CPSIA - What's the Difference?

The current debate over the need for mandatory CPSIA testing of children's products derives from consumer advocate assertions that American consumers "want" this testing to be "assured" that products are not laden with lead.  This assertion has never been backed up with real data (other than "push poll" data) but strikes a nice chord with certain politicians seeking to have something nice to say on the stump.

Has this very notion, that mandatory testing "assures" anxious consumers, ever been tested?  More to the point, how does mandating testing achieve anything - given that the core issue preceding the CPSIA was compliance with the rules.  In other words, prior to the CPSIA, a small number of companies making children's products (some of them large multinationals like Mattel) did a poor job of following the rules. Some quite notoriously ignored the rules, too.  Despite the fact that the agency had the legal power to enforce against these companies and despite the fact that these companies were not following the rules, Congress decided what we really needed were more rules.  Apparently, when companies don't follow one set of rules, there is a big need for more rules.

More rules certainly solved the problem. . . .

And out of that effort grew the myth that mandated testing was absolutely necessary to keep America safe.  Of course, mandated testing for real hazards isn't controversial.  For instance, you will not find one peep from me about testing for lead-in-paint since 2008.  That's a real hazard, actually linked to real, actual victims.  However, the CPSIA invented a couple new standards concerning "hazards" not previously documented to have caused any actual injuries, and instituted mandated testing.  This was Congress' solution to a perceived lack of compliance by the market.

How does that work logically?  There were standards or rules previously, and they were notoriously ignored by a small number companies. That made everyone "mad" and gave people like Dick Durbin something to spout off about.  But the fact is, the rules were well-known and were nevertheless ignored.  We can certainly conclude from this experience that the existence of a rule is not assurance that the rule will actually be followed.  Compliance is independent from posted restrictions.  [Have you ever been cited for speeding?  'Nuf said.]

The new rules mandated third party testing for every product.  Why?  Purportedly to make SURE that every product complied with the standards that Congress felt were being ignored.  Since we "cannot trust" companies to obey these standards, they must test.  Apaparently, we trust these companies to test even though they previously ignored the mandated standards.  And this apparently helps the CFA sleep better at night.

But if a small number of companies were ignoring the old rules, what makes Congress think a small number of companies won't ignore the NEW rules and simply lie about their testing or cut a few corners . . . until they get caught?  Good question?  I have no answer to it. 

The Dems don't like to talk about this.  In their perfect world, while the old standards were rules that might be ignored, the replacement rules (mandated testing) will CERTAINLY be universally followed.  No reason for this conclusion has ever been provided.  The lack of rationale has not deterred the Dems from clinging to this idea like grim death . . . .

Not all of the new CPSIA rules work to protect consumers, but disclosure of the facts is not forthcoming if it might reflect badly on the agency or Congress.  For instance, you may recall that companies can petition to certify firewalled in-house labs to conduct testing on a "trust me" basis - this rule effectively only benefits big companies like Mattel.  Yet when Mattel recalled 11 million units of its toys last September, nothing was disclosed about the involvement of its firewalled labs in the recalls.   Were any of these items tested in0house and passed?  Let's not forget that Mattel is largely responsible for the CPSIA because of its bad acts.  Was the firewalled lab rule a bummer for American consumers?  This is not a question welcomed by Dems.

And if a small number of companies will skirt the NEW rules on madndated testing, what happens to the rest of us?  Well, our costs will certainly go through the roof and put us at a disadvantage to the scofflaws.  In other words, the more compliant you are, the worse you fare competitively.  Many of us would rather eat sand than knowingly break the law.  So our costs skyrocket, and the basic problem that Congress wanted to solve (presumably, making consumers safer, not making consumer advocates sleep easier in their naivete) is not advanced at all.

Is this economically-efficient? Stupid question - to this politicos, it only matters what the CPSIA sounds like on the stump.  Is anyone safer?  Well, first tell me whether a markedly lower percentage of cheaters are present in the market.

Let's get one thing straight:  there is no way to know if you are complying with lead content standards without testing.  Whether testing is mandated or not, testing will need to take place to assess compliance with mandated levels of lead in children's products.  Mandating compliance with the standard and mandating testing is the SAME THING - but the big difference is that in the former case, we can run our businesses and succeed or fail based on our ability to run those businesses well and competitively.  In the latter case, the government becomes our partner and nothing we do is beyond their scrutiny and "advice" (needed or not). After all, they have nothing better to do.  Catch criminals?  Please - watching over our shoulders is all they have time for.

We can only hope that some Dems will wake up and do the right thing for our economy and job creation.  This three-year disaster is a metaphor for everything that's wrong with our current government and political leadership.  I wish it were otherwise, but there is no sign that the Dems care what we have to say.  Until this storm breaks, we are doomed to slowly asphyxiate through mandated testing under the supervision of the government.

CPSIA - NSSEA Calls for Letters on ECADA

The NSSEA (National School Supply & Equipment Association) is calling for letters in support of the pending CPSIA Amendment legislation (ECADA).  Please send the below letters BY FAX to your House Representative and to members of the House Committee on Energy and Commerce.  You can get the fax numbers off each Representative's website.  The mark-up may happen as soon as Monday June 20th (but is not scheduled yet to my knowledge).

Now's the time to stand up and be counted!!!  There are two forms of letter below (Manufacturer and Dealer/Retailer).  Please modify as appropriate.


Letter from Manufacturers:

Dear XXXXXX:

I am writing as a constituent and concerned member of the National School Supply & Equipment Association (NSSEA) to express my support for HR 1939, the Enhancing CPSC Authority and Discretion Act of 2011 (ECADA). We urge you to support this important bill that fixes problems created by the Consumer Product Safety Improvement Act (CPSIA) while maintaining the core provisions of this law that ensures the safety of consumers.

[INSERT INFORMATION ABOUT YOUR BUSINESS, INCLUDING NUMBER OF EMPLOYEES]

The safety of our products and the safety of our customers are our top priorities. Unfortunately, we have encountered many problems in trying to comply with the well intentioned but overly burdensome CPSIA. We have been forced to spend thousands of dollars for unnecessary lead and phthalate testing and continue to deal with compliance programs that change multiple times to meet constantly changing rules. ECADA provides common sense reform to sections of CPSIA which have burdened our industry during these challenging economic times. Given your strong record as a friend of small business and manufacturers, I hope that I can count on your support for this bill.

A costly new rule mandating a burdensome, unreasonable testing regime, the lifting of the stay on third party testing for lead substrates, and the retroactive application of a tighter lead standard despite overwhelming evidence showing that this new limit is not technologically feasible are just several challenges that my company will face this year if the reforms in ECADA are not approved by Congress soon. ECADA reduces the most excessive regulatory burdens created by CPSIA while maintaining protection for consumers. The bill enhances the Consumer Production Safety Commission’s (CPSC) ability to investigate complaints and prioritize testing based on cost-benefit analysis, and improves the CPSC’s public database by ensuring more accurate information.

As manufacturers and small business struggle to recover from the worst recession in decades, it is vital that government does not impose costly and unnecessary regulations that have no positive impact and hinder the fragile recovery. I urge you to vote for ECADA to ensure that companies like mine can continue to provide quality products and services that are so important to our children's education.

Sincerely,

XXXXXXXX

 
Letter from Dealers/Retailers:
 
Dear XXXXXX:
 
I am writing as a constituent and concerned member of the National School Supply & Equipment Association (NSSEA) to express my support for HR 1939, the Enhancing CPSC Authority and Discretion Act of 2011 (ECADA). We urge you to support this important bill that fixes problems created by the Consumer Product Safety Improvement Act (CPSIA) while maintaining the core provisions of this law that ensures the safety of consumers.

[INSERT INFORMATION ABOUT YOUR BUSINESS, INCLUDING NUMBER OF EMPLOYEES]

The safety of our products and the safety of our customers are our top priorities. Unfortunately, we have encountered many problems in trying to comply with the well intentioned but overly burdensome CPSIA. As a distributor, we fear that the range of products offered by our suppliers will continue to narrow due to the costs manufacturers incur for unnecessary lead and phthalate testing. In turn, the needs of American students will be unmet, including those children with disabilities and special learning needs, because fewer specialized products will be available to our customers.

CPSIA has caused considerable confusion in the marketplace due to the constantly changing rules and regulations associated with the law. ECADA reduces the most excessive regulatory burdens created by CPSIA while maintaining protection for consumers. The bill provides common sense reform to sections of CPSIA which have burdened our industry during these challenging economic times. The bill enhances the Consumer Production Safety Commission’s (CPSC) ability to investigate complaints and prioritize testing based on cost-benefit analysis, and improves the CPSC’s public database by ensuring more accurate information.

Given your strong record as a friend of small business and manufacturing, I hope that I can count on your support for this bill. As small business struggles to recover from the worst recession in decades, it is vital that government does not impose costly and unnecessary regulations that have no positive impact and hinder the fragile recovery. I urge you to vote for ECADA to ensure that companies like mine can continue to provide quality products and services that are so important to our children's education.

Sincerely,

XXXXXXXX

CPSIA - The Senate Wants to Save ATVs . . . What about the Rest of Us???

Yesterday Senators Klobuchar and Tester offered an amendment to S. 493, a moving bill to reauthorize the small business administration ("SBIR/STTR Reauthorization Act of 2011").  This amendment is intended to exempt ATVs, dirt bikes, motocross and snowmobiles ("All-terrain vehicles") from the lead restrictions of the CPSIA.  To my knowledge, this amendment has not been voted on yet.  The text of their amendment reads as follows:

SA 259. Ms. KLOBUCHAR (for herself and Mr. TESTER) submitted an amendment intended to be proposed by her to the bill S. 493, to reauthorize and improve the SBIR and STTR programs, and for other purposes; which was ordered to lie on the table; as follows:

On page 116, after line 24, add the following:

SEC. 504. EXEMPTION OF OFF-HIGHWAY VEHICLES FROM BAN ON LEAD IN CHILDREN'S PRODUCTS.

(a) Exemption.--Section 101(b) of the Consumer Product Safety Improvement Act of 2008 (15 U.S.C. 1278a(b)) is amended-- (1) by redesignating paragraph (5) as paragraph (6); and (2) by inserting after paragraph (4) the following:

(5) EXCEPTION FOR OFF-HIGHWAY VEHICLES.--

(A) IN GENERAL.--Subsection (a) shall not apply to an off-highway vehicle.
(B) OFF-HIGHWAY VEHICLE DEFINED.--For purposes of this section, the term `off-highway vehicle'-- (i) means any motorized vehicle--(I) that is manufactured primarily for use off of public streets, roads, and highways; (II) designed to travel on 2 or 4 wheels; and (III) having either -- (aa) a seat designed to be straddled by the operator and handlebars for steering control; or (bb) a nonstraddle seat, steering wheel, seat belts, and roll-over protective structure; and (ii) includes a snowmobile.

(b) Additional Amendment.--Such section is further amended in paragraph (1)(A) by striking ``any''.

This is pretty stunning, really.  Did you notice that they are "fixing" the CPSIA by making two changes (one surmises that they think these are the only needed fixes), exempting All-terrain Vehicles from the law, and ALSO knocking out the word "any" from the lead exemption process.  If their amendment were to become law, the CPSIA Section 101(b)(1)(A) lead exemption would read as follows:

"The Commission may, by regulation, exclude a specific product or material from the prohibition in subsection (a) if the Commission, after notice and a hearing, determines on the basis of the best-available, objective, peer-reviewed, scientific evidence that lead in such product or material will neither— (A) result in the absorption of any lead into the human body, taking into account normal and reasonably foreseeable use and abuse of such product by a child, including swallowing, mouthing, breaking, or other children’s activities, and the aging of the product . . . ."

I must be stupid, but in this context, I don't think anything is achieved by deleting "any" (assuming "plain English" is the language of choice for legislative interpretation).  The word "any" is implied in "the absorption of lead into the human body", at least I think it is.  This is the kind of legislative change I am used to from the Dems in the last three years, a change that brings no relief whatsoever.  After all, they are plainly deaf.

Perhaps more interesting is why they chose to make these changes now.  I have long asserted that ATVs have no business being regulated under the CPSIA.  Klobuchar was a prime mover for the CPSIA but apparently found out later that her state of Minnesota is deeply affected by this awful law because of the ATV ban.  Oops!  Minnesota is home to several large manufacturers of these products.  Jobs, jobs, jobs are the key nowadays, especially if you are running for reelection.  Oh no, did I say that?  How cynical of me!  Tester is also running for reelection - last time, he won by by 3,662 votes.

There must be some reason why Klobuchar and Tester think legislation relieving these industries from the burden of regulation.  Since I know the Senators are ALL ABOUT safety, I can only conclude that they figured out that these products are already safe.  Aha.  I wonder how they made this determination.  Perhaps they took note of the fact that lead in these products has never injured any children EVER.  That fact suggests that it is wasteful to regulate the presence of lead in these products - it would not make anyone safer.  Even if there were one or two injuries, wouldn't the argument be the same?  After all, we are a country of 300 million, with 50 million-plus kids in the age range enveloped by the CPSIA.  A tiny handful of injuries over a decade of use by perhaps 75-80 million children passing through the age range would hardly justify the billions in expense and disruption caused by the CPSIA. Good thinking, Senators!

Have I ever mentioned that the CPSC cites one death and three unverified injuries from lead over an 11-year period from 1999-2010?  Hmmm.

If THAT'S the standard now, then I think Senators Klobuchar and Tester should expand their amendment to exempt ALL other products classes and components that have the same safety profile.  Rhinestones?  T-shirts and shoes?  Educational products?  Rocks and fossils?  Books?  Pens?  Musical instruments?  CDs and DVDs?  Steel and other metal parts? 

Isn't this proposed amendment just what we have always wanted - a concession by zealot Democrats that the law makes no sense and needs to be sharply revised?  If they are rational legislators (that's a big "if"), let them tell us WHY it makes sense to NOT regulate All-terrain Vehicles and STILL regulate everything else for lead in children's products.

Senators Klobuchar and Tester, you owe us an explanation!  This regulatory torture has gone on for three years, not in small part because of your unwillingness to do the right thing.  Now that you are sufficiently motivated to propose giving a pass to certain favored products and industries, you must tell the Electorate why this is GOOD LAW and why the rest of us deserve to stay in Purgatory.

'Fess up - we've had enough!

CPSIA - Remember the Victims (If You Can Find Them)

Rumorville has it that a draft amendment to the CPSIA is pending in the next few days. As I contemplate what that might mean, I think back to where the CPSIA began and what has been achieved in its wake.

As an aside, there are actual poisoning risks in the world. As previously noted, the Japanese nuclear crisis seems pretty real to me. In the past 24 hours, the owner of the disabled Japanese reactors told the press that they evacuated one of the reactors (again) because the radiation level was now a mere 10 million times "normal" levels. As if to make the point that they are out of their depth, the Japanese utility later announced that it wasn't really 10 million times too high, just 100,000 times. It's always good to check your work.

In the U.S., we remain blissfully, almost quaintly obsessed with lead. Lead is THE problem we need to solve, apparently, according to the junior scientists who called themselves the 110th Congress. As far as I can tell, the CPSC has enthusiastically embraced this point of view.

Why?

Well, we have been told monotonously that there is NO safe level for lead. Commissioner Bob Adler wrote a 21-page treatise to "prove" the point (rebutted by yours truly here). And the consumer groups, ably represented by Don Mays of Consumer Union and Dana Best of the AAP, repeated the slogan in their February 16th testimony on the urgent need to reduce lead levels to 100 ppm. When the lead zealots speak of the dire need to protect against this "scourge", they never speak in terms of CPSC injury statistics. That makes sense. As I have documented, there have been fewer lead injuries in a decade than the fingers on your right hand.

But isn't this all about injuries? If there is REALLY no safe level for lead, shouldn't it be easy to find victims? Ahem, the consumer groups state that lead harms "silently". You can't tell you are being harmed, you see! When questioned about "victims", those few deigning to respond to my stupid questions (Jan Schakowsky and a staffer for a Senate Democrat) point to a meeting held in May 2008 with victims of lead poisoning. Nonetheless, they have never produced victim case histories and typically simply wag their fingers at me over lead poisoning.

I am no fan of lead or of lead poisoning, believe me, but I think I am entitled to an answer. If the object of the law is the prevention of childhood injuries, and if this May 2008 meeting was the critical basis for the push for the CPSIA, who were the victims at the meeting? How many victims were seen, and how were they poisoned?

Before we answer this question, it is important to note that the issue here is NOT lead-in-paint. As is well-known, lead-in-paint has been illegal for decades. Victims of lead-in-paint from products sold today are victims of violations of law. We are looking to find victims of lead-in-substrate. The over-arching regulation of lead-in-substrate is the source of the regulatory misery that befell ATVs, bicycles, pens, musical instruments, books, educational materials, rhinestones, t-shirts, shoes, and so on. Do these victims exist? No lead zealot or CPSIA apologist has ever produced even one lead-in-substrate victim in three years. Were they at the May 2008 meeting?

The Internet knows all. Parents of two childhood victims of lead-in-paint were present at the 2008 meeting, as identified in several press reports. See "Parents Visit Congress to 'Get the Lead Out' of Toys", as well as "Congress vs. lobbyists over tainted toys" and this transcript of the Lou Dobbs Show (May 23, 2008) thoughtfully provided by the plaintiffs lawyer front Center for Justice and Democracy. There is no mention of any child harmed by lead-in-substrate. Two victims of lead-in-paint spurred this legislation. That's it.

Without a demonstration that there are actual victims of lead-in-substrate in existence, the CPSIA has no proven factual basis. It's all pure conjecture. Playing fast and loose with the facts, the lead zealots have SOLD the idea that this law was necessary, all without PROOF. Perhaps in the heady days of 2007/8, the legislators didn't recognize the significance of the data problem. But today, members of the 112th Congress, facing the prospect of an amendment to fix the CPSIA, cannot afford the same ignorance. Constituents have been screaming for years now - and apparently with good reason.

The misuse of data, the zealots' twisting of fear of lead-in-paint into a blind fear of everything, got us into this mess. Questions need to be asked as the new amendment is processed. Why are we doing this? Who is really being protected here?

In desperation, the consumer groups are saying just about anything to keep their law in place. Spreading fear of bicycle licking and trombone playing is certainly not beneath them. Dr. Dana Best sums up the consumer groups' dubious, twisted "argument" for the need for a tightened CPSIA:

"An object containing 77 ppm of lead is capable of raising a child's blood lead level to a level that would result in the loss of one IQ point. . . . Ingestion of an item containing 300 ppm of lead would result in the loss of almost four IQ points . . . . When averaged across even a modest population of children, the public health harm caused by lead is significant. Considering that there are about 75 million children in our nation, impacting one-half of one percent of all children would mean an exposure of 3.75 million children. . . . For one million children, [the loss of lifetime income from one IQ point per child] would total over $8.3 billion." [Emphasis added]

Yet Dr. Best cannot deliver the goods to prove her farfetched theories and even more farfetched mathematics. Stating the danger in terms of 3.75 million possible victims is corrupt and immoral when you cannot deliver even one victim.

Let's cross our fingers that Congress is resolved to not be fooled again. If there is a hearing, ask for real data, real case histories, real proof.

I can't wait to hear about the kid who licked the ATV engine block and was poisoned by . . . lead? Give me a break.

CPSIA - In My Fantasies, the CPSC is Just Like Homeland Security

On Monday, March 15, the Department of Homeland Security did something we probably will never see from this CPSC:

"[Docket No. DHS–2011–0015]

Reducing Regulatory Burden; Retrospective Review Under Executive
Order 13563

AGENCY: Office of the General Counsel, DHS.
ACTION: Notice and request for comments.

SUMMARY: Pursuant to Executive Order 13563, ‘‘Improving Regulation and Regulatory Review,’’ issued by the President on January 18, 2011, the Department of Homeland Security (Department or DHS) must develop a preliminary plan to facilitate the review of existing DHS significant regulations through the use of retrospective analyses. The preliminary plan will include criteria for identifying existing DHS significant rules that might be modified, streamlined, expanded, or repealed, so as to make DHS’s regulatory program more effective or less burdensome in achieving its regulatory objectives. The Department is soliciting views from the public on how best to develop its preliminary plan. The Department is also seeking views from the public on specific existing significant DHS rules that the Department should consider as candidates for modification, streamlining, expansion, or repeal. These efforts will help DHS ensure that its regulations contain necessary, properly tailored, and up-to-date requirements that effectively achieve regulatory objectives without imposing unwarranted costs." [Emphasis added]

Imagine that, an agency that wants to streamline and to avoid imposing unwarranted costs!

Of course, Homeland Security is not facing anything as dreaded as LEAD - have I mentioned that there is NO safe level of lead? - and can probably cut a few corners without any untoward effects. Homeland Security doesn't seem too busy, just checking a few boarding passes, looking serious and so on. I guess when you have an unimportant, almost trivial responsibility in the government, you can afford to review your rules for fat, waste and stupidity. But when CHILDREN'S SAFETY is concerned, and bicycle licking is possibly at stake, well then, you can't take ANY chances.

Damn the cost, man, we have to be SAFE!!!

CPSIA - Answers to Supplemental House Questions (Hearing of Feb. 17th)

This is my Response for the Record to questions posed by Rep. Mike Pompeo after the February 17th hearing held by the Subcommittee on Commerce, Manufacturing and Trade:


February 17, 2011
Commerce, Manufacturing, and Trade Subcommittee:
“A Review of CPSIA and CPSC Resources"

Congressman Mike Pompeo

1. Did your company have to buy a copy of the F-963 standard? Why? How much did that cost?

Our company has purchased several copies of ASTM F963 over the years. According to the ASTM International website (http://www.astm.org/Standards/F963.htm), the current cost of F963 is $62, or $74 (redline version). [This means that the ASTM literally charges companies EXTRA to figure out what changed in this legally-mandated standard.] To my knowledge, this standard is only available from the ASTM. Ironically, even the CPSC is unable to provide access to this document (as acknowledged in this CPSC Powerpoint presentation http://www.cpsc.gov/BUSINFO/intl/toyweb2_en.pdf) which casts doubt on its ability to guide companies attempting to comply with the law. The lack of access and cost of access to this standard certainly makes compliance burdensome for small businesses.

The F963 standard has been updated regularly over the years, and we need to have access to the current version of the standard at all times. Until the CPSIA was enacted, the F963 standard was the tacit equivalent of a mandatory standard because the toy industry adopted it as a “voluntary” standard with the encouragement of the CPSC. At one time, voluntary standards were the preferred way the agency regulated many industries, including our industry. We have always used the F963 standard as a reference in product development and safety administration and frequently tested for compliance with the standard.

2. You’ve been dealing with all of the agency’s rules for the last few years. By my reckoning, an entrepreneur with, say, a good idea for a board game would have to pay to buy a copy of F-963 from ASTM (not a small price to pay for some small or start-up toymakers). Then, because the standard is literally dozens of pages long of densely spaced text, he’d have to hire a lawyer to tell which parts of the standard apply to his product. Then, he’d have to find a third-party test lab to test and certify a random sample of his actual production line for compliance with all of the F-963 requirements. And, if any product fails, you are basically back to the drawing board. And, of course, he’d have to do all this before ever selling a single toy. Do you think the next board game entrepreneur (e.g., Trivial Pursuit) might have a hard time getting off the ground under this regime? Has this agency effectively killed entrepreneurship in the toy market? Does a start-up company stand any chance of being able to navigate the CPSC’s new rules and regulations on its own?

The CPSIA has had the effective of creating new barriers of entry in the children’s product market, once one of America’s most entrepreneurial industries. The burdens are heavy in the toy industry but even worse in related industries like juvenile products. Large companies with steady cash flow enjoy considerable and valuable advantages over entrepreneurs who must put large sums of money at risk in their initial investment in compliance costs before receiving their first dollar of revenue. The effect of the CPSIA is one of picking winners and losers in affected markets. I question whether this is the appropriate role of the federal government in our markets.

We believe that these heavy costs will discourage investment in new products, by new entrants, by existing players and especially by small businesses. Recently, at the CPSC’s hearing on the looming 100 ppm lead standard, representatives of the bicycle industry noted that in the wake of the 300 ppm lead standard, many small bicycle manufacturers have already left the market and large companies cut their product lines considerably. I have long predicted a reduction in product diversity as a necessary consequence of the CPSIA. Other evidence of market contraction exists, as well. At this year’s ICPHSO, CPSC Acting Director of the Office of Compliance and Field Operations Robert (“Jay”) Howell noted the CPSC’s challenge in identifying a test lab that has or will agree to equip itself as a certified test lab for ATVs. Why? So many ATV manufacturers have stopped producing youth model ATVs under the effective ban by the CPSIA’s lead standards that testing labs can’t justify the capital investment to provide CPSIA compliance testing. Product diversity is declining all over the children’s product market.

Toymakers will experience the same depressing effect and yes, that means that the next Trivial Pursuit inventor may be washed out. We may never know because the absence of a new toy or novel game will be hard to detect in the ad-driven, promotional toy market. It is clear, however, that entrepreneurs are free to deploy their capital wherever they want – they are seeking returns on their capital - so the combination of high CPSIA compliance costs, high regulatory risk, high legal costs and a generally hostile regulatory environment seems unlikely to attract new entrants to the toy market. War stories will also discourage new entrants – the well-known experience of toymakers who have suffered under this regulatory regime.

As a practical matter, the rules and regulations put out by the CPSC to implement the CPSIA for toys are incomprehensible, not to mention incomplete. We are now 31 months into the CPSIA era, yet the CPSC has yet to promulgate a final phthalate standard or certify even one phthalates testing lab. EACH and EVERY toy must be “phthalate-free” but the CPSC has yet to tell us how to know it has achieved this goal. This means we are subject to the risk that they will invalidate all the work we have done since 2008. While this regulatory delay is simply outrageous, it is more likely proof of the defects in the CPSIA than a sign of failure by the CPSC. Even the largest companies have complained to the CPSC about the blizzard of rules and interpretations. One of great frustrations in attempting to comply with the new rules is that many CPSC legal interpretations have been given in private letters, orally in speeches or even in the form of voicemails. Access to such information may be critical but is obviously inaccessible to anyone not obsessively watching every minute of every video, reading every letter, attending every meeting or hearing and talking to every stakeholder in an attempt to master the breadth of this ever-morphing regulatory scheme.

3. Does the existence of a small business ombudsman at the agency solve the compliance problem?

The office of the Small Business Ombudsman serves a useful purpose as a friendly point of contact and possible advocate for small business within the agency. That said, there is no evidence that the office has power to make decisions, change policy or offer its own definitive interpretation of rules. For small businesses totally at a loss, the ombudsman is a good place to turn to for plain English answers to basic questions about rules. Notably, the office is not permitted to make decisions on behalf of the agency. The Ombudsman does not have the authority to make problems “go away”. For this reason, the ombudsman function appears to be the regulatory equivalent of a shoulder to cry on. The current ombudsman, Neil Cohen, has been a good friend to the small business community, but unfortunately, he doesn’t write the rules.

4. What problems do you anticipate occurring as a result of the public database?

We know that the public database will be administered on a post-it-and-forget-it basis. Based on our dealings with the agency, I believe that the agency will post all incidents unless a mistaken identity can be proven. As a consequence, we anticipate that the database will be allowed to be filled up with “incidents” that are conjectural, misleading or even proven WRONG. In the first and only filing against our company, an anonymous complaint accused one of our products of posing a small parts hazard. That accusation was based on an image viewed on a website – there is no indication that the filer had ever handled our product. Consequently, the filer had no reasonable basis for the small parts claim. As a matter of fact, we routinely test for small parts and have done so for years, and when we presented a valid CPSIA test report under F963 (and EN71, the European standard), we were told by the General Counsel of the CPSC that the claim would nevertheless be eligible to be published under current rules. Thus, we KNOW that the false and misleading filings will KNOWINGLY be published by the CPSC even if PROVEN false. We believe this flagrantly violates our basic right to due process and creates the potential for damaging “feeding frenzies” that can consume our products and brands.

Other claims may relate to “hazards” which affect a wide swath of products already well-known by regulators and industry. This presents many risks to industry and to brands. What will a consumer make of a "report of harm" relating to a general hazard and only one particular product? Is this a minor incident or a harbinger of a real risk? Should they stop using the product? Should they stop using the particular model or brand which is subject of the complaint? Given that many products may present the same hazard (for instance, that an electrical cord could pose a strangulation hazard), how does this information help consumers? Will consumers actually understand the issue and be able to put it into some sort of perspective? And when incidents accumulate, as they are likely to do, presumably the brands and models with the largest numbers in distribution will have more incidents even though, ironically, they may be better constructed and "safer" than the alternatives. Will consumers falsely conclude that the models with more incidents are less safe and turn to something that really is?

Responding to this type of complaint obviously creates a new and terrible dilemma for manufacturers. Should they expend resources to respond? Do they need to lay out "a brief" about the nature of the failure and why their product is named? Will people just view whatever they say as unreliable, self-serving information or will they really be able to internalize the data? As noted above, most people will not be able to put these incidents in any kind of perspective. The only thing we know for certain is that brands and companies will be the losers.

The public portrayal of the database belies the unverified nature of the filings. Notwithstanding the disclaimers made by the agency, even esteemed media outlets like The New York Times refer to the database as a “database of unsafe products”. Unsafe? That label presumes some kind of judgment or filter prior to filing, which even The New York Times must assume is being provided by the CPSC. Ironically, the CPSC is doing everything possible to avoid providing that service. The result may be disastrous for American manufacturers, importers, private labelers and retailers of children’s products. It will be yet another self-inflicted economic injury.

5. What can Congress do to return the agency to one that regulates on the basis of risk?

Congress should mandate that the CPSC use principles of risk assessment to make all decisions relating to regulation of children’s products. The legislatively-mandated use of judgment and proportionality will likely lead to better rulemaking and more regulatory common sense. It is the legislative banishing of the exercise of judgment that led to the devastation of the bicycle industry, the elimination of youth model ATVs from the market (even though those products owe their very existence to a concerted effort by the CPSC to protect children from injury on adult-sized ATVs), the banning of all products made of brass, the senseless and almost neurotic banning of rhinestones as embellishments on children’s clothing, shoes and jewelry, and so on. NONE of these changes in rules have been tied to even ONE avoided injury.

Congress should also mandate the use of principles of cost-benefit analysis by the agency in its rulemaking processes. Under the CPSIA, all considerations of economics have flown out the window with predictably disastrous results. We can operate our government better according to basic common sense notions of cost-benefit analysis.

CPSIA - My Testimony at the CPSC Hearing on 100 ppm Lead Standard 2-16-11

Here are clips from my testimony at the CPSC Hearing on 100 ppm Lead Standard on February 16, 2011. As noted in previous blogposts, there's much more to see and hear in this panel discussion. The clips focus on me and my testimony. I admire the testimony of the other panelists and especially the quality of the dialogue after the testimony under questioning by the Commission. If you want to see it unedited, check out the full video at the CPSC website.

I have already published the links from the morning session. Viewing those clips before watching these clips may help you understand the flow of the argument better.

My full testimony:

[Notably, Ms. Tenenbaum cut me a break and let me go over my 10 minute allotment. I appreciate that courtesy.]



Commissioner Bob Adler questions me on the future of small business under the CPSIA and the need for the Commission to "follow the law" and implement the new standard despite the known consequences. This may be the most interesting interchange on the troubling issues under the CPSIA that I have participated in over the past four years. Check it out!



Commissioner Anne Northup asks about the ability of small business to obtain exemptions from the lead standard:



Commissioner Nancy Nord questions me about recycled materials, the cost implications of the new standards and injuries:



My call for a Five Year Stay on the new lead standard to allow for development of real injury statistics:

CPSIA - House Hearing Testimony of Jolie Fay and Wayne Morris

Testimony of Jolie Fay, HTA Board Member:



Testimony of Wayne Morris, Association of Home Appliance Manufacturers (AHAM):

CPSIA - Nancy Nord Chimes in on Baby Monitors

You gotta read Nancy Nord's blog on the baby monitor recall. It speaks for itself and is basically on the topic of why they call certain actions "recalls" and others something else. In the controversial recall of Summer Infant baby monitor, Ms. Nord notably admits the involvement of the CPSC in this recall. Check it out. This is NOT my imagination.

CPSIA - Mothering Magazine R.I.P. - Thanks, CPSIA!

Last week, Mothering Magazine announced that its print edition was kaput. [Thanks to the HTA for alerting me to this event.] This 35-year-old publication ceased publishing as a magazine for all the usual reasons . . . and one more: "Many of our advertisers have been hard hit by the economy. Toy manufacturers have been burdened by the cost of complying with the new regulations of the Consumer Product Safety Improvement Act (CPSIA). Many of our sling and baby-carrier advertisers experienced declining sales or went out of business altogether in 2010 as a result of loss of sales due to the Consumer Product Safety Commission (CPSC) recalls of infant carriers."

More anecdotes, but sadly no evidence. Just another dead enterprise blaming the innocent and innocuous CPSIA for its troubles. I wonder if there's a connection there somewhere . . . .

CPSIA - CPSC's Shameful Failure of Leadership

On Monday, the CPSC will decide whether or not to extend the testing and certification stay that has been in place for two years. The 16-page document which sets out the parameters of the decision does not mention risk anywhere. That's because the law prohibits the CPSC from considering safety in its work under the CPSIA. [Ironically, the CPSC warns users that use of its http://www.saferproducts.gov/ website is at their own risk (see par. no. 2 in the user's agreement) - and ironically, we're talking about a "dot gov" website, too!]

The CPSC explains that extension of the stay is only one of its options. It can do nothing, it can roll all the existing stays forward, or just some of them (to heck with the ATV'rs and the bike industry). Presumably, they will choose to roll all of it forward to September 14, 2011. We can all be screwed on the same day. I like the symmetry of that!

The CPSC has not lost sight of the issues. They know they haven't finished their work. They note that two years ago on February 9. 2009 when the Commission first extended the testing stay. it was because delaying implementation of the testing requirement by a year "give[s] us the time needed to develop sound rules and requirements as well as implement outreach efforts to explain these [new] requirements of the CPSIA and their applicability."

How time flies! That didn't happen, so the Commission again extended the stay by another year on December 8, 2010. Why? Chairman Tenenbaum: "I voted to extend the stay on lead content testing and certification until February 10, 2011, in order to allow component testing adequate time to develop and to give our stakeholders adequate notice of new requirements." Commissioner Robert Adler: "One of the primary rationales advanced for extending the stay is to await the effective date of the so-called 15-month rule."

Where does the time go?? None of that ever happened. Hey, CPSC, take all the time you need!

So now the Commission is poised to kick the can down the road until September 14, 2011. Why that date? The CPSC Staff report notes that this gives the Commission time to sort out the new, lower lead standard due to be imposed on August 10, 2011. The CPSC is holding a hearing on February 16 on the feasibility of the 100 ppm standard. As Staff notes, if the Commission doesn't determine that 100 ppm is feasible, then they will have to set a standard between 300 ppm and 100 ppm that is feasible. "Feasibility" was defined in the CPSIA, lest there should be any disagreement, to exclude ANY consideration of economics. In other words, if it's possible at any price or under any condition, it is considered "feasible" and thus mandated by the law. I can save the CPSC some time - under that definition, it's definitely feasible. Completely unreasonable and unnecessary but "feasible".

The idea promoted in the Staff memo is that we will time to get used to all this if the stay lifts a month after the implementation of the new lead standard. [The concept of "learning disability" floats through my head. Have we heard this song before?] "Staff recommends that the Commission extend the stay to allow time for the Commission to determine whether it is technologically feasible to lower the amount of lead in children's products to 100 ppm." I guess once the Commission makes up its collective mind, the CPSC will wave a magic wand and make your business, your supply chain and your sales channel comply with the new rules in a matter of days. The fact that the rules are hazy after almost three years is no concern of theirs. Is it a concern of yours?

I love magical rules and magical plans! It must be a job requirement for Commissioners to be wizards, too.

All concerns over the "15 Month Rule" seem to have evaporated. This is presumably Robert Adler's doing (see his statement above, which is a rant that the 15 Month Rule and the stay are separable issues). The Staff report intones: "While a Commission decision to extend the current stay of enforcement will give industry an opportunity to test and certify finished products and components according to the final rule and provide the Commission time to clarify any confusion regarding the new rule, it is not necessary for the testing rule to be complete to lift the stay as to the initial test for lead compliance." Can't see any problem there, can you???

The CPSC doesn't want you to worry, however. They have apparently promulgated several documents that set out their policy and whatnot on lead, namely "Statement of Commission Enforcement Policy on Section 101 Lead Limits" (February 6, 2009) (6 pages); "Children's Products Containing Lead: Interpretative Rule on Inaccessible Component Parts" (August 7, 2009)(32 pages); "Statement of Policy: Testing and Certification of Lead Content in Children's Products" (October 2009)(5 pages); and "Interim Enforcement Policy on Component Testing and Certification of Children's Products and Other Consumer Products to the August 14,2009 Lead Limits" (December 28, 2009) (4 pages). If these four documents totalling 47 pages don't clear up everything, the CPSC is ready for you. "Manufacturers of children's products can seek guidance for what the Commission considers reasonable and representative testing in these rules."

You may have to wait a few years for a reply, but darn it, they're going to answer your question. And that's because they really CARE. We're the government and we're here to help!

A few more cock-ups aren't deterring the agency. The phthalates standard is still undrafted, likewise the certification procedures for phthalate testing labs. Oopsie! Well, they've been busy . . . and the much fantasized-over component testing "market" has failed to materialize. Imagine that, businesses that inadvertently serve the children's market with components or which derive a small percentage of sales from children's products aren't volunteering to test their items and expose themselves to the ravages of a crazy and out-of-control federal agency. Shocking!

Those of you who live in the past may recall my mentioning this very issue on November 6, 2008 (yes, 2008) when I addressed the CPSC Lead Panel. [It's a safe assumption no one was listening at the agency - opportunities for stakeholder feedback is not for listening, it's for venting.] I talked about the futility of expecting our suppliers of aluminum foil (widely used in schools in science kits) to test their products. After all, they are allowed to sell it for use with food without testing, so why should they test for me? If I asked them for a test for compliance with the CPSIA, they would certainly refuse and then ask in outrage why I was selling aluminum foil to kids anyway. As I said, who could see this coming? No one . . . .

For all the outrages that this sick situation brings to mind, NOTHING is as shameful as the CPSC's refusal to admit that this is all administrative, bureaucratic nonsense (or use your own word for "nonsense") that has nothing to do with SAFETY. Oh yeah, safety - isn't that word in the name of this agency - the Consumer Product SAFETY Commission. What about safety, guys? Are you concerned about that anymore? This failure of leadership is the basic issue I have with the folks running the agency today. There's a reason that bureaucrats are called "soul-less".

The fact is that this administration at the CPSC (Democrats) will not stand up for what's right - they are prepared to go down with the ship. It's ironic that they remain so strident and so stubborn. Mr. Obama can smell change in the air and even he has called for reconsideration of the deluge of regulations. The Republicans in the House have declared war on over-regulations and the House Energy and Commerce Committee has made reform of the CPSIA the top priority of Mary Bono-Mack's subcommittee.

As I have said again and again - this is YOUR government at work. Their shameful acts which are harming your markets and your business are destroying jobs, discouraging innovation and hurting children by impairing the activities of businesses devoted to children's welfare. This intolerable situation will only be fixed when you MAKE it change. You can do it and you must. There is a new Congress in town and they need to hear from you. Don't let the Democrats keep on wrecking your industry. This isn't about safety and never was. This is politics, pure and simple.

Make them pay for their sins. Call your Congressman.

CPSIA - The Worm Continues To Turn

The day we all feared, the day we knew would come someday . . . well, the Federal Register says it's coming soon. According to a notice of "Final Rule Stage" published on December 20, the CPSC is moving forward on the so-called "15 Month" Rule.

You have to chuckle at the "15 Months" part. This rule was legally mandated to be enacted 15 months after the CPSIA was signed into law. The presumed date of enactment would then have been November 14, 2009, a mere 14 months ago now. They didn't even published a first draft until May 2010. If the agency can somehow finish this project by January 14, it could be called the "15 Months Times Two" Rule. Then again, it's basically inconceivable that they will make it. Eventually they'll need another name for this thing.

The urgency behind finishing up this rule is that the testing and certification stay expires on February 10, 2011. Remember that Bob Adler already said he wouldn't vote an extension of this stay because . . . he hates stays. Perhaps he prefers market chaos and economic depression instead. Anyhow, to avoid the showdown, they need to get their ducks in a row, hence the need to get this rule going.

I sent in comments on the first draft of this rule on August 3. I wasn't a big fan . . . and I guess other people had reservations, too. According to www.regulations.gov, the CPSC received 112 comments letters (that may overstate the number, because regulations.gov seems to have some duplicates). I haven't read them myself, but I assume I am the only one who saw any flaws in this rule. The rest of the letters are probably just "thank you" notes.

Anyhow, it's worth noting that the Chinese New Year occurs on February 3, 2011 so take my word for it, all the Chinese factories will be closed on Feb. 3rd and probably won't reopen until Feb. 10 at the earliest after a two-week holiday. Some workers are gone three or even four weeks for this holiday. In a "best case" scenario, the CPSC can't take action on this rule until they officially acknowledge the public comment "thank you" notes and hold a public Commission meeting. Do the math - if they choose to take action on this rule now, we will get about ten minutes notice to begin conforming. I can't see any risk of market chaos again . . . can you?

Here's a fairly obvious fact for you - we have not incorporated any of the pending rules into our supply chain or manufacturing processes. Why? You tell me what I'm supposed to do. The rule that has been published is deeply flawed and, basically, stupid. It is not a final rule. 112 comment letters were filed on it. It could change . . . it BETTER change. How am I supposed to implement rules that haven't been published or possibly even written? Telepathy? I don't read minds and I haven't implemented the unknowable, either.

If this does not make your blood boil enough, consider these excerpts from the notice of Final Rule Stage:

• "The U.S. Consumer Product Safety Commission is charged with protecting the public from unreasonable risks of death and injury associated with consumer products." [Emphasis added] The CPSIA makes consideration of RISK by the CPSC illegal. Bummer, huh? Someone should have told the CPSC because they still claim to be concerned with "risk" of injury.
• "When deciding which of these approaches to take in any specific case, the Commission gathers and analyzes the best available data about the nature and extent of the risk presented by the product." And then ignores it??? See also the final bullet below.
• "As for exemptions [from the "15 Month Rule"], the statute does not appear to give the Commission the authority to exempt firms from the testing or certification requirements, so it may not be possible to exempt firms within section 14 of the CPSA." In other words, HTA, you can lump it. And the CPSC is telling you who to blame - Congress.
• "The congressional mandate to issue this regulation does not require the Consumer Product Safety Commission to do a cost/benefit analysis for this regulation. Therefore, a cost/benefit analysis is not available for this regulatory action." Head-in-sand syndrome. I bet you'll be able to do a cost/benefit analysis pretty quickly when your costs go up again by 20x.
• "[It] is not possible to provide an analysis of the magnitude of the risk this regulatory action addresses." Ahem. And it's okay to put forward a rule of this complexity and far-reaching impact while flying entirely blind because . . . why???

Let's not forget that there's a new Congress being sworn in January 5th. The incoming Republican House majority has pledged to shrink the federal government and to closely examine how regulatory agencies are governing. Hmmm. Help may be on the way . . . soon.

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.

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 Amazon.com 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. https://www.cpsc.gov/cgibin/incident.aspx

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 Lawyers-and-Settlements.com. 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 - 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 - 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?

Hmmm.

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!"

and

"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 . . . .

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!