Will fines follow last year's record recalls?

In the last three months of 2007, the Consumer Product Safety Commission issued 167 recalls, according to the Product Safety Letter, an independent newsletter that tracks product-safety issues. That's almost 50 percent higher than the same period a year earlier and more than double the number issued the year before that. Many of those recalls were for toys that violated the lead-paint ban.

We may have turned the page on 2007, but many of last year's recalls remain fresh in the minds of CPSC officials. The agency is now investigating whether any companies should be fined for those safety breaches. As CPSC's spokeswoman Julie Vallese told us, "It is unlikely that manufacturers will be getting off scot-free for violating the lead-paint ban." 

It will be interesting to see just how far the CPSC goes in "punishing" the manufacturers that repeatedly violated regulations. The agency has the power to impose financial penalties on companies that violate mandatory safety standards, such as lead paint regulations, but the agency's track record hasn't been great for levying those fines. In the relatively few instances over the past few years when the agency has fined firms, it has issued civil penalties based on a single reason: failure to report possible defects in a timely manner. Last month, for example, HSN LP (previously known as Home Shopping Network), agreed to pay a civil penalty of $875,000 to settle allegations that the company failed to report in a timely manner serious injuries and hazards with the Welbilt Electronic Pressure Cookers. 

More than 25 million children's toys were recalled in 2007. Some of those recalls were for lead paint, toxic chemicals, and other hazards for which there are mandatory standards in place; other recalls involved toys that were defective. But last year Fisher-Price was the only toy company to be assessed civil penalties. Even then, the fine was just $975,000 for failing to report to the CPSC injuries associated with a defective toy (Little People Animal Sounds Farm) uncovered years ago, not for the violation.

The Commission usually doesn't issue fines for the safety violation itself because the burden of proof is far higher and more procedurally complicated than it is for issuing recalls. And with limited resources, agency representatives say it has preferred to spend its time, money and staff on preventative and corrective actions such as product recalls.

We at Consumers Union, publisher of Consumer Reports, are well aware of the agency's current limited resources and have been pushing Congress hard to pass the legislation necessary to boost the CPSC's budget and authority. But we think the agency should consider using some of its valuable resources right now to more aggressively pursue companies that violate mandatory safety standards. And later on, when the CPSC has more resources at its disposal and the authority to levy higher fines, we hope it will have the courage to slap some meaningful fines on companies for violating safety standards—not just violating the reporting rules—so that all companies will be more vigilant in producing quality, defect-free goods in the first place.

Manufacturers of unsafe products are also facing another type of penalty in the form of class-action lawsuits. Last week, RC2 Corporation, the maker of Thomas the Tank Engine, agreed to a proposed settlement valued at approximately $30 million to settle a nationwide class-action lawsuit representing families that purchased lead-laden toy trains. The agreement also includes toy exchanges and refund programs. Other similar actions may follow. And that could become a strong incentive for manufacturers to ramp up their product safety assurance practices.

We'd  like to hear your thoughts on this matter. Do you think civil penalties should be levied against those companies that brought all those toys with lead paint to the market? Or do you think the bad publicity and threat of lawsuits many of these companies faced is sufficient?  Please post your comments below.