Hunton Retail Law Resource

June commenced with another massive civil penalty. A manufacturer agreed to pay a $5.2 million civil penalty and maintain a compliance program for allegedly failing to immediately report defective floorboards in recreational off-highway vehicles. In a three-year period, the manufacturer received over 400 reports of floorboards cracking or breaking in one vehicle model and over 150 similar reports in two other models. Once the manufacturer filed its report, it allegedly underreported the number of floorboard incidents associated with one model and failed to identify altogether the floorboard incidents associated with the two other models. These omissions, according to CPSC staff, constituted a material misrepresentation. The CPSC accepted the settlement by a 4-to-1 vote.

April served as a microcosm for recent trends in the world of recalls. A gas range manufacturer agreed to pay a $4.65 million civil penalty to the CPSC. In a six-year period, the manufacturer received 170 incident reports that the gas ranges had turned on spontaneously and could not be turned off using the control knobs. But the manufacturer knowingly failed to notify the CPSC immediately. The manufacturer agreed to pay the massive penalty, maintain an enhanced compliance program and maintain a related system of internal controls and procedures.

This past week, several consumer actions made headlines that affect the retail industry.

Public Comment Period Extended for FTC’s Connected Car Workshop

The FTC has announced that the public now has until May 1, 2017, to submit public comment ahead of its June 28 workshop on connected cars.

March was an eventful month in the world of recalls. Children’s products have always been a CPSC focus, and for good reason. A recent study by Nationwide Children’s Hospital examined data over a 21-year period and found that a young child visits the emergency room for an accident involving a nursey product about every eight minutes. That is roughly 66,000 children annually. Last month alone, children’s products were the subject of six recalls. That trend continued in March as six children’s products were again recalled—infant caps, toys, games, sleepwear, bibs and rattles. The CPSC also approved unanimously a new federal safety standard for infant bath tubs. This serves as a notable development because, under the 1981 Amendments to the Consumer Product Safety Act, the CPSC must defer to an existing industry standard if it adequately addresses the risk and fosters adequate compliance. Accordingly, the CPSC has only issued 37 safety standards and roughly one-third of them (14) are for children’s products. The new standard serves as additional evidence that the CPSC is taking a more proactive approach to regulating children’s products.

The CPSC extracted another steep civil penalty this month from a manufacturer of coffee brewers that agreed to pay $5.8 million after it knowingly failed to report a defect or unreasonable risk of serious injury to the CPSC. Specifically, the manufacturer received roughly 200 reports in a four-year period about its coffee brewers spraying out hot liquids and coffee, inflicting burn-related injuries to consumers. As part of the settlement, the manufacturer also agreed to develop, implement and maintain a compliance program to avoid failure-to-report problems in the future. Perhaps the recent change in CPSC leadership will impact the frequency or amount of these civil penalties in the future.

The beginning of the New Year experienced a drop off in recalls as the busy holiday season came to a close. Nevertheless, two important trends developed throughout January.

Civil penalties continue to serve as a reminder that noncompliance with the Consumer Product Safety Act can be costly. A major retailer agreed to pay a $3.8 million penalty for failure to implement an internal compliance program for the distribution and sale of recalled products. The retailer sold about 600 recalled products over a five-year period, a pattern of behavior that continued even after informing the CPSC that measures were in place to reduce this risk.

This past week, several regulatory, self-regulatory and consumer actions made headlines that affect the retail industry.

Regulatory Actions: FTC

FTC Drives Home Privacy and Security Point in Comment to NHTSA

On November 21, 2016, the FTC’s Director of the Bureau of Consumer Protection filed a comment with the National Highway Traffic Safety Administration (“NHTSA”) in support of including consumer privacy and cybersecurity guidance in NHTSA's Federal Automated Vehicles Policy. The guidance governs the collection, transmission and sharing of personal data, and how to protect that data, as cars become smarter and add Apple CarPlay, Google Android Auto and Windows Embedded Automotive, among other Internet-connected software options. The FTC applauded NHTSA's efforts to embed consumer privacy protections and cybersecurity into the software, expressing wholesale support of NHTSA's efforts while emphasizing the FTC's expertise in this area, including the Consumer Privacy Bill of Rights, to offer further guidance.

November brought a reminder that civil penalties are the trend to watch from the CPSC when a pet goods retailer agreed to a $4.25 million penalty for failing to immediately report to CPSC an alleged defect in fish bowls at risk of breaking, which posed a risk to purchasers of cutting themselves. CPSC’s data shows a hefty increase in the amount of civil penalties extracted, ranging from a low of $700,000 to a high of $4.3 million in fiscal year 2015 and a low of $2 million to a whopping high of $15.45 million in fiscal year 2016. Virtually all of those instances involved a “failure to report” or delay in reporting.

October was filled with frights as malfunctioning electronics took center stage. With personal panic devices failing to operate and diving computers posing drowning risks, manufacturers should keep in mind that life-threatening hazards dramatically increase their potential liability.

Much ado about lithium-ion batteries. If you have watched the news, you have seen that certain smartphones have been recalled due to fire and burn hazards posed by the phones’ lithium-ion batteries. While this recall is important, it is not unique. This year alone, at least nine other companies have issued recalls due to problems with lithium-ion batteries. These recalls include video baby monitors, batteries in laptop computers, batteries in flashlights and other battery packs. Not to mention last year’s slew of recalls over the most popular holiday gift – the hoverboard. While there are advantages to lithium-ion batteries, such as their recharge capability and their low memory effect, there are risks to using them in household electronic devices. Manufacturers must assess these risks when rolling products out to the public. Companies could not only face an expensive recall, but also a potential shift in public perception of the quality of its devices that could have repercussions long after the initial recall is over.

Hunton & Williams LLP focuses on product issues ranging from compliance, recall issues, investigations and products-related litigation in state and federal courts and in various administrative forums. Our lawyers have managed and consulted on recall or potential recall issues for a number of clients requiring involvement with the Consumer Product Safety Commission, the Federal Trade Commission, the Food and Drug Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the state attorneys general. Our lawyers have conducted broad-based federal and 50-state research to identify applicable regulatory schemes, consulted with clients regarding compliance strategy and litigation risk management issues, and litigated numerous products liability claims (gas controls, valves, water heaters, tires) in state and federal courts.