The Nickel Report

It is no secret that California has had appliance efficiency standards in place for some time now. And it is no secret that the California Energy Commission (“CEC”) has been responsible for crafting those standards. According to the CEC and the California State Legislature, however, compliance with those standards has been hit-or-miss. In 2011, the Legislature found that “significant quantities of appliances are sold and offered for sale in California that do not meet the state’s energy efficiency standards,” and the CEC itself has stated that nearly half of all regulated appliances are non-compliant, and that certain product categories are entirely non-compliant. The broad range of products covered by the CEC’s efficiency standards may be partly to blame for the lack of compliance, as manufacturers may not even realize their product must comply. For example, the efficiency standards encompass nearly every device with a rechargeable battery and that rechargeable battery system, meaning everything from cell phones to laptops to tablets to golf carts must be tested, certified and listed in the CEC’s database before being offered for sale in California.

The CEC has a broad range of enforcement tools at its disposal, including the power to impose penalties of up to $2,500 per non-compliant unit sold or offered for sale. For businesses whose products line store shelves throughout California, penalties can add up quickly. Indeed, the CEC has obtained settlements from a variety of businesses within the past couple of years—up to $1 million in at least one case. And, of course, that does not include any costs associated with product redesigns or repackaging, or the pulling of product from store shelves.

So what can a business do to avoid becoming the target of an enforcement proceeding and having “non-compliant” products pulled from store shelves? Simply meeting testing, efficiency and marking standards will not render a product “compliant.” The regulations flatly prohibit the sale of “any unit of any appliance” subject to an efficiency standard unless the specific unit model is listed in the CEC’s Appliance Efficiency Database. In simpler terms, if an otherwise “compliant” product is not listed in the database, any sale of that product could trigger an enforcement action.

Who should be concerned? The reach of the CEC’s regulations is sweeping, so manufacturers, distributors and retailers who sell products into California all should take steps to ensure compliance with the CEC’s regulations. While manufacturers have the duty to test their products and apply for inclusion in the database, distributors and even retailers also must verify that the products they sell are listed. Moreover, the CEC’s regulations, and the penalties that go along with them, are not confined to California businesses; on their face, they reach beyond California’s borders and apply to out-of-state businesses. In fact, the CEC has put the onus on out-of-state businesses to affirmatively show “that the appliance was intended for shipment and use outside of California, and that the manufacturer, distributor or importer took reasonably prudent precautions to assure that the appliance would not be sold or offered for sale in California.”

As stated above, a manufacturer’s, distributor’s or retailer’s reliance on the commonplace meaning of “appliance” would be misplaced, as California’s appliance efficiency standards have a much broader reach than one might expect, covering everything from traditional “appliances” (i.e., washing machines and televisions) to cell phones and electric shavers – devices that one doesn’t normally consider to be “appliances.” And the CEC is always expanding the standards to cover new products and technologies. Ongoing vigilance, therefore, is necessary and prudent.

This article was also published on the Hunton Retail Law Resource blog.