Will Product Recalls become more common during the Biden administration?
The Senators are fired up. They have questions, lots of them, for the U.S. Consumer Product Safety Commission (CPSC), the federal agency responsible for monitoring the safety of some 15,000 types of consumer products. Is the CPSC going to up the ante and become more aggressive in pursuing product safety-related recalls? Will the new leadership at CPSC succumb to pressure to abandon its voluntary enforcement model and begin to mandate recalls? Importers and manufacturers would be well-served to play close attention and to assume that however the specifics play out, enforcement at CPSC is on the increase.
Questions are being asked
In a recent confirmation hearing on Capitol Hill, to review President Biden’s three new nominees to lead the CPSC, the questions from the Democratic Senators laid bare their criticism of the agency. Their view is of an anemic agency asleep at the wheel, one that doesn’t pursue its mission vigorously. As one senator stated, it is time for the CPSC to “end the era of corporate deference and take seriously the agency’s mission to keep consumers safe.”
Senator Ed Markey (D- Mass), asked each of the nominees to commit to making CPSC recalls “mandatory” and not “voluntary”. This was a striking and important question for anyone who follows the CPSC. 99.99% of consumer product recalls for almost the past 50 years have been “voluntary”. These voluntary recalls are common because most companies realize it is in everyone’s best interest – theirs and their customers – that they act quickly to remove potentially dangerous items from the marketplace. The CPSC has typically recognized that encouraging companies to voluntarily initiate a recall is the fastest way to encourage consumers to stop using the product in question and provide an equitable remedy – often a repair or a full refund. CPSC even developed its own Fast Track Recall Program specifically to expedite its internal approval process for those voluntary recalls where a company has indicated its willingness to partner with the CPSC and to quickly produce the required documentation that CPSC needs to make an informed decision.
And, despite the Senator’s question, voluntary recalls are not likely to go away as CPSCs preferred approach. Under current law, for CPSC to make every recall mandatory, the agency might have to sue a hundred or more companies every year. Even the government doesn’t have those resources. But even the fact that the question was raised should serve as a red warning flag that the CPSC will likely be upping the ante. To quote an old 1980’s advertisement, “When Senators talk, the CPSC listens.”
Is the CPSC heeding the call to action?
And the CPSC is listening. Even before the new majority takes the helm, the CPSC has already started to take heed of the mood on Capitol Hill and institute a series of aggressive actions that have caught the attention of product safety professionals. The agency has begun suing companies, including the largest retailer in the world, Amazon.com, for allegedly not recalling products in conjunction with the CPSC (Amazon responded that it has already taken the actions that the CPSC would require). In addition, the CPSC has come down hard and publicly on other companies who resisted CPSC’s determinations that a product is hazardous. These dire product warnings are stark examples of the clout and effectiveness of the agency in forcing recalls even without filing a lawsuit.
CPSC has ‘lawyered up’, requiring lengthy contractual-like documents outlining the details of each recall, what the company is promising to do, and how the company is promising to promote and deliver notice of the recall to affected consumers. Heeding the calls of the Senators, CPSC is pushing for much greater public notification requirements for companies, pressuring companies to post recalls repeatedly on various social media channels and to use financial resources to promote recalls, including purchasing advertising on major search engines promoting its recalls. This is all a remarkable and drastic turnaround from less aggressive CPSC policies in prior years where companies and the agency simply announced the recall and placed a notice on the company’s website.
Is new legislation on the horizon?
There are also increasing calls to make the agency better funded and more efficient. New legislation in Congress is likely to come. The agency can do a better job with Big Data, sifting and analyzing the information already provided to it by companies. There is also much room for improvement in getting notice to consumers more quickly. The agency has been notoriously slow in conducting recalls as compared to its peer agencies, like the Food and Drug Administration (FDA) or the National Highway Transportation Safety Administration (NHTSA), which can often publish their recalls the same or the next day. CPSC recalls – even so-called Fast Track recalls – require extensive in-house review at the CPSC and often take 1 to 2 months to publish with the agency’s consent. Working with the CPSC can be frustrating for a company which wants to announce its recall quickly.
Congress has already approved an additional $50 million of funding for the agency over the next five years to supplement the agency’s work at the ports screening for regulatory violations. Congress is widely expected to raise the agency’s budget from approximately $130 million annually to approximately $170 million annually. (By contrast, FDA’s budget is about $6 billion).
The people to know
The names to know are the three new Democratic nominees whose confirmations are pending in the Senate to lead the CPSC. Alexander Hoehn-Saric would serve as Chairman, the most important role at the CPSC. The Chairman role has been unfilled for many years due to partisan deadlock on Capitol Hill. Hoehn-Saric has worked as a senior staff person on Capitol Hill for many years. He is currently Chief Counsel for Communications and Consumer Protection at the House Energy and Commerce Committee, which oversees the CPSC. He has previously worked at Charter Communications and at law firms.
Mary Boyle, an attorney who is currently CPSC's Executive Director and Richard Trumka, Jr., an attorney who currently serves as General Counsel and Staff Director at the House Oversight and Investigations Committee's Subcommittee on Economic and Consumer Policy, would both serve as Commissioners. There are already two Republican Commissioners serving at the CPSC: Peter Feldman, also of Capitol Hill, and Dana Baiocco, an attorney, formerly a partner at the law firm of Jones Day. Commissioners are akin to Directors on a Board of Directors while the Chairman is, of course, the Chair of the CPSC who appoints and oversees the Executive Director and the day-to-day direction of the agency.
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About the Authors: Rick Brenner and Neal Cohen lead Product Safety Advisors, a boutique firm based in DC and NY and which is focused on recall avoidance and recall readiness. Beazley has partnered with Product Safety Advisors as its preferred consultant. All Beazley consumer product recall insurance policies include complimentary access to Product Safety Advisors for guidance in the event of a potential issue or insurable event.
Disclaimer- The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Beazley or its affiliates.