On August 14, 2008, the president signed the Consumer Product Safety Improvements Act of 2008 ("CPSIA"), significantly adding to the budget, the oversight responsibilities and enforcement powers of the Consumer Product Safety Commission ("CPSC" or the "Commission"), an agency with regulatory authority over approximately 15,000 consumer products. While many of the CPSIA's provisions are directed to particular children's products and contamination issues, several other provisions represent broader, sweeping changes to how the CPSC will regulate consumer product safety and enforce applicable requirements. Specifically, the CPSIA requires the CPSC to create an online, publicly available consumer product database, reduces the time within which companies can object to public disclosure of confidential information, and increases the cap on civil and criminal penalties for failing to comply with the Commission's reporting requirements. This article reviews these changes and discusses procedures companies ought to consider to ensure the accuracy of publicly available information in CPSC's database, protect confidential information, and recognize the CPSIA's potential impact on product liability litigation.
Changes To The CPSC Database
The Existing CPSC Database
The CPSC's existing Injury Information Clearinghouse contains publicly available information from The National Electronic Injury Surveillance System, death certificates filed by state health authorities, In-Depth Investigations ("IDIs") by the CPSC following consumer complaints, summaries of reports received from the CPSC hotline, product-related newspaper accounts, reports from medical examiners and letters to CPSC. The IDIs, also called Epidemiological Investigative Reports, are follow-up reports prepared by the CPSC when it receives a report of a serious injury. The CPSC will often conduct in-person interviews of the injured party to learn more about the surrounding circumstances. This report is then sent to the manufacturer for comment. The company is not required to respond but may do so if it believes the information is misleading or inaccurate. The company's response will be included with the same file as the IDI.
Another source of information in the current database comes from the CPSC's Retailer Reporting Model. In this system, retailers such as Wal-Mart send all of their incident reports to the CPSC and code the submissions according to certain "triggering" considerations, such as reports of death or serious injury. This data is also sent to the manufacturer. This information is not subject to any verification process by the reporting retailer. The CPSC then makes a determination as to what, if any, follow up is necessary through an IDI. Presumably, the manufacturer receiving the reports conducts a similar analysis.
Acting Chairman Nord has estimated that in the aggregate, the Commission receives over half a million reports from all of its different sources of information each year. The Commission does its best to focus on reports that may indicate a serious product hazard, but this is a monumental task and the CPSC has a limited budget that, prior to the CPSIA, has been reduced in real dollar terms over the years. None of this information is currently available through any online, consumer-friendly database or searchable by product type.
In addition, the CPSC's existing Injury Information Clearinghouse does not automatically include product information from companies filing Section 15(b) reports. A company is required to file a Section 15(b) report with the CPSC if it obtains information which reasonably supports the conclusion that its product creates an unreasonable risk of serious injury or death. 15 U.S.C. § 2064(b)(3)(4). The Section 15(b) report must disclose information about the product, including total sales and reports or complaints involving the safety of the product, 16 C.F.R. § 1115.13(d), and in many instances, must also include information requested by the CPSC beyond that specifically required by the regulations.
The New CPSC Database
Section 212 of the CPSIA requires the Commission, within 24 months after the date of enactment and subject to the availability of appropriations, to establish an online, publicly available consumer product safety database. The database will be searchable by date, product name, model and manufacturer. While the CPSIA authorizes an increased budget for the CPSC over the next several years, Congress must still appropriate the money in its budget. It remains to be seen whether, given the current budgetary restrictions, the CPSC will actually receive these funds.
The new database has been described as an "early warning system" similar to one presently maintained by the National Highway Traffic Safety Administration. The database is intended to avoid what critics claim is an unnecessary delay in the Commission's response to Freedom of Information Act ("FOIA") requests, as well as to address the current difficulty in accessing information on the prior records of specific products. Importantly, the new database would contain information from Section 15(b) reports not otherwise publicly available.
The new database presents a host of problems for individual companies, and affected entities would be well advised to closely monitor the CPSC's forthcoming database proposals. For example, the establishment of a new database raises the following basic and critical questions:
• How will companies protect the disclosure of confidential information contained in correspondence and reports filed with the Commission?
• What are the procedures for ensuring that the information entered into the database is accurate?
• What rights do companies have to correct misleading information with respect to their products? (For example, it is one thing to have five deaths on sales of 5,000 units in one year but quite another to have five minor injuries on sales of 5,000,000 units over 10 years.)
Finally, it is no secret that many FOIA requests are filed by counsel for plaintiffs seeking to prove that a product is defective and thereby caused the plaintiff's injury. In the past, companies could both monitor these requests and take steps to ensure that the reports in the Commission's possession about to be publicly disclosed are accurate. However, the information in the CPSC's database, such as retailer reports, have not been verified. These will presumably be included in the new CPSC database, and a plaintiff's lawyer will have unrestricted access to them. Companies would therefore be well advised to closely monitor the information on the CPSC's database for their individual products to ensure that they have the same information as the plaintiff's counsel. Indeed, companies may very well be found at fault, through the eyes of the jury, if the company is not fully aware of reports present on the Commission's database.
Shortened Time Periods For Objecting To Information Disclosure
Section 6(b) of the Consumer Product Safety Act prevents the public disclosure of proprietary and confidential information. 15 U.S.C. § 2064(b). Information contained in Section 15(b) reports can be made publicly available, for example, through a FOIA request, once a remedial action is requested, a complaint has been issued, or the firm consents. The Commission must notify the company prior to the release of this information, as well as the release of information received from other sources such as consumer complaints.
Section 211 of the CPSIA reduces the time within which a company may object to the public release of information, upon confidentiality or other grounds, from 30 to 15 days. Moreover, Section 211(12) adds an additional provision allowing the Commission to shorten this time period if it determines that "the public health and safety requires public disclosure with a lesser period of notice." It also reduces the time within which a company can file a court action to block public disclosure after the Commission's rejection of the company's initial objection - from 10 to five days. Companies must be sensitive to these shortened time requirements and be prepared to respond quickly or they will have waived their opportunity to do so.
Increased Civil And Criminal Penalties
Section 217(c) of the CPSIA increases the maximum civil penalty for failure to comply with the CPSC's Section 15(b) reporting requirements from $1,825,000 to $15,000,000 and the maximum criminal penalty from one to five years. These civil and criminal penalties can be imposed on the company and/or its officers, directors or agents. Significantly, Section 217(c) of CPSIA also eliminates the requirement that officers, directors or agents have knowledge of the notice of noncompliance sent by the CPSC to the company in order to be subject to criminal penalties. Finally, Section 217 of the CPSIA adds "forfeiture of assets associated with the violation" as an additional criminal penalty.
The increased civil and criminal penalties will, no doubt, encourage companies to file Section 15(b) reports when there is any question as to whether a substantial product defect exists. Indeed, companies will likely submit information to the Commission on products that they do not believe create a substantial product hazard, in an abundance of caution and to avoid even the remote risk of civil and criminal penalties. The Commission risks the possibility that too many reports will be filed and they will not have the resources to address each of these submissions.
The CPSC will undoubtedly argue for higher civil penalties given the increased cap. The CPSC cannot sue on its own behalf but must proceed through the Department of Justice. In the past, it was often far too expensive for both the Commission and individual companies to litigate the penalty issue. This may change as the Commission seeks penalties in the $10 to 15 million range and companies decide to contest this in court. Even where companies have voluntarily submitted information, the agency has in the past sought civil penalties for failure to report expeditiously.
The Commission's actual use of higher criminal penalties is difficult to predict. In the past, the Commission has not, to our knowledge, sought a criminal penalty for failure to file a Section 15(b) report. These cases can be very expensive to prosecute and the agency must prove criminal intent beyond a reasonable doubt. Nevertheless, the elimination of the notice of noncompliance requirement for company officers, directors and agents could have such an in terrorem effect that such individuals may insist that reports be filed to avoid even the remote possibility that a criminal action could be brought against them.
Mark L. Austrian is a Partner in the litigation practice group at the Washington D.C. office of Kelley Drye & Warren LLP. He represents companies in intellecutal property, toxic torts, environmental, products liability and commercial law litigation, and represents companies before the CPSC.