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In the wake of a record-setting year for product recalls and widespread criticism of the U.S. Consumer Product Safety CommissionAca,!a,,cs ability to protect consumers from dangerous products, Congress has enacted the Consumer Product Safety Improvement Act of 2008 (CPSIA). President Bush is expected to sign this legislation into law in the near future. The new legislation revamps the Consumer Product Safety Act (CPSA) and strengthens the U.S. Consumer Product Safety Commission (CPSC). Though targeting entities in the chain of distribution of dangerous and defective goods, the new law will place greater burdens on all manufacturers, importers, distributors and retailers of consumer goods. Due to unforeseen or unanticipated consequences, the CPSIA will likely result in significant collateral damage to business interests, or to businesses which fail to act nimbly to comply with or react to the new, more stringent, safety obligations imposed by the new law.
Wilson Elser has a team of attorneys evaluating how the CPSIA will impact our clients. We are developing a nationwide rapid response team to address the potential impact the new law will have on businesses, both foreign and domestic, and the possible adverse consequences to them, if not adequately counseled and prepared.
As many of the much publicized recent recall announcements have involved childrenAca,!a,,cs toys, mostly concerning lead and magnets, Title I of the CPSIA addresses childrenAca,!a,,cs product safety. Consistent with tightening standards for childrenAca,!a,,cs products, there will be a revitalization of the infrastructure of the CPSC by doubling its funding over the next six years.
Among the measures that will impact both foreign and domestic manufacturers, importers, distributors and retailers are: new, more stringent reporting requirements; increased civil and criminal penalties for violations of the existing and new law; and the public disclosure of information, including the establishment of a public product safety database. The new act also will allow state attorneys general to file actions in federal court against manufacturers and other businesses to enjoin the sale of products in the individual states if it is believed that the products fail to comply with applicable safety standards or pose a risk of serious injury to consumers. The new law also provides for a Aca,!A"whistle-blowerAca,!? protection to employees who notify employers or governmental agencies of product safety violations.
The CPSIA increases the maximum civil penalties for an individual violation of the CPSA from $5,000 to $100,000 and increases the maximum cumulative penalties from $1.25 million to $15 million. To determine civil penalties, the CPSC must now consider the Aca,!A"nature, circumstances, extent and gravity of the violationAca,!? as against the nature of the product defect, severity of the potential injury, and the number of the product in the marketplace. In addition to providing for criminal penalty fines for Aca,!A"knowing and willfulAca,!? violations of the CPSA, the CPSIA also increases the criminal penalty of imprisonment from a previous maximum of one year to a new maximum of five years. Individual corporate directors, officers and agents may be subject to imprisonment and fines, regardless of the penalties assessed against the corporation.
The CPSIA also modifies the CPSA by shortening time periods before information obtained by the CPSC can be disclosed to the public. It also shortens the time periods for which manufacturers, distributors and retailers have to respond to requests for disclosure of information, making it more likely that information requested by plaintiff lawyers and consumer advocates under Freedom of Information Law requests will be disclosed unless affected businesses are ready to react almost instantaneously. Under the new law, a manufacturer, distributor or retailer may commence an action in a United States District Court to enjoin the public disclosure of information. The CPSC, however, can also file a request with a United States District Court for an expedited decision if the CPSC determines that the matter concerns public health and safety. The shortened time periods will be burdensome for manufacturers, distributors and retailers; however, it is also expected that the CPSC will have great difficulty in meeting the new deadlines as it rebuilds its resources.
The CPSIA will now enable the CPSC to request supply chain information from manufacturers, importers, distributors and retailers of products subject to a corrective action. The disclosure requirements will include information concerning subcontractors involved with the manufacture of a product or the identities of component part suppliers. One of the limitations on this requirement is that the information has to be Aca,!A"known or readily determined,Aca,!? which means the disclosed information would be limited to known entities in the chain of distribution.
One of the more controversial enactments in the CPSIA is the creation of a searchable online Aca,!A"Consumer Product Safety Information Database.Aca,!? The database will not include voluntary or mandatory filings by industry; but it will include information reported by consumers, government agencies, healthcare providers, childcare providers and public safety entities. Concerns exist among businesses that there will be limited or no oversight for or verification of the information contained in the database. There are concerns that the database may be exploited by the posting of inaccurate complaints, which, in turn, could result in making a manufacturer, distributor or retailer the target of increased claims and product liability actions, including class actions. While the CPSIA provides industry the opportunity to review and comment on a database posting, it only allows a small window of 10 days after the information is forwarded to the manufacturer for comment. The primary remedy for a manufacturer or private labeler rests with bringing an action in a United States District Court to have the posted information removed. If the information posted can be shown to be inaccurate the CPSC will revise or remove the post.
