CPSIA - Washington Times Lashes Out at Database

In an editorial in today's Washington Times, the paper railed against the CPSIA database. Says the Washington Times:

"The Republican-led House of Representatives is fighting back against big-money plaintiffs’ attorneys who use campaign cash to control congressional Democrats. . . . [The database is] an open invitation for competitors or interest groups to destroy a product’s reputation - and sales - without proof. It’s also a major come-on to trial lawyers eager to file class-action suits. Attorneys could tell juries that publication on an official government website is evidence that allegations have weight."

Perhaps the Washington Times should talk to Cheryl Falvey. She'd tell them not to worry, it's just a "complaints" database . . . but that's the rub, isn't it?

The paper carries on: "Previous bogus consumer scares . . . show the dangers of letting unsubstantiated allegations gain premature credibility. The CPSC database would add to the mischief trial lawyers could cause with spurious lawsuits."

The big question is - will the Dems abandon their plaintiff lawyer patrons when faced with the LEGITIMATE CONCERNS of industry - or will they sell American business down the river and kill yet more jobs with a further expansion of the government's reach into our lives?

Please write your Senators and demand their support to de-fund the database!

CPSIA - ICPHSO Update on the Database

Cheryl Falvey announced at the beginning of this overtime Q&A session that she wants to have a civilized discussion of the problems of the database, because they want to solve problems. That said, she said she'd cut it short if it turns into a gripe session about the database "because I know you hate the database".

Nice, at least the General Counsel of the CPSC has an open mind! This reminds me of her aggressive and utterly unsympathetic suggestion at the November 2008 CPSC Lead Panel that we should all have a big "yard sale" of products that exceed the lead standard. Gave me a warm feeling then, gives me a warm feeling now.

I will try to craft some questions that she will find acceptable.

CF: Need to have your licensees register as part of the database. Licensors can also be listed as a "viewer" under the DB. They may not want that, because there could be liability issues.

[RW: Hmmm, I thought this database was all about empowering consumers. Liability? Empowering consumers to do WHAT?]

CF: More details given to licensors [aimed at Disney, who must have raised this question offline] plus some legal advice on how they should structure their licensing agreements "right now".

CF: It's a "complaint" database, not a "causation" database. [RW: This makes NO sense based on the stories they all tell about why they want the database implemented, especially the fantastic story told by Inez Tenenbaum in her keynote speech. She says she feels good when someone removes a product from use while the CPSC is working on a recall. This is CLEARLY all about making a JUDGMENT on the products - in other words, CAUSATION. It's a tall tale to contend that the general public will understand that this is a complaint database. Consume groups promote the database as a warehouse of the truth, not just a "blog". Cheryl Falvey is spinning yarns to justify her work on the database.]

CF: You are raising policy questions and this meeting is not about policy. We were dealt this hand and were told by the Commission to get the database up and running. If you disagree with the policy, you need to take it to the Hill. I am going to take other questions now.

[RW: So we cannot complain about the consequences of CPSC action on the database because they're just doing their job. We must hold them harmless and "get used to it". This is an old argument used by Falvey in past speeches - don't be in denial, it's coming, get used to it, take it on board. My question for you - do you like being treated this way? I don't.]

Q: We have been the victim of fraud where people submit pictures of "injury" pulled from the Internet. We also don't get enough data from you, may not have consumer's contact information and don't have the time or resources to properly research or resolve these accusations before the ten days are up. At that point, the damage is irreversible. What can we do to protect ourselves?

A: We have not had bad experiences in the "soft launch". We don't want you to be hurt, you should "raise" these issues. [Didn't she say this morning that they received so many photos that they had to get new servers? No problelms . . . .]

[RW: Fingers-in-ears. This does not correspond to the rules, Cheryl, and you didn't answer the question. The question notes that there won't be enough time or information to verify or sort out the claim before it's published. Why are you deaf to this? You know that your publication of this data CANNOT be remedied. Oh yeah, you are just doing your job.]

Q: Why can't you just test this system with people who have already registered and learn about the issues from this experience?

A: Your idea is a "great idea" and we will see if we can run with it.

[RW: Don't hold your breath.]

CF: We really want to talk about the brand and license issue!

Q: What will happen to me if an injury report blaming me for an exploding battery is actually counterfeit?

A: The interest is in protecting the public, that's the policy issue. The disclaimer seems to mean a lot to Cheryl, cures all these ills. She poses the question of whether bulking up the disclaimer.

[RW: The answer to all of these question boils down to the fact that manufacturers have no due process rights because their rights are deemed inferior to consumers. This is a policy decision, too, and is NOT part of the law. It's the philosophy of the CPSC these days, and is political in nature. Using Falvey to announce the policy makes it look more like a legal judgment, however. Falvey has not explained HOW due process rights guaranteed by the Constitution have been removed for U.S. corporations under the CPSIA.]

CF: Can't put off the March 11th implementation of the database.

[RW: Recall my remark about an open mind. This isn't a gripe session, this is a venting session hosted by Cheryl Falvey. She has no interest in making any changes - consumer groups get their way. Mike Pompeo's amendment better become law. The CPSC will do NOTING to address known defects in the database. As Falvey says, these are "policy" issues, outside her job spec.]

Q: Can manufacturers reply or comment privately?

A: Nope, if you comment, the comments need to be published. Only the confidential parts of the comment won't be posted. [RW: This is so unbelievably one-sided. It's victory for the left wing. They put their people in charge and let them run amok.]

Q: We share brands with other companies (think of celebrity brands). How will you handle notification tied to such brands on multiple products?

A: The tracking labels would really solve all of these problems! We need to be able to send the notice to somebody. We understand the gap and are working to make the system better. We have a lot of brand information already.

Q: We traditionally get written notices that identify us as a manufacturer of a halogen table lamp. We make 20 halogen table lamps. What will happen under the database?

A: You'll get the notice and if you can't give us information on the product, one of us will have to call the customer. In any event, the data will go up on the database.

[RW: This is a classic problem illustrating how manufacturers will be unable to verify information or contest information before it's posted. As Falvey demonstrates, CPSC policy is that this is the manufacturer's problem. This is a travesty. Ironically, the issue was subtle enough that the questioner (a large company) could not see that he is prevented from identifying the product - even to verify that he made it - but will be labeled the source of a product "incident". And Falvey says that a claim this lame will still make the cut to be published. Is that true? I wonder about that. If it doesn't make the cut, then Falvey can't match the rules to a scenario accurately. One way or another, it's a screwing. Thanks, CPSC!]

Q: If Li & Fung registers and gives my name as importer of record, who gets the notice?

A: We will go off the consumer complaint. Whoever is named will get the complaint. If they are registered, they will get it by email. If they are not, they get it snail mail. It's still going up in ten days.

[RW: It's worth recalling that I testified at the original database hearing. As was the case in three of my five appearances at the CPSC, it was at the CPSC's request. I gave a very detailed dissection of the database, and distinctly recall being cut off by the Commission for going past ten minutes. They asked me to give comments, fly out at my own expense, and then cut me off. This abysmal attempt at public policy is the result. Screwing from square one.]

What a nauseating way to finish out such a lovely day.

CPSIA - Last Ditch and Pointless Comments on Public Database

The CPSC Commission will be voting on a final rule governing the new public database for product safety complaints on Wednesday. The final rule tips the scales at 248 pages.

I know I am a public utility. . . but it's confession time - I didn't read it. I know what's in there and the Powers-That-Be don't care what I think anyhow.

Commissioners Nord and Northup have published their own alternate rule. It must be worse than the CPSC's proposed final rule because it's much shorter, only 27 pages long. I read the Nord/Northup rule - they asked for comments and I believe they will actually listen. It won't matter because the Commission now votes on party lines, so our comments are irrelevant. The Dems already know what they intend to do. Adler, Tenenbaum and the out-of-office Moore vote as a pack and do as they collectively please. Perhaps this time they won't even bother to make a pretense of listening to Nord or Northup. I picture the meeting going quickly as the Dems all put on their iPods and ear buds while Nord and Northup have their say. Might as well bop to iTunes, Commissioner communication is at a standstill anyhow.

Relax and enjoy it, kids! You'll love it. What could possibly go wrong???

Before I tell you all the reasons why I detest the public database, I want to give you my comments on the Nord/Northup draft:

1. I greatly appreciate the effort and the gesture. They didn't have to do this, and made a game effort to help out. Their rule has as much of a future as the 2010 Cubs but nonetheless, I admire their commitment to their job responsibilities and to the market the CPSC regulates. Nord and Northup recognize the many risks implicit in the database idea and attempt to fix as much as they can within the context of the deeply-flawed CPSIA, the law of the land. Thank you for trying.
2. The proposal commendably attempts to limit who can post in the database by narrowly interpreting the CPSIA. This is an appropriate regulatory agency response to an excessive law, something a well-run federal agency would do to keep the trains moving on time. Naturally, the agency has not opted for that courageous route over the past two years.
3. Much of the proposed rule involves what can be disclosed, how to protest inaccurate information and the disclosure of confidential information. It is highly technical - your eyes will glaze over. It's all necessary to make the best of a bad situation.

The basic concept of the database is that the government must set up coercive rules to make "bad" companies do the right thing. Apparently, the geniuses behind the database assumed that we cartoonish corporate bad guys would never exercise good judgment without the pressure of the public database. Many steps backward resulted. For instance, the Nord/Northup proposal says that manufacturers will not be provided the name or contact information of the submitter of the complaint or the injured party. We also won't receive photographs of the injury. And this is for what purpose? Apparently by withholding this information, the CPSC enhances the ability of manufacturers to do their job. I believe this is a reversal of current practice.

There are many consumer "advocates" out there who are telling misleading stories about the database. A good example is "Wallet Pop" who provided an update on the database on November 12th. Here's how he portrays the situation:

a. "Trying to keep your family safe from dangerous products is extraordinarily challenging."

RW - Is that really true? What is the evidence that we are all "in danger"? This is not an exaggeration - this is a LIE.

b. "As much energy as the U.S. Consumer Product Safety Commission spends trying to alert consumers to hazardous products, an alarming amount of the information it possesses is kept secret."

RW - Enforcement investigations and enforcements themselves are very closely associated with litigation. Confidentiality is absolutely ESSENTIAL for any semblance of due process, a Constitutionally-guaranteed right, even for corporations. The Rule of Law protects us all, even if we must tolerate some sacrifices, such as the sanctity of confidential investigations.

That DARNED Constitution, so inconvenient.

c. "Releasing all this information is a frightening and annoying prospect to many companies, who fear tarnished reputations."

RW - There's a lot more to fear in the database than just tarnished reputations. Let's not overlook that the Internet exists. We manufacturers live in a world where the consumer is KING - our reputations are on the line every day already. There are already many websites ready and willing to let you bash away at us, as long as you let them sell ads. So it MUST be something more than "tarnished reputations" that is causing all that fear. Could it be . . . heightened litigation and liability risk???

d. "Nancy Nord and Anne Northup want further restrictions on such things as whose reports can be included in the database (no lawyers acting on a victim's behalf, thank you) . . . . Traditionally, Nord and Northup are on the losing side of 3-2 votes, but they're not going down quietly."

RW - Safety is now PARTISAN at the CPSC. In other words, in their spin machine, Democrats CARE deeply about kids and Republicans are heartless money-grubbers. These days the caring Dems run the show and money-grubbers are always outvoted.

I know you like a good story at bedtime! Bad Republicans, good Democrats. Sweet dreams.

e. "Companies will still make huge profits after this database is made public. Is it wrong for a handful of large and powerful corporations to perhaps take complaints a bit more seriously when they come in instead of choosing to dismiss them until hundreds are hurt or innocent children lose their lives?" [Emphasis added]

RW - The CLASSIC mischaracterization of our market that it's all about big companies. This guy has Mattel and Graco on the mind. The irony is that the mass market companies could care less. The ones who will be CRUSHED are the small businesses. Let's not forget that Mattel gets to test its own products - and when it LATER had a recall of 11 million units of its merchandise, no one asked any questions about testing. The rules are hardly even a blip to those guys. The cost to Mattel from that massive recall: ONE PENNY PER SHARE. The database is just another sidelight for them. The story is rather different for small businesses, however.

Not that the CPSC cares . . . .

So why do I hate the database?

1. There is a big difference between restaurant reviews and "United Breaks Guitars", and product liability. The database is all about litigation and liability risk. Reputational reviews are about goodwill, but the database has to do with systemic risk for our businesses. It is a pro-plaintiff distortion in an already out-of-control tort system. Fundamentally, reputation is about consumer as king. Liability is about bloodsucking lawyers as king. This database is not designed to inform consumers well - the information is not certified. So why have a garbage in-garbage out database. It's intended to foster more vexatious litigation. Read the WalletPop article again - it's clear that the database is intended to be coercive. How do you suppose it will be coercive?

2. The government has no business lending a hand to tort lawyers. The tort system which provides the "little guy" with a way to seek redress functions just fine. The New York Times just published a study on hedge fund investing in tort lawsuits. Must be quite the cash cow if those guys are getting into it. The database gives them a new target - you. Why is it appropriate for the CPSC to oversee the disbursement of this information?

Do you think this will raise our standard of living? Create jobs? Increase capital available for investment?

It is worth noting that the database will create an expansion of the role of government in our markets. This is classic government bureaucratic creep where the government attempts to compete with the open market. Yes, there is that Internet thing. All those new tedious jobs, those eyes-glaze-over procedures must be administered by freshly-minted bureaucrats. The database must be built and maintained on government servers. Decisions will need to be made, filings and "transmittals" processed, deadlines watched, complaints followed up. This is PURE overhead. [And there is also the even larger devotion of resources that will need to be deployed by manufacturers.] Read the rules and ask yourself - will the world be better with all the new rules? With this expansion of our government? Isn't this what you read about in the papers every day?

I am so, so sick of it. When will it end?

3. There is no economic justification for the excessive risk that the government is forcing on the market. The children's market has not been killing or maiming kids in large numbers. Let's not forget that we are a country of 300 million and it is not a utopia - some injuries will happen. [My apologies, I don't mean to burst your bubble.] Far more kids are killed or maimed in swimming pools than in any other children's product activity. Apparently those kinds of deaths and injuries are not as troubling as other kinds of childhood deaths and injuries - there is no database on swimming pools.

4. The database is definitely subject to manipulation by competitors and other agents of corporate extortion and destruction (like bloodsucking lawyers). That is, under the proposal that Tenenbaum and Co. will pass when they take off their ear buds on Wednesday. For myself, I am particularly apprehensive about the stress that the database will place on our company. We will get notice in five days and have ten days to reply. Since the agency is going to launch a publicity campaign to convince the public to report every nit in the database, I expect MANY such postings. Now every broken toy will be a potential liability for our company, and trivial incidents will become our top priority. Forget about growing our business - it's catering to the exigencies of the database that will matter. Still, I cannot imagine making the database the centerpiece of my business life. I also don't know how we are supposed to answer a lawyer who asks how we monitor this database if we ignore it. Damned if you do and damned if don't.

Not that the CPSC cares.

I can hear the advocates now - "This is what we want companies to do. They need to be 'responsible' and pay attention to their products and their customers." Well, that presumes that we weren't doing that already. In any event, we choose what we do every day. If you make us miserable enough, we'll get out of this market fast. And that's what the CPSC seems committed to do.

I think the database will quickly supplant the old way of finding out that there was a problem with our products - namely that our customers would call or write us. So they will place this information anonymously in a database and we will not be able to interview them or see their product. This puts us more in the dark and makes our job much harder. Or impossible. Brave new world . . . .

The whole subject depresses me. Be prepared for more fireworks and then the expected outcome on Wednesday. Our opinions will not sway the Majority (remember, Adler told us that anecdotes aren't evidence, so they are free to ignore us and our amusing anecdotes).

And after this ugly business is concluded, you know what's next . . . the 15 Month Rule. Then we're goners, once and for all. Eric Cantor, where are you???

CPSIA - More Analysis of Damaging Foreign Mfr Accountability Legislation

One additional point about the design of the extremely ill-conceived Foreign Manufacturers Legal Accountability Act of 2010: the "minimum amount" hurdle that triggers the requirement to register for service of process is NOT set by the law. The different agencies have to set it for the products they regulate.

The draft legislation provides the following mechanism for establishing this limit:

"(4) APPLICABILITY — (A) IN GENERAL.—Paragraph (1) applies only with respect to a foreign manufacturer or producer that exceeds minimum requirements established by the head of the applicable agency under this section. (B) FACTORS.—In determining the minimum requirements for application of paragraph (1) to a foreign manufacturer or producer, the head of the applicable agency shall, at a minimum, consider the following: (i) The value of all covered products imported from the manufacturer or producer in a calendar year. (ii) The quantity of all covered products imported from the manufacturer or producer in a calendar year. (iii) The frequency of importation from the manufacturer or producer in a calendar year."

So for those of us suffering under the CPSIA, this legislation tenders some discretion to the CPSC on how penal this provision will be. Interesting, isn't it, that Congress will allow the CPSC to set this threshold without oversight but won't let them assess the risk of pens, rhinestones, science kits or ATVs? Anyhow, given the current practice of the CPSC to apply strict liability standards to so many things, leading to recalls of (for instance) 40 inflatable toy baseball bats for violative phthalate levels (the one-and-only recall for phthalates in U.S. history) and the pending "15 Month Rule" which creates an unbearably expensive and risk-averse scheme of safety compliance, I presume that the CPSC will set these thresholds very low. After all, how else can American consumers sleep well at night???

And consider how this rule might be applied. To determine whether you are above or below the threshold, you must disclose your revenues and volumes to the government for their scrutiny and approval. This is remarkably invasive and is reason enough for many factories to concentrate on sales to South America, Europe, Asia and the Middle East. Who needs this nonsense?

[And if registration is unavoidable, the registration process itself is also tedious and requires the disgorgement of lots of detailed information - which not only will discourage participation but also sets up the foreign manufacturers for liability to the government for "false" statements if they make errors. We have 1500 catalog items, so I can identify with the problems that this kind of requirement might create. It's nothing more than a bureaucratic set-up for regulators to accumulate causes of action to use as they see fit.]

If you think I am delusional or just tend to see the world darkly, please ask yourself - would YOU disclose ANY of this information to the government of Germany? China? Slovakia? Venezuela? Do you trust foreign governments? The confidentiality of their records? The likelihood that this information will not come back to bite you? Do you expect to get a fair shake in a foreign jurisdiction, particularly in a dispute with a local company? Do you think your suppliers will serve you better if you ask them to do this? Are you important enough to influence your suppliers or would they simply throw you overboard? What will this mean to your business - even if foreign governments refrain from retaliation (unlikely)?

This is yet more evidence of the shamefully low quality work of this Congress and its absolute ignorance of the real world. Think of the pending Waxman Amendment which posits that alternative testing methods can be used by small (micro) businesses to avoid certain testing requirements under the CPSIA. Of course, no such testing methods exist but that's just a trivial detail, right? Or the fact that in order to qualify for this "relief" under that legislation, each of these tiny businesses must disclose their financial records to Mother Government to confirm their eligibility for relief. Sounds REALLY workable, right? It does, if you have never worked for a company and have been closeted in the federal government for long enough.

Another sad, sorry low point for the worst Congress in history. Well, it's nice to be distinguished in SOME way, right???

CPSIA - Your Partner in Mischief, Congress

Never content to leave an economy merely in tatters, Henry Waxman and Bobby Rush jumped into action this week to create an international trade war, all in the name of "protecting" you. In fact, their troubling new legislation includes a sneak amendment of the CPSIA. It also takes an idea dropped from the CPSIA (submission to U.S. jurisdiction) and applies it across several new industries. Sounds promising, right?

Nominally introduced by Rep. Betty Sutton (D-OH), a wobbly Democrat said to need propping up in her faltering reelection campaign, the new bill (called "H.R.4678 -- Foreign Manufacturers Legal Accountability Act of 2010") is scheduled for mark-up tomorrow (in Rush's subcommittee. This innocuous and technical sounding bill is packed with trouble for you and for our country. In Sutton's blue collar industrial district, that kind of work is prized. Or so the Dems must think.

Here is the GovTrack version of the bill. In fact, I have obtained a more recent version of the bill, a "manager's mark-up" , which includes many new provisions. The revised version of the bill packs quite a punch, right to the gut. I discuss the newer version of the bill below.

The purpose of this bill is to make foreign manufacturers of finished goods and parts intended to be used as components in those finished goods register for service of process in this country. In other words, foreign manufacturers must register here so our plaintiff's bar and the government can sue them with ease. The new law prohibits trade with foreign manufacturers unless they are registered, and enlists the aid of the federal government's snarling dog, the U.S. Customs and Border Patrol, to enforce this law.

This means that every factory we use outside the U.S. will have to register for service of process in the U.S. if we want to continue to import our products from them. The law goes even FURTHER, asking that each agency involved to study ways to force manufacturers of components to register here, too. So, for example, if you make a toy in China and your factory buys boxes from a local printer who has NO contractual relationship with you, this law asks the agencies to study the feasibility of getting such box printers to register for service of process in this country. To accomplish that lofty goal, of course, you have to know their identity. Our customers do not know our vendors' names and we aren't telling. It's none of their business. Do you think it's any different for our factories relative to us? Will they ever disclose that information to our Mother Government (to them, a foreign government)? Please - would you disclose your sources to the Chinese government? And who pays the administrative and out-of-pocket costs of this exercise? And what about the consequences of the fear factor and the costs of new litigation on markets?

What-a-stimulus program! Naturally, those groups most linked to your future business health and ability to create jobs, the plaintiff's bar and consumer groups, think this legislation is long overdue!

The scope of this law covers the EPA, the CPSC, the FDA and NHTSA, and applies to drugs, cosmetics, medical devices, "biological products", consumer products, chemicals and chemical mixtures under TSCA (the coming storm), pesticides, motor vehicles or "motor vehicle equipment", plus components for the foregoing. That's pretty much everything and everyone.

Oh, by the way, the manager's mark-up adds a little provision that gives you five working days to inform the CPSC if you have "a safety recall or other safety campaign" in any country, whether initiated by the company or by the foreign government. Just thought they'd slip that one in, just in case you weren't watching!

So, who cares? Doesn't this "solve" the Chinese drywall problem? In fact, it's going to make things a lot worse. This is Major League trade war material. It is not entirely unlike Smoot-Hawley, the bill that precipitated the Depression. None of our factories will be willing to accept exposure to our ravenous tort system and out-of-control invasive government regulators as a condition of doing business with us. To most of them, this will be too risky and too hard to understand. Our suppliers are small businesses like us - they will NEVER have the resources or skills to master the minute details of our legal system and myriad risks and rules. It will also be breathtakingly expensive for them, and they run very low margin businesses with no ability to absorb those costs.

Even if some of our factories will take this risk, many will not. As with Smoot-Hawley's tariffs, this kind of rule will spur quick responses by foreign governments. If the U.S. wants the right to reach across borders and take the assets of foreign companies without a legal presence in this country, then foreign governments will extend the same "privilege" to U.S. companies selling products inside their borders. Won't that be nice?! Learning Resources sells its products in dozens of countries. Will we have to register in each country to continue to do so? Will we be exposed to lawsuits all over the world as a result? Will we have to pay to settle "strike suits" in dozens of new jurisdictions? If the answer is yes, I cannot imagine staying in business across borders.

The provision about foreign "safety campaigns" is intended to make sure that we don't miss a trick here. The Waxmanis want a worldwide recall system. Does ANYONE IN CONGRESS know what this will cost? Congress must want to terminate small businesses in our economy.

Rumor has it that Ways and Means wants to take this bill out of the hands of the Energy and Commerce Committee. Of course. Speaker Pelosi can skip that step if she wants. Ways and Means purportedly knows there are BIG problems here and I am assured the Republicans on that committee will fight to restrain this bill. Still, it is in keeping with recent House practice to pass something irresponsible and dangerous like this bill, relying on the Senate to stop it. It's a "message" bill, unless it somehow gets passed into law . . . . Then there's the rumor that the Dems intend to stick it into a moving bill, like a jobs bill, to make it impossible to stop. You know, because it's for our own good.

This is an example of how I learned to HATE Congress and Democrats. These rules descend on our business in suffocating waves, adding no value but creating major distractions and feeding fear. On the other hand, perhaps I will be eating crow when Obama's recently announced master plan to reduce the deficit by two-thirds in three years through increased spending, increased entitlements, increased taxes and increased regulation works like a charm. Maybe this law is part of the implementation of that great plan.

It must be me.

It must be me. . . right?

CPSIA - Tenenbaum/Adler Comments Revealed

A little birdie dropped off what are purportedly the comments of Chairman Inez Tenenbaum and Commissioner Bob Adler on the Waxman Amendment. This is one interesting document. First of all, it's quite secret (but not anymore). You can't find it on the CPSC website. Other members of the CPSC community haven't seen it and have been refused a copy. It also doesn't have Tenenbaum's or Adler's name on it so it has appropriate deniability. Oddly, it speaks in sentence fragments. Hmmm. In an era of greater "transparency", this secrecy is something of a shock. Perhaps the Prince of Darkness is at work here.

Among the "highlights":

• The comments recommend incorporation in the legislative report of the consumer group belief system assertion that there is no safe level of lead. If enacted, this change would enable, if not instruct, the Commission to reason from this "principle" and presumably ban many safe products. The hypocrisy of this position (or its obliviousness) in light of the permitted lead in our air, water and food is part and parcel of the CPSIA.
• The suggested report language clarifying the "no measurable adverse effect on public health and safety" will perpetuate the exemption morass confronting the Commission and regulated community. The comments state explicitly that anything that can be empirically measured will be impermissible, the exemption process will remain a hollow shell, a phantom provision. Why not just delete the exemption process and save everyone a lot of time, money and aggravation?
• Tenenbaum and Adler seem to miss the point that requiring a warning label for a product deemed safe is fatally inconsistent. Why warn for something determined to be safe in an exemption process? They ask for more discretion - to do what? What exactly is the risk here?
• The Commissioners note an openness to using a different term than "low volume manufacturer", such as "small batch manufacturer". This is apparently important to the HTA but seems to connote nothing of substance as both phrases are just terms or labels. I am stumped.
• The Commissioners basically go along with the definition of "low volume manufacturer". As if to dispel any notion that they favor relief for small business, they note simply that the $200,000 revenue limit should be restricted to manufacturing or importing revenue. The fact that this revenue level is both absurdly low and that the provision itself is designed to be useless to almost everyone did not garner comment from Tenenbaum and Adler.
• Their comment about the need to "assure" compliance by LVMs confirms my reading of the Waxman Amendment that it is NOT designed to change testing requirements on small companies - they must ALL "assure" compliance through a reasonable testing program. The "assurance" will require third party testing. Here is the comment offered by Tenenbaum and Adler: "At this time, CPSC staff believe that reasonable testing methodologies meeting this criterion could be developed for only a few of the CPSIA testing requirements and that third party testing will still be required in many instances. However, this provision could provide greater relief in the future as new technologies develop that the agency may be able to recognize as capable of ensuring compliance through reasonable testing methodologies." I guess LVMs can lump it . . . .
• The comments clarify that "imminently hazardous consumer products" incorporate the definition in Section 12 of the CPSA. Here is the definition from the CPSA: "[The] term ‘‘imminently hazardous consumer product’’ means a consumer product which presents imminent and unreasonable risk of death, serious illness, or severe personal injury." The comments simply remove any reference to "being made aware of" - perhaps to avoid the implication that the CPSC has to act before it has "identified" the risk, whatever that may mean. Remember, current law requires going to court - the new language merely requires that the agency "identify" the risk. That's quite a change - especially if you are on the receiving end. Think baby slings.

The comments by Tenenbaum and Adler did not comment on the perils of the "technical" provisions in the Waxman Amendment previously documented in this space. As I have noted, Rumorville has it that some or all of these changes appeared on a mysterious and secret document sent by Tenenbaum to the Hill with her 20 requests for changes to the CPSA and CPSIA. This secret document has not been revealed yet. It is therefore no surprise that her comments would endorse the approach of the Waxman Amendment (as in the foregoing tweaks). Perhaps Rumorville is right that these changes were made at her request or with her consent.

Consider the noxious changes to Section 6(b) of the CPSA - Tenenbaum and Adler apparently see nothing to comment on. Did you realize that the Waxman changes permit release of information based on a phone call? Say you make a Section 15 report, the CPSC does some interviews, creates internal documents, sends letters and emails back and forth to you - and a plaintiff's attorney calls for disclosure of these confidential exchanges and papers. The CPSC may simply ask how quickly the lawyer needs them. Did you also know that this release can be done without notice or even the knowledge of the parties affected by the information release? Did you know that the new language even permits the CPSC to release information it knows to be FALSE? Due process doesn't matter when you are protecting kids!

Can you believe that Tenenbaum and Adler had no comments on this terrible provision?

Or, how about the problems associated with damage to physical evidence subpoenaed by the CPSC which are also the subject of a civil suit? There is apparently substantial risk that this would be held against the defendant (you) under a principle called "spoliation of evidence". What might happen? If the evidence is damaged, "[the] finder of fact can review all evidence uncovered in as strong a light as possible against the spoliator and in favor of the opposing party." Ouch - that means you lose, big.

To judge by their comments, it appears that Tenenbaum and Adler don't believe we deserve any procedural protections here.

It would appear that the "governing principle" demonstrated by yesterday's passage of the health care bill applies here. There is little need for Democrats to try to build a consensus. They have control, so bipartisan support will only be achieved when those with opposing views capitulate or are outvoted. Brave New World, I feel so safe now. . . .

Very disappointing.

CPSIA - Workshop on the Public Database Jan. 11/12

The CPSC has scheduled another two day workshop in January, this time for the dreaded and much-feared public database. This workshop comes on the heels of a lightly-attended hearing on the same subject held November 10 at CPSC headquarters. [You can watch the hearing at this link.] I testified at this hearing, one of two companies to participate (there were also a few trade associations presenters and the usual assortment of highly-motivated consumer "advocates"). There has been no response by the agency to this information-gathering exercise other than to schedule the workshop.

No never mind, they really want to hear from us. According to a blanket email I received from Scott Wolfson, "Education and advocacy are at the center of our priorities, which means strengthening partnerships with community leaders like you . . . . We hope for significant participation and we greatly value your input." Wow, I am touched.

Of course, it is nice that the agency is attempting to show an interest in dialogue and exchange of views with stakeholders. I certainly appreciate being afforded the opportunity to speak at these events. However, I find this particular workshop opportunity somewhat grating. Here are a few reasons why I am so easily annoyed:

a. I testified at the November 10th hearing at the request of the Commission. I was not planning to attend the hearing, as I have made many trips to Washington in the last year - all at company expense and at the sacrifice of my "regular" job. The CPSC staff made it clear that they not only wanted me to attend, but that I should present. This may have been particularly important because as of the beginning of the week of the hearing, there were only two people committed to speaking (including me). Okay, so I go to Washington, study up on the issue, write a little speech, and try to keep it short. They have a strict time limit, you see. This wasn't always a problem. At my first hearing (lead panel, Nov. 6, 2008), my speech was impromptu and they let me speak for 23 minutes (other speeches were longer). That flexibility is a mere memory now, as I learned at the tracking labels hearing (May 12) when I was cut off at the ten minute mark. And, drat, at the public database hearing, I again ran a bit over. Even with hardly anyone in the room, the time limit police stopped me at ten minutes, mid-sentence.

So I find it irritating that they asked to fly in to tell them my thoughts in November, but limited me to ten minutes, and now they want me to pony up for more flight and travel expenses, so they can . . . what, cut me off again?

b. I would take this process a bit more seriously if they gave ANY sign of listening at the last workshop. Why so cynical, Rick? Well, wasn't it this Commission who moved to act on the testing stay only three business days after we attended the LAST workshop (December 10/11, on the so-called "15 Month Rule")? There was no time to process the testimony at the 15 Month Rule workshop before the stay decision was made (those three days were devoted to complete chaos, courtesy of Henry Waxman and his unilateral amendment of the CPSIA). The fact that the agency spent two days intensively gathering information from 250 stakeholders on the impact of the 15 Month Rule and then the Commission almost immediately disregarded it in one of their most important decisions of the year made me feel the workshop was a SHAM. And if that one was a sham, this one promises to be an even greater sham. Since the last hearing has apparently generated no work product or further dialogue and since it was so lightly attended, the January workshop appears to be entirely for show.

I can talk to myself at home for free.

c. Finally, does the CPSC think drafting implementing rules for the CPSIA is some sort of hobby for the business community - or is it a plot to make the conduct of regulated business impossible? Do they really think any ordinary business can sacrifice its leadership to monthly trips to Washington to blather on to regulators who are only slightly interested in what they have to say? [Let's not forget about the CPSC's pet organization, ICPHSO, which bookended meetings in late October 2009 and mid-February 2010. ICPHSO meetings are essentially unofficial CPSC workshops/hearings.] Who can afford this financially, as a matter of priorities or allocation of scarce corporate resources? It seems obvious to me that the more frequently the CPSC holds these meetings, the fewer participants they will garner. The scheduling of meetings and hearings every month by the CSPC seems naive and sinister at the same time.

I won't be there.

All Roads Lead to Rome, as the old saying goes. Why the nuttiness here? I have the usual explanation:

• an irrational, over-reaching law is impossible to implement sensibly;
• the regulatory agency is left with no discretion under the new law and has no power to alter the ridiculous, irresponsible or impossible language of the statute;
• Congress won't listen and would prefer that the CPSC make the problem go away, perhaps even at the expense of breaking the law Congress passed;
• The agency gamely tries its best to carry on, with increasing chaos and market damage inflicted; and
• Businesses (particularly small businesses) are the big losers, with the agency itself a close second.

So we have another two-day session to help the CPSIA create an over-arching database that will likely harm American businesses, create liability storms, eliminate jobs (except at plaintiff law firms and at consumer groups) and generally fail at whatever starry-eyed objective underlay its conception. A good time for all, no doubt.

Let me know how it goes.

CPSIA - Another Big Fine for L-I-P: What Does It Mean?

The CPSC today lashed out at RC2 Corp. for significant lead-in-paint violations on its Thomas & Friends wooden toys in 2007. The fine totalled $1.25 million. The facts of the case are relatively simple - an original recall in June 2007 of 1.5 million pieces was quickly followed by an additional September 2007 recall of 200,000 units. You can read all the details in the provisional agreement between RC2 and the CPSC. The agreement, however, doesn't mention the really famous bit, namely that the second lead-in-paint recall included some of the "bonus gifts" that RC2 sent out to people who returned items in the first recall. Not a real confidence builder, apparently . . . .

We probably owe the CPSIA to RC2 and Mattel, who together so shocked and motivated Congress (and my hometown newspaper, the Chicago Tribune) that nothing could stop that runaway train. Since Thomas the Tank Engine was such a beloved traditional toy, the public's sense of betrayal was understandable. Unfortunately, it is hard to believe that RC2 didn't see this coming. The law on lead-in-paint was clear and unambiguous. The righteous outrage and the perceived need for retribution eventually led not only to the awful new law but also to this fine.

Let's try to put it in perspective.

First, RC2 Corp. is a big company and won't feel much pain from today's action. It has peak sales of over $500 million and peak earnings of over $80 million. It has generated over $100 million in annual cash flow at least twice. In other words, they have pretty deep pockets. This fine is basically "walking around money" for them. They are even projecting earnings this year in excess of $25 million and cash flow of over $40 million - and 2009 was an awful year for the toy industry. As if that weren't enough evidence of the symbolic nature of the fine, RC2 recently raised almost $60 million in a stock offering. In no sense will this fine imperil or even perturb the business over at RC2 - as an official "big business", they seem structurally exempt from the pain we ankle-biters might feel.

That said, hasn't RC2 paid quite a bit for its folly already? According to their 2008 year end financials, they incurred recall-related costs of $28.3 million in 2007, $14.3 million in 2008 and a further $13.9 million in 2009 year-to-date. Those are total costs of $56.5 million, excluding the new CPSC fine. Arguably, the CPSC recalls induced or precipitated these costs. These costs presumably also take into account the impact of RC2's $30 million settlement of a class action lawsuit and related legal expenses.

[According to the provisional settlement agreement, in the wake of the publicity of the recalls, RC2 was hit with a number of allegations of injuries and claims from lead-in-paint, leading to lawsuits. I have no way of estimating the financial impact of these claims on RC2. The validity of the claims is also unknown. Welcome to America.]

These losses exceed RC2's typical annual earnings - most people would call that a pretty high price paid, something that gets your attention.

And as the CPSC slams the barn door long after the horses got out, the company must now reiterate that it learned its lesson . . . three years ago. The press, however, will frame this case as a remedy much needed: "Toymaker's fine in lead case tops $1 million. Oak Brook-based RC2 sold Chinese-made toys that were later recalled" [Headline from print edition].

With all this as background, I think the fine looks a bit different:

a. The fine cannot be justified as punishment, as the CPSC's previous actions induced a very high stream of costs for the company. It cannot be justified as an inducement to behavioral reform, as better safety practices at RC2 began in 2007. What is the purpose of the fine then? I think the fine is intended for political purposes, to make the CPSC look "active" and "tough". It hardly matters that the fine is opportunistic and coercive. [CPSC fines under the CPSIA are also arbitrary and hard if not impossible to negotiate.] Apparently, the RC2 recalls were not enough to satisfy the personified "Congress" - it wanted pecuniary revenge. This allows the Chairman and her fellow Commissioners to look "tough" to Congress and it allows the RC2 company to look "contrite". Two needs met, neither of which should be part of our law.

b. The fine (the supposed punishment for the "crime") is so detached from the time of the infraction that it has no actual connection as a "remedy". The passage of time sacrificed any moral high ground for the regulators - its fine is only a gratuitous penalty now.

c. By waiting three years to impose a high profile penalty like this, the CPSC deals the company a cruel blow to its market. The fine makes it look like RC2 needed more correcting three years after the fact - isn't that what any rational person would think? Yet RC2 already paid for its failings to the tune of more than $50 million out-of-pocket. [This does not include the significant loss of goodwill from the recalls, a tangible loss to RC2 business managers.] They also changed their safety practices, presumably quite significantly. The defective goods are long off the market. Yet, with the imposition of this high fine now, the company looks like a creep, again - even though there is no sign that it is anything but a good citizen today. As a consequence of the CPSC's action, RC2 must again counter with more PR to attempt to preserve its good name.

Even more outrageous, to squeeze in the fine under the wording of the CPSIA, the CPSC asserts that the RC2 violation was made "knowingly". [See par. 16 of the provisional settlement agreement.] I highly doubt that it was "knowing" in the plain meaning of the word and naturally, the company denies it, too. It's a ridiculous contention. However, the law defines "knowingly" to include imputed knowledge; if the CPSC deems that RC2 should have never let this happen (duh), they can assert the imputed knowledge of a reasonable man to convert the infraction into a "knowing" violation. Prest-o, change-o! Incompetence or organizational failure can thus be given the appearance of ill intent. Since virtually any violation can be deemed "knowing" with the aid of 20/20 hindsight under this terrible law, the CPSC now has an unwritten strict liability penalty policy at its disposal. That's sweet for an agency that is part legislature, part judge, part jury. As for companies cited for "knowing" violations, denials ring hollow. Frankly, it's a set-up . . . and when this happens to you, it will feel the same way.

d. The CPSC's apparent indifference to these factors will have a chilling effect on the children's product market. There is no question that business people tend to look at these cases as "there, but for the grace of G-d, go I". If RC2 can be hammered this way, what will happen to us if we make a mistake? There is just no way to tell. But, the RC2 and Mattel fines make it clear that "over" isn't "over" with the CPSC until the statute of limitations passes. This fine came more than three years after the recalls. When are you allowed to move on from your mistakes? Seems like never. The recent fines levied against Excelligence for $25,000 are of a similar vintage, so this can happen to small companies with small infractions, too. This is randomness run amok. The fact that the agency has been unable to issue final penalty factors in more than a year does not help matters.

Finally, of course, we private business people can't just stick our palm out to Wall Street for more money whenever we need to restock the coffers. The RC2 capital raise restores 100% of their losses from the recalls. Nice for them! Small private businesses have to go to their banks or our personal bank accounts to fund remediation of these problems. And let's hope your bank sticks with you after bad publicity. . . .

Could the CSPC be so myopic that it doesn't know how these risks affect the thinking and planning of small businesses? I can only conclude that the answer is yes.

Let's hope that the RC2 fine helps the agency and its leadership build up a suitably tough image. And for their sake, one can only hope that the architects of this law and the agency's penalty strategy are long gone, onto their next glories, before the cumulative impact of the CPSIA and its implementation are felt. And for the rest of us . . . good luck!

CPSIA - Are Toys Supposed To Be Fun Anymore?

In a wonderful Op-Ed last week, Windsor Mann lampoons the ridiculous CPSIA by announcing his intent to not give any presents this year. His plan is as simple as the subtitle of his essay: "Giving children what they need most - nothing". Mr. Mann expands: "As someone who loves to be a wonderful person for a brief period of time, I enjoy this season of temporary giving. I am obsessed with helping people, especially children, and the best way to help children is by not giving them Christmas presents."

Sadly, Mr. Mann observes that "toys are not something to play around with", noting the recent recall of toy darts because an 8-year-old almost choked on a dart that he was chewing. This is a real case. [This recall is eerily similar to a life-imitates-art spoof on The Onion entitled "Fun Toy Banned Because Of Three Stupid Dead Kids".]

Mr. Mann recounts in hilarious fashion various recent recalls illustrating the fact that we seem to have lost sight of what constitutes safety. [He even mentions the unfortunate Timberland ankle-high boots recalled for the lead-in-paint logo on their insoles.] To make his point, Mr. Mann notes the useful instructions provided by the CPSC in its "The Super Sitter" manual for babysitters. Here's some tips the government felt the need to give babysitters:

• "Keep the youngsters safe by preventing accidents."
• "Running or horseplay on [stairs] can lead to falls."
• "In the event of accidental choking, apply first aid measures to clear the child's airway."

He quips: "(In the event of intentional choking, do not apply first aid measures.)"

The fear of everything, railed at in this essay, is the philosophical underpinning of the misconceived CPSIA. There is no solution to this disease short of changing the law. In a world dominated by the fear of everything, nothing is safe and everything must be feared. Mr. Mann's strategy of not giving gifts seems to be an appropriate response in this environment.

It's a funny article, but it's not a funny problem for those of us stubborn enough to remain in the children's product market. I don't know how it comes as a surprise to anyone that misuse of products or the absence of individual responsibility may result in injuries, but that plague has descended on our industries. The issues inherent in this shift away from common sense are many:

• Fear of liability creates a perception of COST that deters investment in products and markets. Random costs feed the fear.
• Unjustified fear of injury by consumers translates into lower sales or higher costs in making sales. Markets shrink. Consumer needs become difficult to meet.
• An atmosphere of fear affects regulators, who tend to recall more often and to assess more penalties (even if non-monetary) because it's politically-expedient or follows the trend. In other words, it's "safer" for regulators to err on the side of caution - but that cost is borne by somebody . . . businesspeople.
• Rules tighten illogically, diverting attention from real issues, increasing the cost of participating in the market. All parties suffer from the consequences of complexity, including regulators.
• Misallocation of resources (expending too much energy on unimportant things) leads eventually to true crisis, fueling the fire of the original proponents of the legislation. The obvious solution - even MORE government.

And the joke will be on you and on us, if we don't do something about it. Mr. Mann takes a lighthearted swipe at the silliness of your Congress, but it's really no laughing matter.

CPSIA - Randy Swart Takes My Spot in PSL!

Never tiring of a good thing, the Product Safety Letter today published an Op-Ed by Randy Swart entitled "CPSC's Guidance Is Not as Confusing as It May Seem". Mr. Swart is the founder of the Bicycle Helmet Safety Institute. In this article, Mr. Swart replies to Rob Wilson's Op-Ed in PSL on Resale Shops and Inez Tenenbaum in a way not exactly reminiscent of my rejected Op-Ed on the same subject. Recognizing the PSL's reputation for "neutrality" and "accuracy and clarity", I am trying to figure out why Mr. Swart got the nod over me. Could it be that Mr. Swart's views might be more pleasing to the regulators that feed the PSL its life-sustaining information? Golly, that's a head scratcher. . . .

Mr. Swart: "CPSC's Guidance Is Not as Confusing as It May Seem"

RW: "Tenenbaum Silence on CPSIA Speaks Volumes"

Mr. Swart: "As all readers of Product Safety Letter know, CPSC is struggling to maintain any level of enforcement at all, and will not be going after yard salers!"

RW: "Scott Wolfson, a spokesman for the agency, said it wouldn't be dispatching bureaucratic storm troopers into private homes to see whether people were selling recalled products from their garages, yards or churches. ‘We’re not looking to come across as being heavy-handed,' he said. 'We want to make sure that everybody knows what the rules of engagement are to help spur greater compliance, so that enforcement becomes less of an issue. But we're still going to enforce.'"

Mr. Swart: "In fact, [the CPSC] would have no more idea than the parent which old toys contained phthalates or had lead in the paint, and would have to test to establish that. Finding recalled product would be looking for needles in haystacks. It just will not happen."

RW: "After all, didn’t NY Attorney General Eliot Spitzer secretly inspect resale shops in 2003 and then release names and addresses to the media? Interestingly, Spitzer was joined by some of the same consumer advocates who are behind the CPSIA. The CPSC has the same power to embarrass."

Mr. Swart: "It is not fair to blame the Commission or Congress for not grandfathering the dangerous toys in our market. We need to get them out of circulation [Ed. Note: Who, the Commission or Congress?], and that fact is independent from the enforcement of the CPSIA legislation. It will impose a hardship on some retailers, but that pales in comparison to the alternative--to tolerate the continuation of poisoning our children for years to come until those toys are worn out."

RW: “'The [West Michigan] Salvation Army does not have thousands of dollars to spend on lead-testing equipment, so anything that looks suspicious — plastic toys, painted toys, toys with magnets or small parts, toys made in China — is pitched, said Robert Pierce, director of operations for the Salvation Army stores. Only about 20 percent of donations to the Salvation Army — compared to about one-third before the law — make it onto the store floor.' The CPSC’s tough talk on enforcement is having a chilling effect on the business community – and that cost must be weighed when regulators get 'tough'”.

Mr. Swart: "In fact, any threat of CPSC retribution is probably less real than the possibility of being sued by the buyer if someone is injured by a recalled product. That should give the yard saler pause if nothing else does. Many people trash some items that they would have sold or Freecycled because of that risk." [And this guy thinks he is helping make a case for the CPSC and the new law???]

RW: "The agency previously played a critical role in setting safety priorities, assessing risks and interpreting the law. . . . The Chairman can show she is a leader by providing an honest assessment to Congress of the problems with CPSIA and mapping out the necessary changes. Ironically, none of this is about safety – it’s about a law that just doesn’t work."

Okay, I can't figure it out! Can you?

A couple final thoughts (can't resist): Mr. Swart says "The chemical detoxification of America is just beginning, and this is one of the early skirmishes in a long war." Please remember this blather. This is the mantra of the "everything-is-bad-for-you" crowd. If you want to see this mania in action, watch this video (and if you have the time and energy, the three other segments). This outlook is extremely dangerous but with Mr. Waxman as champion, threatens to infect federal regulation of many markets besides toys. This is the so-called "Precautionary Principle" and is the basis of the proposed amendment of the Toxic Substances Control Act (TSCA).

Second, in response to Mr. Swart's comment "It will impose a hardship on some retailers, but that pales in comparison to the alternative--to tolerate the continuation of poisoning our children for years to come until those toys are worn out", I want to reprint the words of a staffer from the office of Illinois' own Senator Dick Durbin:

April 16, 2009: "I think you are right that the CPSIA imposes costs on businesses, and because of economies of scale it’s the smaller businesses that will feel these costs more acutely. This is part of a larger calculation that it’s worth the costs to shift from the old system of post-market correction (once a dangerous product is out in the market and leads to sick kids, recalls, lawsuits, etc.) to a new system of pre-market testing and certification (instead of just assuming products are safe and paying the price for false assumptions). . . ." [Emphasis added]

I can hardly express my joy at being a Congressionally-selected victim for the greater good of our country! Their "larger calculation" sounds so sophisticated. I will go out with a smile on my face.

The barf bags are over on the shelf on the left.

CPSIA - News Round-up

What a day for news on our favorite subject!

a. A sad, almost pathetic, illustration of the ill-effects of the CPSIA is found here: "Police Switch To Handing Out Books To Children" (WISC-TV, Channel3000.com). Be SURE to check out the embedded video, too. In this article, this Wisconsin television station shares the news that police cannot give out teddy bears anymore to children who witness traumatic events like a robbery or the arrest of a parent. For years, the police had been trying to soften those blows with comforting teddy bears. But no more! The CPSIA straightened them out: "The new Consumer Product Safety Improvement Act . . . has law enforcement officers rethinking handing out stuffed animals because of the chemicals they might contain. . . . Mueller said that he used to hand out Teddy bears or other stuffed toys to children. Now, Middleton police are using the books to make sure they're in compliance with new federal regulations."

The local police are scared of the consequences of breaking this law: "'One of the reasons for that is we get older toys that come in and they're perfectly fine to give out, but we don't know if they were made under the new requirements,' [Middleton police Sgt. Don Mueller ] said. . . . The new federal law is retroactive so the departments like Middleton are no longer using any stuffed animals as they can be held liable."

How charming! The CPSIA is actually taking teddy bears away from traumatized children, nice. At least we know the kids will be so, so safe now.

Btw, as you all know, our company makes educational products, including readers, so I am hardly opposed to giving books to kids. I would observe, however, that there are a couple obvious issues here. First of all, it's an odd message to a kid that just saw a parent being arrested to receive a book. Hey, kid, go read this book and try not to think about where we're taking your folks. Not much solace in that, certainly compared to a teddy bear. A second objection is, here's a shocker, not everyone speaks English. Giving a book in English to a traumatized child who does not speak English or has poor reading skills could even be seen as a kind of insult.

b. For a view from the scary people behind the law, check out: "Toxic Toy Law Criticized For 'Lack Of Enforcement" (WBZ Boston). In this alarming article full of inaccuracies, fear of the unknown is given a great deal of unquestioning credibility. "'They don't really know if lead or phthalates are in their products, so we don't know either,' said [Environmental activist Laura Spark]. Her daughters have a playroom full of toys that she can only hope are free from lead and other toxic chemicals." In other words, Ms. Sparks doubts everything about everyone, and feels free to spread this doubt among the populace. The grounds for this latest libel of the toy industry: HealthyStuff.org's recent spot check of pet products, automobiles and women's handbags.

HealthyStuff.org (formerly known as HealthyToys.org) has been the subject of criticism in the past for its shoddy field work. Among other things, the Wall Street Journal published an article entitled "Guerrilla Toy Testers Take Aim at Lead" on December 16, 2008 documenting their maligning of a toy company. Now the presence of "dangerous chemicals" in pet products is enough to convince a TV station that the entire children's products industry can't be trusted?

To compound the sense of fear, the article also completely misstates the Target fine, asserting that it was a "knowing" lead-in-paint violation, which is patently untrue. See my recent blogpost on Target.

c. For a glimpse of the future of litigation under the CPSIA, check out "Mattel Settles Suit Over Lead in China-Made Toys " (WSJ). Mattel has already paid big settlements in California and Arizona, as well as a serious CPSC fine, and paid many millions more for the expense of its mega recall. It's not enough, apparently: "Co-plaintiff lead counsel Whatley Drake & Kallas said in a statement the settlement provides 'tens of millions of dollars in monetary relief as well as significant injunctive relief.'" That'll teach ya!

While my heart does not bleed for Mattel ("The world's largest toy maker previously recorded charges to reserve for the litigation. The company, based in El Segundo, Calif., said final settlement won't be material to its operating results. . . . Mattel shares were up 2.9% to $19.41 in recent trading amid a broad market rally."), this case is at the heart of one of the worst risks embedded in the CPSIA - the possible onslaught of litigation opened up by recalls under the new law.

This problem will continue to bite the children's product industry HARD. My previous blogpost highlighted the snarling lawyers poised at the gate, eyeing us eagerly. Oh joy.

CPSIA - Something Else . . . Again?

Sometimes I feel the assault never ends. Today is such a day. I just heard about the latest innovation of our very own Congress. The new morsel is the Foreign Manufacturers Legal Accountability Act of 2009 (S. 1606), introduced last week by Senators Whitehouse (D-RI), Sessions (R-AL) and Durbin (D-IL). In this "long awaited" legislation, the three gallant Senators provide a way for Americans to sue foreign manufacturers by forcing the foreign manufacturers to accept service of process in this country and further, to accept personal jurisdiction in our courts. In order to spread the love, the bill specifically includes products subject to the Consumer Product Safety Act.

If this legal jargon has not put you to sleep yet, it means that you can sue a foreign manufacturer in U.S. courts under this legislation without a hassle. Previously, to pull a foreigner into the jurisdiction of our courts was difficult or impossible. The law ostensibly was inspired by evil Chinese drywall, and naturally our Senators need to jump into action by pointing the finger overseas. [Couldn't be the fault of the unaware importer, naturally - he's American.] Sound good?

Let's hope this goes NOWHERE. Here are a few reasons to be more than a little suspicious:

a. Mr. Durbin thought the CPSIA was a great idea (and still does). That's enough for me, personally. Other CPSIA rabble-rousers supporting this brave new world include the Consumers Union and Consumer Federation of America, as well as the "American Association of Justice" (formerly known as the Association of Trial Lawyers of America). Let me just say, what's good for trial lawyers is not good for us. Period. Take a close look at the links above - how many are sponsored by plaintiff lawyers? Worried yet?


b. If you make foreign manufacturers subject to our courts, what do you think will change for THEM? Do you think they will experience a greater or lesser incentive to enter our markets? Okay, maybe we won't miss the drywall guy, I'll grant you that. But what about the incentives felt by other factories? Some, perhaps like the factories that makes your iPod or iPhone, have enough capital and are sufficiently international in their reach that this law will little effect on them. Others, particularly the small, private family-owned factories supporting much of our middle market and small business importers, cannot take on the U.S. legal system. This law cooks their goose.

Trying to find new factories to custom manufacture products will be much harder if lawsuit exposure comes with your purchase orders. Right now, foreign factories do not have to add legal exposure to U.S. consumers into their importers' costs. All American consumers benefit from the resulting lower prices (one reason for our high standard of living). It is up to us to select and supervise our supply chain properly - that's our job. If something goes wrong, we believe you are going to come looking for us. Most (if not all) U.S. companies maintain liability insurance for this very purpose. This shifts the liability (contingent risk) to insurance companies at an affordable cost to everyone. As long as you deal with a creditworthy supplier, you will have recourse if there's a problem. This phenomenon is nothing new and if anything, this allocation of risk between U.S. businesses, their insurers and their factories is simply a matter of contract and no concern to their customers. If this law goes through, however, the entire system breaks down. Expect many market dropouts - and expect prices to go WAY up.


c. This bill is jingoistic and is intended to create a trade barrier to hurt foreign companies attempting to sell here. Trade barriers are fundamentally misguided. What happens when we put up a big trade barrier? A trade war, perhaps? In fact, a typical response (besides punitive tariffs on our products overseas) would be reciprocal laws. In other words, our principal trading partners might pass similar rules aimed at U.S. businesses, meaning that we would become subject to lawsuits all of the world. Do you know what it costs to defend a lawsuit in a foreign jurisdiction? The number isn't small. Will that provide a positive incentive for American businesses to branch out and find customers overseas? I know that it would be a viable option for us to leave a market (a country), simply to avoid lawsuits. The grass is definitely greener overseas right now. This law is a "solution" to all that.

Connect the dots, guys.

The tyranny of these new looney laws must be stopped. The damage keeps piling up. This is not my imagination - yet it definitely is your government. We better take it back before it's too late.