The FTC joined with the National Labor Relations Board in order to bolster efforts to protect workers against anticompetitive and unfair practices. It also announced a $25 million refund to U.S. and international consumers that were allegedly defrauded by a sweepstakes scheme. And for the first time in FTC history, the Commission brought an action under the Military Lending Act against a Jewelry company that allegedly mislead military families. These stories and more after the jump.
Cheryl A. Falvey
“Wiping the Slate Clean”— CPSC Commissioners Signal Higher Penalties to Come in Wake of Vornado Penalty Resolution
Despite imposing onerous new compliance terms, the recently announced Vornado civil penalty was criticized by three commissioners as too low amid their urgent calls for larger penalties in the future. On July 7, the U.S. Consumer Product Safety Commission (CPSC) announced a $7.5 million civil penalty settlement with manufacturer of air circulation products, Vornado Air (Vornado). Vornado agreed to pay the civil penalty to resolve charges that the Company knowingly failed to immediately report allegedly defective electric space heaters to the CPSC under Section 15(b) of the Consumer Product Safety Act (CPSA). The Commission voted 4-0-1 to provisionally accept the settlement. Notably, three of the agency’s five commissioners published individual statements alongside the agency’s announcement of the penalty, which is atypical. The statements provide product safety stakeholders with insights on how the “new” Commission views civil penalties and its enforcement authority. …
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Silence Isn’t Golden: Failure to Report Consumer Product Safety Issues Results in Rare $91 Million Criminal Penalty
In one of the most significant developments in product safety law over the past decade, Gree Electric Appliances Inc. of Zhuhai, Hong Kong Gree Electric Appliances Sales Co. Ltd., and Gree USA Inc. (the “Gree Companies”), an appliance manufacturer and two of its subsidiaries, have pled guilty to willfully failing to report to the Consumer Product Safety Commission (CPSC) under Section 15(b) of the Consumer Product Safety Act (CPSA). According to the U.S. Department of Justice (DOJ) and the CPSC, the Gree Companies knew their dehumidifiers were defective, failed to meet applicable safety standards, and could catch fire, but failed to timely report that information to the CPSC. Section 19 of the CPSA makes it unlawful to fail to furnish information required by Section 15(b), and such failures are subject to both civil and criminal penalties. While CPSC civil penalties have become fairly routine—the Gree Companies also paid a then-record $15.45 million civil penalty in 2016—this is the first corporate criminal enforcement action brought under the CPSA, according to the DOJ. …
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Product Recall Notification Legislation Reintroduced in Congress
Last month, U.S. Representative Grace Meng (D-NY) announced that she has reintroduced legislation—the Total Recall Act—to change the way that businesses notify the public about recalls. The text of the legislation can be found here.
H.R. 3724, entitled the “Total Recall Act,” requires firms engaged in a product recall to post recall notices on their websites and all social media accounts, and also spend a defined amount of money on publicizing the recall depending upon whether it is mandatory or voluntary. For a mandatory recall, which is an incredibly rare event, businesses would be required to expend a sum of money that equals at least 25% of what the firm spent on marketing the product prior to its recall. On the other hand, for common voluntary recalls, firms would be required to use at least 25% of the product’s original marketing budget as well as 100% of the product’s social media marketing budget on publicizing the recall. The bill would also mandate that the U.S. Consumer Product Safety Commission provide an annual report to Congress on participation rates for each recall.
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CPSC Publishes Report on Artificial Intelligence and Machine Learning
On May 21, 2021, the U.S. Consumer Products Safety Commission (“CPSC”) published a report on artificial intelligence (AI) and machine learning (ML) in consumer products. The report highlights recent CPSC staff activity concerning AI and ML, proposes a framework for evaluating the potential safety impact of AI and ML capabilities in consumer products, and makes several recommendations that the CPSC can take in identifying and addressing potential hazards related to AI and ML capabilities in consumer products.
Concerning staff activity, CPSC recently hired a Chief Technologist with a background in AI and ML to address the use of AI in consumer products. The CPSC also recently established an “AI/ML Working Group” and held a virtual forum on AI and ML in March 2021.
Informed by the discussions held with various stakeholders at this forum, the CPSC staff has proposed a framework in the report for evaluating the potential safety impact of AI and ML in consumer products. The framework’s first step involves screening products for AI and ML “components.” The CPSC and stakeholders have identified the following components to be essential to producing an AI capability: data sources, algorithms, computations, and connections. Likewise, the CPSC and stakeholders have found the following components to define ML capabilities: assessing and monitoring outputs, analyzing and modeling changes, and adjusting and adapting behavior over time. The framework’s second step involves assessing the functions and features of consumer products’ AI and ML capabilities. The third step involves understanding how products’ AI and ML capabilities may impact consumers, which can be accomplished by studying the nature of the technology, how it is implemented in the product, and how the consumer might use the product. The final step involves ascertaining if, and to what extent, AI and ML capabilities may transform the product and/or its use over time.
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New Bills Seek to Repeal Controversial Provision of Product Safety Act
Could the end of Section 6(b) of the Consumer Product Safety Act (CPSA) actually be near? Time will tell. But last week’s development on Capitol Hill in the saga of “Section 6(b)” is noteworthy, and, one day in the not-so-distant future, may be recognized as the beginning of the end for this controversial provision of the law.
On April 22, Senator Richard Blumenthal (D-CT) and Representatives Jan Schakowsky (D-IL) and Bobby Rush (D-IL) introduced legislation—the Sunshine in Product Safety Act—to fully repeal Section 6(b) of the CPSA. This is the first time in recent memory that Members of Congress have introduced legislation to do away with Section 6(b) altogether. For example, in the last Congress, Representative Rush introduced the “SHARE Act,” which sought primarily to scale back one of Section 6(b)’s most important protections for firms—allowing a company to judicially challenge the U.S. Consumer Product Safety Commission’s (“CPSC” or “the Commission”) decision to release information about a firm, or one of its products, prior to its disclosure. But that legislation left the rest of Section 6(b)’s procedures and protections intact. This current bill, therefore, is much more ambitious, and stakeholders should take note.
By way of background, Section 6(b) requires the CPSC to engage in certain procedural steps before publicly disclosing information from which the identity of a manufacturer of a product can be readily ascertained. Those include taking reasonable steps to ensure that the information to be disclosed publicly is fair, accurate, and reasonable related to effectuating the purpose of the product safety laws. Practically speaking, this means notifying the manufacturer of the potential disclosure, providing either a summary of what the agency intends to disclose, or the actual disclosure itself, and providing the company with the opportunity to comment, typically 15 days, though that time period can be shortened by the CPSC with a “public health and safety finding.” Other regulators, like FDA and NHTSA, do not have similar statutory constraints on the release of product information nor do they have due process protections around data release, whether those be adverse events or vehicle accidents.
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New Proposed Legislation to Prevent Furniture Tip-Over
There have been recent calls for Congress to re-visit H.R. 2211, the “Stop Tip-overs of Un-stable, Risky Dressers on Youth Act” also known as the “STURDY Act.” Sponsored by Janice Schakowsky (Dem-IL 9th District), the bill was introduced in Congress last session and passed by the House on September 17, 2019 but never passed by the Senate. It would require the U.S. Consumer Product Safety Commission (“CPSC”) to promulgate a consumer product safety rule for free-standing clothing storage units to protect children from tip-over related death or injury.
As we indicated in our May 2020 analysis of dresser tip-overs, tip-overs have been a main focus for the CPSC and consumer advocacy groups in recent years. A CPSC report indicates that 571 people died from furniture tip-overs between 2000 and 2019, and 82% of those were children (ages ranged from 1 month to 14 years). A survey conducted by the CPSC showed that 41% of respondents did not anchor furniture in their homes.
Currently, there is no mandatory standard requiring manufacturers to test furniture to specific stability and safety standards. The current voluntary standard, ASTM F2057 – 19, is recognized by industry and the CPSC as required best practice in order to prevent tip-overs from dressers and other clothing storage units.
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Appliance Manufacturers Should Prepare for Increased DOE Enforcement Activity
The Biden Administration has promised an across-the-government effort to combat climate change, consistent with policy priorities during the Obama Administration. While much speculation has focused on a climate infrastructure package or a possible revamp of the Clean Power Plan, appliance manufacturers should be prepared for a less publicized but similarly significant change in direction from the current administration: increased enforcement under the U.S. Department of Energy’s (DOE) appliance standards program.
The DOE administers the appliance standards program under the Energy Policy and Conservation Act (EPCA), which includes setting mandatory appliance energy and water efficiency standards for over 60 covered products, such as refrigerators, dishwashers, vacuums, and battery chargers. Each appliance standard has two components: a conservation standard and an associated testing procedure through which the manufacturer demonstrates compliance with the applicable standard.
Although this program has existed since the 1980s, the Obama Administration was the first to explicitly include goals for greenhouse gas emission reductions as a component of the standards-setting process. Over the course of 8 years, DOE issued new and updated conservation standards for numerous products, and DOE’s Office of Enforcement investigated and issued monetary penalties to companies failing to comply with updated standards incorporating these emission reduction goals. The Trump Administration, by comparison, has not directly incorporated these greenhouse gas-related factors into the rulemaking process, and has been comparatively less active in updating standards in general. The Trump Administration also has pursued fewer enforcement actions on the whole – and appears to have sought smaller penalties – relative to the Obama Administration.
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Lithium Batteries: Mitigating Risks and Executing Recalls When Needed
Over recent years, the use of lithium ion batteries has become widespread in consumer products such as laptops, smartphone, hoverboards, electric scooters and bicycles, and power banks. Unfortunately, many companies have been forced to recall their products over thermal events involving those products’ lithium ion batteries.
Manufacturers can mitigate their risks of fire hazards with…
Who is the regulator? What is the rule?: Navigating the Alphabet Soup of COVID-19 Product Requirements
In the wake of the COVID-19 pandemic, product manufacturers and distributors—many of whom have pivoted to create PPE-related products for the first time—are now faced with a veritable morass of guidelines and requirements to navigate from a variety of governmental agencies. Recent enforcement actions by federal agencies have only highlighted the importance of understanding exactly how a product must be produced, advertised, labeled, and sold. This begs the important question: who is the regulator and what is the rule?
Our product risk management team has been speaking to several trade associations in September 2020 about how to navigate the alphabet soup of federal agencies supervising COVID-19 product distribution. The biggest takeaway: How a product is advertised for sale plays a critical role in how it is regulated and by which agency . The regulatory profile can mean the difference between required manufacturing registration or specific requirements as to product labeling.
This article outlines a few of the major players involved in regulating products designed to mitigate or prevent COVID-19—specifically, the Food and Drug Administration (“FDA”), Federal Trade Commission (“FTC”), and Environmental Protection Agency (“EPA”)—and discusses high-level considerations for entities who find themselves caught up in the regulatory alphabet soup.…
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