The CPSC announced a civil penalty today against Gree Electrical Appliances that hit the statutory maximum of $15.45 million. CPSC Chairman Elliot Kaye had previously expressed his desire at a recent trade conference for the Commission to hit a “double digit” million dollar civil penalty and to pursue more criminal charges. Today’s announcement achieved one of those goals.

There are many lessons learned here, even based on initial impressions.

  • The CPSC is serious about accelerating penalty enforcement, which could include maximum civil penalties and criminal action for violators.
  • The CPSC will seek penalties for misrepresentations to staff in the course of a compliance investigation.
  • The CPSC is going after products sold with UL certification marks that do not meet UL standards.
  • Maximum penalties may result even where there have been no serious injuries or deaths, only claims of property damage.
  • Foreign entities are not necessarily out of the CPSC’s reach.  The settlement agreement names a party based in China and another in Hong Kong, both which agreed to CPSC jurisdiction, as well as a U.S. company that sold the products in the U.S.

Gree had engaged in a series of messy recalls of the product, a dehumidifier, over time, potentially driven by the misrepresentations alleged in the settlement agreement. The recall was first announced in September 2013, updated in January 2014, and then expanded in May 2014. But the settlement agreement is too vague and does not tie those public recall announcements to the alleged misrepresentations. Commissioner Joseph Mohorovic’s statement on the penalty calls for more disclosure in these agreements to inform the regulated community about the actions that will lead to higher penalty amounts so that “they can better understand what behavior they should avoid.”