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 - Let's Play a Cadmium Game!

We all know that cadmium is dangerous. After all, the Associated Press and seven Senators told us so. I have asked the innocent question - if cadmium is so dangerous that we absolutely cannot tolerate it in jewelry, what else is similarly dangerous? We have a business making children's products so it's important that we understand this critical question, right?

At this point, other than whatever the AP decides to print tomorrow, we know that anything with lead is really dangerous. The CPSC, following orders, determined that palladium, rhodium, osmium, iridium and ruthenium are safe. They blessed these materials for inclusion in children's products in August 2009 so they must be safe, right? Here's what the CPSC said: "In addition, in the proposed rule, the Commission preliminarily determined that certain metals and alloys did not exceed the lead content limits under section 101(a) of the CPSIA provided that no lead or lead-containing metal is intentionally added. The metals and alloys considered included surgical steel, precious metals such as gold (at least 10 karat); sterling silver (at least 925/1000); platinum; palladium; rhodium; osmium; iridium; ruthenium."

So here's the game: match the following statements from Wikipedia about these elements with the element itself. [To verify my quotes, just go to Wikipedia and search for the element.]

1. Cadmium
2. Palladium
3. Rhodium
4. Osmium
5. Iridium
6. Ruthenium

A. "[This element] reacts with oxygen at room temperature forming volatile [element] tetroxide. . . . [Element] tetroxide is highly volatile and penetrates skin readily, and is very toxic by inhalation, ingestion, and skin contact."

B. "[This element] is also a potential environmental hazard. Human exposures to environmental [element] are primarily the result of the burning of fossil fuels and municipal wastes. However, there have been notable instances of toxicity as the result of long-term exposure to [this element] in contaminated food and water."

C. "[This element] chloride was at one time prescribed as a tuberculosis treatment at the rate of 0.065 g per day (approximately one milligram per kilogram of body weight). This treatment did have many negative side-effects, and was later replaced by more effective drugs."

D. "The compound [element tetroxide] similar to [XXX] tetroxide, is volatile, highly toxic and may cause explosions if allowed to come into contact with combustible materials. [This element] plays no biological role but does strongly stain human skin, may be carcinogenic and bio-accumulates in bone."

E. "[C]hemical complexes of [this element] can be reactive. Lethal intake for rats is 12.6 mg/kg of [element chloride] [This element] compounds can strongly stain human skin. The element plays no biological role in humans."

F. "Very little is known about the toxicity of [this element's] compounds because they are used in very small amounts, but soluble salts, such as the [element] halides, could be hazardous due to elements other than [element] or due to [the element] itself."

It's good to know that only one of these items is considered dangerous. I feel safer already!

CPSIA - What Constitutes "Safe"?

One of the tragedies of the CPSIA melodrama is that the consumer groups have completely hijacked the concept of safety, turning it utterly away from concepts of risk assessment. To what, you say? Away from management of identifiable risks to avoidance/elimination of perceived risks. In other words, Congress and our regulators now ignore the data on risk and focus instead on the possibility of risk. The POSSIBILITY of injury, not the actuality of injury.

How much of a difference is this? Pretty big, to judge by the frenzy over cadmium in jewelry. Seven Senators have sponsored a bill called the Safe Kids' Jewelry Act. This law would ban the use of cadmium in kids' jewelry. Is this "good"? I am not sure how to answer that. To my knowledge, no one has identified a single injury from cadmium in children's jewelry. It is undeniable that cadmium is a bad element and has the potential to harm. Ergo, jewelry with cadmium is "bad"? I can imagine circumstances where cadmium in jewelry might hurt a child. Then again, if it were so dangerous, where are all the victims?

If this is going to be the new standard, whether a product MIGHT harm someone, I think we are cooked. Assuming that "prevention of possible injury" is to be used as the standard to evaluate products or components of products, let me ask a few questions to see if I understand the "new rules of the road":

• How certain must the prospect of injury be?
• How specific must the circumstances of the prospective injury be?
• Are we talking about probable injury (more than 50%) or possible injury (odds greater than 0%)? How are those odds to be measured - by unit sold, by contact, by owner, by year, by lifetime use? What's "reasonable"? [Does anyone care what's reasonable?]
• Are all things that could possibly injure a child now illegal on the same basis?
• If the answer is yes, when will all those other products be banned and/or recalled? Is equity in the treatment of all products "important"?
• If the answer is no, then where do we draw the line?
• How relevant is it that no injuries have been reported?
• How many incidents are required before we declare a product or substance illegal or recalled? How many newspaper articles, editorials or CEH lawsuits are required?
• What responsibility do we have to be consistent in the administration of these rules?

Consistency, that's important, don't you think? If cadmium is now tacitly illegal because it might harm a child, do we have to make everything with the possibility of injury to children illegal?

Presumably, since no injuries to children from cadmium has been reported and the Washington Post confirms that doctors do not perceive cadmium as a serious risk (perhaps because it was not prevalent in house paint or in gasoline, hmmm), then anything with the same level of prospective risk would be illegal. That's more or less everything from water to chicken bones to lead to ruthenium. [Pardon me, ruthenium, one of the world's most expensive and dangerous elements, is a-okay to include in children's products.] Why then aren't we closing swimming pools which cause more than 250 deaths each year? What about water - you can drown in two inches of water. No more showers?

Is there something special about cadmium, besides that it has appeared in an Associated Press article?

The mania over the prevention of possible injury has turned the business environment into a feeding frenzy that will drive the business community down, down, down. Is that in anyone's interest? Will we all be safer if we have nothing to buy?

Please consider that the House Energy and Commerce Committee has today weighed in on the Toyota recall. Yes, the same Henry Waxman who is torturing our industry has now turned his talons and sharp teeth on Toyota. Toyota enjoys one of the finest reputations for quality and service in the world. It is renowned as a business leader - and proactively took strong medicine in its gas pedal recall. This is not enough for the venomous Democrats who hate businesses. They need to dig deeper and perhaps damage Toyota enough to help GM and Chrysler, owned by the U.S. government and unions. Bringing the great low, that's the new American way of the Democrats. It makes me SICK.

I want to close with a note about cows - did you know that cows are killers, too? Yes, they are - the New York Times reports:

"The image of cows as placid, gentle creatures is a city slicker's fantasy, judging from an article, published on Friday by the Centers for Disease Control and Prevention, reporting that about 20 people a year are killed by cows in the United States. In some cases, the cows actually attack humans -- ramming them, knocking them down, goring them, trampling them and kicking them in the head -- resulting in fatal injuries to the head and chest."

COWS kill 20 people a year, cadmium has apparently killed ZERO. We are running pell-mell to ban cadmium from jewelry because a misguided newspaper article fueled panic. Are cows next? Should they be? If cadmium jewelry goes away and cows stay unregulated, will respect for our laws remain?

Respect for Congress, that's another thing.