CPSC Again Pursues Significant Penalties for Untimely Reporting

On November 14, 2016, the United States Consumer Product Safety Commission (CPSC) announced that PetSmart, Inc. has agreed to pay a $4.25 million civil penalty for failing to timely report that two of the fish bowl brands it sold had a defect that could create a substantial product hazard or that the fish bowls posed an unreasonable risk of serious injury. The fish bowls were sold for about $20 each from March, 2010 through September, 2013. PetSmart had received 19 reports of fish bowls cracking, breaking or shattering during use, resulting in lacerations requiring stitches and some severed tendons requiring surgery.

This case highlights the seriousness with which the CPSC treats untimely reports. PetSmart conducted a recall on the fish bowls in 2014 and an expanded recall in 2015. In total, PetSmart recalled about 91,000 fish bowls. With a retail price of about $20, the total revenue PetSmart received on the fish bowls was around $1.8 million. Thus, the penalty agreed to by PetSmart was more than two times the revenue PetSmart received by selling the fish bowls. Put another way, the $4.25 million penalty was equivalent to paying nearly $225,000 for each of the 19 incidents that occurred.

The Consumer Product Safety Act, which the CPSC relies on in enforcement actions, requires companies to “immediately” inform the CPSC of defects that “could create” a substantial product hazard or defects that “create an unreasonable risk of serious injury or death.” While the Federal Regulations allow a company to perform an expeditious investigation to determine whether to notify the CPSC, this latest penalty underscores the importance of making reports as quickly as possible. The PetSmart penalty also highlights the importance of careful and accurate investigation when reporting to the CPSC. In announcing the civil penalty in this matter, the CPSC noted that PetSmart had initially failed to identify the correct amount and distribution dates of the fish bowls that posed a hazard, and therefore committed a further violation of the Consumer Product Safety Act by knowingly misrepresenting the scope of products subject to the CPSC’s action.

“The PetSmart civil penalty is merely the latest example of the CPSC’s aggressive enforcement efforts against companies that fail to timely report product defects,” said John Wackman, product liability and regulatory attorney with Nilan Johnson Lewis. “Companies should be aware that by filing a report with the CPSC of a potential product defect they are not committing to perform a product recall or take other corrective action.”

“Indeed, many reports filed with the CPSC do not result in recalls or other corrective actions,” added Ben Johnson, also with Nilan Johnson Lewis. “However, by filing a timely and accurate report, companies can avoid the type of civil penalty just agreed to by PetSmart.”

John Wackman and Ben Johnson are product liability and regulatory attorneys who have substantial experience assisting companies in dealing with their CPSC obligations. To contact John about regulatory or product liability issues, email him at jwackman@nilanjohnson.com or call him at 612.305.7659. Ben can be reached on the same issues at bcjohnson@nilanjohnson.com or 612.305.7693.

 

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