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Industry Opposition to CPSC Voluntary Recalls Proposal Bolstered by Former Agency Chairman

July 2014

A significant voice has been added to the criticism of the Consumer Product Safety Commission's (CPSC) proposal to increase its powers regarding voluntary product safety recalls.  The voice is that of former CPSC Chairman Ann Brown.

Brown has expressed substantial concern that the proposal will undermine the successful, award-winning voluntary Fast Track Product Recall Program developed during her chairmanship.  She therefore has urged the House Committee on Energy and Commerce to put a shot across CPSC's bow.  This could open a new chapter in the controversial rulemaking.

Brown's letter stems from CPSC's proposal to make the agency's regulations on voluntary product recalls dramatically more stringent.  See 78 Fed. Reg. 69793 (Nov. 21, 2013).  The proposal has resulted in extensive criticism from industry and others who are concerned that the changes would entail such risks to companies that they would be less likely to undertake Fast Track recalls.

A primary issue is the legal effect of voluntary recall agreements with corrective action plans (CAPs).  For many years CAPs have resulted in prompt, voluntary resolutions, pursuant to the Fast Track program, under which products are voluntarily recalled without lengthy and contentious administrative proceedings.  Consistent with a 1978 CPSC interpretation of the Consumer Product Safety Act (CPSA), CPSC's regulations state that a CAP sets forth the remedial action that a firm will voluntarily undertake, but that the CAP “has no legally binding effect.”  16 C.F.R. § 1115.20(a); see 43 Fed. Reg. 34988, 35003 (Aug. 7, 1978).  As stated by CPSC in 1978, under this approach CAPs result in saving considerable time and effort and, “[a]s a result, the hazard is remedied faster, and the consumer is protected earlier.”  43 Fed. Reg. at 34996.

Voluntary CAPs also can include a statement, if desired by the subject firm, that submission of the CAP does not constitute an admission by the firm that either reportable information or a substantial product hazard exists.  16 C.F.R. § 1115.20(a)(1)(xiii).

The CPSC proposal would fundamentally change the nature of the voluntary recall program.  Under its proposal, Section 1115.20(a) would be amended to provide that a CAP, even though voluntary, “is legally binding.”  78 Fed. Reg. at 69799.  And violation of a voluntary compliance program agreement in a CAP could result in a formal CPSC enforcement action, including sanctions set forth in the CPSA, and legal action by CPSC to enforce the terms of a compliance agreement.  Proposed § 1115.20(b), 78 Fed. Reg. at 69799.

In addition, CPSC proposes that CAPs could include compliance program requirements that “echo compliance program requirements incorporated as part of recent civil penalty settlement agreements.”  78 Fed. Reg. at 69795.  CPSC would be able to sue to enforce these CAP undertakings, because CAPs purportedly would be legally binding.

Further, the disclaimer that submission of a CAP does not constitute an admission by the firm that either reportable information or a substantial product hazard exists would be allowable only “if agreed to by all parties.”  Proposed § 1115.20(a)(1)(xiii), 78 Fed. Reg. at 69799.  This would give CPSC veto power over a firm's disclaimer in the CAP, thus exposing the firm to increased risk of litigation—clearly a disincentive to enter into a CAP.

Former Chairman Brown's May 30, 2014 letter to the Committee on Energy and Commerce, which cc's CPSC's Commissioners, warns that the “Fast Track” program “appears to face the risk of being unintentionally undermined” by the proposal.

Brown expresses concern that prohibiting disclaimer of a hazard in a CAP unless agreed to by CPSC, if adopted, “could undermine the efficacy of the Fast Track program” because firms would have “no incentive to participate in the program.”  And making a voluntary CAP “legally binding” would “transform[] a CAP into a Consent Decree, potentially delaying an otherwise effective recall weeks or even months due to haggling over legalities.”  This would render a Fast Track procedure “impossible.”

She says that if this occurs, “recalls would be delayed, CPSC would be required to use substantial technical resources to evaluate products so that the staff can determine whether to make a preliminary determination of hazard, and consumers are left unprotected potentially for many months.”

Brown concludes by requesting that the Committee urge CPSC to consider its proposed rule carefully and to assure that it does not adversely affect the Fast Track program.

If the Committee indeed sends such a message to CPSC, this will add an even further voice to the chorus of criticism of the agency's proposal.