Storm Warning -- Businesses Should Prepare Now for the Impact of the New CPSC Consumer Product Database

Oct. 20, 2010
The database will be a treasure trove of information for regulators, plaintiffs' lawyers, and consumer interest groups.

The federal consumer product database comes online in March 2011, and savvy businesses should act now to avoid having their products listed. The Consumer Product Safety Improvement Act of 2008 (CPSIA), Congress's reaction to mass recalls of lead-tainted toys in 2007, requires the Consumer Product Safety Commission (CPSC) to create and maintain a searchable Internet database of reports of product defects and harm caused by consumer products. This database will be a treasure trove of information for regulators, plaintiffs' lawyers, and consumer interest groups. Manufacturers and private labelers of consumer products should act now to reduce the likelihood that this open database will include adverse reports about their products and should develop a plan to address such reports to minimize their impact.

Storm Front -- The CPSC Database

The database will allow any person to access "reports of harm relating to the use of consumer products, and other products or substances regulated by the CPSC" that the Commission receives from any source, including consumers, health care professionals, child service providers, and local, state, or federal government agencies. The website also will include notices that the CPSC receives from a manufacturer, supplier, or retailer about a product that is allegedly hazardous or fails to conform to federal product safety regulations, including notices related to voluntary recalls.

The reports in the database will provide a description of the product at issue and the alleged harm or defect related to the product. This information will be searchable by each report's date of submission, the name/model of the product, and the name of the product's manufacturer or private labeler (as well as any other information the CPSC deems "in the public interest"). Reports will be posted going forward after the database is publicly launched in March 2011, although consumers will still be able to request past reports from the CPSC. The CPSC has not yet stated how long reports will remain in the database after they are posted.

Manufacturers and private labelers will have the right to comment on reports, and at their request, the CPSC will include these comments in the database. The CPSC also is expected to send the manufacturer or private labeler reports within five days after it receives those reports "to the extent practicable" by given circumstances. Manufacturers and private labelers that receive such reports are allowed the opportunity to comment, but they must respond quickly because the CPSC must add any new report to the database within ten business days after sending it to the manufacturer or private labeler.

Other than this process, the CPSC will not independently investigate or verify a report prior to including it in the database. Although the CPSC is required to reject reports it knows are inaccurate and to correct inaccurate information already posted, the CPSC does not have any affirmative duty to ensure a report's accuracy. If a manufacturer or private labeler has not commented beforehand, the reports in the database regarding its products may be inaccurate or exaggerated. Thus, even though the database will contain "a clear and conspicuous notice to users of the database that the Commission does not guarantee the accuracy, completeness, or adequacy of the contents of the database," that disclaimer will be cold comfort to a company facing the fallout from inaccurate reports about its product.

Storm Surge -- Legal and Public Relations Implications of the Database

The database will be a significant new source of information about consumer products and their manufacturers and private labelers. Although inaccurate reports are problematic, accurate reports are even more so because they create the possibility for significant legal consequences. Both, however, pose significant problems for companies, including the possibility of regulatory action, increased private litigation (especially class actions), and exposure to large damage awards and legal fees, as well as the harder to calculate, but no less significant, damage to companies' brands and the risk that retailers may halt purchases of those goods. As the amount of information available to consumers will increase exponentially, manufacturers and private labelers will need to act quickly to ensure that reports in the database are addressed properly.

The database also is likely to facilitate cooperation between federal and state regulators, particularly State Attorneys General (AGs). The CPSIA authorizes AGs to seek injunctive relief to halt the sale of products that violate federal consumer protection laws and regulations. AGs also have been increasingly active in using their own state consumer protection laws to investigate and sue companies for making and selling dangerous products, such as lead-tainted toys or baby cribs reported to have collapsed on infants. Access by AGs to a database of potentially defective products will enhance the role AGs play in pursuing consumer product actions for which the CPSC may lack adequate resources.

Weatherproofing -- (1) Act Now to Avoid Inclusion in the Database Later

Manufacturers and private labelers should take steps now to minimize the likelihood of adverse reports regarding their products being included in the CPSC database. These steps include implementing procedures now to ensure that manufacturing and purchasing practices comply with federal testing and labeling requirements, as well as those of States with additional requirements (such as California). These procedures include testing for lead and other toxic substances in children's products, ensuring that laboratories test the products properly, maintaining records and correspondence related to quality control, and guaranteeing that packaging is labeled properly. Complaints received from consumers, regulators, and consumer groups should be monitored regularly now to ensure that safety-related issues are identified quickly and addressed properly. Counsel should be included in this process to minimize potential exposure, ensure compliance, and preserve appropriate privileges.

Weatherproofing -- (2) Act Now to Minimize the Adverse Impact of Reports

Companies should also prepare a broader strategy now for dealing with negative publicity and the likely increase in public and private enforcement that will arise from adverse reports, especially multiple ones relating to the same product, being included in the database. With the database providing one-stop-shopping for media, consumer groups, private plaintiffs' attorneys, and state regulators, companies without a plan to coordinate public relations, political outreach, and legal strategies will start the process from behind and will have to play an expensive game of catch-up.

Having a team in place that includes representatives from manufacturing, consumer relations, public relations and counsel and creating a protocol now for addressing complaints, and if necessary, recalls, will allow the company to address problems quickly and minimize their exposure in the long run. In addition, companies should consult with outside counsel who practice regularly before the CPSC and State AGs who can assist in developing cost-effective and efficient compliance strategies. These steps will help companies prepare for March 2011 and the next front of the consumer protection regulatory storm.

Margaret Feinstein is a partner in the Washington, DC office of Dickstein Shapiro LLP and has counseled clients in responding to investigations and prosecutions by state AGs as well as the CPSC and the Federal Trade Commission. Christopher Allen is an associate in Dickstein Shapiro's Washington, D.C. office.

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