Andrew M. Grossman and James L. Gattuso analyze the CPSC Reform Act, S. 2663 (the update to S. 2045). We discussed Feb. 20 and Feb. 25, as well as briefly Jan. 1. Update: After the jump, Senator DeMint’s office provides the “Top Ten Reasons to Oppose the CPSC “Reform” Act (S. 2663)”

Top Ten Reasons to Oppose the CPSC “Reform” Act (S. 2663)

1. Makes it legally impossible to fire disruptive employees: Once an employee – be they a union salt or just your average disgruntled employee – notifies the CPSC of an action they “believe to be” a violation of a consumer product safety regulation, the employer faces fines in excess of $250,000 if they discharge or take any “negative” action against them. This will dramatically expand the scope of federal whistleblower protections. (Section 21)

2. Creates a public government-sponsored website to anonymously smear companies: The substitute requires the federal government to establish a website to post complaints from consumer groups. Now left-wing interest groups don’t have to harass businesses via their organization’s website, they can post them on CPSC.gov. This places the imprimatur of the federal government on oftentimes frivolous complaints filed by left-wing interest groups. This database will be of little use to anyone other than trial attorneys and left-wing interest groups. (Section 7)

3. Creates a new tool for anti-business state AGs to harass companies: Under the “Spitzer Section” of the bill, State Attorneys General will now have a new cause of action to sue companies to enforce the Consumer Product Safety Commission rules. Instead of having to comply with only one federal authority regulating consumer product safety, American businesses now have to worry about complying with the varying interpretations of law of 50 state Attorneys General. (Section 20)

4. Undermines a cooperative relationship between businesses and the CPSC: Under the information disclosure provisions of current law, information is reviewed for accuracy and fairness. Under the bill, this protection would go away and all information will be posted on the internet within 15 days. This will eliminate thousands, possibly tens of thousands of voluntary reports the CPSC uses every day to do their job. This cooperative relationship ensures that businesses and the CPSC share information and work together to protect consumer safety. Under the new regime, instead of having experts cooperating with experts, you’ll have lawyers fighting with lawyers. (Section 7)

5. Massively increases fines, threatening small businesses for no good reason: The substitute increases maximum civil penalties more than 10-fold and the individual violation penalty more than 50-fold subjecting each product that wrongfully enters the stream of commerce to a $250,000 fine. The threat of a $250,000 fine will cause many small manufacturers and retailers who commit only minor violations (50 toys) to declare bankruptcy. Larger businesses are already discouraged from having defective products in the stream of commerce by the impact on their reputation and more importantly their stock price. After the 2007 scandals alone, Mattel’s corporate valuation lost $5.4 BILLION. (Section 16)

6. Dick Durbin’s Garage Sale: Senator Durbin, at the behest of an Illinois-based company, has included language in the bill that overrides the garage door safety standards developed by the non-profit independent Underwriters Laboratory and American National Standards Institute (UL 325). Senator Durbin decided that it was appropriate to substitute his judgment, and the judgment of the company’s lobbyist, for that of the panel of technical experts who were assembled to evaluate what technologies were safe for use in garage door openers. Senator Durbin is setting a terrible precedent by substituting the judgment of a lawmaker for that of experts in a highly technical and complex subject area. (Section 31)

7. Threatens to send the owners of small companies to prison for unknowingly selling a dangerous product: Section 16(b)(2) states, “(2) DIRECTORS, OFFICERS, AND AGENTS.—Section 21(b) (15 U.S.C. 2070(b)) is amended by striking ‘‘19, and who has knowledge of notice of noncompliance received by the corporation from the Commission,’’ and inserting ‘‘19’’.” Under the new regime, unknowing violations of the CPSA could lead to jail time for business owners. This may make the bill proponents feel good, but it does nothing to improve product safety. (Section 16)

8. Eliminates protections from disclosure of confidential preliminary information: Under current law industry can share information with the CPSC discussing preliminary factual matters (i.e. the company had recently received a report that a product had malfunctioned) even if the information may or may not have a bearing on a possible future recall. This open sharing of information provides a significant amount of important information that the CPSC can use to make informed recall decisions. Under the vague authority to allow disclosure when the CPSC deems the information “in the public interest” companies will be extremely unlikely to voluntarily share information because of fear of having all the information end up on the CPSC’s website regardless of whether it has an actual bearing on public safety. (Section 7)

9. Increases the CPSC’s budget by nearly 100% and significantly increases the staffing at CPSC: The bill increases the budget of the CPSC from $80 Million in FY08 to over $158 Million in 2015. It would also take the CPSC from its 2007 level of 393 full time equivalents to 500 full time equivalents. While there may be needs at the CPSC, there has been scant justification for these increases in the size and scope of government. (Sections 3 and 4)

10. The Bill has been endorsed by the Consumer Federation of America and the Consumers Union: The Consumer Federation of America said the measure contained “significant improvements over the status quo” and the Consumers Union, said the agreement “adds important new tools to the CPSC toolbox, and moves us closer to finally fixing our broken product safety system.” But in fairness, Public Citizen dissented saying the Senate bill would leave the CPSC with “far less authority than most regulatory agencies.” There’s always conference.

Filed under: attorneys general, CPSC Act, CPSIA, Eliot Spitzer, Public Citizen, trial lawyer earmarks, whistleblowers