Michaels Agrees to Pay $1.5 Million over Reporting Allegations

Michaels Stores' $1.5 million settlement of CPSC Section 15 reporting allegations was the third agency penalty announced in FY2018. All were older cases that CPSC had referred to the Justice Department for litigation. The other two involved a court order that Spectrum Brands pay over $1.93 million and Dr. Reddy's $5 million settlement (PSL, 1/29/18).

The Michaels' penalty brings CPSC's FY2018 average to about $2.8 million over three cases. That is lower than averages of the prior two years (see chart below), but keep in mind that this year's set had more Justice and/or court involvement.

Michaels also agreed to other terms that have become common in CPSC settlements. They focused on maintaining a compliance program as well as controls and procedures for adhering to Section 15 reporting duties.

The case stemmed from the retailer's connection to a 2010 recall of vases. Another company was involved in importing them, and Michaels forwarded complaints to that entity. CPSC asserted that the retailers had full reporting duties. There also were material misrepresentation allegations, but government lawyers dropped those last year. CPSC referred the case to Justice nearly three years ago (PSL, 4/27/15).

The Dr. Reddy's settlement involved allegations of reporting failures and lack of CR packaging with some of its prescription drugs. The allegations went back to 2012, and CPSC referred the case to justice in 2016 (PSL, 6/13/16).

The Spectrum case was focused on coffeemaker incidents and was similar to Michaels' in that it involved questions of responsible parties for Section 15 reporting. Another company, Applica Consumer Products, initially had that role. Incidents occurred from 2009 to 2012. Applica became a subsidiary of Spectrum in 2010, and they merged in 2014. The agency referred the case to Justice in 2015 (PSL, 6/22/15).

In assessing penalties against Spectrum, the court did fault CPSC (bit.ly/2BuZoNb) for failing to establish how much of an injury risk the broken carafe handles posed and for submitting no admissible evidence of actual injuries.

Justice announced the Spectrum decision in early October, which was FY2018, but it concluded in the final days of FY2017. PSL, counted it the FY2018 penalties below.