Monday, October 25, 2010

CPSIA - Let's Keep Sucking Our Thumbs . . . .

803 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 7 days left until Election Day.

Seven days to go! Go, baby, go!

I just found this article documenting the pain of some Illinois toy craftsmen owing to the CPSIA. Imagine, these guys are being held up by the noxious CPSIA and are essentially shut down. I have been reading these articles for almost three years now. Ho-hum.

Have any of you heard of Mattel or Hasbro going out of business because of this law? Me, neither.

Articles of this type are discouraging on several levels, not least of which is the lack of comprehension of almost everyone who gives a quote. The scale of the problem for small business, even the very nature of the problem presented by the law is unclear, apparently. No one asks the right questions like - why are we doing this? What are we achieving? Is it worth the cost? Can we even measure what we have accomplished?

Of course, the answers to these questions are all negative. No one knows why we're doing this, other than a general love of children. Don't know about you but a "general love of children" is a rather flimsy justification for killing off an entire industry (other than mass market companies like Mattel). Given that we have many fine universities here and train the occasional engineer in this country (I am one of them), I would think we could be a just a little more "science-y" in our analysis. So, if we can put our "general love of children" on the shelf for just a moment, why indeed are we doing this? To improve the health of children, right? That sounds good to me.

To assess whether we have had any impact on the health of children, presumably we would need to be able to describe what is WRONG with the health of children now. The zealots assure us that there is no safe level of lead. They also assure us that lead harms children "silently", in other words, the harm cannot be measured accurately, but trust us, it's there. In other words, there is no way to differentiate between lead "poisoning" in children not presenting symptoms - and a purely imaginary condition in those same children. The "real" problem and the imaginary problem present exactly the same way - no symptoms. Contrast banning pixie dust with banning lead-in-substrate - the issues are the same.

[Ed. Note: Apparently there ARE safe levels of lead in musical instruments made of brass if they are full-sized, but not if they are under-sized. This is part of the new interpretative rule on the definition of "Children's Products". Therefore, if you had a small trumpet (dangerous, subject to regulation) and you stretched it, making it into a full-sized trumpet with thinner walls of brass, it would become safe (no regulation)! Hmmm. This is not magic, this is the CPSIA!]

And if you want to measure your impact on this dreaded problem, how would you do it? The health statistics are purely made up, because there are no symptoms. The reasoning goes - since there is "no safe level" for lead, then we must consider anything that could possibly cause a blip in blood lead levels as a causative agent, therefore, we must ban everything that COULD POSSIBLY make blood lead levels rise.

Given that blood lead levels are declining these days and are not considered a health risk by the EPA, FDA, NIH or CDC except in connection with certain specific hazards (leaded house paint, residual pollution from leaded gasoline, or other environmental factors like air pollution), we cannot measure any improvement in health. It's literally impossible (remember, the "real" problem and the purely imaginary problem present exactly the same way). Thus, it will be impossible to measure how much we have achieved for our investment. We must cling to our assertion that there is "no safe level" for lead to assure ourselves that we have accomplished something. This is a logical argument, but there's no evidence to support it.

So the entire exercise is speculative? The benefits cannot be measured. The problem can't be measured or even described accurately. There weren't any victims before, there aren't any victims now. Seems like nothing has changed. Uh-oh.

Ah, thumb suckers, THAT isn't true. Something fundamental has changed, thank you Congress. Safety hasn't improved . . . but a few things have changed substantially:

  1. Our regulator is no longer capable of exercising a judgment about what is and what is not safe. Consider the musical instrument example above. The CPSC has also become quite aggressive, perhaps to justify its existence and its new jumbo budget. Not pretty.
  2. The cost of compliance has already skyrocketed. Those dollars are coming out of activities that would otherwise be used to grow our businesses.
  3. You ain't seen nothing yet on costs - wait for the CPSC to approve the 15 Month Rule on testing frequency and reasonable testing programs. Costs will rise by 10-100x for many companies if the rule is adopted as presently drafted. I'm not kidding.
  4. Complexity and risk have skyrocketed. What do people do when they can't figure out the rules or they get scared about the consequences of failure? They exit.

    [Here's another pre-Xmas threat by the ever-lovable Inez Tenenbaum: "'We will continue to recall their products and it will damage the brand. There will be penalties, there will be lost customers,' she said in an interview." She's quite a charmer, isn't she? Does this sound good to you? Want to enter the Children's Product market? Want all your family's wealth dependent on the health of a business in this market, being regulated by Ms. Tenenbaum? Hmmm, the line's out the door, everyone wants in!!!]

  5. Products and markets are being dropped, or aren't being entered in the first place. Profits are being lost (profit prevention) and jobs are being shredded. Lots of jobs . . . .
  6. It's not fun anymore to be in this business.

As for the Illinois wood toymakers, it's a shame for them. We read about this kind of thing all the time. Maybe it will go away on its own. Maybe it's all their imagination. Small businessmen are often so unsophisticated, they probably don't know what they're talking about. The U.S. government is just too smart to get something this wrong. If they really screwed up, they'll fix it - the government's not the enemy, you know. Something this big and stupid can't be true. Somebody big and important, like a trade association, will save us. No, no, 60 Minutes or John Stossel will do an embarrassing story and that will break the logjam. [Ed. Note: been there, done that.] I'm too busy running my business to address this. You can't fight City Hall. It will get fixed, don't worry! Nothing this ridiculous lasts very long.

Boy, that thumb must be yummy! But at your age, thumb-sucking seems so inappropriate.

Don't forget to vote on November 2nd. Even if this scourge won't go away and has become entrenched, you can still strike a note for capitalism and for sanity by voting against the idiots and the venal people who want to destroy your businesses and deprive you of valuable products that you prize. You can defend yourself - and you MUST.

CPSIA - Governmental Biases On Display at CPSC

802 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 8 days left until Election Day.

The WSJ published a short article about the psychology of governments called Studying the Biases of Bureaucrats (subtitled "Five Ways Regulators Think Wrong"). The application of psychology to economic decisions has produced a few Nobel Prizes - the implications of psychology on decision-making is well-known and generally accepted.

See if you recognize the Democrats who run the CPSC in some of these bureaucratic decision-making foibles:

". . . [P]sychologists have shown that we systematically overestimate how much we understand about the causes and mechanisms of things we half understand. The Swedish health economist Hans Rosling once gave students a list of five pairs of countries and asked which nation in each pair had the higher infant-mortality rate. The students got 1.8 right out of 5. Mr. Rosling noted that if he gave the test to chimpanzees they would get 2.5 right. So his students' problem was not ignorance, but that they knew with confidence things that were false." [Emphasis added]

My comment: Is the author suggesting the election of chimpanzees to the CPSC Commission? Hmmm, you must admit it's a creative suggestion. . . .

"The issue of action bias is better known in England as the "dangerous dogs act," after a previous government, confronted with a couple of cases in which dogs injured or killed people, felt the need to bring in a major piece of clumsy and bureaucratic legislation that worked poorly. . . . It takes unusual courage for a regulator to stand up and say 'something must not be done,' lest 'something' makes the problem worse." [Emphasis added]

My comment: This hypothetical regulator does not work at the CPSC. The aversion of the current Democratic CPSC leadership to not regulating is continually reinforced. Consider for instance, the CPSC's willingness to make a mockery of protecting the public against harm in the definition of "Children's Products". In that recent master stroke, the Commission approved a rule that says that the musical instruments marketed to schools (even exclusively) will be unregulated (even if made entirely of "dangerous" brass) if the instruments are full-sized (a so-called general use item) BUT will fully regulate kid-sized instruments. Big instruments made of brass apparently do not deserve their regulatory attention but little ones do, even if BOTH are used exclusively by kids. Big instruments won't poison kids but little ones will, apparently.

Spineless or just plain stupid - you make the call!

"Motivated reasoning means that we tend to believe what it is convenient for us to believe. If you run an organization called, say, the Asteroid Retargeting Group for Humanity (ARGH) and you are worried about potential cuts to your budget, we should not be surprised to find you overreacting to every space rock that passes by. Regulators rarely argue for deregulation."

My comment: Ho-hum, has anyone EVER seen this at the CPSC? Since the WSJ metaphor relates to rocks, I would note that we must warn consumers that the rocks in our rock kits may contain lead which might be harmful if swallowed. We do NOT have to warn people that our rocks ALSO contain rocks - yet another reason to not to eat them. We also don't warn consumers to not eat our fossils because it destroys the fossil record - but we do warn them about lead in fossils. Nice!

It's so fun to contribute to making a mockery of safety! I find it gratifying (not).

"The focusing illusion partly stems from the fact that people tend to see the benefits of a policy but not the hidden costs. As French theorist Frédéric Bastiat argued, it's a fallacy to think that breaking a window creates work, because while the glazier's gain of work is visible, the tailor's loss of work caused by the window-owner's loss of money—and consequent decision to delay purchase of a coat—is not. Recent history is full of government interventions with this characteristic."

My comment: Invisible costs are the true cancer of the CPSIA. I recently voted NO on a market expansion of our company into a product class that I felt would attract WAY too much regulatory attention at the maniacal CPSC these days. Why take a chance? With the government almost promoting the destruction of our industry and its supply chain (see today's WSJ for yet another scare tactic by Inez Tenenbaum), there is just no reward for moving into certain markets. And how will the regulators measure this effect? There is no evidence of our choice to NOT enter a market. That must mean it never happened . . . right??? Perhaps that's what they think. They only believe bodies (that are still warm and only if they are stacked high - and even then, we know that "anecdotes are not evidence"). No bodies are evident when you opt out.

Case closed?

"'Affect heuristic' is a fancy name for a pretty obvious concept, namely that we discount the drawbacks of things we are emotionally in favor of. For example, the Deepwater Horizon oil spill certainly killed about 1,300 birds, maybe a few more. Wind turbines in America kill between 75,000 and 275,000 birds every year, generally of rarer species, such as eagles. Yet wind companies receive neither the enforcement, nor the opprobrium, that oil companies do."

My comment: Or here's an example from the CPSIA world: deaths from lead number just one, and injuries number just three (all alleged, none verified) over ll years (CPSC data) but deaths and injuries from swimming pools are greater on an average DAY. So what's our national obsession, at least of the Democrats? Lead. Makes a lot of sense. Not.

The CPSC - it's a psychologist's dream . . . but it's our nightmare.

Sunday, October 24, 2010

CPSIA - Hey Sucker!

801 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 9 days left until Election Day.

Consider this note I received today from a friend:

"Thought you'd like to know that i received a check in the mail today from Uncle Sam's new Affordable Care Act to help cover the cost of my Medicare drugs in the amount of $250. Mind you, this one-time gift arrived just eleven days prior to election and, to me, an obvious bribe to receive my endorsement of their plan. Hope this backfires on them as I am immediately turning this check back to Joel Pollak in the form of my contribution in the same amount. Hope it helps the last few days of his successful campaign." [Emphasis added.]

The Affordable Care Act is Dem-sponsored legislation designed to ameliorate the "donut hole" that Seniors experience in drug coverage under Medicare. I am sure this is a real problem. That said, the arrival of this check magically two weeks before the election is just one more bit of evidence of the privilege taken by Congress and the White House to award themselves gifts in even-numbered years to ensure reelection. The real question is "how dumb are we?"

Please note that the CPSIA was just such a gift. Passed almost unanimously on August 14, 2008 right ahead of the 2008 election season, the CPSIA allowed every member of Congress to blunt accusations that they were "soft" on Chinese toys. Not unlike so many other pieces of complex legislation passed by Nancy Pelosi's Congress, our esteemed members of Congress apparently never read the bill which covered soup-to-nuts in Children's Products, not just toys. Even today, you can find Congressmen expressing surprise and alarm that the law covered anything other than toys.

Duping members of Congress must seem like child's play to devious staffers. After all, they know the members can't or won't read their handiwork. We call that the "political process".

Some people ask me why I cut the Republicans such a "break" by attacking only Democrats on this law. Didn't all the Republicans vote for the law, too? By and large, that's true. However, since passage of the CPSIA, many Republicans have stood up and tried to help us. They have allied with my efforts and have gone to considerable effort, not to mention taken political risk, to address a Congressional screw-up that imperils Small Business without any corresponding safety benefit for consumers. Has every Republican member of Congress helped us? No. However, ZERO Democrats have lifted a finger to help us and most have scorned us publicly and privately. The Democrats who were put in charge of the CPSC are perhaps the MOST insensitive and the most strident in their political posturing.

Until the Democrats DEMONSTRATE that they can be trusted, which for me will take quite a bit of work on their part, I have NO interest in giving them a pass. The Republicans have EARNED my support. I hope you are not susceptible to bribes or other trickery by the party in control. Your business and your markets hang in the balance. Assess the situation clearly and pick sides. It's now or never!

CPSIA - Jan Schakowsky Wants to Design Your New Home, Too.

801 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 9 days left until Election Day.

801 days without ANY help. Amazing . . . .

Rep. Jan Schakowsky, the Illinois Congresswoman who informed the WSJ that I am a "cynical special interest" because I dared to participate in the upcoming midterm elections, is not content with rearranging your business and the Children's Product industry. Now she wants to redesign your new home.

Does she have good taste, you ask. Well, read on and see what you think of Jan Schakowsky as your architect or decorator.

Your home is your last refuge, right? Not if she gets her way - but then again, she knows what's best for you! After all, a bigger government involved in every aspect of your life is a BETTER government. The estimable Ms. Schakowsky is the sponsor of HR 1408 Inclusive Home Design Act of 2009. In other words, this law-in-the-makings is her handiwork.

She brags about this pending legislation on her Facebook page in posts dated October 6, so she must be pretty psyched about it. I gather she wants the electorate to know of her excellent leadership in Congress, so I thought I'd help out. Happy to lend a hand to such a "great" leader.

Best I can tell, Ms. Schakowsky latest brain wave is to require you to redesign your new home to be disability-friendly if you get "federal assistance". The so-called purpose of the act is "[t]o require all newly constructed, federally assisted, single-family houses and town houses to meet minimum standards of visitability for persons with disabilities."

And what might she have in mind, precisely? Anyone who receives "federal assistance" needs to design new homes to meet several ADA-like standards even if they are useless to the buyers. No matter that this will cost money or that you don't want it. It's good for you, Jan says so. It may also make it difficult for you to find new homes without these features. Like cod liver oil, you'll get used to it!

As noted, to get into this spot, you need to receive federal assistance. Here's a sample of what might constitute "federal assistance":

"any assistance that is provided or otherwise made available by the Secretary of Housing and Urban Development or the Secretary of Veterans Affairs, or any program or activity or such agencies, through any grant, loan, contract, or any other arrangement, after the expiration of the one-year period beginning on the date of the enactment of this Act, including . . . grants, subsidies, or any other funds . . . services of Federal personnel . . . any tax credit, mortgage or loan guarantee or insurance. . . ."

In other words, if you even brush against the federal government in constructing your new home, you are COVERED by this law. Tax credit for your new energy-efficient furnace? You're IN. HUD loan refinance for a development of several homes? You're IN. Fannie Mae or Freddie Mac involved? You're IN. Vet benefits? You're IN. Inspected by a federal employee for some reason? You get the idea.

Hey, here's the REAL idea - the government belongs in EVERY aspect of your life. Ms. Schakowsky doesn't even think you should be allowed to measure the door frames in your house without her oversight. It doesn't even matter if you have a disabled person living in the house - you MIGHT be visited by one and certainly, you would not able to accommodate that visit without Ms. Schakowsky's supervision.

Perhaps you should invite her, too, just to work out the kinks. Uh-oh, I sense an amendment coming!

Had enough yet? If not, vote DEM on November 2nd so society can be reengineered a little bit more. On the other hand, if you have the vaguest sense that this is a runaway train and might need to be stopped before it's too late . . . vote the other way.

The Dems brought this on themselves. They put people like Schakowsky in leadership roles. The Children's Product industry is in tatters as a result. PLEASE STOP THE INSANITY ON NOVEMBER 2ND!!!

Tuesday, October 19, 2010

CPSIA - Do We Need More Government? [No!]

796 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 14 days left until Election Day.

Hey, have any of you noticed that since I began a daily reminder of our abandonment by this Democrat-led government (reminders began on August 22nd when 738 days had passed without help), no Democrat has done a single thing to help us? Have you also noticed that as they weren't rising up to help us, the Dems were actually engaged in making things WORSE? Definition of Children's Products, the so-called "15 Month Rule", making carpets subject to testing, further implementation of a database certain to make our business environment FAR more hostile.

Do we need a lot more of this?

Mr. Obama says we do: "The basic idea is that if we put our blind faith in the market and we let corporations do whatever they want and we leave everybody else to fend for themselves, then America somehow automatically is going to grow and prosper." The implication is clear - more government is the solution, we can't trust markets.
Corporations need overseers, heavy regulation.

This quote is from a remarkable WSJ article that appeared last week by Daniel Henninger entitled "Capitalism Saved the Miners". Beleaguered victims of the awful CPSIA should read this article. Let me sum it up with his concluding remarks:

"The U.S. has a government led by a mindset obsessed with 250K-a-year 'millionaires' and given to mocking 'our blind faith in the market.' In a fast-moving world filled with nations intent on catching up with or passing us, this policy path is a waste of time. The miners' rescue is a thrilling moment for Chile, an imprimatur on its rising status. But I'm thinking of that 74-person outfit in Berlin, Pa., whose high-tech drill bit opened the earth to free them. You know there are tens of thousands of stories like this in the U.S., as big as Google and small as Center Rock. I'm glad one of them helped save the Chileans. What's needed now is a new American economic model that lets our innovators rescue the rest of us." [Emphasis added]

I don't know about you, but I think we operated our company very well before Mother Government invited herself into our affairs. We knew the difference between right and wrong, and were pretty good at allocating our capital to its highest and best use. Now we must play "Mother May I" with the self-appointed experts who arrived to protect against "dangers" they can't accurately describe or measure. The vacuuming up of our money, our resources, our mind share, our energy, destroys our ability and will to compete.

Fine, ignore the reality. Wait for the bodies. Assert your superiority and your authority. But the facts are the facts. The case against the CPSIA is crystal clear and the only ones who don't "get it" are the Democrats. After two years of banging my head against the wall, I can only conclude that they don't WANT to get it.

It's no mystery - I know why the Dems refuse to listen. They are rather transparent about it. When I spoke to Rep. Jan Schakowsky (D-IL9) at a candidate forum eight days ago, I asked her why she called me a "cynical special interest" to the WSJ. She asked me who I was, and then told me she didn't know me. That fact didn't stop her from trashing me, a private citizen, to a nationally-prominent newspaper. Pointing the finger at me serves her interest in getting reelected - she's saving the populace . . . again. Who is in a position to argue with her? When I protested that our products had been safe for 26 years, she replied that she "didn't understand what the problem is" and turned to a voter standing nearby to assert that she just wants to protect children against lead. The higher moral ground . . . for people who don't know what they're talking about. Unfortunately, scare tactics sell very well.

I believe the Mob also sells protection. Do you want to buy some protection from them?

The Chilean miners were saved by companies that invested their money to make the world a better place incentivized by the opportunity to make a profit. Our industry, the one that serves children as our reason-to-be, is being depleted by a heavy tax - the intrusion of a heavy-handed government that treats us as "guilty-until-proven-innocent". The government REFUSES to listen to us.

Those of you with children will pay the consequences.

Thank you, Mother Government. The market saved the miners, but you will happliy kill us.

Vote on November 2nd for a fresh start.

Monday, October 18, 2010

CPSIA - Appropriate Recall Points Out The Real Problem

795 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 15 days left until Election Day.

The CPSC today announced a recall of a product called "Bathtub Subs". The battery-operated bathtub submarine toy is "yellow, has a smiling face, turquoise windows, an orange propeller and an orange periscope that turns the toy on and off. The intake valve has a water pump that sucks in water to propel the submarine." The cringe-worthy problem: "The intake valve on the bottom of the submarine toy can suck up loose skin, posing laceration hazard to children. . . . CPSC and the company are aware of 19 incidents of lacerations to boys' genital area. One of the incidents required medical attention."

This product has a real safety issue, and it has nothing to do with lead. We can understand the problem because the issues can be described accurately and the injuries can be measured. This is how we can measure the right response. The product was aimed at very young children (toddlers) in bath-time play. It seems foreseeable that the toy might rest against "sensitive" areas. The product was not apparently designed with this risk in mind. Please contrast your ability to assess the issue here with, say, rocks, fossils, pens, ATVs, bicycles, musical instruments, children's underwear, shoes, books and other products that have famously run afoul of the CPSIA's restrictions on lead without demonstrating any apparent safety issues.

As a toy maker, I hate when this kind of problem happens. It makes all of us look bad, even we had nothing to do with the issue. We all get blamed for problems caused by other companies. This is how CPSIA's are born.

There were 19 incidents in the last year with this product. Makes you wonder what it takes to get someone to do something about the issue. Do you think this was a "mystery"? Here's what you find on the review page today (before it gets taken down):

"Dangerous toy, May 25, 2010
By Tyler Warren

I bought this toy for my 12 month old son. He was playing with it in the bath one evening and put it down in his lap. It sucked up some skin on his penis and cut it. I called and put in a complaint to Munchkin and I am very disappointed that this toy is still on the market a month later. This toy is dangerous and should not be given to children.

Comment Initial post: June 15, 2010 8:37 PM PDT

Julie Everett says:

The same thing happened to my 19 month old son tonight. I reported it to the CPSP [sic]. You should do the same since the company didn't take you seriously. My son has injuries to his penis and testicles. Here is the link if you like.

Very Dangerous, June 15, 2010
By Julie Everett (Florida)

My son loves this toy. Tonight he was playing with it in the tub and also set it in his lap and it sucked some of the skin from his penis and his testicles and cut both of them. I will be filing a complaint with the company as well. Do not buy this for your child!

I agree it is a dangerous toy..., August 8, 2010
By Pamela Beightol (Falconer, NY United States)

I had the same thing happen to my 15 month old when he was playing with the toy. His skin from his penis got cut after about 3 minutes play with the toy. I would not let my 5 year old play with it either.

I would have given it no stars if possible, August 26, 2010
By Kendall Tupker

The same thing happened to my 13 month old son. We had just given him this toy to play with in the bathtub and within a few minutes he was screaming in pain. While he was holding it in the water near his lap it caught his foreskin and cut him. Needless to say the sub ended up in the garbage and I made a complaint to the company. Never, ever buy this toy."

This was publicly available on Amazon for months before either the company or the agency did anything about it. By all appearances, neither did Amazon.

Let's face it, this item is not exactly a dire threat to our way of life. That being said, this kind of insensitivity to consumer needs and expectations is how unjust laws like the CPSIA get written, passed and revered. It is also raw, red meat for a headline-mad CPSC anxious to justify its existence and its budget. Do I hear massive penalties?! Manufacturers have to think ahead and consider whether they want stories like this told about them. This is a compliance issue, a duty of care issue. It is NOT an issue that requires legislation. Unfortunately, nothing is routine at our regulator these days. Who knows what the implications will be flowing from this recall.

One last thought: among the many reasons that I truly HATE the CPSIA, it is the rising specter of a liability feeding frenzy over children's product safety. This can ruin what we are doing, and in any event, I don't relish planning my business around protecting myself from ravaging trial attorneys. Paranoid? Well, I received notice of this recall at 5:40 PM CST and in the next 15 minutes found these two sites devoted to this very recall:

Lawsuit Settlement Funding and The latter website invites: "If your child has suffered an injury related to the use of this product, please click the link below and your complaint will be sent to a lawyer who may evaluate your claim at no cost or obligation." Remember, this was up within 15 minutes of the announcement of the recall.

Think of the chaos that will follow the much-anticipated public database. We can only pray that a Republican Congress will de-fund the database before it gets off the ground. Or else we'll all be in the ground . . . .

Vote on November 2nd. It's your duty!

CPSIA - My Appearance on Fox News "Fox & Friends"

795 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 15 days left until Election Day.

I appeared on Fox News' Fox & Friends show today discussing the CPSIA, testing costs and my political involvement to save our business. To watch the video, please click here.

CPSIA - Washington Times SLAMS "Children's Product" Definition


Bureaucrats way out of tune
Government imposes regulations on children's CDs and DVDs

The Washington Times
7:09 p.m., Wednesday, October 13, 2010

The government wants to regulate Hannah Montana CDs and DVDs. The bureaucrats at the Consumer Product Safety Commission (CPSC) insist that the discs marketed to children be tested for lead, but when the same young starlet churns out raunchier material under her real name, Miley Cyrus, they will escape scrutiny. Never mind that the same 10-year-olds will likely end up buying both products.

For the rest of the article, please click here.

Friday, October 15, 2010

CPSIA - Tune in to Fox News on Monday AM

792 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 18 days left until Election Day.

I am scheduled to appear on Fox News "Fox & Friends" program on Monday at 6:15 AM EST to discuss the CPSIA and my involvement in politics as a means to address our many CPSIA problems.

Let's set some Nielsen ratings records for Fox on Monday!

Wednesday, October 13, 2010

CPSIA - Jan Schakowsky's Expert Opinion

790 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 20 days left until Election Day.

I guess I'm famous now. Rep. Jan Schakowsky (D-IL9) is talking about me to the Wall Street Journal:

"Ms. Schakowsky said Mr. Woldenberg's success as a fundraiser, is proof that 'very cynical … special interests are highly engaged in the [Ninth District] campaign.'"

It seems strange that Ms. Schakowsky is so certain that I am an official Special Interest, a cynical one at that. When I ran into her at the BJBE candidate forum on Monday night, she asked me who I was. I was just a touch insulted, since as a cynical Special Interest, I would have expected her to know who I am. After all, she did tell Elizabeth Williamson of the WSJ that I was attempting to cynically influence the election in her district. This is what cynical Special Interests do, apparently.

What sneaky business am I up to? I want to amend the CPSIA. Ms. Schakowsky does not want to change her seminal law. That makes me a Special Interest. In other words, I disagree with her. And I thought my "special interest" was educating kids. Apparently not.

I never met a Special Interest before but now I know what one looks like. Here's a picture of a Special Interest:

What makes Ms. Schakowsky such an expert on Special Interests, anyhow? Well, it turns out she has experience. For instance, Crain's Chicago Business recently pointed out the "highly unusual intervention" by Ms. Schakowsky to stop foreclosure procedures against a "group" of borrowers in her district. What a caring, generous act, always looking out for her constituents! Here's Ms. Schakowsky both explaining and congratulating herself:

"In an interview, Ms. Schakowsky says she was concerned that Devon Avenue 'essentially would go dark. . . . If there are communities that are (in danger of being) decimated, I assure you that any member of Congress would do everything they could to deal with the devastation of foreclosures. I feel very proud of this,' she says, adding that Mr. Singh’s contributions had nothing to do with her decision to help. 'It was clear to me there was a widespread problem,' she says." [Emphasis added]

What a swell Congresswoman!

Ummm, some of the borrowers were donors to Ms. Schakowsky and her Democratic cronies. Is it okay for the Congresswoman to do this? Should she be "proud" of her magnanimous act? Republican challenger Joel Pollak filed an updated House Ethics Complaint against Ms. Schakowsky providing following details:

  • "While initial reports suggested that Schakowsky had helped about 20 businesses in the local South Asian-American community, court documents show that 19 of the 24 loans (80%) in foreclosure . . . were held by just three individuals: Mr. Amrit Patel (12, including 3 held jointly), Mr. Balvinder Singh (5), and Ms. Shahira Khan (4, including 2 held with Patel). One of the remaining 5 loans is held by Mr. Haresh Patel, who is apparently Mr. Amrit Patel’s son."
  • "Court documents indicate that only 3 of the 24 affected properties are actually located on Devon Avenue. Only 4 are actually in the neighborhood. Except for those few, and for a small cluster of multi-unit properties further north near the intersection of Touhy Avenue and Clark Street, most are well outside the area, including properties as far away as Calumet City, Itasca, Barrington, and Sauk Village, IL."
  • "Some of the key individuals who benefited from Schakowsky’s actions have close political ties to her and her allies. Mr. Singh contributed $500 to Schakowsky in 2004 and $2000 in 2006. He has also given thousands of dollars to other federal, state, and local Democratic candidates. Mr. Patel contributed $1000 to Ms. Schakowsky in 2002, and raised $50,000 for former governor (and convicted felon) Rod Blagojevich (D) in 2006. He also paid $34,000 to Mr. Blagojevich’s wife in real estate consulting fees; similar transactions were probed by prosecutors during Mr. Blagojevich’s recent corruption trial. . . . In addition, Mr. Patel’s lawyer is Democratic state senator Ira Silverstein, whom Schakowsky backed successfully in 2008 for the position of 50th Ward Democratic Committeeman."

Cozy! Does that sound like a Special Interests story to you? If it does, perhaps Ms. Schakowsky IS an expert on such things . . . .

[Btw, I am Joel Pollak's Finance Chair. On the occasion of the WSJ profiling me in that role, Ms. Schakowsky labeled me as a Special Interest.]

Still wondering about her authority on the topic of Special Interests? According to FEC records, Ms. Schakowsky seems to hang out with Special Interests by the basketful. How many Labor Unions, lobbyists and trial lawyers does it take to be tainted by Special Interests? Or are Special Interests just small educational toy companies which complain about laws that Schakowsky defends???

Let's see who gave money to Rep. Schakowsky through June 30:


Union PACs:

• Air-line Pilots Association PAC
• Amalgamated Transit Union PAC
• Am. Fed of Govt Employees PAC
• Am. Fed. Of State, County and Municipal Employees PAC
• Am. Fed. Of Teachers (AFL-CIO) PAC
• Am. Postal Workers Union PAC
• United Brotherhood of Carpenters and Joiners PAC
• Letter Carriers Political Action Fund
• Intl Brotherhood of Teamsters DRIVE PAC
• Intl Union of Operating Engineers
• Intl Assn of Bridge, Structural, Ornamental & Reinforcing Ironworkers PAC
• Intl Assn of Firefighters PAC
• Intl Assn of Machinists and Aerospace Workers PAC
• Intl Brotherhood of Boilermakers Campaign Assistance Fund
• Intl Brotherhood of Electrical Workers PAC
• Laborers International Union of North America PAC
• Natl Air Traffic Controllers PAC
• Natl Assn of Social Workers PAC
• Transport Workers Union PAC
• United Auto Workers PAC
• UniteHere (Garment and Textile Workers) PAC
• United Food & Commercial Workers Intl Union PAC
• United Pilots PAC
• United Transportation Union PAC

Medical Interest Group PACs –

• Am. Academy of Family Physicians PAC
• Am. Academy of Neurology Prof. Assn BrainPAC
• Am. Academy of Phys. Assts PAC
• Am. Assn of Nurse Anesthestists CRNA-PAC
• Am. Assn of Orthospaedic Surgeons PAC
• Am. College of Radiology Assn PAC
• Am. College of Surgeons PAC
• Am. Congress of Oby-Gyn PAC
• Am. Hospital Assn PAC
• Am. Nurses Assn PAC
• Am. Occupational Therapists Assn PAC
• Am. Optometric Assn PAC
• Am. Podiatric Medical Assn PAC
• Blue Cross Blue Shield PAC
• Natl Community Pharmacists Assn PAC
• Natl Emergency Medicine PAC

Corporate PACs -

• CME Group PAC
• Coca-Cola Enterprises PAC
• Credit Union PAC
• Emergent Biosolutions PAC
• Entertainment Software Association PAC
• Ford Motor Civic Action PAC
• General Electric PAC
• Illinois Central Rail Co. PAC
• Harris N.A. PAC
• Hospira Inc. PAC
• Kellogg Company PAC
• Kraft Foods PAC
• Lockheed-Martin PAC
• Microsoft Corporation PAC
• Natl Assn of Chain Drug Stores PAC
• Natl Assn of Realtors PAC
• Natl Beer Wholesalers Assn PAC
• Natl Cable and Telecom Assn PAC
• Northern Trust Corporation PAC
• Raytheon Company PAC
• Walgreen Co. PAC

Trial Lawyer PACs–

American Association for Justice (formerly the Assn of Trial Lawyers of America) PAC

Law Firm PACs

Drinker Biddle
Dykema Gossett
Hogan Lovells
Holland & Knight
Nelson Mullins Riley & Scarborough (former firm of Inez Tenenbaum's Chief of Staff Matt Howsare and CPSC Executive Director Kenneth Hinson)
Venable LLP (VEN-PAC)

Others –

• J Street PAC
• Medical Marijuana PAC


Lobbyists –

Michael Bauer (community organizer/lobbyist)
Jonathan Cuneo
Andrew Fields
Ken Inouye
Charles LaDuca
Andrew Quinn
Ed Rothschild (Podesta Group)
Larry Suffredin See also this link.
Susan White (health insurance lobbyist)

CPSC-related -

Pamela Gilbert (former Exec. Dir. of CPSC under Ann Brown; partner in Cuneo Gilbert & LaDuca law firm and lobbying firm; member of Obama Transition team - with now Commissioner Bob Adler - responsible for the CPSC)

Plaintiff/Trial Lawyers –

Patricia Bobb
Thomas Clancy
Robert Clifford
Kevin Conway
Philip Corboy, Jr.
Anne Megan Davis
Jay Paul Deratany
Linda Friedman See also this link.
Andrew Greene
Keith Heibeisen
Penny Nathan Kahan
Thomas Keefe See this link, too.
Clint Krislov
Jerry Latherow
Joseph Power
Thomas Prindable See this link, too.
Larry Rogers
Antonio Romanucci
Mary Stowell [She gave a mere $98,525 in 2008 campaign donations, and recently felt it was her "duty" to file a complaint with the FEC about Republican Bob Dold's June 30 campaign disclosure for the missing cost of a bus (bill not received).]
Candace Wayne

Other Notable Lawyers:

Patricia Curtner (bond lawyer)
Lynn Cutler (government affairs lawyer)
Elizabeth Gracie (real estate tax lawyer) See also her 2008 campaign contributions.
Gail Morse (state tax specialist)

Large Contributors to Dem Causes –

Lucy Ascoli
Prudence Beidler
Pam Crutchfield
Grace Allen Newton
Bettylu Salzman
Susan White
Lois Zoller

Others –

Gila Bronner (prominent government contractor)
Anna Giannoulias (mother of Democratic Senatorial candidate Alexi Giannoulias and family owners of well-known failed bank)
Laura Ricketts (part-owner of the Chicago Cubs)
Sheli Rosenberg (executive in various Sam Zell entities)
Howard Trienens (longtime Chairman of Board of Trustees of Northwestern University)

This list gives me a whole new perspective on Schakowsky's campaign slogan "A Fighter on Our Side". Which side is that, precisely?

While I am sure Ms. Schakowsky meant "cynical . . . special interest" as a compliment, I hardly deserve to be in such august company as her campaign contributors. I am sure she really meant "Shoo, fly, shoo".

On November 2nd, we'll see who shoos. Don't forget to VOTE!

Tuesday, October 12, 2010

CPSIA - Fox Business Interview of RW on CPSIA

789 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 21 days left until Election Day.

I was interviewed on Fox Business Bulls and Bears Show today to discuss CPSIA. In particular, I noted the high cost of testing and the low potential payback in avoided injuries. Loyal readers, you've heard it all before. I also note that the pending paper deluge in Obamacare will add to the misery.

Help me . . . on November 2nd. Please!

CPSIA - RW on The Laura Ingraham Show re CPSIA

789 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 21 days left until Election Day.

I was interviewed today on The Laura Ingraham Show. To listen to this interview, just click HERE.

CPSIA - WSJ Radio Interview of RW re CPSIA

789 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 21 days left until Election Day.

The WSJ today released a radio interview in which I discussed my opposition to the CPSIA and my recent political awakenings. I hope you will give it a listen: Click HERE.

[PLEASE NOTE - if you have trouble opening this mp3 file, you can "right click" on the link and save it to your hard drive. You will easily be able to open from there.]

Monday, October 11, 2010

CPSIA - WSJ Profiles RW in Article on Business Backlash

OCTOBER 12, 2010

Business Backlash Grows


VERNON HILLS, Ill.—Rick Woldenberg runs an educational-products company from a suburban Chicago office stacked with brightly colored toys. He supported President Barack Obama in 2008. But he has turned on Democrats this year.

Sally Ryan for The Wall Street Journal

Rick Woldenberg, chairman of Learning Resources in Chicago, backed President Barack Obama in 2008 but is now raising money for Republicans.

Mr. Woldenberg is angry that Congress and the Obama administration won't revise expansive new rules on lead testing in children's products that he says will kill his business, Learning Resources Inc. So he is raising money for Republicans among Chicago business owners to help the GOP—so much money that he is rattling the incumbent in what has been one of the safest Democratic seats in Mr. Obama's home state.

"If Democrats are going to put me out of business, I'm going to put them out of business first," he said.

Disaffected business owners like Mr. Woldenberg have emerged as a potent force in the 2010 campaign. The U.S. Chamber of Commerce, which plans to spend $75 million in this election cycle, says it has exceeded its targets for raising money from small businesses every quarter this year, despite the poor economy. More small-business candidates are running for public office than at any time in a generation, say officials at the National Federation of Independent Business, the capital's chief small-business lobby.

Business contributions are fueling campaign efforts by conservative and business groups, which are gearing up to spend as much as $300 million to help Republicans this fall.

Mr. Obama and Congressional Democrats have wooed small-business owners with a series of tax breaks and a $30 billion lending program that was the centerpiece of a Small Business Jobs Act Mr. Obama signed last week at a White House ceremony attended by a group of supportive entrepreneurs.

But many small-business owners still fault Mr. Obama and Congressional Democrats for what they see as a costly explosion of new rules and regulations.

"I think Obama ran as more of a moderate, and business people here are now realizing that this huge expansion of government is not sustainable," said Leo Dombrowski, an attorney at Wildman, Harrold, Allen & Dixon LLP in Chicago, whose clients are fighting new environmental rules.

Mr. Woldenberg has helped raise more than $470,000 for Joel Pollak, a 32-year old Harvard Law School graduate who is challenging Rep. Jan Schakowsky in Chicago's 9th district, a friend of Mr. Obama who is an author and ardent defender of the new children's-product lead law. That's 20 times more than any Republican has ever raised for a run against Ms. Schakowsky, who won 75% of the vote in the last election and is vying for a 7th term.

"This is a war," he said. "Individuals can make a difference, and I want my kids to see it."

Over the past few months, Mr. Pollak said, he and Mr. Woldenberg have been trying to tap into "donors residing outside the district with a strong business or personal motivation." The Pollak campaign scored a fundraising appearance by Republican economic policy star Rep. Paul Ryan of Wisconsin. Mr. Pollak took the podium and pointed out Schakowsky campaign manager Alex Armour, who was in the crowd videotaping the event.

Ms. Schakowsky is polling at slightly more than 60%, according to her internal polls, a solid lead but narrower than in the past. The campaign has hired four field staffers for the first time, and is sending less money to Democrats in closer races.

"I'm not worried about it, but I'm taking it seriously," she said. Ms. Schakowsky said Mr. Woldenberg's success as a fundraiser, is proof that "very cynical … special interests are highly engaged in the campaign."

As for the lead law, she said she was proud of it. "The goal is to save children from toys that are toxic."

Mr. Woldenberg's efforts include addressing 130 people in a Holiday Inn ballroom in suburban Skokie, Ill., during Mr. Pollak's "Chicagoland Business Breakfast" in late September.

He held up a "box of rocks," the company's igneous rock collection kit, and read its new consumer warning.

"Caution: federal law requires us to advise that the rocks in this educational product may contain lead and might be harmful if swallowed,'" he read, to laughter.

"This is humiliating," he said, ticking off the costs of the law. "I'm hoping Joel can help us."

Two dozen attendees took the microphone, voicing concerns with health-care, tax, environmental and workplace rules. They included Jay Stieber, vice president of restaurant chain Lettuce Entertain You Enterprises Inc., and chairman of the Illinois Restaurant Association, who has his headquarters in the 9th district. He and his family have contributed the maximum $4,800 to Mr. Pollak.

"The hospitality industry is the biggest employer in Illinois, and my partners and I have been lifelong Democrats," he said, but changed sides because "I can't stand here and tell you what health-care is going to cost."

Write to Elizabeth Williamson at

CPSIA - Schylling Penalty Update

788 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 22 days left until Election Day.

You may recall that I expressed outrage over the mega penalty imposed on Schylling Associates earlier this year (see my posts on February 6, June 8, June 9, and June 10). There were many troubling aspects to this penalty, such as an expired statute of limitations and its arbitrary and massive size. This penalty was quite scary, especially in light of Bob Adler's remark at the March 3rd Commission meeting: "I personally wouldn't want to tie our hands by saying that the only time we can hit you with a big civil penalty is when there was a death or a serious injury. There may be an immense potential for death and serious injury which just through fortuity did not occur." There were no injuries in this case. No one has clarified the "immense potential for death and serious injury" in this ordinary and minor lead-in-paint case.

When you read on, don't forget - you could be next.

I submitted a FOIA request for documents relating to this penalty on June 9th.

Four months later, I received a very partial disclosure of documents from Schylling. The CPSC has not disclosed anything to me directly yet - they routed documents to Schylling who routed them to me, redacted for confidential financial information.

I don’t intend to belabor the inadequacy of the CPSC's disclosure right now, except to note that failure to provide full disclosure is against the explicit policy of the agency. Not that policy or the law matters at the CPSC these days if they want to do something else. It’s great to be King, ain’t it? My original FOIA filing included this paragraph:

“In making this request, I note the following statement in 16 CFR §1015(b): ‘The Commission's policy with respect to requests for records is that disclosure is the rule and withholding is the exception. All records not exempt from disclosure will be made available. Moreover, records which may be exempted from disclosure will be made available as a matter of discretion when disclosure is not prohibited by law or is not against the public interest.’”

Enough whining. I will pursue the missing documents with the CPSC but for now, want to give you a clue on how penalties are being imposed by this agency. Quick summary: my original blogposts above were pretty accurate (we're all screwed).

I was given four documents that were not previously available publicly:

1. Letter of March 5, 2010 to CPSC from Patton Boggs LLP, counsel to Schylling.
2. Letter of March 5, 2010 to Patton Boggs from Cheryl Falvey, General Counsel, CPSC
3. Letter of April 21, 2010 to CPSC from Shook, Hardy & Bacon LLP, counsel to Schylling (missing attachments, see below)
4. Email exchange between Trial Attorney, Office of Compliance and Patton Boggs, counsel to Schylling, from September 4-9, 2009.

Schylling also provided me with the
letter dated August 10, 2009 from late Senator Ted Kennedy to the Commission
protesting the original suggested penalty of $600,000. The penalty was later to reduced to $200,000, approved, rescinded and then doubled to $400,000 by an angry Commission. [Why they got so angry remains a mystery, but their anger oddly is only tangentially related to this discussion today. All permutations of the penalty were unreasonable - before, during and after the Commission got angry.] Finally, Schylling also provided me with missing attachments from the April 21 letter – hate mail they received.

Here’s what I learned about this penalty:

a. There are few apparent constraints on the CPSC when it comes to arbitrary penalty assessment. That's how Schylling got zinged for $400K and probably explains how Daiso got whacked for $2.05 million.

The big issue confronting the CPSC in deciding on this penalty appears to be the profitability of the company and whether the owners collected too much money from the company. It is worth noting that the CPSC chose to weigh in on owners' salaries and bonuses and ALSO on whether the company DISTRIBUTED too much money to the owners. Cash distributions from a S Corp is a RETURN OF CAPITAL - in other words, that cash is the property of the owners. They are legally free to remove it without corporate law or tax implications (as long as the distribution doesn't bankrupt the company, not an issue in this case).

Do you think it is any business of this federal agency whether YOU take YOUR money out of YOUR company? Apparently it is the CPSC's concern and equally, they assert that they can approve or disapprove such transfers after the fact.

Is there a law somewhere that gives them this power?

There is no evidence in the papers that the CPSC weighed ANY mitigating factors, including the lack of injuries.

The CPSC requested the following documents to assess their penalty:

  • Federal tax returns for one entity from 2005-2009 and for another entity for 2008-2009
  • Federal tax returns for the three family members employed as executives at the company for 2007-2009.
  • Federal tax returns for a family trust over 2007-2009 plus financial statements for such entity.
  • Information about ownership structure, all affiliated entities with "explanations as to how each relates to [the others]".
  • Consolidating and individual financial statements for each entity for full year 2009 (this request is not entirely clear, but this is my interpretation of what the CPSC requested).
The CPSC said it was trying to assess "Schylling's ability to pay a civil penalty." Was all this information necessary to make that determination or was this an over-reaching fishing expedition into private affairs outside a federal agency's purview?


The March 5th Patton Boggs letter states "When you informed me on February 24 that the Commission had rescinded its provisional approval of the Schylling settlement, you indicated that there was concern that Schylling had misled the Commission regarding the financials, and/or had made exorbitant payments to its owners. Any such allegation is false."

I find this dialogue chilling. Please consider that the CPSC might have been talking about YOU. And might be talking about you soon.

The Patton Boggs letter pleads "Submitted herewith [is] a chart showing the annual salaries and distributions of the three owners of this S-Corp, 2007-2009 . . . . As this shows, the compensation paid to the owners is well within the reasonableness zone for companies of Schylling's size" and continues "salaries paid to the three owners are reasonable and have not increased - except for modest cost of living adjustments - over the past 4 years." [Emphasis added]

Intrusive? Over-reaching? Humiliating? Ready to do this yourself when the time comes???

Does this agency have too much power? What do you think, Commissar?

[Btw, the fact that the company's testing budget ballooned from $144K in 2006 to $645K in 2009 didn't save them. It was noted in the letter, but the Commission still whacked them with the $400K penalty.]

In the April 21 Shook Hardy letter, counsel to Schylling makes even clearer what was going on here: "The inference appears to be that Schylling could have afforded to pay a higher civil penalty had its principals not taken excessive compensation or that Schylling and its principals attempted to hide the assets of the business prior to action by the CPSC. This view does not reflect the facts."

To judge by these letters, the agency's goal was to hit Schylling as hard as possible without killing it, and so the debate turned to whether Schylling could withstand the blow. The agency questioned owner compensation because Schylling's disclosure might frustrate the plan to hit them with an epic penalty. To defend the mega penalty, the CPSC actually needed to prove that Schylling was playing games with its disclosure, something their lawyers hotly contested. The issue of safety is lost in the hunt for retribution. How far the CPSC has fallen . . . .

My mind wanders . . . might this CPSC also want a big headline? Hold that thought for a little while.

Don't forget, NO ONE was hurt by the products Schylling recalled. The recalls were YEARS OLD by the time the CPSC decided to make an example of Schylling, arguably past the statute of limitations (for those of you who are small-minded enough to care about the Rule of Law). The company's conduct, good or bad, seems irrelevant to the discussion in these pages.

Can you imagine what it would like to defend yourself against this kind of foe? How can you protect yourself against a vengeful government agency unconstrained by checks-and-balances? I can tell you - Schylling was scared "witless". They had no practical ability to litigate, despite the injustice of this excessive and unfair penalty. In the face of undocumented government threats, the ugly reputation of this agency's tactics whispered among practitioners these days, who would face them down? Bet the company - good idea until it's your company.

Let me know when you figure out what you would do.

b. Schylling's ancillary losses or penalties were substantial. The CPSC was also not accountable for its torts or mistakes. Buyer beware!

Can you trust the CPSC today? I think one can form a better opinion of the trustworthiness of this federal agency after reading the Schylling case documents.

Here are a few additional Schylling punishments and penalties noted in the papers:

  • They were forced to withdraw from an important acquisition in May 2009 when threatened with a $600,000 cash penalty (which was later cut by two-thirds).
  • They incurred massive legal bills, not to mention costs relating to the recalls.
  • The highly-publicized remarks of a CPSC spokesman to the Chicago Tribune in which he discussed the "diminished financial condition" of Schylling led to problems with Schylling's lender. This comment to the press violated the confidentiality of discussions between Schylling and the CPSC - but I guess confidentiality that doesn't apply when the Chicago Tribune calls. I am not aware of any apology from the CPSC about this flagrant violation of trust.

The adverse publicity which resulted from the recall, and fed by a publicity-hungry agency desperate to appease the media and Congressional overlords, led to hate mail like this:

"Being Untruthful about lead in paint has cost you our business. We will tell everyone we know that none of your products can be trusted. This will be painful for your bottom dollar sales. The lack of leadership in your company and caring about the bottom dollars is evident. We hope your made in China policy is worth it!"


"Actually, This isn't about the RECENT recall, this is about the SNOW JOB recall you never reported. You people are REAL pieces of sh*t, I lived up there when you distributed these toys, you're about to have you ASS sued off. In case you forgot, I'll help you remember that you are MORTAL ! Maybe you need someone to bring some lead into your life you piece of sh*t. I hope you make the right choice as to just what to do with yourself. Technically, this isn't the same damn email XXX got. btw, you people soon enough won't even BE in the toy business."

[Emphasis added]

Do you get mail like this? What do you think about a federal agency engaging in conduct that produces this kind of extreme response . . . for what is essentially a dispute about administrative procedures involving a no-injury recall of a small number of toys several years ago? Did I mention that there is no way to bring this agency to account? Remorseless pursuit of scary headlines leading to threats of violence against toymakers - I guess this is that famous "change you can believe in".

Yes, we can.

Senator Kennedy noted that the penalty was "disproportionate to penalties recently assessed against other substantially larger companies for the same type of violations." Arbitrary and capricious, perhaps? Kennedy provides DATA to back up his assertion, noting CPSC penalties against Family Dollar Stores, Hobby Lobby Stores, First Learning Company, Ltd., Michaels Stores, A&A Global Industries, Raymond Geddes & Co., Downeast Concepts and Mattel (oh, Mattel . . . ) - ranging between 0.001% and 0.316% of sales. The proposed penalty on Schylling - 2% of sales, ultimately reduced to 1.33% of sales.

This letter may be the reason Anne Northup revoked her vote in favor of the $200,000 penalty., even though Kennedy's letter proceeded the decision by almost six months and referred to a penalty THREE TIMES the size presented to the Commission.

Have you done the math in your head about what you would be paying if the CPSC got pissed off at you? Do you have a fund set up to finance this kind of setback? Hmmm.

It's a shame that our legal system provides no way for a company to defend itself against government gone MAD without taking fantastic financial, regulatory or business risks. I fondly remember the days when we had a working legal system in this country and when decisions were subject to review, you know before government power was expanded so dramatically and individual rights were extinguished.

I know, I know, we have to protect the CHILDREN! That makes everything okay. The agency can do no wrong. . . .

I remember those days fondly. I will be thinking of them on November 2nd, too.

In the meantime, I will see if I can get the CPSC to cough up a few more documents for the public to see. They have a policy on this, you know . . . .

Sunday, October 10, 2010

CPSIA - What Are We Trying Achieve?

787 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 23 days left until Election Day.

Sean Oberle published a lengthy contemplation of the issue raised in my last post on the relationship between compliance and safety as objectives for regulators and for industry. Mr. Oberle's essay speaks for itself, so I will not attempt to summarize it. He concludes with the following message: "Therein lies the frustrating and frightening aspect of product safety. Those of you tasked with ensuring product safety – industry rep, consumerist, and regulator alike – are trying to quantify ambiguity amid a chaos of demands … all of them in flux … I don't envy you."

Sean, boy are you right!

I think it's worth discussing a few issues on compliance versus safety since Mr. Oberle devoted so much ink (or electrons) to the topic.

1. The law defines what the CPSC can and cannot do. It's a shame no one told them . . . .

First and foremost, the CPSC exists because of the CPSA and its activities are governed by the CPSA. Recall authority is governed by Section 15 which limits the agency's recall authority to "substantial product hazards", namely a product that ". . . creates a substantial risk of injury to the public". [Section 12 gives the agency additional powers to seek a court order for "imminent hazards".] In other words, the CPSC does not have the legislative authority to tilt at windmills - it cannot demand recalls for anything unless it presents a "substantial risk of injury to the public".

Consider recalling 12 million glasses that the CPSC acknowledges in writing are SAFE. Substantial risk of injury?

Consider recalling more than seven million trikes sold over 14 years that caused six children to cut themselves. Children who were under three years of age and should have been under the care of attentive adults. Substantial risk of injury?

Consider recalling more than 400,000 Sarge cars because the little yellow dot on the wheel hubcap violated the lead-in-paint ban, and those dots were produced from two cans of paint. Substantial risk of injury?

One must distinguish between legerdemain and reality, between policy and what the law intended. It is a little focused-upon responsibility of the agency to exercise this judgment. Is it even possible for everything that happens to be a "substantial" risk? We know of cases where a single broken toy without an injury provoked an official investigation at the agency. Fair? Is this an activity that the CPSA authorizes? It is . . . if you are running the agency and you say it is. Arguably, the recall of the 480,000 Mattel Wheelies on September 30 was just such a case. Consumers apparently reported two broken cars with wheels that fell off, and no injuries were reported or implied. Substantial risk of injury? I question that.

2. The notion that we need all this supervision flies in the face of injury statistics. But it sure makes the CPSC look irreplaceable, doesn't it?

I have already published and discussed ad nauseum the historical injury statistics from lead based on CPSC recall notices - ONE DEATH and THREE UNVERIFIED INJURIES over 11 years (1999-2010). If we were facing such a dire public health crisis, why weren't kids dropping like flies from lead poisoning over such a long time period of "lax regulation"? If the harm was so widespread and so devastating, why aren't any of these actual victims known? Names, addresses, photos, case histories?

A friend replied to me recently reasoning that there is no safe level of lead. Okay, I concede that lead can be dangerous but it is absolutely true that lead in present throughout our environment and in the air, food and water that we consume every minute of every day. So since we take in lead from several sources all the time, we know we are building up lead and this leads to several questions. If lead is so harmful at all levels, why aren't we ALL showing the effect of our cumulative build-up of lead? How can you demonstrate that children's products contribute meaningfully to the asserted "problem"? How can you prove that "fixing" children's products will meaningfully change lead blood levels? And if you could prove those things (which cannot be done), how can you measure the return on investment of our multi-billion dollar annual investment? Remember, we can only spend those dollars one time - so is flushing them down the toilet on test reports REALLY our best use of scarce and irreplaceable dollars? How would you measure that?

But the more that the CPSC enforces the law against "bad" corporations, the more they scam the public into thinking they needed the help all along. They talk about recall statistics but never put them in the context of injury statistics. The proponents never compare lead injury statistics to other injury statistics like swimming pools.

[Is a child injured by lead "worse" that a child killed in a pool? It better be - because we are spending billions to prophylactically eliminate the possibility of purported lead injuries while leaving swimming pools open to continue a continuing skein of killings of more than one child each day. That's okay according to our Democrat-run Congress. Tell that to the family of drowning victim - they can take comfort in knowing that their child didn't have lead poisoning thanks to the relentless and remorseless enforcement of the CPSIA . . . .]

So as the regulators abuse and confuse the definition of hazard, they create an atmosphere of dependence. Oh thank you Mother Government for saving me! What would I do without you?!

3. Mr. Oberle reminds us that "Lack of incidents may not mean a product is safe." And just because you're paranoid doesn't mean they AREN'T out to get you.

Mr. Oberle does not take an offensive stance on this topic, btw. He is right, you can sometimes catch something dangerous before it creates harm. Presumably a quicker recognition of the hazard in Magnetix might have prevented injuries. Responsible companies need to always keep a lookout for insights that reveal latent hazards.

On the other hand, injury statistics are a useful tool. If, as is the case for lead, the assertion is that the hazard is widespread and present over a lengthy period of time, injury statistics become QUITE relevant. So, if lead was such a terrible problem in children's products (putting lead-in-paint aside, long ago banned), injury statistics over many years would reveal a latent problem. Think of the breadth of the definition of "Children's Products" and think of the years of recall data available for study. We are looking at TRILLIONS of interactions with children every year in the United States alone. Where are all the lead victims? We cannot say that we don't know the scale of this problem. We have apparently been running an "experiment" on the U.S. public for decades in the period the zealots label as "lax regulations" or "lax enforcement". If lead-in-substrate were so dangerous, wouldn't you expect to see SOME evidence of it?

If we must imagine the scale of the danger, can we spend imaginary dollars to deal with it?

4. The compliance hawks want to frame this as a financial question - how much is your safety worth? I think that's the wrong question - I think the question is "how long do you want to have a job?"

I have already reported that our compliance group is currently up to six people from a historical one or two, and of course, our products are no safer today than in the past. They were always safe and still are, but it costs us a lot more to operate. That's not good for you or for me.

So how do we pay for all this new bureaucracy? We have not raised prices, that's impossible these days. We are lucky to have customers and cannot spit in their faces with a price increase. Think of your business - it won't fly.

We also need to hit profitability targets because we need to remain financable. We do not get money from "money fairies" - we have to deal with a bank, just like you. Our bank prefers to see that we make money. I know that doesn't seem very civic-minded but I can't fault them for their POV. In any event, I think it's elementary that a business needs to make a profit to have the model sustain itself. Therefore, we cannot commit ourselves to ever-eroding profitability. When our costs rise, we cut elsewhere . . . just like you do.

Needless to say, we have skinnied up a lot since 2007. We have a much-reduced headcount and operate far more efficiently. This is how everyone behaved during the financial crisis and the jobs have not returned, in part because the economy remains sluggish. With our rising overhead relating to pointless regulations, what can we do? We must recover the money from activities that are focused on raising revenues. In effect, we are discontinuing activities that create growth to fund activities that are pure costs.

What's the math behind this? Consider how we recover a dollar of bureaucratic cost from productive activities. If you are already operating efficiently and cannot wring out big productivity gains (as may be the case post-financial crisis cost reductions), then how do you pay for an additional dollar of overhead cost? When you eliminate a "productive" dollar of cost to pay for an unproductive dollar of cost (e.g., you trade a dollar of marketing promotion for a dollar of test costs), it's not an even trade. No, because your dollar of productive cost creates gross margin whereas your overhead produces no profit whatsoever. Your productive dollar of cost produces gross profit which defrays your operating costs and produces marginal net profit on top of that. Wiping out the dollar of productive cost also wipes out the contribution to operating costs, so effectively, only the associated marginal net profit can defray the unproductive cost. Since profit percentages are generally low for most of us, the ratio of productive cost dollars needed to be sacrificed to cover unproductive costs is probably on the order of 2:1 or 3:1. Hire another QC person and fire the equivalent of two people elsewhere. In our case, we do it by attrition. We just shrink away.

As if this weren't bad enough, it's also a recipe for disaster or business death in a worst case. The continued erosion of productive spending to finance unproductive spending has a dramatic impact on growth. Revenue flattens out or stays in a downward trend. It's no surprise - you are starving your company of investment dollars as you spend at constant levels. You have simply shifted your spending from productive uses favoring growth to unproductive uses that will not create growth. Presumably, those of you with children have discussed the merits of eating fruits and vegetables versus eating potato chips. It's no different for a business and how it consumes dollars. We will never grow up to be big and strong if Mother Government restricts our financial diet this way.

Sean's right. I don't envy you . . . or me. This makes me very pessimistic about the future.

I hope you are mad as hell and won't take it anymore. In 23 days, you will get to vote. DO IT!

Wednesday, October 6, 2010

CPSIA - Stories from the Front (My "Vivid" Imagination)

783 days have passed since ANY Democrat in Congress did ANYTHING to help us on the CPSIA. There are only 27 days left until Election Day.

Have I ever mentioned how the CPSIA is strangling us to death slowly, death by a thousand cuts? I know the media and the "leaders" at the CPSC want me to put up bodies, my word and my reasoning are not enough. I also realize the body they want to see most of all is mine. Sorry, guys, I am working to prevent the delivery of that evidence to you. After all, anecdotes aren't evidence. Somebody said that once . . . .

How about some other evidence (anecdotes) from our business in recent days?

a. Good news for the U.S. economy? We just added our SIXTH person to our growing department of compliance and safety folks. Please NOTE that the volume of work is going to EXPLODE when the testing stay is lifted, so these hires are just a starter. For many years, it was one or two people doing this job (including me). No longer . . . .

I know what you're thinking, this obviously confirms how much we needed the extra safety people. In addition, it follows naturally that everyone is so, so, SOOOO much safer now that we have six pairs of eyes on the ball, not the one or two pairs we relied on for years. And those are jobs being created by Congress and the CPSIA - we must be so much better off . . . right?

Well, let's take a look at those points.

First, are we adding jobs? No. The department is clearly growing, BUT those jobs do not create revenue. They create COSTS. We are adding those jobs without increasing new economic activity (we're not growing) - in other words, our burden to conduct the same or less business is growing. That's simply a drain. Even WORSE, as a company, it turns out we shrunk our headcount in 2007, 2008, 2009 AND 2010. So much for a recovery . . . . If we are shrinking our headcount this year but have a growth department like Compliance, what does that mean? It means that we are reducing our investment in revenue-generating activities like Marketing and Sales, and shifting our personnel investment into managing bureaucracy. To pay the cost of paper pushing, we are shrinking overall headcount.


As for safety, we achieved a remarkable 26-year track record with far less investment and far fewer people. I firmly believe that more cooks in the kitchen sharply raise the probability of poorer results. Yes, more is NOT better. Why? Because the focus on our efforts is now COMPLIANCE, not safety. [We still work on safety first but it has a lot more competition from paper pushing.] Compliance monitoring and "gotchas" have become a perverse parlor game. Consider Sean Oberle's recent meditation on Mood Rings. The subject of whether the rings are SAFE never comes up, it's all about whether they fall within the rules or not. Safety is secondary in the CPSIA scheme - and everyone is losing sight of what we're trying to accomplish. Paper stacked to the rafters won't make anyone safer but then again, it's comforting to have so many rules to follow.

Do I recall correctly that Mattel with its many CPSC-certified internal labs just recalled about 11 million units of toys? Hmmm.

b. Profit Prevention in Full Bloom at Learning Resources. We had two lessons in the joys of safety compliance money-burning in recent days. Consider these stories and their implications on incentive, motivation, ability to fund our operations, fairness and most importantly, safety.

First Case: We sold a longstanding product incorporating a motor to a mass market retailer with its own testing regime. Their testing regime includes CPSIA tests and is administered according to their specifications by a certified test lab of their choosing. The motor for that item was tested and failed for phthalates. We don't know why - it has been made reliably without the six verboten phthalates since 2007 (many passed tests in our files). So we pulled a second sample from the same batch, and bingo, it passes. This happens all the time.

Of course, certified labs are never wrong. We are the only ones who are ever wrong. After all, the certified labs are CERTIFIED. No doubt that's how Mattel keeps its shop so clean. Oops, they had some big recalls recently, didn't they? I am confused . . . .

Anyhow, back to my story. Motor fails for phthalates and then passes. [Let's not dither over whether phthalates on internal components could even THEORETICALLY harm anyone. It's all about compliance.] Unfortunately for us, this nonsense took two weeks. So the customer penalized us by making the sale a guaranteed sale. If they don't sell out, we lose.

Total cost - unknown. Was any of this cost budgeted for? Of course not. Is our customer happy? No. Could we control against this risk? Probably not, as the explanation of the "failed" test is not and never will be known. We are not making pharmaceuticals here, we make injection molded toys, but we are being held responsible for chemistry and testing results that have no real world significance.

And, it is worth mentioning, all this cost and disruption had NO impact on safety. It only reduced our profit and made us miserable.

Second Case: Another motor case. In the mania over safety and compliance, many formerly minor "gotcha's" have become elevated in signficance. This time, we were trying to mollify a customer over EMC approval of a motor. Electrical motors emit a frequency, apparently, which is regulated. You know, the government doesn't want our motor-powered toy to bring down a plane. We are required to test several of our products, sometimes even calculators. In this case, the motor failed . . . although we have no record of planes crashing after several years of sales of this toy and its motor. Our customer then hired a consultant at its expense to tell us how to "fix" our motor. The result - we were told to add two resistors to the motor, which we did, but then it was too weak to power our toy.

Then we had to find another motor. This took time and finally, we found another motor and had to have it retested. This entire process took two months. Once testing was complete, we were so late with this Xmas order that we were forced to bring in inventory by air freight to make it up to the customer. This cost about $15,000 in air freight and testing costs were an estimated $5-6,000 more. Think of how safe the planes are now!

This customer is a big customer of ours and if we didn't air in product for them, they told us they would have cut us off.

We had a great relationship with the customer before this interaction. How do you think they feel about us now? Do you think they respect us as much? Do you think they believe we "know what we're doing" because our motor failed an obscure and meaningless test? Does it matter that it is basically impossible for a terrestrial toy of this magnitude to influence the operation of a plane miles up in the air? No matter what, we look bad and we lost all of our profit and more on this ordeal, not to mention our good name.

And no one was made safer.

Thanks Congress! Thanks CPSC! Thanks Democrats! Can't wait to show my appreciation in the future. I'll find a way.