CPSIA - Listening but Disagreeing - or Not Listening At All?

We know that the CPSC plunged ahead with the database on Friday despite the outcry of many industry stakeholders. Among the protesters was the National Association of Manufacturers, not exactly a lightweight organization. Industry protests fell on deaf ears. It goes without saying that the resistance of the two Republican Commissioners (who drafted their own database rule) aligned with industry objections. None of this apparently mattered.

As if to make the point that the CPSIA database will be misunderstood, misused and dangerous, the New York Times announced the arrival of the database in an article entitled "Consumer Agency to Post a Database of Unsafe Products". Nice work, New York Times! The information in the database is unverified and in many cases will NOT be true. There is simply no way to conclude that the products referenced in the database are "unsafe". Good luck convincing anyone of that now.

It is embittering and frustrating to be so flagrantly disregarded. There seems to be so much at stake, and the fix was seemingly so simple. No one asked to kill the database, just protect innocent businesses from damaging inaccurate postings on a website enjoying the prestige of a federal safety agency. Even the Pompeo Amendment was promoted as "hitting the pause button". It is hard to fathom why dialogue was so impossible to start. Actually, after a few years of this war, it is not hard to fathom at all.

I know we were rejected - it is hard not to conclude we were ignored completely from the beginning.

My involvement in this issue began when I was asked to testify before the Commission on the issues relating to a searchable database of product incidents. Actually, I had been on record of objecting to the database even before the CPSIA became law (you can see excerpts of letters I sent in my response to Slate). I was called by Matt Howsare, then counsel to Inez Tenenbaum (now her Chief of Staff) who asked me to fly to Washington to testify. He told me that they "needed" me. Wanting to be helpful and to pitch in when asked by the agency (I was charmingly naive at that time), I agreed. I posted video of my testimony in this space, and as you will see, I was cut off by Ms. Tenenbaum. Get it? I was asked by her staff to present because they needed industry testimony, and when I gave my remarks, they cut me off - one suspects they had heard enough . . . .

This experience left me disgusted in a way that, frankly, hasn't worn off.

Later, the agency called for a two-day workshop on the database. Owing to the discourtesy of my treatment at the hearing and because of their apparent utter disinterest in my views, I declined the opportunity to continue banging my head against the wall by attending their database confab. Later, as we know, the Democrats released a 248-page rule that greatly expanded the database rule from Congressional intent. Written as though edited by Consumer Federation of America, the rule produced howls of protest, but as has been the case thusfar in this CPSIA saga, it mattered not. The three Dems voted as they would have in the absence of any protests and the defective rule was adopted.

I continue to believe that the criticisms of the rule were (and remain) legitimate. That is, they were rational and reasonable, and lent themselves to reasonable and understandable resolution. The Dems did not make any effort to address these reasonable concerns, rejecting them out of hand.

This pattern of ignoring stakeholders while calling for comments and participation has been a hallmark of the Tenenbaum era. I am trying not to take it personally but wonder how we can be so consistently "wrong". The Dems barely pause to discuss industry objections other than to simply reiterate that their policy objectives are more pressing. Are we so obviously wrong that our objections don't merit an answer?

I have trouble reaching that conclusion. I have made the same points consistently over and over, yet I cannot put my finger on a single response to my objections other than outright rejection. There is a question of good faith here. The rejection of my company's PROOF of a material error in the one filing made against one of our products in the soft launch of the database seems to call into question whether the agency can ever be trusted under this group of administrators. The response by SENIOR STAFF at the agency that the consumer in question had stated a "risk of harm" when his/her accusation was PLAINLY WRONG means that even the English language is being corrupted in service of the database. How can trust exist in an environment like this?

Ask around among industry stakeholders. Trust is GONE. No one trusts the CPSC these days.

Looking back on the database saga, it makes me all the more certain that I am doing the right thing pushing back against these people. They are not operating in good faith and have no apparent concern for the well-being of our company, our employees or the countless companies, schools, families and children who depend on us. This cancer on our markets must be stopped. We have another election coming up and I will be working hard to put more Democrats OUT OF WORK. They have no one to blame but themselves. They won't listen . . . .

So we need to get rid of them.

CPSIA - My Answer to Slate.com on the CPSIA Database

Dear Mr. Noah,

I read with interest your March 8th article on the CPSC database entitled “Who’s Afraid of the CPSC?” and was disappointed at the inaccuracies in the piece and your blanket dismissal of the business community's legitimate concerns about the database. The database has devolved into a divisive partisan issue simply because of the utter refusal of consumer groups and their Congressional allies to acknowledge the flaws in the database as well as the law that established it – the Consumer Product Safety Improvement Act (CPSIA).

I'll try to address the inaccuracies one-by-one:

Database cost - $3 million or $29 million? The cost figure of $3 million sparked a public dispute between the CPSC Chairman Inez Tenenbaum and her fellow Commissioner Anne Northup at a House hearing last month. In response to Ms. Tenenbaum’s testimony on the cost of the database, Ms. Northup testified that the figure of $3 million had never been shared with the CPSC Commission and that the only database cost figure she was familiar with was $29 million. Interestingly, in April 2010, the Associated Press reported, based on information provided by the CPSC, that the cost of the http://www.saferproducts.gov/ website would be about $20 million, and the CPSC apparently saw no reason to update the media with the good news that the cost had shriveled to $3 million until the February 2011 hearing. . . . Hmmm.

The supposedly noncontroversial CPSIA database. Why didn’t anyone kick up a fuss about the database in 2008? A better question is “Why didn’t Congress listen when the business community protested?” Here’s what I said in a letter to each Congressional conferee dated June 25, 2008: “While we support public notice of recalls, we oppose a national database of reports of injury, illness, death or risk of injury. This forum will not be subject to appropriate findings of fact and thus will be a forum subject to considerable abuse. In a society where tort lawsuits are an ever-present risk for all businesses, a risk that can wipe out a lifetime’s work in a heartbeat, the very real potential for abuse by competitors or mischief-makers far outweighs the public’s ‘right to know’. Once the CPSC has adjudicated a case appropriately, made a reasonable finding of fact and determined the right course of corrective action, public notice would be appropriate.”

I continued to try to make my point to CPSIA Congressional conferees in another letter dated July 21, 2008, just ahead of final consideration of the CPSIA: “CPSC Searchable Database: The well-intentioned idea for complete safety transparency is an open invitation to mischief makers. This is a real threat to our business, as we know from hard experience. The better way is to let the CPSC filter this data first. Please remember, even YouTube will take down videos on request. The proposed law won’t give defenseless toy companies the same recourse as YouTube. Is that an appropriate way to regulate an entire industry?”

It wasn't only me. Many others in the business community opposed the creation of a database that would contain inaccurate or misleading accusations and complaints. That’s the story of the CPSIA in a nutshell – no one was listening when the law was originally drafted, and now three years later, we are fighting City Hall to restore common sense to federal safety law. Please consider the assertion that consumers really need this database, that it is essential to their children’s safety. In fact, there are many places on the Internet where consumers can and do post their experiences without controversy. Why would a federal database be a greater cause for concern? Well, for one thing, this one is called “SaferProducts.gov” and is sponsored by the federal government. Notwithstanding the lawyer language disclaimers all over the website, it is crystal clear that the public will place a lot of credence in these postings. After all, why would our federal government allow misleading or inaccurate information to be posted on a website called SaferProducts.gov? Ms. Tenenbaum is famous for her defense of “dot gov” websites: “I say don't believe everything you read on the Internet, except what you read on Web sites that end in dot gov.” [Keynote speech at ICPHSO, February 17, 2010] She may not be the only one who feels this way.

The NHTSA database exists; ergo a CPSIA database is a good idea? The NHTSA database can be distinguished in several important ways: (a) auto accidents are a leading cause of death in this country (consumer products are not), (b) every use of automobiles is known to be hazardous and the risk to human life from reckless use of cars is obviously magnified (not true for consumer products), (c) the auto industry is one of the largest components of our entire economy - we all use cars and many of us owe our livelihoods to automobiles in one way or the other (the average sale of consumer products is far less than a car), and (d) at all levels, the auto industry is highly consolidated among a relatively small number of massive companies that are well-prepared for litigation and regulatory issues (consumer products is not a consolidated market and there are many small companies involved in the trade). I think GM, Ford, Toyota and other multi-billion dollar automakers can handle the burden and risk of a database of consumer deaths and serious injuries from use of their products. Our family business, Learning Resources, on the other hand, ain't no GM or Toyota. The NHTSA database is NOT an appropriate precedent for consumer products for all of the foregoing reasons.

"One of the ironies in Pompeo and others screaming bloody murder that the database will kill jobs is that most of the appliances likely to get dinged in the database won't even be American products." This remark completely misses the point, unfortunately. It is American companies that are going to be hurt by the misinformation in the database, whether those companies are manufacturers, importers, private labelers or retailers. Even worse, thousands of American small businesses are going to be put at risk with no practical means to defend themselves. Is this the “American Way” at work? Who will pay when jobs are lost from companies shifting away from this market or dropping products to limit exposure to liability? This is just going to be another self-inflicted economic injury from misguided and overzealous regulation.

Whether the product is made in China, the U.S. or India, it should not matter from a safety perspective. Companies must ensure that they market safe and appropriate products no matter where the products are made. The reality is that every product can break, and accidents and other bad things happen to good people. The database will be unforgiving and if filled with post-it-and-forget-it garbage, will harm innocent victims – American companies that employ your neighbors and make products for your schools. Unqualified and unverified complaints on SaferProducts.gov WILL induce consumers to take our products away from children - pending a recall that may never be forthcoming . . . because nothing's wrong.

Chairman Tenenbaum has publicly encouraged consumers to rely on the postings in the database - to draw conclusions on the likelihood of future injury. This is quite alarming, given that Ms. Tenenbaum also testified in a Congressional hearing in February that the agency will likely post unverified or inaccurate information to the database. She admits that this information will be faulty. As she said in testimony, "that's what the rub is".

Claims of inaccuracies are low in the soft launch. Given the short life of the database in its test phase and the small population of registered users, reports of few data problems must be greeted with skepticism. Less than 1000 companies have registered with the CPSC for the database, an absurdly small percentage of the number of companies whose products will be in the database. Taking into account that many consumer product companies (such as Disney) will need to register numerous brands, product lines and corporate divisions to ensure that the right data flows to the right paper pusher, the current registrations are even paltrier. If companies are not registered, it is unlikely they are even aware of the soft launch, let alone that there may be inaccurate claims against their products being sponsored by the federal government.

Sadly, we are likely to confirm that the CPSC’s faulty processes are damaging companies only AFTER the damage is done. Let’s not forget that the agency is all set to launch a big “public awareness” campaign for the new database – in other words, the federal government will soon be beating the bushes for consumer complaint submissions. As usual, consumer advocates hype uncertain and unquantifiable losses (someone somewhere might not know about something that COULD have been in the database and later be injured) to distract Congress and the media from the certain losses that will befall companies with damaged reputations. Good for plaintiff lawyers but maybe no one else.

Our small company in Illinois has already experienced a materially inaccurate submission – in the very first “complaint” we faced – and were unable to block it from the database. The anonymous posting concerned a consumer’s “feelings” about one of our products based on a photograph she found on the Internet. Unfortunately, she was clearly wrong and we could prove it. The CPSC wasn’t impressed by our valid CPSIA test reports or photographic evidence of the consumer’s error. I can safely assure you that misleading and inaccurate claims will not only be submitted to the database and but will be posted by the CPSC knowing full well that the claims are untrue. I wrote about my experiences in my blog.

I hope you will reconsider your views on the CPSIA database and weigh more carefully the legitimate concerns of businesses serving the children’s marketplace. We are in this business for a reason – we are devoted to making children’s lives BETTER. The new database will not further our mission, nor will a database filled with garbage benefit consumers. We can do better, and we MUST do better.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.
Vernon Hills, IL
My blog: http://www.learningresourcesinc.blogspot.com/

CPSIA - Report Abusive Database Rule to Eric Cantor!

Today, Republican CPSC Commissioners Nancy Nord and Anne Northup, noting the stifled debate orchestrated by Democratic CPSC Commissioners on the final public database rule (up for a vote on November 17th) and the toxic impact of that rule on the business community, have proposed their own alternative rule on the database.

HERE is the link to the Nord/Northup proposal. I believe the CPSC is currently mud wrestling over whether the Nord/Northup alternative proposal can be shown to you . . . the public. I think the Dems don't think you are mature enough to be able to read it. Perhaps when you're older . . . .

Here is Nancy Nord's blogpost and Anne Northup's blogpost relating to their proposed new rule. I also want to commend Ms. Northup's three other blogposts on this topic, beginning on October 27. It is gratifying to see Commissioners taking political risk to do the right thing. Both Ms. Nord and Ms. Northup are taking a stand here. Let's hope that fighting breaks out on other issues, too. We need the help.

This proposal by two Republican Commissioners is yet more shocking evidence that at today's CPSC, safety and market integrity is an entirely partisan issue. Frankly, I don't understand this and find it all so outrageous. In my view, this cartoonish standoff is ENTIRELY the fault of the Democrats who are stone deaf to the legitimate concerns of the business community. The hollow words of Inez Tenenbaum committing to "dialogue" with stakeholders makes me want to scream.

Consider, for instance, that I testified at the hearing on the database on November 10, 2009 at the personal request of Matt Howsare, Tenenbaum's then counsel (now her Chief of Staff). Ms. Tenenbaum purportedly wanted my feedback on this critical proposal, and as it was related to me, the agency needed more comments from the business community. Naively, I spent our company's money to fly to Washington to accommodate this seemingly reasonable request. I am accepting Fool of the Year nominations at this time. . . .

This hearing took place almost exactly ONE YEAR AGO - plenty of time for Ms. Tenenbaum to absorb my testimony. Listen to my testimony - did the majority take ANY of my points seriously? According to Nancy Nord, she was not allowed to ask at the October 20th Commission meeting about CPSC Staff's conclusion that the rule would have an insignificant impact on small business - the ENTIRE focus of my testimony in November 2009. Don't kid yourself, staff conclusions like this are are driven from ABOVE - from Ms. Tenenbaum and her political patrons. Ms. Nord was gaveled silent by the majority party - they had heard enough, I guess. Other issues impacting business interests from a fairness standpoint were also ignored or blunted.

This kind of treatment is completely outrageous. This example of government-out-of-control explains why the public spoke so profoundly last Tuesday. Nevertheless, the people running the shop at the CPSC didn't hear you on Election Day. We MUST stop the Dem's plan - unless you want to be eaten alive by trial lawyers. Listen to my testimony - it's a road map to litigation doom.

Eric Cantor has called for substantially increasing Congressional oversight of the activities of federal agencies which he says are "now actively working to enact [President Obama's] agenda through agency regulations". Could Tenenbaum, Adler and Co. be doing JUST THAT at the CPSC right now? Hmmm.

Please WRITE ERIC CANTOR to tell him what you think. His fax number is 202-225-0011. Please post your letter as a comment to this blog.

CPSIA - In Memory of Harrison Bergeron

One of my great frustrations with the CPSIA is its presumption that all children's product manufacturers are identical and none can be trusted to operate responsibly without vigorous government oversight. The CPSC, under the direction of the CPSIA and Congressional zealots from the Democratic Party, are developing identical safety and business administration processes for all businesses making children's products, notwithstanding an absence of data confirming hazards (think books, bikes, ATVs, pens, educational products). This lowest common denominator approach is one of the main sources of increased expense for businesses like ours. And, unfortunately, this offense of government intrusiveness adds no value to our safety efforts despite the self-congratulations of the Democrats leading the charge in Congress and at the CPSC.

Why don't I want to be like everyone else? Why don't I want the government to tell me how to run my business "better"? Of course, the CPSC has absolutely no idea how to effectively operate our business. Even more importantly, the CPSC's voluminous new rules misappropriate the value of our innovations and know-how. We taught ourselves how to efficiently assure the quality of our products - that's how we achieved our enviable safety record over a quarter century. The fact that we can do it at a low cost does not make us bad people - this is an economic advantage we should be entitled to capture and use. The CPSC has written rules to take that advantage away. This policy is un-American and profounding anti-small business. We are no longer able to compete with larger companies by being smarter or fleeter-of-foot.

By making everyone "equal" (forcing adoption of government-designed and government-approved procedures), Democrats like Inez Tenenbaum and Bob Adler now prohibit our company from prospering from hard work, innovation and investment in productivity and efficiency. The Dems' justification is that they know what's best for us and for all American consumers. Other than bravado, this assertion has no basis in fact. Even the very existence of the "crisis" they seek to avert (with our money) is very much in doubt.

If I am wrong, someone should show me DATA to prove it.

To protect the public from imaginary crises, our government just wants everyone to be equal. Kurt Vonnegut addressed this approach to government regulation in his dark short story "Harrison Bergeron". The set-up for the tragic story of Harrison Bergeron is simple - and familiar:

"THE YEAR WAS 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General."
The CPSC seems eager to be our industry's U.S. Handicapper General, driven by the CPSIA and the Waxmanis.

In "Harrison Bergeron", all individuality has been eradicated by law. Those who by the grace of G-d or through their own efforts crafted some form of advantage were reduced to the lowest common denominator by the H-G. Resentment of successful people is called the Tall Poppy Syndrome in some countries. Ironically, people in the U.S. tend to admire the successful and seek to emulate them. The CPSIA takes an opposite tack - Mother Government knows best and safety innovation must be illegal. We need "standards". The Tall Poppies can't be trusted.

I hate to feel like Harrison Bergeron. The bad feelings sting all the worse because I know that the "crisis" is imaginary and has been coopted for political and populist advantage. This is an awful justification for destroying our lives' work. Even more demoralizing, we have already proven our expertise in supply chain management and quality control/compliance over many years. No matter. The CPSC knows best.

Something's VERY wrong here. Is it any wonder that there is anti-incumbency rage in this country now?

CPSIA - Schylling Agrees to a $200,000 Fine for Lead in Paint

What is the principal goal of the CPSC - to protect consumers from unsafe consumer products, or to punish legal transgressors? If consumers haven't been harmed, how should this aftect the agency's decision to punish?

These questions come to mind when considering the most recent punishment meted out by the CPSC. In particular, on February 4th, Schylling Associates ("Schylling") agreed to pay a $200,000 fine for lead-in-paint violations disclosed in 2007. How does this fine affect the CPSC's mission?

Background: I have no personal knowledge of this situation, although I know the company and some of its principals, and I have had no contact with anyone associated with the fine. My summary of L-I-P recalls from 2007 shows five Schylling recalls, although the CPSC press release does not relate to all of them. The recalls total about 80,000 pieces sold from June 2001 to May 2003. The fine works out to about $2.50 per unit for violations almost seven years old or older. No injuries were reported since the sales began almost nine years ago.

Schylling apparently promptly recalled one of the items upon discovery of the infraction in March 2002 and also terminated the factory. Here is Jack Schylling's letter to his dealers describing this incident. This item comprised a relatively small portion of the defects. Schylling apparently (mistakenly) believed that the other L-I-P problems had been resolved and therefore did not recall them until 2007 (see below).

In August 2007, a Chicago Tribune article featured a defective Schylling top purchased in an online auction; consequently, several additional L-I-P violations dating back to 2001-2003 were uncovered, promptly disclosed to the CPSC and recalled properly.

Judging from the press release and the settlement agreement, this is a messy fact pattern with some poor judgments. bad operational execution and some violations of serious rules. Schylling was a repeat offender, albeit by all appearances not because of bad intentions. No one was hurt.

That Schylling was in the wrong is only part of the story. Was the fine the right move by the CPSC?

The Schylling Fine is Excessive and Unrelated to the CPSC's Mission to Protect Consumers. The CPSC is not the Department of Justice. They are the Consumer Product Safety Commission - the agency "is charged with protecting the public from unreasonable risks of serious injury or death from thousands of types of consumer products under the agency's jurisdiction." I do not believe this fine is consistent with their mission.

In this case, the fine is removed from the protection mission, as all defective pieces were recalled from the market voluntarily and pursuant to voluntary disclosure. This is "good behavior" since the company sought to mend its ways and fix the problem. In addition, because the offenses lasted two years ending almost seven years ago, this matter is old and cold. Addressing it now seems to unfairly reach back in time. Finally, the amount of the fine is arbitrary and therefore unfair. The size of the fine cannot be related to other fines for similar offenses.

Manufacterers Are Likely to React Badly to Fines Intended to Make Examples. If the mission of the agency is to protect consumers, all of its activities must be judged against that mission. In this case, the fine for Schylling would need to make consumers safer to be consistent with the mission. Ironically, I think it is quite possible that this excessive fine may endanger consumers by discouraging manufacxturer cooperation.

The striking thing about this fine is not simply its excessive size - it is that the fine seems motivated by retribution, not consumer protection. This company appears to have tried, perhaps ineptly or even improperly, to do the "right thing". They turned themselves in voluntarily. The product was removed from the market voluntarily, although not with all the required CPSC disclosure or as timely as possible.

Ultimately, to be successful, the CPSC needs manufacturers to come forward. The trust factor is crucial. When the CSPC acts to squish people who turn themselves in, perhaps to set an example, businesses may conclude that they cannot afford to throw themselves on the mercy of the CPSC. The Schylling action reinforces the notion that the CPSC is not a trustworthy partner. And this is a very damaging notion for consumers.

Here at the Nuremberg Toy Fair, the tradeshow is abuzz with several examples of companies who suffered grievous losses by disclosing problems to the CPSC. These issues were never of a life-threatening nature. However, the CPSC defaulted to remedies that placed the maximum risk on the manufacturer. Now, to make matters worse, the CPSC is adding large, arbitrary penalties for companies that come forward. Do the math - manufacturers may well see disclosure as a bad deal. Highly publicized punishments like Schylling destroy trust. While some manufacturers may be "scared straight", many others may simply drop off the radar altogether.

Other agencies in the U.S. government see things more clearly. Customs, for instance, grants full immunity from penalties if you confess your sins before official notice of an investigation. While this too is painful, at least you control you control your own fate and pay no penalties. Customs' policy encourages disclosure, which is what Customs wants. I contend that disclosure is what the CSPC should want, too - it needs to know what defectivce products are "out there" to protect the public.

A big fine was not the agency's only possible remedy here. It did not have to hit Schylling with a huge penalty, or any penalty at all. Schylling could havc agreed to implement new safety procedures or to conform to certain standards for future behavior. The CPSC also could have agreed with Schylling on some sort of public service. These options would have sent a strong message to Schylling about the consequences of future infractions, while encouraging openness and cooperation with the manufacturing community.

Unfortunately, a reasonable approach would not satsify a ravenous pack of Democratic members of Congress, consumer groups and newspaper editorial boards who are demanding blood. Giving in to populist outrage buys the CPSC time . . . but at a high cost. A punishment-oriented CPSC will be defeated by its own shortsightedness. As more and more people slink into the shadows, this CPSC might accuse the manufacturing community of venality and launch even stronger actions against bad behavior. A safety police state is possible. Is that what we want?

If the CPSC persists in this approach, it will soon eat its own cooking. It's time for the mania and blood lust to end, and for rationality to return to safety administration. Fear does not have drive regulation of these markets.

CPSIA - ICPHSO Toronto Update

I attended this week's ICPHSO meeting in Toronto. The meeting was located in Toronto and focused much attention on the proposed amendment to Canada's 40-year-old Hazardous Products Act (the so-called Bill C-6). The meeting was attended by more than 250 people, largely comprised of Health Canada officials (the analog to the CPSC), CPSC staff, including Chairman Inez Tenenbaum directly from China, a variety of testing companies, mass market companies, Canadian companies, lawyers and other interested parties.

I thought I would share a few tidbits from the meeting:

Chairman Tenenbaum's Keynote Speech: Chairman Tenenbaum addressed the conference on Wednesday morning. Her speech is posted on the CPSC website. The speech included a few hints of movement toward accommodation of businesses under the CPSIA, but unfortunately, it is only provides hints at this point. It is worth noting that sidebars at the conference suggest that there is more sensitivity to business concerns than CPSC public statements might suggest, but then again, we can only rely on real action, not just words. The next development to look for is a change in tone and a change in actions. When we can triangulate from words to actions, and see a real easing of the intense pressure on businesses, then we can take the off-line assurances more seriously.

Some highlights from the speech:

• The "good": The "15 Month Rule" is due soon. Tenenbaum promised a special two-day workshop on this rulemaking IN ADDITION to normal public outreach. She emphasized that they want to "get it right". [Ed. Note: Rumorville has it that this rulemaking will be delayed, and the two day workshop may precede the issuance of the draft rule. Likewise, there is growing suspicion that the testing stay may therefore have to be stayed. There are multiple reasons why this may have to happen.]
• She emphasized a need to minimize the burden on small businesses. [Minimize is a relative term, let's not get too giddy yet. Need to see what they have up their sleeves.]
• The CPSC is reaching out to SAGs to make them partners in the safety process. She wants to minimize competition between the CPSC and the SAGs. I consider this a major advancement in CPSC practice and a nice contribution by Ms. Tenenbaum in the early days of her administration. Arguably, the 2007-8 crush of State legislation and SAG grandstanding evidenced strong State feelings of isolation and legal impoverishment (in addition to a general desire of local politicians to appeal to the populace before elections). A proactive approach by the CPSC to working with the SAGs is the best chance for ANY OF US to neutralize or minimize the disruptive behavior of States and SAGs in the future.
• Ms. Tenenbaum announced a substantial change to the penalty factors when she said: "In cases where CPSC may impose a financial penalty on a U.S importer for violations, CPSC may to take into account whether the importer has safety or compliance programs in place and whether they conducted pre-market and production testing to minimize safety risks." Gib Mullan also acknowledged that the penalty factors will be changing. This is another faint sign that we are being heard. The penalty factors were very harsh in the first draft. After a bit of an uproar, it appears now that the agency is going to moderate its approach somewhat. If this turns out to be a "real" shift, it is good news indeed.
• The "bad": The overall tone of the speech remained harsh and somewhat threatening, at least that's how it felt to me. Phrases such as the following were reminders that the CPSC has a big club and intends to use it:

- "Chinese suppliers and U.S. importers are now on notice from both governments that it is a mistake to depend on good intentions and a few final inspections to ensure compliance with safety requirements."

- "We will enforce in a firm but a fair manner the new federal law that puts strict limits on lead and phthalates in children’s products and makes all toy requirements mandatory." [The emphasis was hers in the live speech.]

- "As I have consistently stated, we intend to enforce this law that Congress put in place in a firm but fair manner. CPSC also has a federal rule making underway that puts U.S. importers on notice."

- "Another area that we at CPSC are rethinking is the singular approach used in the past to identify risks and simply recall products when necessary. This is one aspect of enforcement that will not work if pursued alone."

So Ms. Tenenbaum maintained the tough tone but gave hints of a coming thaw. We'll see in due course if I am imagining things. Needless to say, I hope not!

Remarks of Gib Mullan: Gib Mullan, the CPSC chief enforcement officer, gave a short speech summarizing the CPSIA and recent events. I must say I found some of this speech positively chilling. For one thing, Mr. Mullan noted with apparent satisfaction the first recall of a toy for violations of the phthalates ban. I believe this refers to the recall of 40 inflatable toy baseball bats previously highlighted in this space. Aside from the fact that Mr. Mullan confirmed that the enforcement focus of the agency is (supposedly) bath squeeze toys, which certainly does not include inflatable baseball bats, this micro-recall of 40 bats is highly suggestive of a strict liability enforcement policy. If that is so, then what is the purpose of pointing out this recall to the crowd at ICPHSO? I would suggest that it is intended to scare the business community. Mission accomplished?!

Further to that mission, Mr. Mullan announced that the agency is attempting to be more "consistent" and "rigorous" in assessing penalties. Okay kids, think of Target's $600,000 penalty - if the CPSC is going to be "consistent", what does that precedent mean for the rest of us? If Target gets hit with a massive penalty after it performed preshipment testing, had no actual knowledge, was increasing its safety surveillance and turned itself in voluntarily after catching its own errors, what should we expect from a "consistent" penalty practice at the agency now? Mr. Mullan continued by noting (again, with a bit too much relish) the rising tide of penalties assessed by the agency in 2009, and further noted that they haven't even cracked the 2007 lead-in-paint violations yet. He said larger penalties should be expected now, given the new powers allowed the agency under the CPSIA.

What is the purpose of this announcement? What else could it be, besides an intent to scare you and me? And, hats off to the chef, it succeeded. Among the many outrages of this new practice is the focus on retribution for old recalls with new penalties. Why is this a problem in my view? Well, for one thing, no one can do anything about the 2007 recalls at this point. Is the CPSC under the impression that the toy industry hasn't "learned its lesson" yet? If that isn't their view, then why lay on mega-penalties for matters that were apparently closed with significant expense now almost three years ago?

At what point is our penance complete? I can only supply a couple suggestions to explain this new penalty practice - (a) vindictiveness (as in CPSC meting out "justice", rather than simply ensuring a safe marketplace), and (b) terrorizing the corporate community into "compliance". Both rationales are wrongheaded and destructive. I continue to return to my original comment (December 17) on the penalty factors - CPSC penalties can only be consistent, rigorous, purposeful and (importantly) predictable if they are restricted to egregious conduct. Until the CPSC disciplines itself to a fairer penalty system, ALL OF US will assume we are next in line to get whacked like Target. After all, the CPSC has said publicly that they intend to be consistent and rigorous on penalties - in other words, they are telling us that we can and should learn from Target's experience. That message unleashes a parade of horribles. The CPSC needs to take this on board.

One last observation about Mr. Mullan's speech - he noted that recalls from China fell by 40% in 2009, the first fall in years. This is of course good news for everyone, most of all the children's product industry. As we know, success has many fathers but failure is an orphan. Many pundits point to the CPSIA as the reason that recalls have fallen. Mr. Mullan added another factor, the deep recession of 2009. Both of these factors contributed, but I think the real "father" of this success is that the notorious publicity of the new law and the new strict enforcement of the lead-in-paint rules (under the old law) led various companies and industry organizations to get mobilized to address safety practices. Who among us wasn't shocked and horrified by the suicide of the owner of a Chinese factory that supplied Mattel with lead-in-paint toys? The horrors of the recall frenzy and everything it entailed led to changes in practice. The remaining hubbub of the new law is just a hang-over IMHO, and does not explain the good recent reduction in recalls. For this reason, I believe the focus of the CPSC and its enforcement activities can and should SHIFT toward maintaining these gains through industry outreach, education, targeted and focused enforcement, and development of new and modern systems appropriate to the changing marketplace. It even calls into question the value of the law's kneejerk requirement of prophylactic testing, something I am on record opposing.

Health Canada and Bill C-6: Frankly, I have not had time to dig into the Bill C-6 yet but it got a lot of air-play at ICPHSO. Much of the brass at Health Canada was there, and I attended several talks by these professionals. I must say I left impressed with the Health Canada leadership. They were incredibly approachable and engaged. I was not made to feel like the "enemy". Especially notable was their TONE. They don't even imply that businesses are populated with bad or untrustworthy people. They repeatedly pledged to work cooperatively with businesses and noted that they have done well for 40 years with voluntary recalls and non-confrontational relationships. Hmmm, could it really be true that you catch more flies with honey than with vinegar?

They also stressed their interest in hearing about "lessons learned" and engaging in real dialogue as the new bill is crafted and refined. They noted some real gaps in their enforcement empowerment under the existing law, which they characterize as outmoded, but then again, they also stressed that these powers are intended to be used only if necessary. What a different tone they struck. They convinced me that they are nice people who mean to be partners in safety with industry. A refreshing change.

The contrast with the last year of CPSC hostility was palpable. It gave me reason to reflect on the course of my own relationship with the CPSC. Interestingly, I was a big fan of the agency until about two years ago. For 17 years I trusted them, I consulted with them, I had no reluctance to work with them and thought of them as partners, I advised friends to trust them, I did not see them as the 'enemy". The CPSIA and the feeding frenzy of the last two years sadly eroded that trust. Trust has to be earned, of course. I believe trust in the CPSC can be restored but not without real effort and real action. The Health Canada folks struck the right tone, and we can only hope that the CPSC was listening. Industry and the CPSC do not have to be at loggerheads, and there can be trust (there MUST BE trust). To get there, the "new" CPSC may need to make some concessions, but a path to this worthy karma level does exist. This detente does not need to involve endangering children, either. Health Canada implicitly recognizes that industry has no interest in harming children. Considerable efforts by industry are expended to avoid this terrible outcome. The presence of a few bad or incompetent actors in a massive marketplace of many thousands of companies and millions of different products does not make the rest of the market participants into bad guys, too. This is the notion that must be abandoned.

Final Thoughts: ICPHSO was a great event for networking, off-line conversations and sharing of perspectives. I feel that there is room for more dialogue. We can only hope that some barriers are being broken down, and that we may see some positive surprises (for a change). It is also clear, as Health Canada demonstrated, that a regulator can be effective and non-confrontational at the same time. We know the CPSC has a big stick, perhaps they can stop reminding us with harsh rhetoric and harsh actions (we won't forget about the stick, trust me). Next on the agenda is a rationalizing of the rules to allow businesses to function economically. Unfortunately, I cannot conceive of this development without a change in the law. To do this, the CPSC must summon up its resolve and TELL Congress that changes are needed. I do not see any way to avoid this. Time has a value, too, so the CPSC leadership must weigh the consequences of waiting - costs are mounting rapidly as time goes by.

I hope I'm not dreaming. This can be done. The coming weeks will reveal a lot about the direction and resolution of the pending issues confronting the business community.

CPSIA - Finally . . . Some Good News About Safety

GREAT NEWS! Apple is apparently "looking into" the issue of exploding iPods and iTouches after the EU gave them a poke. Boy, is that reassuring! The CPSC apparently has 800 pages of documents in its files about exploding Apple music devices. The CPSC, however, was so busy looking into whether ballpoint pens and rhinestones are always lead-free, approving the informal recall of Potato Clocks, okaying Palladium, Ruthenium and recycled nuclear fuel rods for use in children's products, etc. that it didn't have time to focus on exploding iPods. Understandable. Good thing the EU has some time on its hands. I certainly look forward to hearing more about how Apple's "look-see" is going. Obviously, this is no emergency requiring "vigorous enforcement" like the CPSIA.

Balance and equity, those are hallmarks of the new law and the new CPSC. I can't wait for the CPSC to ramp up their port inspections - gotta stop those dangerous rhinestones at the border. Apple's got that iPod thing in its sights and will probably send the agency a letter about it sometime, so it's "all systems go" for the CPSC to pursue the "real" safety issues like lead substrates testing and tracking labels . . . .

CPSIA - Hypocrisy Contest, We Have a WINNER!

No one beats Congress at being hypocritical. In this case, please note the valiant efforts of two Congressmen to preserve the rights of National Park Service employees to use lead bullets and lead tackle in our National Parks. "Sports, conservation and gun rights groups had not been consulted, and they condemned the idea." Good news, however - the National Park Service has no intention of restricting you and I on the use of lead ammo or tackle, just their own employees. You see, poisoning is apparently not possible from recreational use of these materials. It is only through recreational use of rhinestones, library books, ballpoint pens, ATVs and electricity kits that serious health issues are possible . . . . Sure.

CPSIA - More Reasons to be Cynical

A couple news items to consider:

a. The Tenenbaum hearings scheduled tentatively for next week in front of the House Energy and Commerce Committee have been postponed indefinitely, supposedly until sometime in September. I do not recommend holding your breath waiting for Mr. Waxman to act. Expect Senate hearings first. Mr. Waxman wants us all to rot before he allows anyone to discuss the CPSIA publicly in front of him. A consistent man, this is one in a series of hearing cancellations on the CPSIA for him. He has not held a hearing on the CPSIA since it was passed last year. I guess he must feel there's nothing to discuss. We seem to be talking to ourselves here.

b. The tracking labels guidance is DONE - yippee, how exciting! Of course, we are not permitted to read it . . . . As disclosed in this space yesterday, the guidance is up for a Commission vote before you get to read it. Apparently, they know what's best for all concerned, so seemingly there is no need to solicit your comments on this long-awaited document (it took more than 11 months to craft). [N.b., as previously noted, despite great effort in constructing the first set of rules on advertising rules last Fall, the CPSC felt a need to solicit comments on the new rules and later significantly changed them. There were many comments submitted, and serious issues were fleshed out in these comments. In other words, the later round of public comments on the rules had some VALUE. Public comments on new rules has much precedence at the CPSC over the last 30 years. Those days are gone, apparently.] No vote on the NAM tracking labels stay petition has been docketed.

We are now 30 days away from implementation of the tracking labels requirement. Zero questions have been publicly answered on tracking labels thusfar. IMHO, many important and reasonable questions have been asked on this topic by many different affected industries. The point has been well- and clearly-made that it takes TIME to implement something as sweeping (and pointless and ultra-expensive) as tracking labels. Any person of even modest sophistication can figure out that three weeks advance notice ain't gonna do it. The Commission vote is docketed for July 20. That leaves 24 whole days to absorb and implement tracking labels according to their new FINAL rules. Golly, that doesn't sound like much time (especially for the inevitable curveballs or impossible requirements), but if you consider that 24 days are comprised of 2,073,600 seconds, it sounds like a lot more time. Insiders admit the guidance, when we get to read it, won't answer all the questions. Hope those aren't your questions, that would be a shame.

Hey, did anyone consider that knowingly NOT applying tracking labels to your products after August 13 in violation of the statute is a possibly felony (Section 217(c))? That a failure to place tracking labels on your products in accordance with the new law and new guidance is IMMEDIATELY reportable under Section 15(b) of the CPSIA (24 hours, guys)? And that knowingly failing to report is ALSO a possible felony? [It's another "intentional" violation of the statute.] Of course, a felony charge would get your attention. Hey, business owners or business managers reading this blog, don't forget about the asset forfeiture provision in the CPSIA (Section 217(d)) - that comes into play for all the felonies you are probably racking up! Better get a lawyer lickety-split. [Good news - there may be room in Mr. Madoff's cell if you hurry. He probably won't make much trouble and may be interesting company, but keep your hand on your wallet to protect the $.40 an hour you will be earning making license plates!]

The cold detachment of the CPSC's guidance approval procedure, REGARDLESS of the wonders of the new guidance, leaves me speechless. Well, that's a lie, I am never speechless. Consider the betrayal in this initial handiwork of the Tenenbaum Commission. Here is a quote from her job application (her written testimony before the Senate Committee on Commerce, Science and Transportation on June 16): "I will ensure that the Commission is operated in an open, transparent, and collaborative way and in a manner worthy of the American people. . . . While emphasizing the life-saving mission of the Commission, I will also ensure that industry knows that their views will be heard and considered." Aha, so this is the new model of an "open, transparent and collaborative" process? Is this new procedure the way Ms. Tenenbaum plans to convince industry that "their views will be heard and considered"? Ms. Tenenbaum, we heard you in front of the Senate Committee - how can you justify this kind of leadership as Chairman of the CPSC?

It bears repeating that the tracking labels provision does NOT fix or even address a public health disaster - it is a made-up "crisis". There is no possible risk to life or limb from delaying the implementation of this provision - so why the apparent refusal of the Commission to do the right thing and admit that the CPSC has failed to give timely guidance? Needless to say, this is not OUR fault. With the recent invention of "enforcement discretion", the CPSC has a demonstrated ability to rewrite safety legislation. [It's unconstitutional, but who cares nowadays?] The CPSC has also been told by leaders in both Houses of Congress in no uncertain terms to use "common sense" in implementing the CPSIA, a tacit invitation to make all the problems go away. I do not see how the right response to these Congressional entreaties is to close the door on dialogue and shove this provision down the throats of struggling domestic industries. Why not push it off for a reasonable period of time and reinforce Ms. Tenenbaum's promise to be open to the ideas of industry?

The CPSC can do better. It knows how to protect the public without putting an end to commerce in this country. I hope they will exercise better and more caring judgment in the (near) future. There won't be any products to supervise if they manage to kill off all the companies.

CPSIA - Penalties (You Can't Say You Weren't Warned)

Cassandra that I am, I have been warning of many problems with the CPSIA for many months. It's a long list, I won't bore you. Among my bitter complaints are the CPSIA's wild penalty provisions and open-ended liability provisions. [Others have also written about the penalty provisions.] I have gone further and noted that since the law is so complex and overarching, the CPSC will be accumulating claims against everyone and will be able to pick and choose who to penalize, when and how. This process won't necessarily be fair or even-handed. The possibilities for coercion and abuse in assessing liability are rampant and obvious. At ICPHSO, Gib Mullan warned that penalties would be expanded significantly. Yeah, yeah, blah blah blah, right? Worrywart . . . .

Well, you decide. In recent days, the CPSC began to announce its penalty assessments for past lead-in-paint recalls. First, Mattel was forced to pay $2.3 million in penalties (95 items, 2 million units, @$1.15 per piece in penalties). [Of course, Mattel also previously paid millions of dollars in penalties to California and to a consortium of 39 States for the same recalls, but who's counting . . . .] Then OKK Trading was cited and paid a penalty of $665,000 (repeated violations over several years for several reasons). Earlier this week, the CPSC resumed its activities, citing nine companies ($530,000 in penalties, 13 recalls total). I understand there are more penalties in the hopper right now.

Here are a couple facts before we dive into the merits of these cases. First, did you know the CPSC has a FIVE YEAR WINDOW to impose penalties? Yessiree, that's the statute of limitations. It doesn't MATTER that they imposed a recall on you or even that the case is CLOSED. Nope, the penalty window remains open. Second, it's the Legal Department, not the Enforcement folks, who set the penalty numbers. My understanding about these last nine cases is that the penalty numbers were NOT negotiable, and if you protested, you were told that a mega investigation would ensue with subpoenas and a risk of referral to the Department of Justice (you know that that means). Of course, any idiot would realize that legal fees ALONE would eat up the proposed penalty in mere days if you were to choose to fight, and then you would still be left with a potentially yawning legal mess. In other words, the CPSC's deal is "Pay or else". That's due process under the CPSIA nowadays.

Before we overreact, let's see what these latest penalty assessments are all about. Perhaps there is a pattern here.

Cardinal Industries: One recall of a toy jewelry sold in vending machines, 900,000 units, penalty of $100,000 ($0.11 per unit). NO INJURIES.

Cardinal was turned in by a consumer. They were cited for a "knowing" violation of the CPSIA under Section 20(d) because they "failed to take adequate action to ensure" that their products were lead-free. [Congress' confusion, or worse, over the meaning and possible use of the term "knowingly" in Section 20(d) has been highlighted in this space previously. And ignored.]

Dollar General Corp.: Three recalls (1, 2 and 3), 494,000 units, penalty of $100,000 ($0.20 per unit). NO INJURIES.

Dollar General was turned in by the University of Ashland on one recall, and turned itself in on the other two recalls - as is required by law and by good corporate citizenship. Dollar General was cited for the same "knowing" failure under Section 20(d) for the same reason - "failed to . . . ensure". [Consider this quote from the Settlement Agreement: "Thus, Dollar General neither knew, nor should have known, of any potential problems with these products. However, as a result of industry changes and in an abundance of caution, Dollar General voluntarily commenced validation re-testing of toys to confirm initial test results. Dollar General tested hundreds of samples and, of those, discovered that two, the Sunglasses and Toy Cars, did not meet applicable standards. Dollar General notified the CPSC of the results and promptly initiated a voluntary recall of the items." Obviously, an excellent candidate for the CPSC to teach a lesson!]

Family Dollar Stores, Inc.: One recall, 142,000 units, penalty of $75,000 ($0.53/unit). NO INJURIES.

It's not clear from the Settlement Agreement how FDS's problem was discovered. Same "knowing" citation on the same grounds.

Hobby Lobby Stores, Inc.: Two recalls (1 and 2), 23,000 units, penalty of $50,000 ($2.17 per unit). NO INJURIES.

It's not clear how HLS's problems were discovered. Same "knowing" citation on same grounds.

First Learning Company, Ltd.: Two recalls (1 and 2), 24,400 units, penalty of $50,000 ($2.05 per unit). NO INJURIES.

The CPSC found one of the recalled items in a retail sweep. The means of discovery of the other problem is not clear. Same "knowing" justification.

Michaels Stores, Inc.: One recall, 310,000 units, penalty of $45,000 ($0.145 per unit). NO INJURIES.

Michaels was turned in by the University of Ashland. They were cited for the same "knowing" violation, same justification.

A&A Global Industries, Inc.: One recall of bracelets sold in vending machines, 4,000,000 units, penalty of $40,000 ($0.01 per unit). NO INJURIES.

A&A was turned in by a customer. They were cited for the same "knowing" violation, same justification. [From the Settlement Agreement: "A&A specifically denies that it failed to take adequate action to ensure that the Bracelets did not bear lead-containing paint exceeding the permissible limits set forth in the Ban. A&A's compliance program, at the time of the subject recall met or exceeded industry standards for ensuring compliance with the permissible lead limits set forth in the Ban. Likewise, A&A asserts that it acted responsibly and reasonably to respond to the Commission's concern regarding the Bracelets, including its prompt and voluntary implementation of a successful product recall of the Bracelets in cooperation with the Commission."]

Raymond Geddes & Co.: One recall of a pencil pouch with lead paint on the zipper pull, 84,000 units, penalty of $40,000 ($0.48 per unit). NO INJURIES.

RG may have turned itself in (not entirely clear). Same "knowing" citation, same justification.

Downeast Concepts Inc.: One recall, 18,000 units, penalty of $30,000 ($1.67 per unit). NO INJURIES.

DCI self-reported this problem as required by law and by good corporate citizenship. Same "knowing" violation, same justification.

Every one of the companies denied the "knowing" violation, for whatever good that did them. Not ONE of these companies was hit with the minimum penalty (that is, the lowest penalty above refraining from imposing any penalty), even the ones who turned themselves in or the one with a dab of paint on a pouch's zipper pull.

To me, these cases seem like "ordinary" breaches of the L-I-P ban. There is no indication from the publicly available facts that these are "bad" companies or that any of the cases show a pattern of abuse or disregard of the law. Several of these companies clearly were actively trying to make amends for their own errors. The penalties do not seem to correlate to corporate behavior nor do they suggest a formula for determining penalties. The amounts seems random and capricious to me. As noted above, the companies were effectively denied the right to negotiate a penalty on any basis (such as presenting mitigating factors).

It appears that the philosophy of these penalties is one of absolute liability (you are liable for a penalty if you violate the L-I-P ban, regardless of reason or circumstance). This is an an entirely new way for the CPSC to administer this law (and excessive, unrealistic and unfair in my opinion). It also seems clear that mitigation for acting promptly and cooperatively or for the absence of injury is no longer relevant in the determination of these penalties. NONE of these cases involved injuries or death. As I have previously noted on several occasions, only ONE recall for L-I-P in 2007-8 resulted in an injury (one injury only) and NO deaths. The good faith cooperation of several of these companies is described in their Settlement Agreements.

Can you begin to connect the dots here?

In my comment letter on the CPSIA penalty provisions (linked above), I opened with this suggestion: "We strongly urge the CPSC to reserve the imposition of penalties for only the most egregious and dangerous situations. Penalties under the CPSIA should NOT be to punish but instead to motivate better legal compliance. This is consistent with the mission of the CPSC - to protect the public. Notably, the CPSC does not have a mission to mete out 'justice' so the use of penalties should be purposeful and not motivated by retribution. . . . We are fearful that the power to impose high penalties will be used coercively by the CPSC, ending any notions that law-abiding companies can work openly and in partnership with the CPSC. At present, the CPSC encourages a practice of 'when in doubt, file'. In a regulatory environment where minimum penalties are $100,000, how many companies will take up the CPSC's suggestion to file 'when in doubt'? " This letter was submitted to the CPSC on December 17, 2008.

Now we know where the CPSC stands on my advice.

Near the end of my comment letter, I made the following observation: "All in all, the CPSC must be very careful to not create a menu of 'gotcha' penalties. The CPSC's penalty policy or rules will be part of the 'game play' between the regulators and the regulated companies. If the rules encourage cooperation, the CPSC has a chance to partner with industry to improve safety. If industry believes that penalties are viewed as a revenue source or are being handed out in a way disproportionate to the infraction, then interplay between industry and the CPSC will change for the worse. If the penalties are too great, companies will exit the business (find something less regulated to do) or start hiding infractions as a survival technique. This outcome would not contribute to the safety of American children, and must be carefully considered in crafting the CPSC's penalty policies."

The dark clouds are gathering, guys. I am not sure how much more evidence is needed to prove that the cards are stacked against industry under the CPSIA - notions of "common sense", fairness or equity seem to have no place in a CPSIA world. If you think this is a great development for your business or your market, then rub your hands in glee - you are getting your wish. If you think the CPSC is going to too far or the rules empower the agency too broadly, I think you may want DO SOMETHING ABOUT IT. The few of us engaged in pushing back on this law CAN'T DO IT OURSELVES - we need your help. Get out there. Before you get whacked by a vengeful government . . . .

CPSIA - The Significance of the ATV Exemption Decision

As you may know by now, the CPSC as anticipated denied the ATV Exemption request on Friday on the grounds that the law does not permit exemption of ATVs from the noxious CPSIA. On this point, both Commissioners agree. The Commissioners voted 2-0 to extend a retroactive and permanent enforcement ban on ATVs made on or before May 1, 2011, thus permitting the continued manufacture and sale of child-sized ATVs for at least two more years, and directed their staff to prepare an official enforcement ban for publication in the Federal Register. What does this all signify?

1. The Continuing Issuance of Stays is an Acknowledgement of the Flaws in the CPSIA. This is essentially the third stay of the CPSIA, and perhaps not the last. [Look for a stay of the tracking labels requirement as chaos is again building in the marketplace.] Having stayed the testing and certification requirements for a year, and deferred enforcement of the law against certain products and materials previously, the Commissioners have again put the law on hold. Why would "landmark" legislation need to be stayed again and again, and may need to be stayed some more? Let me suggest an obvious reason - the law makes no sense and the CPSC cannot make it make sense. Not only does the CPSC recognize that the law is toxic to commerce, which is not the desired purpose of well-crafted safety legislation, but it is also turning many safe and valued products into endangered species. As the Commissioners note, the law is so restrictive that a stay is the only means they have available to avoid the most terrible consequences of this overreaching law.

PLEASE NOTE the absence of howls of protests from Congressional "leaders" and consumer groups over the gutting of the retroactive feature of the CPSIA for the benefit of the ATV'rs. I thought these luminaries told us the standards were intended by Congress to be retroactive and that (evil) American industry had enough time to get the old product off the shelf. If so, why aren't our Mother Protectors screaming about the terrible CPSC Commission selectively letting the ATV industry off the hook??? That darned Nancy Nord again . . . oh yeah, it was Thomas Moore, too. Perhaps the screamers' principles aren't quite so rock hard, and retroactive effect of the lead and phthalate standards weren't actually essential to preserve our way of life after all. Hmmm. Senators???

What does that say about the law itself?

2. The CPSIA Puts the CPSC in Gridlock (not Nancy Nord). The Commissioners continue to struggle with the straitjacket imposed by Congress. In the case of the ATV Exemption request, the staff indicated that the law compelled them to deny the application despite absurdly low lead intake from ATVs (far below daily lead intake from food, water and breathing, ah but details like this are the hobgoblin of the small mind . . .). Likewise, BOTH Commissioners came to the same conclusion. Nancy Nord: "It is clear that the law does not give the Commission the flexibility to grant an exclusion for the petitioners' products." Thomas Moore: "Given the extremely restrictive language of the law, the only avenue I can see is for the Commission to establish an enforcement plan that follows, to the greatest extent possible, the Act's intention for future production. . . ." The Commissioners are stuck and make no bones about it.

Okay, so no exemptions are possible. [Senators, there's some "common sense" for you.] How about the future? Can manufacturers ever find a way to wriggle out of the ridiculous restrictions or will the entire Children's Products industry be slave to these inflexible restrictions going forward? Ummm, we're slaves. The enforcement stay proposed by the Commissioners after considerable delay to study their legal options states that the standard for relief in the future will be "technical feasibility". This sounds like a logical standard, something that reasonable people exercising "common sense" could administer capably, right? I don't know how to tell you this [Senators] but . . . no, not right.

The term "technological feasibility" is defined in Section 101(d) of the CPSIA specifically to tie the hands of the CPSC. Among other things, no consideration of economics is allowed. Notably, something is considered technologically feasible if "a product that complies with the limit is commercially available in the product category . . . or . . . alternative practices, best practices, or other operational changes would allow the manufacturer to comply with the limit." In other words, if Rolex can do it, Timex MUST do it. Mr. Moore, whose enthusiasm for this law seems to approach the pathological, gloats: "The evidence considered is strictly limited to technological feasibility, not on the higher cost of a viable substitute. The guiding principle of this agency's determinations has to be the safety of the children . . . ." Notwithstanding the non sequitur of Mr. Moore's second sentence, his statement is a clear admission that the CPSC has no way to exercise that famous "common sense" recommended by Senator Pryor and his flock.

3. The Notion that a New Chairman Would Impact Outcomes Has Been Exposed as Nonsense. This is the 24th consecutive CPSIA decision of the two person CPSC Commission which has been decided 2-0. There are NO examples of 1-1 votes on the CPSIA. The two Commissioners read the law EXACTLY the same. My heavens, if the Commissioners under this kind of pressure read the law as similarly as they do, is it POSSIBLE that they read the law correctly and are working in concert, exercising similar sound if constrained judgment and in fact, are doing their jobs responsibly? The new Chairman is supposed to clean this up by instituting a new policy at the CPSC to . . . what? Break the law? The demand for a new Chairman to "resolve" the issues under the CPSIA insults the public's intelligence. The Members of Congress and consumer groups that stand in line to bash Nancy Nord and blame her for these decisions and the direction of the agency shame themselves with their mischaracterization of the facts.

4. Fairness and Equity in Safety Regulation or Application of Rules across Industry Lines is Another Casualty of the CPSIA. I am happy for the ATV'rs that they got a break on the unfair retroactive application of the lead standards to their products and inventory. Our suffering need not be their suffering. It is worth noting, however, that they are not alone in their need for relief from the retroactive impact of the law or its harsh disruption of their marketplace. The rippling impact of this law on many industry groups has been well-documented. At a minimum, I simply cannot understand how the CPSC could justify giving a PERMANENT pass on retroactive effect for ATVs through May 1, 2011, but not do the same for all other industries affected by this law. This is shocking, irresponsible, oblivious, unfair and unkind. Had Congress or the CPSC actually given a two-year pass to everyone on retroactivity (preferably several months ago), the transition time alone would have cured many ills, including the need to sort out how to administer the new rules. Likewise, a big chunk of the problem for resellers of used or donated goods would be resolved or at least tabled for further study. Instead, justice will apparently be meted out slowly and unevenly, and will be governed by economics. You can safely anticipate that there will be justice for the rich only. Only rich industries or companies will be able to afford to mount the multi-million dollar effort to appeal for these exemptions. Crafters, for instance, will be sacrificed unless a Sugar Daddy saves them. Don't count on it.

5. The Future of Safety Regulation is Bureaucracy and Complexity without Benefit. The decision in the ATV case makes it clear that unless the law is changed, regulation of safety in children's products will be by exception only. Having mandated that regulating by risk assessment is no longer permitted, Congress' great new scheme is to make everything illegal unless the Commission decides it isn't illegal. It will be years, if not forever, before a coherent, settled law emerges. In the meantime, we will live in the grey zone.

As I have written in the past, there will be significant costs to a regulatory system based on exceptions. For one thing, it will be exceptionally difficult to clearly understand the rules if you must first find and understand all the exceptions. While this might sound achievable, it is not. Neither the law nor its exceptions are clear or entirely black-and-white. Case law or a body of other regulatory decisions will slowly and expensively clarify the law - provided you can find, understand and utilize those decisions. And. . . the body of decisions may not (likely will not) set out the answers applicable to you. It is typically clear as mud.

What will life under this kind of legal system look like?

• You will need to hire counsel. You will not feel comfortable making the legal analysis yourself. You will also become accustomed to weighing legal risks in the normal, everyday conduct of your business.
• Easy things will become hard. There will be a need for vast paperwork that does not contribute to the development of your business or the satisfaction of your customers.
• Your costs will rise to cover the bureaucracy. This will not make your products more valuable or raise the price you will receive for them in the market.
• Increasingly, your focus will be on paper, not building your business. Regulatory paper will become the medium of trade and owing to the blizzard of paper will lose its meaning. Your business processes will feel Dickensian. [Ah consumer groups, thank you so much for all you are doing to make America great!]
• You will learn to fear the CPSC and State regulators in your bones for the randomness and pettiness of their rule administration. Rules, NOT common sense, will dominate in a world of forbidden risk assessment, and random seizure of your profits (through fines and technically-driven recalls) will become commonplace. If this sounds apocalyptic, talk to anyone who has dealt with Customs. Get used to it.

6. Small Business is the CPSIA's Sacrificial Lamb. Who survives in a world defined by the ATV decision? This decision makes clear that a serious and expensive legal campaign is required to get permission to sell known safe products that give off about as much lead as four cups of water from your kitchen tap. [You know, the water you feed to your children and grandchildren, and drink yourself.] This is unaffordable and well-beyond the capabilities of 99% of all regulated companies and is thus a closed door (effectively) for small business. We have seen a recent letter by Senator Durbin's staff practically clucking at the nobility of sacrificing small business to the need for pre-market testing. As an Illinois resident, I find this indescribably infuriating. I understand the importance of small business to the marketplace and to local communities. I work at a small business and fear what will happen to us if this law is not gutted quickly. If we really must accommodate these rules, our business will become unrecognizable. That would be a very sad day for me, for our associates, for our marketplace and for our valued customers.

7. The CPSC Has Been Neutered as a Regulator. Ms. Nord sums it up in her April 17 letter: "I hope the state attorneys general will follow our lead in [the enforcement ban on ATVs.]" I hope so, too. That being said, in an orderly legal system, there is one policymaker, one decision-maker. The U.S. Supreme Court doesn't close all of its decisions by saying "We sure hope the Supreme Courts of California, Arizona and the other 48 States will follow our lead on this one." In our business, we say "Hope is not a strategy." Uh-oh.

The CPSC knows it has been cuckolded by the law since it is now subject to oversight by 50 SAGs. If you get yourself a nice two-year enforcement stay from the CPSC, are you going to take a chance to continue to sell your products when Lisa Madigan (SAG-IL) or Edmund Brown (SAG-CA) or others might choose to read the law differently than the CPSC? Does the Federal stay actually mean ANYTHING? According to my 15-year-old daughter, who has more common sense than at least 28 Senators I can name, the answer is NO. And, yes, these SAGs are not above telling the CPSC that they read the CPSIA wrong (see my recent blogpost on this topic). There is no longer a law of the land.

Final Thoughts. With the ATV decision in the books, we now must wait for the enforcement stay to be written up and published. Don't expect any surprises as the Commissioners have published their expectations already (again, one list from the 2-0 Commission vote). Will other industries raise their voices in protest? Questionable, in my opinion. If the past few months has not been enough to get people over their (irrational and misplaced) animal fears, I don't know how the current situation will add much motivation. There aren't enough motivated and persistent protestors out there, and frankly, it's understandable. The economy's still a wreck so everyone needs sales, not new hobbies. Advantage, lead fear mongers.

Time will tell. I hope some of you will answer the call.

Rick

Calcification!

Right now, I am cleansing my mind by attending a business class. So, while Rome burns, I am not fiddling but I am trying to think "Big Thoughts". Yesterday, we discussed a car company with a big customer service problem (hmmm). In particular, they had several customers who were very angry over car quality problems - what should the car company do? Well, the car company wasn't too motivated about helping these customers because (a) the customers were deemed whiny and "professional complainers", and (b) the car company's Customer Service folks were very focused on how hard they worked to provide service and their implementation of a wonderful "Red Carpet" warranty program and generally preferred to talk about how well-intentioned they were. Our instructor informed us that most companies tend to assign negative attributes to people who complain (e.g., "whiny") rather than deal with the substance of the issue, and that 75% of all companies eventually "calcify" against their customers. What a terrible statistic, and even worse, what a terrible result! It gave me a lot to think about, as we pride ourselves on our strong relations with dealers and our consumers.

But it also made me think about the CPSIA and our evolving relationship with Congress. Has Congress calcified against us? Are they no better at listening than the hypothetical car company? It's an interesting question, isn't it? Having reflected on this question, I say the answer is no - and yes. In fact, your screams have been heard, and Congress is acting. The people who are listening and acting, however, are your representatives. These are the people who have no "skin in the game", the ones who are Government by the People and For the People. Their job is to listen to you and to help you when you need it most.

However, not everyone is listening, and there are strong signs of calcification in Congress toward us in some critical quarters. The authors of the bill, as evidenced by the January 16th letter to the CPSC, seem to be deaf to our arguments and pleas. The data and other information you brought forward have only elicited a letter insisting that the law be conservatively and rigidly implemented as written. The January 16 letter indicates an unwillingness to compromise and appears to be an attempt to prop up (justify) the CPSIA rather than acknowledge its defects. As we know from observing American car companies, this strategy can have tragic consequences. . . .

The moral of the story has yet to be written. If Congress remains self-satisfied and unwilling to contemplate its errors, if they refuse to surface their problems and instead focus on justifying their processes and their defective law, the results are predictable and inevitable. The House and Senate leadership need to wake up to the reality of this law. Safety can be achieved through more rational, less penal means. They need to figure this out before it's too late. It's time to hit the "pause button" to allow for this work to be completed.

Finally, on this Inaugural Day, I want to close with thoughts of forgiveness and renewal. These are important words for those of us opposing the CPSIA. With a new administration in place, regardless of the politics, we can move for a fresh start to appropriate legislation on safety. The past need not govern our future in children's product safety anymore than other policies of the prior Administration. It's time for a fresh start!

Rick