CPSC FY2015 Civil Penalty Average Rises to $2.3 Million

CPSC’s August 14 settlement with Johnson Health Tech to pay $3 million over Section 15 reporting allegations pushed the average penalty in fiscal 2015 to $2.3 million and the total to $20.9 million. This is for eight settlements this year and compares to a FY2014 average of $1.5 million over five settlements totaling $7.5 million. The FY2015 average had been at $2.0 million (PSL, 7/27/15) prior to this announcement (see chart below).

The Johnson case involved CPSC’s allegations that the company received incident reports between March 2012 and October 2013 of smoking, sparking, fire, and melting power components for its Matrix Fitness Ascent and Elliptical trainers. CPSC further asserted that the company made two responsive design changes but did not comply with its reporting duties under Section 15. The company recalled the products in January 2014.The company’s response in the settlement agreement included that it did not knowingly violate the law and did report the problem.

The settlement also contains provisions for the company to set up a compliance program, which has become an increasingly common element of such actions in recent years.

Read the settlement agreement at 1.usa.gov/1MDksRt. Comment on it by September 2; see the August 18 Federal Register for information on how to do so.

Commissioners Ann Marie Buerkle and Joseph Mohorovic voted against accepting the newest payment, but the commission accepted it 3-2 along party lines.

The two Republicans have voiced concern recently with CPSC’s civil penalty approach. Mohorovic commented on an Office Depot settlement that CPSC has not met its burden to make that approach clear and worried about the possibility of inconsistent application (PSL, 6/1/15). Buerkle, following an LG settlement, said she opposes the current drive to push penalties higher, suggesting there is no evidence for the claim that companies see CPSC penalties merely as costs of doing business (PSL, 8/3/15). She called for CPSC to do more to make reporting requirements – which account for nearly all settlements – less vague.

The CPSIA in 2008 raised the CPSC civil penalty cap to $15 million from $1.825 million. It since has increased to $15.125 million due to built-in adjustments. Thus the current payments, while rising, are not hear that ceiling. Last winter, Chairman Elliot Kaye publicly announced his support of CPSC staff’s desire to push penalties higher.

Meanwhile, CPSC has two pending court cases with companies that refused to settle reporting allegations: Spectrum Brands with coffeemakers (PSL, 6/22/15) and Michaels with glass vases (PSL, 4/27/15). Both involve whether the companies were the responsible parties. Spectrum obtained and merged with the company that allegedly failed to report. Michaels’ case (PSL, 4/27/15) hinges on whether it or another company was acting as importer. CPSC says Michaels was, meaning it was obliged under the law to submit more-detailed reports than as just a retailer.