Product Safety: More Protection for Consumers

The barrage of bad news about lead-tainted toys and other faulty goods has Congress and regulators stepping up enforcement efforts.

By Laura Kennedy, Researcher-Reporter, the Kiplinger letters

February 29, 2008

Federal consumer product safety cops will get a bigger arsenal when Congress reauthorizes the Consumer Product Safety Commission (CPSC) later this year. Lawmakers will increase the agency's budget for fiscal year 2009 by about 40% over FY 2007 levels. The money will provide for more inspectors, improved labs and other facilities, plus funds for researching nanotechnology product safety.

The House of Representatives passed its bill to reauthorize the CPSC -- something that hasn't happened since 1990 -- in December. And the Senate is slated to vote on its bipartisan version next month. For the most part, both measures agree with each other. A couple of provisions dealing with providing protection to whistleblowers and more power for state attorneys general remain sticking points, but we don’t expect them to derail the legislation.

"Allowing [CPSC] to modernize their labs is hugely important," says Charles Samuels, general counsel for the Association of Home Appliance Manufacturers, and an attorney with Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC. "If [the contentious issues] can be resolved, and they are quite resolvable, the business community would very much like this legislation to become law.”

Here's what manufacturers, retailers and consumers can expect:

A sharper level of scrutiny of consumer goods. Both bills would fund the CPSC to tune of more than $100 million by FY 2011. (The Senate bill goes even further by proposing up to $155.9 million in FY 2015.) This money will be used to hire more fulltime employees and bolster the agency's inspection facilities, among other improvements. All in all, about 100 staffers will be added in coming years. Congress is also giving CPSC an additional $20 million-$40 million to upgrade its labs, while earmarking $1 million for nanotechnology research.

Funding provided as part of CPSC reauthorization will come on top of recent increases. The FY 2008 omnibus spending bill boosts CPSC funding to $80 million in the current fiscal year from $63.25 million in FY 2007. The CPSC plans to spend $14 million of its current funding on lab upgrades over the next two years and another $4.5 million on improving its information technology systems, plus added staffing.

Higher civil penalties for product safety violations, plus penalties for selling recalled products. The maximum fine for manufacturing, selling, distributing or importing a product that does not follow U.S. consumer safety laws will jump from $1.25 million to between $10 million and $20 million ($10 million is the House number, $20 million is the Senate number) and it is likely the final number will fall somewhere in between. The new law also notably prohibits the sale of products that have been recalled.

Stricter product testing and certification requirements. Manufacturers will have to submit children's products to testing and certification by a third party to ensure they meet toy safety standards.However, the law would allow manufacturers to certify their products in their own labs if the CPSC approves the labs. The Senate's bill includes a prohibition on imports of children's products that haven't been certified by a third party. Both bills also mandate that toymakers and other manufacturers of children's products put labels on products that identify when and where they were made.

A ban on lead in children's products. Current law only limits the amount of lead in paint or surface coatings.

Quicker and broader public disclosure of safety hazards. The CPSC will have to notify a manufacturer in 15 days, instead of the current 30, of plans to disclose information about a product's safety. More significantly, the CPSC will be required to create a searchable database containing any reports of risk and injury caused by a consumer product. The Senate wants the injury reports to become available 15 days after they're received, though they could be removed if they turned out to be inaccurate. Database advocates are patterning it after the crash test database run by the National Highway Traffic Safety Administration. Note that businesses fret that the database would cause undue alarm among consumers, since not all potential product risks lead to recalls.

An OK for the CPSC to conduct business with just two commissioners for another nine months. The CPSC has been down a commissioner since former chair Hal Stratton left the agency in 2006. It was able to operate for six months with just two members, after which the commission lost its ability to order mandatory product recalls. Congress restored its powers again in August. But that extension ran out earlier this month, and the new bills would give the CPSC another reprieve. But the legislation also calls for the panel eventually to be expanded to five members from three (it was reduced to three commissioners in 1987).

And when the dust settles, look for state attorneys general to get more power. Both the House and Senate include a provision to the Consumer Product Safety Act, authorizing state attorneys general to impose an injunction on a company that is violating federal consumer product safety laws. Businesses worry that the language in the Senate bill allows more-independent action by attorneys general under federal law, though both bills specify that an attorney general cannot bring his or her own separate suit if the CPSC is already bringing its own civil action.

Less clear is the outcome for the whistleblower protection provision in the Senate bill, which is drawing particular fire from industry and will continue to be a point of contention as the legislation moves forward. Businesses oppose what they consider a new outlet for employment litigation.

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