CPSC Gives phil&teds a Break on Civil Penalty Amount

Correction: In an earlier version of this story, the chart at the bottom contained some erroneous figures that led the totals and averages to be incorrect. The chart and the last paragraph have been changed to reflect that the FY2015 total was $24.4 million (not $24.5 million), the FY2014 total was $7.5 million (not $7.1 million), the FY2015 average was $2.71 million (not $2.72 million) and the FY2014 average was $1.5 million (not $1.4 million).

Phil&teds' sworn representation that it cannot pay more than $200,000 and stay in business led CPSC September 8 to suspend all but that amount in a $3.5 million reporting settlement. The agreement, however, holds the company responsible to pay the full amount if it defaults in any of four areas:

• Payment of the $200,000 or portions of it when due.

   

• Accuracy of representations and warranties in the agreement.

   

• Adherence to all terms in the agreement.

   

• Full compliance with all CPSC statutes for three years.

The agreement includes creation of a compliance program, an element that has become common to reporting settlements in recent years. The nine areas include written standards and policies, procedures to ensure accurate reporting, procedures for implementing corrective actions, procedures for collecting information from affiliates, a mechanism for employees to report information confidentially and internally, effective communication of compliance policies to employees, senior manager responsibilities and accountability, board oversight, and retention of compliance records for five years.

The alleged reporting violation involved MeToo clip-on highchairs that were recalled in 2011 (PSL, 8/26/11) for detaching, which risked falls and finger pinches. The remedy was a repair kit. That move had followed a disagreement between CPSC and the company, which was offering rubber boots to attach to the upper clamp grips. The agency had deemed that remedy to be unsatisfactory and had issued a unilateral release (PSL, 5/12/11) warning of the risk and dissatisfaction with the company’s remedy: rubber boots to attach to the upper clamp grips. The later, negotiated recall announcement instructed consumers who received the first remedy to stop use and get the updated one.

In the new settlement agreement, CPSC asserts that phil&teds obtained information between September 2009 and October 2010 that triggered its reporting obligations, including finger amputations. The agency also noted that phil&teds made two design changes and, moreover, alleged that when the company did report, it omitted amputation incidents, did not specify the finger risk in its reporting, and did not disclose the redesigns.

The company’s response in the agreement included that it believes it complied with CPSC rules and took the initiative in reporting. It further asserted that “unreasonable misuse of the product was the cause of serious injuries.”

See the settlement agreement at 1.usa.gov/1XQCVhh.

This agreement takes CPSC’s civil penalty total for FY2015 (ends September 30) to $24.4 million over nine settlements. That is more than three times the total in FY2014 over five settlements: nearly $7.5 million (see chart below). The average has nearly doubled, rising to about $2.7 million from about $1.5 million.