Remember how Congress gave birth to the CPSIA way back in 2008? A couple big companies goofed up big time on toy safety, in case you forgot. Of course, everyone remembers Mattel, but then there's RC2 and its lead paint-laden Thomas The Tank Engine wooden trains. Yes, these are the folks who offered a reward for consumers returning recalled iconic wooden toys slathered in lead paint, only to have to recall the free gift trains because they TOO were covered in lead paint. Ouch! This boneheaded move was significantly responsible for the drive to enact the CPSIA. Thanks, RC2!
RC2 paid mightily for its errors. I previously published an analysis of the costs of their missteps, which added up to about $60 million. That's real money, folks. They later raised about $60 million in an equity offering, so they were financially sound despite these extraordinary losses. Bully for them.
Of course, the rest of us were screwed because the CPSIA crunched us. Isn't it a little ironic that RC2 was largely unscathed?
Ah, but there's a happy ending! RC2 was sold today to Tomy Co., a large Japanese toy company that shares elements of the Thomas brand with RC2. Tomy is paying $640 million for RC2. Sweet! And it's really nice to know that the CPSIA has been so effective in stopping the people responsible for the bad acts that supposedly endangered children in the Year of the Recall. They'll never profit from their misdeeds . . . .
Now I understand why people get so pissed about big bonuses being paid at bailed out banks. Hmmm. Is there anything to learn here?
Nah. . . .
Thursday, March 10, 2011
CPSIA - How We Were Forced to Deal with A Misleading Database Entry
As you may recall from yesterday, we were confronted with a false, misleading and inaccurate complaint submitted to the CPSIA database in its "soft launch". We submitted definitive information to the CPSC attesting to the error (or whatever) by the filer and were REJECTED. We were told by a senior staff person at the agency (who should know better) that the complaint needed to be posted based on the facts (the filer THOUGHT she spotted a safety issue). Our evidence that the anonymous filer's musings were flat-out WRONG were not persuasive because this is a "consumer database" and as such, our evidence did not reflect on how the anonymous filer felt. As far as I can tell, that's all that matters, unless they misidentify our product. That seems to be the only "out" (although I can't find that sentence in the law).
Get it? I wish I did.
In some respects, this controversy didn't add up to much because the complaint won't go into the database. No filings made during the "soft launch" will go into the database. It's all practice (until tomorrow morning). However, the CPSC made a policy decision in our case. Don't say you weren't warned. NEXT TIME THIS COMPLAINT WILL GO INTO THE DATABASE.
Because everyone's "practicing" now, we decided to practice by filing a "comment" to this complaint even though it won't be published either. This will no doubt become a standard approach for most people. There's little point and maybe even some downside to pushing back on a complaint. [What if the CPSC takes a look and makes a call that THERE IS A RISK OF HARM? It all seems so innocuous until they lower that boom on you . . . .] The soundest practice is probably to not protest these filings at all (feel the shaft yet?) and simply publish your own comments to be juxtaposed with the complaint.
To craft this "comment", we consulted our lawyer. Cha-ching! Don't worry, we're used to legal fees at this point. I would note that this took two person's time at our office and we had to drop everything to process this baloney complaint as if it were the most pressing matter in our little universe. Consider the cumulative waste of resources and the cost of distraction and disruption across the entire economy all owing to this database. Sounds grrrrrreat!
Our comment is reproduced here for your interest:
"The Smart Snacks Sweet Heart Sayings product has been tested for compliance with ASTM F963, the federally mandated safety standard for small parts and has passed all applicable tests with an independent test lab. The company believes this product incident report is materially inaccurate because the product does not present a small parts hazard and the complainant has provided no evidence to the contrary. As such this allegation is completely unsubstantiated."
I wonder if Congress and the CPSC can come up with even more effective ways to piss me off. Chances are they are working on it right now! I can't wait to raise more money for Republicans in the next election cycle . . . .
Get it? I wish I did.
In some respects, this controversy didn't add up to much because the complaint won't go into the database. No filings made during the "soft launch" will go into the database. It's all practice (until tomorrow morning). However, the CPSC made a policy decision in our case. Don't say you weren't warned. NEXT TIME THIS COMPLAINT WILL GO INTO THE DATABASE.
Because everyone's "practicing" now, we decided to practice by filing a "comment" to this complaint even though it won't be published either. This will no doubt become a standard approach for most people. There's little point and maybe even some downside to pushing back on a complaint. [What if the CPSC takes a look and makes a call that THERE IS A RISK OF HARM? It all seems so innocuous until they lower that boom on you . . . .] The soundest practice is probably to not protest these filings at all (feel the shaft yet?) and simply publish your own comments to be juxtaposed with the complaint.
To craft this "comment", we consulted our lawyer. Cha-ching! Don't worry, we're used to legal fees at this point. I would note that this took two person's time at our office and we had to drop everything to process this baloney complaint as if it were the most pressing matter in our little universe. Consider the cumulative waste of resources and the cost of distraction and disruption across the entire economy all owing to this database. Sounds grrrrrreat!
Our comment is reproduced here for your interest:
"The Smart Snacks Sweet Heart Sayings product has been tested for compliance with ASTM F963, the federally mandated safety standard for small parts and has passed all applicable tests with an independent test lab. The company believes this product incident report is materially inaccurate because the product does not present a small parts hazard and the complainant has provided no evidence to the contrary. As such this allegation is completely unsubstantiated."
I wonder if Congress and the CPSC can come up with even more effective ways to piss me off. Chances are they are working on it right now! I can't wait to raise more money for Republicans in the next election cycle . . . .
CPSIA - My Answer to Slate.com on the CPSIA Database
Dear Mr. Noah,
I read with interest your March 8th article on the CPSC database entitled “Who’s Afraid of the CPSC?” and was disappointed at the inaccuracies in the piece and your blanket dismissal of the business community's legitimate concerns about the database. The database has devolved into a divisive partisan issue simply because of the utter refusal of consumer groups and their Congressional allies to acknowledge the flaws in the database as well as the law that established it – the Consumer Product Safety Improvement Act (CPSIA).
I'll try to address the inaccuracies one-by-one:
Database cost - $3 million or $29 million? The cost figure of $3 million sparked a public dispute between the CPSC Chairman Inez Tenenbaum and her fellow Commissioner Anne Northup at a House hearing last month. In response to Ms. Tenenbaum’s testimony on the cost of the database, Ms. Northup testified that the figure of $3 million had never been shared with the CPSC Commission and that the only database cost figure she was familiar with was $29 million. Interestingly, in April 2010, the Associated Press reported, based on information provided by the CPSC, that the cost of the http://www.saferproducts.gov/ website would be about $20 million, and the CPSC apparently saw no reason to update the media with the good news that the cost had shriveled to $3 million until the February 2011 hearing. . . . Hmmm.
The supposedly noncontroversial CPSIA database. Why didn’t anyone kick up a fuss about the database in 2008? A better question is “Why didn’t Congress listen when the business community protested?” Here’s what I said in a letter to each Congressional conferee dated June 25, 2008: “While we support public notice of recalls, we oppose a national database of reports of injury, illness, death or risk of injury. This forum will not be subject to appropriate findings of fact and thus will be a forum subject to considerable abuse. In a society where tort lawsuits are an ever-present risk for all businesses, a risk that can wipe out a lifetime’s work in a heartbeat, the very real potential for abuse by competitors or mischief-makers far outweighs the public’s ‘right to know’. Once the CPSC has adjudicated a case appropriately, made a reasonable finding of fact and determined the right course of corrective action, public notice would be appropriate.”
I continued to try to make my point to CPSIA Congressional conferees in another letter dated July 21, 2008, just ahead of final consideration of the CPSIA: “CPSC Searchable Database: The well-intentioned idea for complete safety transparency is an open invitation to mischief makers. This is a real threat to our business, as we know from hard experience. The better way is to let the CPSC filter this data first. Please remember, even YouTube will take down videos on request. The proposed law won’t give defenseless toy companies the same recourse as YouTube. Is that an appropriate way to regulate an entire industry?”
It wasn't only me. Many others in the business community opposed the creation of a database that would contain inaccurate or misleading accusations and complaints. That’s the story of the CPSIA in a nutshell – no one was listening when the law was originally drafted, and now three years later, we are fighting City Hall to restore common sense to federal safety law. Please consider the assertion that consumers really need this database, that it is essential to their children’s safety. In fact, there are many places on the Internet where consumers can and do post their experiences without controversy. Why would a federal database be a greater cause for concern? Well, for one thing, this one is called “SaferProducts.gov” and is sponsored by the federal government. Notwithstanding the lawyer language disclaimers all over the website, it is crystal clear that the public will place a lot of credence in these postings. After all, why would our federal government allow misleading or inaccurate information to be posted on a website called SaferProducts.gov? Ms. Tenenbaum is famous for her defense of “dot gov” websites: “I say don't believe everything you read on the Internet, except what you read on Web sites that end in dot gov.” [Keynote speech at ICPHSO, February 17, 2010] She may not be the only one who feels this way.
The NHTSA database exists; ergo a CPSIA database is a good idea? The NHTSA database can be distinguished in several important ways: (a) auto accidents are a leading cause of death in this country (consumer products are not), (b) every use of automobiles is known to be hazardous and the risk to human life from reckless use of cars is obviously magnified (not true for consumer products), (c) the auto industry is one of the largest components of our entire economy - we all use cars and many of us owe our livelihoods to automobiles in one way or the other (the average sale of consumer products is far less than a car), and (d) at all levels, the auto industry is highly consolidated among a relatively small number of massive companies that are well-prepared for litigation and regulatory issues (consumer products is not a consolidated market and there are many small companies involved in the trade). I think GM, Ford, Toyota and other multi-billion dollar automakers can handle the burden and risk of a database of consumer deaths and serious injuries from use of their products. Our family business, Learning Resources, on the other hand, ain't no GM or Toyota. The NHTSA database is NOT an appropriate precedent for consumer products for all of the foregoing reasons.
"One of the ironies in Pompeo and others screaming bloody murder that the database will kill jobs is that most of the appliances likely to get dinged in the database won't even be American products." This remark completely misses the point, unfortunately. It is American companies that are going to be hurt by the misinformation in the database, whether those companies are manufacturers, importers, private labelers or retailers. Even worse, thousands of American small businesses are going to be put at risk with no practical means to defend themselves. Is this the “American Way” at work? Who will pay when jobs are lost from companies shifting away from this market or dropping products to limit exposure to liability? This is just going to be another self-inflicted economic injury from misguided and overzealous regulation.
Whether the product is made in China, the U.S. or India, it should not matter from a safety perspective. Companies must ensure that they market safe and appropriate products no matter where the products are made. The reality is that every product can break, and accidents and other bad things happen to good people. The database will be unforgiving and if filled with post-it-and-forget-it garbage, will harm innocent victims – American companies that employ your neighbors and make products for your schools. Unqualified and unverified complaints on SaferProducts.gov WILL induce consumers to take our products away from children - pending a recall that may never be forthcoming . . . because nothing's wrong.
Chairman Tenenbaum has publicly encouraged consumers to rely on the postings in the database - to draw conclusions on the likelihood of future injury. This is quite alarming, given that Ms. Tenenbaum also testified in a Congressional hearing in February that the agency will likely post unverified or inaccurate information to the database. She admits that this information will be faulty. As she said in testimony, "that's what the rub is".
Claims of inaccuracies are low in the soft launch. Given the short life of the database in its test phase and the small population of registered users, reports of few data problems must be greeted with skepticism. Less than 1000 companies have registered with the CPSC for the database, an absurdly small percentage of the number of companies whose products will be in the database. Taking into account that many consumer product companies (such as Disney) will need to register numerous brands, product lines and corporate divisions to ensure that the right data flows to the right paper pusher, the current registrations are even paltrier. If companies are not registered, it is unlikely they are even aware of the soft launch, let alone that there may be inaccurate claims against their products being sponsored by the federal government.
Sadly, we are likely to confirm that the CPSC’s faulty processes are damaging companies only AFTER the damage is done. Let’s not forget that the agency is all set to launch a big “public awareness” campaign for the new database – in other words, the federal government will soon be beating the bushes for consumer complaint submissions. As usual, consumer advocates hype uncertain and unquantifiable losses (someone somewhere might not know about something that COULD have been in the database and later be injured) to distract Congress and the media from the certain losses that will befall companies with damaged reputations. Good for plaintiff lawyers but maybe no one else.
Our small company in Illinois has already experienced a materially inaccurate submission – in the very first “complaint” we faced – and were unable to block it from the database. The anonymous posting concerned a consumer’s “feelings” about one of our products based on a photograph she found on the Internet. Unfortunately, she was clearly wrong and we could prove it. The CPSC wasn’t impressed by our valid CPSIA test reports or photographic evidence of the consumer’s error. I can safely assure you that misleading and inaccurate claims will not only be submitted to the database and but will be posted by the CPSC knowing full well that the claims are untrue. I wrote about my experiences in my blog.
I hope you will reconsider your views on the CPSIA database and weigh more carefully the legitimate concerns of businesses serving the children’s marketplace. We are in this business for a reason – we are devoted to making children’s lives BETTER. The new database will not further our mission, nor will a database filled with garbage benefit consumers. We can do better, and we MUST do better.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Vernon Hills, IL
My blog: http://www.learningresourcesinc.blogspot.com/
I read with interest your March 8th article on the CPSC database entitled “Who’s Afraid of the CPSC?” and was disappointed at the inaccuracies in the piece and your blanket dismissal of the business community's legitimate concerns about the database. The database has devolved into a divisive partisan issue simply because of the utter refusal of consumer groups and their Congressional allies to acknowledge the flaws in the database as well as the law that established it – the Consumer Product Safety Improvement Act (CPSIA).
I'll try to address the inaccuracies one-by-one:
Database cost - $3 million or $29 million? The cost figure of $3 million sparked a public dispute between the CPSC Chairman Inez Tenenbaum and her fellow Commissioner Anne Northup at a House hearing last month. In response to Ms. Tenenbaum’s testimony on the cost of the database, Ms. Northup testified that the figure of $3 million had never been shared with the CPSC Commission and that the only database cost figure she was familiar with was $29 million. Interestingly, in April 2010, the Associated Press reported, based on information provided by the CPSC, that the cost of the http://www.saferproducts.gov/ website would be about $20 million, and the CPSC apparently saw no reason to update the media with the good news that the cost had shriveled to $3 million until the February 2011 hearing. . . . Hmmm.
The supposedly noncontroversial CPSIA database. Why didn’t anyone kick up a fuss about the database in 2008? A better question is “Why didn’t Congress listen when the business community protested?” Here’s what I said in a letter to each Congressional conferee dated June 25, 2008: “While we support public notice of recalls, we oppose a national database of reports of injury, illness, death or risk of injury. This forum will not be subject to appropriate findings of fact and thus will be a forum subject to considerable abuse. In a society where tort lawsuits are an ever-present risk for all businesses, a risk that can wipe out a lifetime’s work in a heartbeat, the very real potential for abuse by competitors or mischief-makers far outweighs the public’s ‘right to know’. Once the CPSC has adjudicated a case appropriately, made a reasonable finding of fact and determined the right course of corrective action, public notice would be appropriate.”
I continued to try to make my point to CPSIA Congressional conferees in another letter dated July 21, 2008, just ahead of final consideration of the CPSIA: “CPSC Searchable Database: The well-intentioned idea for complete safety transparency is an open invitation to mischief makers. This is a real threat to our business, as we know from hard experience. The better way is to let the CPSC filter this data first. Please remember, even YouTube will take down videos on request. The proposed law won’t give defenseless toy companies the same recourse as YouTube. Is that an appropriate way to regulate an entire industry?”
It wasn't only me. Many others in the business community opposed the creation of a database that would contain inaccurate or misleading accusations and complaints. That’s the story of the CPSIA in a nutshell – no one was listening when the law was originally drafted, and now three years later, we are fighting City Hall to restore common sense to federal safety law. Please consider the assertion that consumers really need this database, that it is essential to their children’s safety. In fact, there are many places on the Internet where consumers can and do post their experiences without controversy. Why would a federal database be a greater cause for concern? Well, for one thing, this one is called “SaferProducts.gov” and is sponsored by the federal government. Notwithstanding the lawyer language disclaimers all over the website, it is crystal clear that the public will place a lot of credence in these postings. After all, why would our federal government allow misleading or inaccurate information to be posted on a website called SaferProducts.gov? Ms. Tenenbaum is famous for her defense of “dot gov” websites: “I say don't believe everything you read on the Internet, except what you read on Web sites that end in dot gov.” [Keynote speech at ICPHSO, February 17, 2010] She may not be the only one who feels this way.
The NHTSA database exists; ergo a CPSIA database is a good idea? The NHTSA database can be distinguished in several important ways: (a) auto accidents are a leading cause of death in this country (consumer products are not), (b) every use of automobiles is known to be hazardous and the risk to human life from reckless use of cars is obviously magnified (not true for consumer products), (c) the auto industry is one of the largest components of our entire economy - we all use cars and many of us owe our livelihoods to automobiles in one way or the other (the average sale of consumer products is far less than a car), and (d) at all levels, the auto industry is highly consolidated among a relatively small number of massive companies that are well-prepared for litigation and regulatory issues (consumer products is not a consolidated market and there are many small companies involved in the trade). I think GM, Ford, Toyota and other multi-billion dollar automakers can handle the burden and risk of a database of consumer deaths and serious injuries from use of their products. Our family business, Learning Resources, on the other hand, ain't no GM or Toyota. The NHTSA database is NOT an appropriate precedent for consumer products for all of the foregoing reasons.
"One of the ironies in Pompeo and others screaming bloody murder that the database will kill jobs is that most of the appliances likely to get dinged in the database won't even be American products." This remark completely misses the point, unfortunately. It is American companies that are going to be hurt by the misinformation in the database, whether those companies are manufacturers, importers, private labelers or retailers. Even worse, thousands of American small businesses are going to be put at risk with no practical means to defend themselves. Is this the “American Way” at work? Who will pay when jobs are lost from companies shifting away from this market or dropping products to limit exposure to liability? This is just going to be another self-inflicted economic injury from misguided and overzealous regulation.
Whether the product is made in China, the U.S. or India, it should not matter from a safety perspective. Companies must ensure that they market safe and appropriate products no matter where the products are made. The reality is that every product can break, and accidents and other bad things happen to good people. The database will be unforgiving and if filled with post-it-and-forget-it garbage, will harm innocent victims – American companies that employ your neighbors and make products for your schools. Unqualified and unverified complaints on SaferProducts.gov WILL induce consumers to take our products away from children - pending a recall that may never be forthcoming . . . because nothing's wrong.
Chairman Tenenbaum has publicly encouraged consumers to rely on the postings in the database - to draw conclusions on the likelihood of future injury. This is quite alarming, given that Ms. Tenenbaum also testified in a Congressional hearing in February that the agency will likely post unverified or inaccurate information to the database. She admits that this information will be faulty. As she said in testimony, "that's what the rub is".
Claims of inaccuracies are low in the soft launch. Given the short life of the database in its test phase and the small population of registered users, reports of few data problems must be greeted with skepticism. Less than 1000 companies have registered with the CPSC for the database, an absurdly small percentage of the number of companies whose products will be in the database. Taking into account that many consumer product companies (such as Disney) will need to register numerous brands, product lines and corporate divisions to ensure that the right data flows to the right paper pusher, the current registrations are even paltrier. If companies are not registered, it is unlikely they are even aware of the soft launch, let alone that there may be inaccurate claims against their products being sponsored by the federal government.
Sadly, we are likely to confirm that the CPSC’s faulty processes are damaging companies only AFTER the damage is done. Let’s not forget that the agency is all set to launch a big “public awareness” campaign for the new database – in other words, the federal government will soon be beating the bushes for consumer complaint submissions. As usual, consumer advocates hype uncertain and unquantifiable losses (someone somewhere might not know about something that COULD have been in the database and later be injured) to distract Congress and the media from the certain losses that will befall companies with damaged reputations. Good for plaintiff lawyers but maybe no one else.
Our small company in Illinois has already experienced a materially inaccurate submission – in the very first “complaint” we faced – and were unable to block it from the database. The anonymous posting concerned a consumer’s “feelings” about one of our products based on a photograph she found on the Internet. Unfortunately, she was clearly wrong and we could prove it. The CPSC wasn’t impressed by our valid CPSIA test reports or photographic evidence of the consumer’s error. I can safely assure you that misleading and inaccurate claims will not only be submitted to the database and but will be posted by the CPSC knowing full well that the claims are untrue. I wrote about my experiences in my blog.
I hope you will reconsider your views on the CPSIA database and weigh more carefully the legitimate concerns of businesses serving the children’s marketplace. We are in this business for a reason – we are devoted to making children’s lives BETTER. The new database will not further our mission, nor will a database filled with garbage benefit consumers. We can do better, and we MUST do better.
Sincerely,
Richard Woldenberg
Chairman
Learning Resources, Inc.
Vernon Hills, IL
My blog: http://www.learningresourcesinc.blogspot.com/
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