly about how many angels can dance on the head of a pin, ask yourself and remind the CPSC how much all of this has to do with SAFETY. We are getting lost in the weeds as we try to build a set of rules to accommodate a terrible and defective law. If we allow the fantasy to go forward that the new rules are somehow about safety (e.g., is a zipper tested by components or as a completed product safer one way or the other? OR are zippers known to be safe already?!), we are going to actually help them build the structure to kill us. We don’t want to do that!

I will try to report from the workshop as time permits.

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CPSIA – Thoughts Ahead of Today’s CPSC Workshop

CPSIA – Thoughts Ahead of Today’s CPSC Workshop

A few tidbits ahead of today’s workshop:

1. Your letters are hitting the mark. PLEASE keep the letters on the Stay coming. The CPSC continues to believe that it can fix the law piece-by-piece with more rules and interpretations, and is ignoring the practical problems that you face. They MUST delay the lifting of the Stay until they either FINISH THE JOB or get Congress to restore sanity to safety administration. I am on record that they cannot fix this WITHOUT a change in the law. You need to make yourself heard.

2. Here’s a shocker – there will be people at the workshop who are AGAINST component testing. For one, in a recent public meeting, YKK (a well-known zipper maker) has come out strongly against component testing on the grounds that it will encourage counterfeiting. To be frank, I have not seen or heard a comprehensive statement of their position and look forward to hearing it. My gut tells me that their principal concern is competition, not counterfeiting. Component testing is extremely beneficial to small businesses. Arguably, Big Business is only minimally affected by the CPSIA, at least in comparison to the impossible burdens borne by small business. Be prepared to argue your case.

3. The CPSC doesn’t want to see their workshop derailed by a complaint session about the many problems with the law. I think that’s a fair request. In any event, find the opportunity to stress the burdens that you bear and try to get them to focus on the challenges posed by COMPLEXITY. This issue is not something that the CPSC wants to fully acknowledge and seems bent on building more and more complexity into their system to compensate for the many, many flaws in the law. They need to know that it’s a real factor that will have a serious impact on the effectiveness of this safety regime. Likewise, it is a killer in the marketplace, especially in relations with dealers and retailers.

4. Finally, don’t forget to ask yourself today about SAFETY. This workshop is about RULES divorced from reality. As we argue endlessly about how many angels can dance on the head of a pin, ask yourself and remind the CPSC how much all of this has to do with SAFETY. We are getting lost in the weeds as we try to build a set of rules to accommodate a terrible and defective law. If we allow the fantasy to go forward that the new rules are somehow about safety (e.g., is a zipper tested by components or as a completed product safer one way or the other? OR are zippers known to be safe already?!), we are going to actually help them build the structure to kill us. We don’t want to do that!

I will try to report from the workshop as time permits.

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CPSIA – Thoughts Ahead of Today’s CPSC Workshop

CPSIA – CPSIA Casualty of the Week for December 4

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CPSIA – CPSIA Casualty of the Week for December 4

CPSIA – Hearing on Testing Stay and Interim Enforcement Policy

There was an important hearing yesterday at the CPSC on the testing stay as well as on the announcement of another interim enforcement policy on component and lead-in-paint testing (their third). I was able to watch about 1:40:00 of the hearing before I lost the signal. I think I got the gist of it, and wanted to give some highlights here.

First and foremost, the tone was relaxed, friendly and open. I want to compliment the Commission and CPSC Staff for making an effort to change the “feel” of their communications. I have not lost sight of the fact that substance matters . . . but so does choice of words, actions and tone. In this space, I have criticized Gib Mullan for this in the past. I would now like to publicly acknowledge Gib for taking pains to communicate his new enforcement policy in a reasonable and business-like tone. There were no threats; quite to the contrary, Gib portrayed the interim policy as flexible, reasonable and measured. I appreciate that.

The Commission and the CPSC Staff are also asking better and more sensitive questions, like whether there is enough lab capacity to do all the tests when required (for instance, there is apparently ONE lab approved to test bikes), how much lead time industry needs to adjust to the component testing rules, whether people are testing components now, and so on. Jay Howell even advised the Commission to weigh the impact on regulated industries when considering how or to what extent to lift the stay. This line of reasoning is another sign that we are being heard, and the issues confronting regulated businesses are on the radar . . . finally.

The content of the hearing was essentially technical. This lengthy discussion was all about compliance with the new requirements. The rules implementing the blessed CPSIA are ornately complex. Mullan in fact informed the Commission that his new interim enforcement policy is replete with footnotes – in other words, the micro-print is now getting smaller. NONE of the discussion involved SAFETY or any discussion of risk.

Let’s consider what that might mean. The CPSC seems obsessed with paperwork now. The two hours I watched were all about how companies might comply, whether they could comply, what forms they had to fill out, who had to perform tests and when, and so on. Of course, that is a critical subject to discuss . . . but it struck me as odd when these details droned on and on without a single mention of the purpose of the discussion – making kids safer.

It is hard to see how this byzantine structure will achieve better safety. To me, the new scheme is all about bureaucracy divorced entirely from purpose. This is the CPSC that the Commission apparently thinks Congress legislated – a bureaucratic agency, one no longer empowered to allocate its resources to prioritized safety threats, instead relegated to paper pushing. Congress has redesigned the agency to be administrative in nature as it relates to children’s products. By defining “safety” precisely in the CPSIA for the CPSC to administer, it forbade the agency from exercising judgment. Likewise, we in the business community are no longer trusted to exercise judgment or operate without governmental supervision. The Nanny State knows best, better than the business community or even the CPSC, and insists now that the CPSC stop thinking and just administrate.

With this new focus, the conversation about safety has taken a bizarre turn, in my opinion. The discussion is principally about how companies can comply. That is the standard against which the new CPSC policies seem to be evaluated. Is there enough testing capacity? Can companies afford it? Can a “home crafter” find paint that was tested by the manufacturer? [By the way, this is a so-called voluntary test - Congress in its INFINITE wisdom decided that makers of children's toys must test paint, not people who actually produce the paint, thus the CPSC has to hope and pray that paint companies will test their paint. Nice!] Which components need to be tested on a little dress? Only the buttons, yippee! No mention of safety or the purpose of this exercise. The high point occurred when both Chairman Tenenbaum and Gib Mullan volunteered that most paint is already certified to be lead-free. This was stated without irony, despite the 20 minutes tortured lecture on how to test paints to ensure compliance. Safety, what’s safety?

So are things now as simple and easy as portrayed? Robert Adler asked if any groups besides the Handmade Toy Alliance had contacted the CPSC with concerns about the lifting of the stay. Jay Howell said no. [My ego survived this minor bruising!] Putting aside the massive failure of business people and trade associations to effectively lobby on this issue, this seems to portray business people as accepting of the lifting of the stay, or at least highly unmotivated on the subject. Ergo, it’s fine to let it go.

What might a lifting of the stay mean? We’ll all have to test. Test what? Ah, that’s the rub. It’s so complicated that I can’t begin to attempt to explain it here. It took them Powerpoint slides upon slides to lay it out, and it is full of asterisks and exceptions. A taste: there still is no phthalates standard or any approved phthalate testing labs or any approved ASTM F963 testing labs. [Makes me wonder what I have been paying for all these years in our tests against F963. . . .] So testing will only be required against some rules, not all, and as new rules come into effect, you will have to figure out what additional tests are required over time. Good luck getting it right.

Sadly, the agency avoids the issue of complexity by focusing on whether it’s POSSIBLE to comply. They put up a photo of a little dress, announce with satisfaction that only the buttons need to be tested, and then assert that button companies will test those buttons to preserve their market. Okay, let’s concede that point – it’s probably true. Does that solve the problem? Not if the rules are so complicated that no one understands them. Even if you understand them, will the people you deal with understand them the same way (your customers, your consumers, consumer groups, the CPSC, Customs, 50 State AGs, the Chicago Tribune, and so on)? THIS ISSUE I have raised again and again (so when the Commission asks about complexity, I want a plug!] Very few people understand these rules so is it realistic to assume they will follow them (even if they are able to comply)?

A typical problem for people who are immersed in something complex and highly-specialized si forgetting that everyone else is not as immersed in the details as they are. It’s a big wide world out there, but the CPSC may only be dealing with people who have invested the time and energy in understanding the complex rules as they have. This may make it look like EVERYONE gets it but in fact, they don’t. The 800 lb. gorilla here is the silence of the majority. What do they know and understand? Not much. This is where the expression Keep It Simple, Stupid (The K.I.S.S. Principle) comes from. The new rules are anything but understandable AND the CPSC tries to solve each identified problem by adding more and more complexity (more rules and exceptions).

So what have we here now? We have a much more congenial and seemingly well-intentioned CPSC that finally grasps the nature of the mess with the regulated community and is trying hard to change course and create a workable solution . . . but all within the context of a law that makes no sense. So to do that, they are building an entirely unworkable sets of rules, unworkable because no one could possibly understand them. Each rule violation is the possible subject of a lawsuit by an eager plaintiff’s attorney, a newspaper investigation spurred on by a consumer group or the subject of a fine or possible jail time, or all of the above. Fear of these externalities will scare people out of the market, simply because they know they can’t control their business environment. This is real. I personally fight these fears every day – and I am someone obsessed with these rules and know them well. But not perfectly. Of course, we could do something else with our time, our resources and our people – but we don’t want to. We are very devoted to the education business and are trying to defend our right to engage in that endeavor without undue risk.

The sad fact is that the CPSC cannot create a workable solution, even with a smile on their faces and good intentions in their hearts, without addressing the deficiencies of the law. A nonsensical law cannot be fixed with implementing rules. At some point, the CPSC is going to figure this out when they see that compliance is very low, and they are overflowing with violations. The rabid and compromised consumer groups have demonstrated their utter lack of character in hunting down technical violations, like sandal insoles, and then mobilizing self-interested local politicians to enforce without even talking to the CPSC. We can certainly expect them to continue to hound innocent makers out of this market.

The details of this hearing are also interesting. The CPSC will be releasing a definition of a “children’s product”, “toy” and “childcare item”. This is a possible hint that some items or product categories may be excised from the law, perhaps including certain educational items used in schools, some kinds of apparel, ATVs and so on. The CPSC Staff has crafted some interesting solutions to testing of lead-in-paint and components, that will help lower costs significantly. They also are aware of the heavy load carried by small volume manufacturers with fixed testing costs and are trying to find an economic solution. They even acknowledge that larger companies also make low volume products, meaning that solutions need to take EVERYONE’S situation into account. All of this is good, it’s progress . . . but it’s not enough. The Commission needs to attack this law and push Congress to get it fixed. If this Commission does not want to leave behind a neutered and impotent CPSC, crippled by a hornet’s nest of ineffective rules, it needs to take on this ultimate battle.

I certainly hope they won’t duck this very important pitch.

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CPSIA – Hearing on Testing Stay and Interim Enforcement Policy

CPSIA – Learning Resources Testifies About Internet Privacy

My associate Michelle Bougie was invited to testify at the November 19 hearing held by a joint session of subcommittees of the House Committee on Energy and Commerce on the subject of Internet privacy. In a re-run of last year’s feeding frenzy on toy safety, consumer groups are promoting paranoia about the collection and use of consumer data on the Internet. As a result of the building pressure to regulate the use of data both online and offline, the interests of small businesses are again threatened. Michelle gave insightful testimony on the current direct marketing practices online and offline and showed how legislation has the real potential to not only stunt the growth of the Internet (a huge job creator) but also to give a federally-sanctioned monopoly to large businesses over the availability and use of consumer data.

It is worth noting that Michelle’s testimony provides evidence that considerable infrastructure exists now – widely-adopted voluntary standards designed to protect consumer privacy and to make visible the practices of direct marketers. Michelle argues that the empowerment of consumers online makes these good practices a market necessity.

In fact, consumer data is rarely if ever sold (to my knowledge, we have never purchased it). Consumer data is RENTED for one-time uses typically and is not disclosed to the company renting the data. For instance, if we mail a catalog, we define the kind of names we want to rent, but never SEE them – they go directly to the mailing house and do not become our property. This makes perfect sense because the compiled lists are the intellectual property of the company that rents them out – and if they SOLD the names once, they could never sell them again. They would be out of business after one sale. Thus, we never get to see the names we rent. In fact, it is highly likely that we have rented many of the same names over and over for different mailings or email blasts. Privacy cannot be violated by uses that do not involve disclosure!

Michelle’s statement is found below (sorry, the audio is a bit tinny). Media coverage of the hearing highlighted Michelle’s testimony.

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CPSIA – Learning Resources Testifies About Internet Privacy

CPSIA – CPSIA Casualty of the Week for November 16

The Alliance for Children’s Product Safety’s “CPSIA Casualty of the Week” highlights how the Consumer Product Safety Improvement Act (CPSIA) is disrupting the U.S. marketplace in order to draw attention to the problems faced by small businesses, public institutions, consumers and others trying to comply with senseless and often contradictory provisions of the law. These provisions do nothing to improve product safety, but are driving small businesses out of the market.

CPSIA Casualty of the Week for November 16:

“Pockets of Learning” Emptied by CPSIA
Special Needs Products Being Driven from Market By Testing Costs

Pockets of Learning is a Rhode Island-based company that for 20 years has designed, manufactured and sold unique heirloom-quality cloth toys and gifts, many of which offer skill-building experiences to children such as tying, matching, buttoning and counting. The company helps fill niche markets, including special needs, religious and independent retailers. Pockets of Learning has an impeccable safety record, and has never offered a product to the marketplace that had not been tested according to CPSC requirements.

On November 10, 2009, Pockets of Learning informed its customers that thanks to CPSIA, it will no longer sell its “How Do I Feel Today?” wall hanging, a bear-themed product sold for young children with special and emotional needs. The company told its customers that it “can no longer afford to manufacture and offer these products, due to the over 500% increase in safety testing cost…The annual volume of the product does not allow for the investment required to properly safety test under the new CPSIA guidelines.”

The loss of this item was made known to us by a leading distributor of therapy tools and other products for educational professionals and psychologists who had his order cancelled.

Pockets of Learning President Jack Grant told us in an e-mail that this product loss is only the “tip of the iceberg.” Due to the financial impact of CPSIA testing, Pockets of Learning is planning to reduce its product line from about 65 products to approximately 22 because of “the reality that CPSIA testing would typically add 30% or more to the cost of each item” made in small production runs.

Large multinational manufacturers who make high volume items can absorb higher testing costs imposed by CPSIA. But the thousands of small businesses across the country that fulfill specific, niche markets are the untold casualties of this law. Worse yet, kids in need are losing access to essential teaching materials. “How Do I Feel Today?”, indeed!

For more information, please contact Caitlin Andrews at (202) 828-7637 or e-mail caitlin.andrews@bgllp.com

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CPSIA – CPSIA Casualty of the Week for November 16

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