Thursday, December 22, 2011

CPSC Registry Launch Could Hurt Those It Was Meant To Help

Under administrative authority and without agreement from the Commission, the Consumer Product Safety Commission has implemented procedures under which small batch manufactures can register to utilize an alternative testing requirement or exemption from third party testing and certification. In doing so, the agency has inappropriately made a unilateral policy decision to publish the business name, city and state of any small batch registrant who cannot prove that the publication would disclose confidential business information.

Congress, in an effort to prevent small business closures and the accompanying financial hardship to business owners and their employees who would be affected by CPSC’s third-party testing requirement, directed the CPSC to provide small batch manufactures with either alternative testing requirements or a complete exemption from third party testing and certification.

In order to register as a small batch manufacturer under the law, a business must make no more than $1 million in total gross revenues from the sale of all consumer products, and must make no more than 7,500 units of the registered product. The revenue and production data of businesses identified as having registered would therefore also be made public. Given the nature of these small businesses, it is unrealistic to expect their owners to possess the legal knowledge necessary to provide evidence and argument establishing the confidentiality of their revenue and production data.

The administrative decision by the CPSC to publish the business information of small batch manufactures on may end up hurting many of the organizations and manufacturers that Congress intended to help. Such companies could be subject to potential negative advertising from larger competitors claiming that the failure to third-party test makes the products less reliably safe. In addition, the same consumer groups who have long pushed for third-party testing may also wish to more widely disseminate the names of manufacturers whose products are not third-party tested, to their competitive disadvantage. Smaller companies can also have greater difficulty placing their products with retailers; so exposing a business’ low revenue threshold could reduce its sales opportunities.

Finally, a small company with a successful product may not wish potential competitors to know that its size makes it an easy target for lower cost competition or a hostile takeover. Companies’ aware of these issues could well choose not to register in order to avoid the competitive harm that may result. It is impossible to imagine that Congress meant to imperil small batch manufacturers who take advantage of this exemption.

Stay No More

As many of you are aware, on December 31, 2011, the CPSC will lift its stay of enforcement on the requirement that most children’s products be third-party tested and certified for compliance with lead, phthalates and/or ASTM F 963 toy safety standards.

As a result, over three years after passage of the CPSIA, children’s product manufacturers and importers will begin to bear the greatest burden imposed by the Act. As I have argued in the past, it has become increasingly clear to most that third-party testing will impose enormous costs without a proportionate justifying benefit, and that the CPSC’s exercise of new enforcement authority and cooperation with the U.S. Customs and Border Patrol (CBP) is a better and more cost-effective approach to ensuring the safety of children’s products sold in the United States.

I want to share with you a recent article I wrote for the BNA Toxics Law Reporter entitled, “The Best Approach to Ensuring the Safety of Children’s Products Sold in the United States.” I hope you find it both interesting and insightful.