Navigating the Consumer Product Safety Improvement Act
HIGH STAKES
THIS ISSUE: NAVIGATING THE CONSUMER PRODUCT SAFETY IMPROVEMENT ACT
While enforcement of the Consumer Product Safety Improvement Act (CPSIA) isn’t expected to begin in earnest until early 2010, smart companies are readying themselves now for a new era of product safety regulation. Soon, the compliance hurdles will be taller, the penalties for failing to clear them will be harsher, and the brand liabilities that accompany enforcement actions will be more dangerous.
In this issue, we outline the steps companies must take to ensure compliance and reputational strength in the face of intensified product safety scrutiny…Gain insight from David Schmeltzer, former Director of Compliance at the Consumer Product Safety Commission…Take a look at the blogs covering product liability issues…And examine how the U.S. focus on product safety regulation is extending overseas.
In this issue, we outline the steps companies must take to ensure compliance and reputational strength in the face of intensified product safety scrutiny…Gain insight from David Schmeltzer, former Director of Compliance at the Consumer Product Safety Commission…Take a look at the blogs covering product liability issues…And examine how the U.S. focus on product safety regulation is extending overseas.
Strategies: Understanding the CPSIA
Companies that recall defective products next year – and for the foreseeable future – will be under scrutiny from federal regulators implementing the CPSIA, which imposes fines of up to $15 million on manufacturers and retailers who fail to follow the new law’s strict procedures.
Already, a newly organized coalition of small businesses is addressing the costs of the new law in communications with Congress and in publications like The Wall Street Journal. Yet Consumer Product Safety Commission (CPSC) Chairman Inez Tenenbaum remains aggressive, declaring that her agency plans to crack down hard on companies that violate the CPSIA.
Under the CPSIA, whistleblower protections have been enhanced and criminal and civil penalties have dramatically increased. All 50 state attorneys general have the power to go after companies they perceive to be in violation of CPSIA standards. Prosecution under state laws could add jail time for corporate executives found responsible for non-compliance. Additionally, the new law empowers the CPSC to determine whether a company has communicated effectively during a recall with consumers.
Companies should take the following first steps to ensure they are ready to comply with the CPSIA:
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Keep detailed records of each product’s manufacturing date, serial number, batch number, and plant so you can easily trace a problem to its source and report it to regulators.
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Hire a qualified company in advance that can set up a consumer call-in center in 12 hours or less.
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Be ready to fix, collect, store, and dispose of any faulty products. If you require outside help, establish relationships with partners now while there is still time to plan.
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Prepare a recall communications plan that can be implemented as soon as a recall is announced. Transparency with consumers and the news media is mandated under the new law.
Federal and state regulators, Congress, plaintiff’s attorneys, and consumer groups now expect manufacturers and retailers to shoulder more of the burden of safeguarding consumer safety. Smart companies will prepare now or face the consequences of a recall that falls short of the CPSIA’s demands.
Industry insight: David Schmeltzer of Stericycle's industry-leading Expert RECALL team
David Schmeltzer is a veteran of the Consumer Product Safety Commission (CPSC) who served as the CPSC’s Director of Compliance for more than 20 years. As Director, he supervised the enforcement of all Commission regulations, monitored investigations of potentially dangerous defective products, and reviewed the adequacy of recalls.
A nationally recognized expert on recall communications and logistics who now helps businesses navigate product liability crises in the most cost-effective, efficient, and brand-protective manner possible, Mr. Schmeltzer shared his insights on an impending regulatory sea change that will dramatically raise the recall stakes.
With key punitive measures of the Consumer Product Safety Improvement Act taking effect this week, what do companies need to know about their new liabilities in product recall situations?
David Schmeltzer: The CPSC is a changed agency. It has more people, more money, and a mandate from the Washington power structure to better protect consumers from potentially harmful products. That means companies should be more vigilant than ever in ensuring that every aspect of a product recall is in order. If not, an inadequate recall that results in serious injuries to consumers has a far greater chance to bring about product liability law suits, government criticism, and harsh oversight.
The maximum civil penalty the CPSC can impose will rise from $1.8 million to $15 million. Corporations will be subject to criminal penalties and asset seizure. Their board members can also be held personally liable if product safety is called into question. Criminal penalties will rise from $8,000 to $100,000. State attorneys general will be empowered to bring independent investigations.
To make a long story short, the monetary and reputational costs of product safety shortfalls are reaching unprecedented heights. Furthermore, I am fairly confident that the CPSC is going to maintain this new level of intensity for some time to come.
Will consumer product companies now be held liable, not only for the problems that led to a recall, but for the effectiveness of a recall itself?
David Schmeltzer: Probably not by the government – though it certainly can and has required companies to do additional recall announcements if it finds recall results inadequate. Moreover, you can be sure that the plaintiffs’ bar will be watching recalls very closely to leverage any perceived shortcoming into a big-dollar award or settlement.
Because the CPSIA includes measures aimed at boosting the effectiveness of recalls themselves, there are more hurdles to clear and more opportunities to make mistakes. If the government finds fault with any aspect of a company’s recall, that strengthens the case of plaintiffs who will argue that “had your recall been more effectively carried out, my client wouldn’t have suffered an injury.”
What’s next with respect to product safety regulation? Are there more issues emerging on the horizon that companies should be aware of?
David Schmeltzer: Legislators and regulators have a hot issue on their hands, so I wouldn’t expect the government’s focus on product safety to wane any time soon. Congressman Henry Waxman is the new Chairman of the House committee on Energy and Commerce – and we all know that he’s going to have a lot to say about how recalls are conducted and monitored. Congressman John Lewis has already introduced new legislation focused on improving recall notification procedures. And consumer groups are already clamoring for stricter guidelines, tougher penalties, and increased government oversight.
The advice to companies moving forward is simple: Be ready to meet the stringent new standards in product recall situations or be ready to face the harsher punitive and reputational penalties that are lurking just around the corner.
Blogs and Product Liability
In this changing product liability environment, companies must stay on top of up-to-the-minute developments that could threaten significant civil, criminal, and reputational liability. The blogs are your best source of the intelligence that keeps you ahead of the game.
Here’s a look at three blogs you should be watching:
ExpertRECALL’s Blog
http://www.expertrecall.com/blog/
Stericycle’s industry-leading recall management service, ExpertRECALL, maintains this blog, which provides tips and strategies for both manufacturers and retailers to ensure product liability compliance across the board.
http://www.expertrecall.com/blog/
Stericycle’s industry-leading recall management service, ExpertRECALL, maintains this blog, which provides tips and strategies for both manufacturers and retailers to ensure product liability compliance across the board.
Drug and Device Law
http://druganddevicelaw.blogspot.com/
Authored by two experienced product liability attorneys, James Beck and Mark Herrmann, Drug and Device Law is the most widely read product liability blog on the Web and an excellent source of information on the latest recall developments.
http://druganddevicelaw.blogspot.com/
Authored by two experienced product liability attorneys, James Beck and Mark Herrmann, Drug and Device Law is the most widely read product liability blog on the Web and an excellent source of information on the latest recall developments.
Product Liability Law Blog
http://www.productliabilitylawblog.com/
Product Liability Law Blog, published by personal injury firm Gilbert, Ollanik & Komyatte, is a great resource for keeping track of which industries and products the plaintiffs’ bar will likely target next.
http://www.productliabilitylawblog.com/
Product Liability Law Blog, published by personal injury firm Gilbert, Ollanik & Komyatte, is a great resource for keeping track of which industries and products the plaintiffs’ bar will likely target next.
What’s next? Product safety focus extends overseas
As companies scramble to comply with the tough new standards implemented under the highly publicized and much scrutinized CPSIA, it’s easy to overlook similar regulatory initiatives looming beyond U.S. borders.
But as this month’s interviewee, David Schmeltzer of Stericycle’s ExpertRECALL team, reminded us in a blog post published last month, the CPSIA is but only one piece of the global compliance puzzle for consumer product companies that do business overseas.
For instance, the European Union issued a Toy Safety Directive in July that enhances toy safety standards and implements new marketing rules for juvenile products. While enforcement of the directive won’t begin until July 2011, international toy manufacturers are well advised to conduct reviews now to ensure their business practices are in line with the new law.
In Canada, a bill striking similarity to the CPSIA – and aimed at U.S. importers – is expected to pass soon. Unlike the EU’s Toy Safety Directive, the Canada Consumer Product Safety Act isn’t limited to a single industry or product sector. It covers everyone, while also empowering the Canadian government to order a recall of any product that doesn’t meet its strict safety criteria. Again, forewarned is forearmed – not only to ensure compliance, but engage consumers should a product be declared hazardous or unsafe.
Finally, increased cooperation between the U.S. Consumer Product Safety Commission and Chinese regulators means that global companies can expect increased scrutiny, not only of products sold overseas, but also of those manufactured overseas. International supply chains – particularly in China – have been in the media spotlight since the pet food and lead paint scares of 2007. With increased cooperation, coordinated government action against manufacturers is a foregone conclusion.
Like just about everything else, government action on product safety is now global. The focus of U.S. consumer product manufacturers must also be global if they hope to avoid government sanctions and loss of business overseas.
This month's top posts on Levick's...
Former Speaker of the House Newt Gingrich shares insight on how what’s happening inside the Beltway – from healthcare reform to the new federal pay czar – are affecting businesses across the country.
Richard Levick examines how U.S. Airways’ Captain Chelsey “Sully” Sullenberger’s heroic crisis response is an example for business leaders in the eye of the storm.
Dallas Lawrence outlines six tips for effectively building communities of support and cultivating brand loyalty among Facebook’s 300 million worldwide users.
Plaintiff’s attorney Won Kim chats with Larry Smith about a new ruling that significantly changes the Canadian class action landscape.
Karen Tyson, Senior Vice President for Communications of the Independent Community Bankers of America, talks about how community banks can continue to regain public trust in the wake of the financial crisis.
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When news cycles are measured in minutes rather than hours, rapid responses to crisis are absolutely essential to winning the communications battles.To help ensure success in the Court of Public Opinion, Levick Strategic Communications presents the second edition of the Crisis Communications Desktop Reference. Featuring updates on issues of critical importance to communicators - as well as a comprehensive look at the issues arising out of the current economic crisis - it is a fully searchable, downloadable desktop resource covering more than two dozen topics of urgent concern to business. It provides, with a click of the mouse, the strategic guidance you need the moment a crisis strikes. Download the complementary Crisis Communications Desktop Reference today.
Making Your Point
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Stop the Presses: The Crisis and Litigation PR Desk Reference – now in its second edition – is a survival manual for corporate leaders, board members, lawyers, and communications specialists. This book provides the dos and don’ts of crisis planning and communications and articulates the essential strategic guidelines for navigating myriad bet-the-company issues. Order your copy today.Future High Stakes™ issues
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Patents & IP Litigation:
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
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Whether in the midst of crisis or at the end of a long and successful run, CEO departures present critical communications challenges. Do you know how they are best overcome?
More to come:
- Coming to America
- Diversity
- Education
- Executives Behind Bars
- Food
- Global Capital Markets
- Intellectual Property
- Internal Communications
- Internal Investigations
- Monetizing Moments
- Money Laundering/Money Transfers
- New Media/Social Networking
- Product Liability
- Professional Services Crises
- Public Equity
- Whistleblowers
- Reputation Management – Celebrity
- Reputation Management – Corruption
- Reputation Management – SEC Investigations
- Tourism
- Trade
Next month in High Stakes™: C-SUITE ISSUES ABOUND