CPSIA - More Details on Schylling Penalty Fiasco

The worm continues to turn on the Schylling penalty. Buried DEEP in the "easy to use" CPSC website are documents relating to the timeline of this penalty assessment.

1. First agreement was signed by the CPSC six weeks after Schylling on January 19.

2. The CPSC Commission met on February 3 to ratify the agreement. The vote is 4-1, with Anne Northup voting no. Northup apparently objected because she felt the penalty was out of line with other penalties set by the CPSC (too high).

[Ed. Note: I have been repeating myself of late when I assert that these penalties are PRECEDENT to be used against YOU. Ignore them at your peril - they are an evolving, common law measuring stick for penalties that may be assessed against you. Fact patterns are very difficult to compare but luckily big round numbers are easy to compare. Schylling may be . . . you next time.]

3. On February 5, in a remarkable and unexplained about-face, Tenenbaum, Adler and Northup voted 3-0-2 to rescind the agreement and send it back for to the staff "for further consideration of the financial condition of the company". Nord and Moore didn't vote.

5. On May 25th, the Commission again met to decide the fate of the beleaguered Schylling. By a vote of 5-0, the Commission approved the new, doubled penalty. Here is what the Record of Commission Action says: "The staff alleges that Schylling's importation, sale, or offering for sale, certain consumer products, tin pail toys and spinning tops, entrusted to or for use by children, violated the Lead Paint Ban, and that Schylling committed these prohibited acts "knowingly" as that term is defined in section 20(d) of the CPSA. The settlement agreement also resolves certain possible liabilities of Sections 19(a)(1) and 19(a)(4) of the CPSA for possible CPSA violations with other products. Section 20(a)(1) of the CPSA, 15 U.S.C. § 2069(a)(1), permits the imposition of civil penalties for the violations."

As noted in my prior post, there is a question of whether the Statute of Limitations on penalties permitted the assessment of this punishment. The focus of this document seems to be on lead-in-paint violations, which were probably beyond the reach of the CPSC's legal authority to assess penalties. Schylling paid anyhow.

So what happened? Only Ms. Northup provided a written statement. Her statement begs many questions but does provide fodder for conjecture. Here are some salient quotes:

"As an aside, I personally believe that it is inappropriate and risky for companies to ask political figures—including those who exercise control over the agency via budget or supervisory authority—to try to persuade the Commission to reduce a civil penalty. Our civil penalties are open for public comment for two weeks after publication in the Federal Register, and elected officials can comment upon them at that time. Intervention during the Commission’s quasi-judicial civil penalty decision-making process creates the possibility of conscious or subconscious influence on the fair resolution of cases. It also creates a perception that penalties vary according to the political influence of the violator rather than the severity of offenses. . . . The penalty will deter non-compliance and create the proper incentives to import safe products in the future without crippling the company. I believe Schylling has received a proportionately lower civil penalty than a similarly situated major corporation would receive if it engaged in similar conduct."

Hmmm. Seems to be a case of foot-in-mouth disease on someone's part. I admire that Ms. Northup was offended by the "insider baseball" approach apparently adopted by Schylling. The notion that the CPSC and the federal government is some kind of "good ole' boys" club is both outrageous and not even slightly surprising. Who doesn't imagine that there are people out there who have the ability to make your problems go away with a simple phone call? It's nice to see Ms. Northup to take a stand on this. Quite interesting that it is a Republican ex-Member of Congress who was apparently offended. Surprising only because of the press bias against Republicans these days. Good for you, Ms. Northup!

One can imagine an ill-advised or ham-handed conversation that set off this odd sequence of events. This may also be why a new law firm was appointed by Schylling.

I still get the feeling that anger determines the size of penalties by this CPSC. Think Daiso. Since Ms. Northup speaks in terms of deterrence, I presume she is addressing our company and companies similarly situated (like yours). We are supposed to be influenced by these penalties. I sure will be. I can't try any harder or spend any more time or money on safety. [Consumers, please note our almost unblemished safety record over 26 years - no more time is NEEDED, either.] Unfortunately, we have to spend a few moments every day tending to the OTHER needs of our business, like sales, marketing, product development, order fulfillment, accounting and so on. It's a shame we can't spend every waking moment on safety. What a world that might be.

In any event, I will be influenced by the mega-penalties that the angry CPSC is handing out. Given my conviction that there is no more time or money available for "more" safety, how will we be influenced? Well, we might hire fewer employees, develop fewer products, invest in fewer systems to operate our business better, pay lower bonuses, take money out of the business, enter new markets not subject to the prying eyes of the CPSC, and so on. We haven't decided how to be properly influenced by the incentives so generously provided by the CSPC . . . but it all sounds good, right?

Time will tell.

CPSIA - FOIA Request Relating to Schylling Penalty Assessment

I am making this document request pursuant to the Freedom of Information Act and 16 CFR §1015. I would like to receive copies of all documents (written or electronic, including notes and staff briefing packages) relating to the provisional agreement between Schylling Associates, Inc. and the CPSC [CPSC Docket No. 10-C0004, published 75 FR 30785 (2010-6-2) (“May Agreement”) and any prior agreement between Schylling Associates, Inc. and the CPSC on the same matter. In particular, I am interested in any document which relates to objections to the original agreement between the parties dated January 19, 2010 (http://bit.ly/aEfWcQ) (“January Agreement”) or which relates to the reasons for the increase in the penalty assessed in this case from the $200,000 amount in the January Agreement to the $400,000 in the May Agreement. Please accord this request “fast track” status.

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

My contact information is found below. Thank you for your cooperation.

Sincerely,

Richard Woldenberg
Chairman
Learning Resources, Inc.

CPSIA - McDonalds Recall Urged by CPSC - WHY?

The CPSC has put in writing that the Shrek glasses recalled by McDonald's last week are "non-toxic". Nonetheless, the CPSC (perhaps the commission itself, as noted in certain press reports) "urged" the company to make the recall.

So now it appears that the CPSC thinks it's okay to ask a company to recall a product for reasons that it acknowledges pose no safety issue. Why?

Let's not forget all the expense that this move imposes on the company coerced into making the recall. The law restrict the power of the agency to take this step, in part to preserve the incentive to make "at risk" investments in new products. There's also that small detail called "due process". My previous post noted that the CPSC does not have the authority to make recalls of products absent a "substantial product hazard". This suggests that the CPSC was exceeding its authority in the McDonald's case. By almost any measure, the CPSC's actions were inexplicable. Why demand a recall of a safe product?

I cannot answer this question for the CPSC or its Chairman, Inez Tenenbaum. However, here's a few salient facts to chew on:

1. The Member of Congress (Jackie Speier) that "tipped off" the CPSC about this matter is a Democrat.
2. Jackie Speier represents a California Congressional district (12th) that abuts Nancy Pelosi's district (8th).
3. Shortly after first being elected to Congress in a 2008 by-election, Speier was appointed by Pelosi to serve as a member of the House Oversight and Government Reform Committee, then chaired by none other than Henry Waxman. Waxman resigned this chairmanship to take over as Chairman of the House Committee on Energy and Commerce.
4. Ms. Speier has publicly endorsed the "black box" requirement for cars that Mr. Waxman supports. She also wants to create a federal law restricting cadmium in jewelry. Her concept of Congressional activism is very closely aligned with Mr. Waxman, another California Democrat and patron of the Democratic majority on the Commission.
5. Today, Speier is a member of three committees. Besides Oversight, the other two committees are chaired by Edward Markey and Barney Frank, two close allies of Waxman and Pelosi.
6. Jackie Speier is running for reelection in one of the most phobic of states, California. The Democrats need every seat they can get in this Mid-Term election.
7. One of the three Democrat Commissioners appointed by Obama was a member of Henry Waxman's staff for several years (Adler).

And can anyone imagine a Democrat-controlled CPSC telling a Democratic Member of Congress from the San Francisco area that her highly-publicized call for investigation of Shrek glasses because of cadmium was, in fact, unmerited, that the product was perfectly safe and the large corporation responsible for the glasses had protected consumers very well? In an election year with Nancy Pelosi in charge of the House and Henry Waxman directly overseeing the agency?

Nope, can't think of a single reason why the leadership of the CPSC would urge McDonald's to recall the safe glasses.

At least the CPSC won't have to pay the costs of the recall. That's McDonald's problem.