CPSIA - Avery-Dennison Volunteers to Collect a CPSIA Tax

When I was the only representative of an operating company to testify before the CPSC Tracking Labels panel on May 12, I warned that the Section 103 requirements would turn Learning Resources into a "tracking labels company", as opposed to our current role as a developer and marketer of educational materials. I predicted that we would need a full-time label staff, considerable extra expense on labeling and testing and a brand new tracking labels software application. I explained that the tracking labels provision cannot be implemented without considerable data collection and retention. As my recent video blog confirms, the CPSC has ambitious expectations for everyone's data retention. By "ambitious", I mean "total, complete and permanent" and by "everyone", I mean "everyone". No relief was offered, IMHO.

[Ironically, I shared the podium that day with a tracking labels software maker who openly pandered for business during his "testimony", going so far as to assert that he was personally so concerned about the "safety" of his granddaughter's earrings that he would prefer them marred by an obvious tracking label than take the risk of not knowing their "co-hort" information. This remark was greeted by widespread snickering in the room.]

Soooo, how crazy am I? Avery-Dennison answered this question recently with their exciting new software/hardware solution that you can buy to label your goods to comply with Section 103 and to retain your production data. I am going to guess here . . . but I think this solution will cost you some money and may need you to add to your staff . . . . Like any ambitious company attempting to take advantage of ridiculous government rules, A-D will very likely (certainly?) charge by the piece, thus collecting a tax on each piece you sell from now on. [Anyone recall the time when Microsoft openly pondered charging a small fee for each email sent using its software?] This is nothing more than an "inefficient tax" - in other words, a government rule causes a market inefficiency solved by paying a fee to an enterprising third party, not the government. This type of inefficient tax is common in quota situations (you buy quotas from soneone who has them, rather than paying the government for the right - have you ever heard of "cap-and-trade"?). In this case, A-D and other companies stepped forward to collect the tax and deploy it for the benefit of their shareholders and employees. The only losers - you and your customers.

Does an inefficient tax benefit society? Taxes tend to depress economic activity by raising costs and either depressing earnings (reducing capital growth for future investment) or causing prices to rise (reducing demand). This additional cost is not accretive to society unless it is less than the cost of the ills "eliminated" by the new rule. Hey, I know all roads lead to Rome - the question remains "How much should we citizens be willing to pay for tracking labels?"

If I put on my consumer hat, I think I would be willing to pay zero for tracking labels for most things. First of all, as a consumer I have had virtually no experience with recalls other than cars (and those items are already tracked). Most of the items I buy are either consumed (they are gone now) or are too low in value to be worth tracking. I say this because if everything was tracked, I would have to pay for the effort to implement tracking on everything I buy. I happen to believe that few if any of my low-value posssessions will ever be recalled, thus I do not want to pay for this service (it's a waste of my money). If an item I possess is recalled and is of low value, I am better off (upfront) agreeing to discard it when in doubt than paying for this detection system that I don't expect to ever use. In fact, I incur costs even trying to figure out if an item is subject to recall. This is one of the points I have made repeatedly about resale shops - it is simply too expensive for them to check every piece against the CPSC website. That requirement is completely absurd and unrealistic, and likewise you aren't going to do deep research on an old item that you have used for 18 months and cost you $12. You are going to toss it or forget about it.

The only exception I can think of is for high value items or durable items that present particular known dangers (high value items intended for the use of infants or toddlers, a very vulnerable class of consumer). Since it is expensive to throw away a crib or playpen, I think those items should be marked.

With this analysis in mind, you can perhaps understand why I view the "opportunity" to use A-D's system as nothing more than a private tax being collected by a small number of companies at the pleasure of the Federal government. Calling it anything else is to obscure the reality of the situation.

The tracking labels fiasco is a good "poster child" for the CPSIA problems. The new rule has completely distorted and redefined the public debate. Lost in the shuffle is the point that the value of tracking labels is questionable at best. This point is not relevant in the eyes of the CPSC since the law was passed by (our all-knowing) Congress; the agency sees their job as "vigorously" enforcing the CPSIA. Sadly, they are right, the CPSIA is the law of the land, even if it is ridiculous, and the CPSC does not make the law. Since the CPSIA is now law, making a rational argument against it seems somehow off point. That's unfortunate. There was a time (two years ago, for instance) when I naively thought the government would listen to you and that our legal system was rational, more or less. Today, I find myself doubting this conclusion on a daily basis. Most frustrating, I find that I have lost ANY confidence in my ability as a citizen to get our government to listen. They made up their mind and moved on. [This is not true for everyone in government - we have the sympathetic ear of a minority of members of Congress but unfortunately, in today's Congress, it doesn't matter what anyone thinks other than about six people. . . and they don't give a darn about the problems discussed in this blog.] This is how we end up with bad rules like Section 103 and find that we can't do anything about it. That's not right, but that's how Mr. Waxman and Ms. Pelosi want it these days.

We can only hope that America will wake up from its fog soon . . . before too much damage is done.