United States: New Regulations Pose New Risks for Manufacturers and Distributors

Consumer Product Safety Commission Database Sharply Raises Regulatory Risks and Product Liability Exposure for a Surprisingly Broad Range of Products and Substances

Click here the full text of this alert, which summarizes the regulations and new risks in greater detail.

Many manufacturers and private label distributors who do not regularly monitor developments at the Consumer Product Safety Commission ("CPSC") may find themselves doing an abrupt about-face on March 11, 2011, when SaferProducts.gov, a publicly available, searchable database created by new regulations promulgated by the CPSC, begins operations. Branded the "Database of Doom" by the Washington Times, the database will contain safety information about all products under CPSC's jurisdiction, including many products that companies may not be aware fall under CPSC's jurisdiction. For example, CPSC has jurisdiction to impose poison prevention packaging on foods (including dietary supplements), drugs and cosmetics under the Poison Prevention Packaging Act (and already does so for certain of these products). Likewise, the CPSC has jurisdiction over consumer products and children's products under the Consumer Product Safety Act and all kinds of fabrics and fabric products pursuant to the Flammable Fabrics Act. Hazardous substances, defined as any substances or mixtures that are toxic, corrosive, irritants, strong sensitizers, flammable or combustible, or that generate pressure through decomposition, heat or other means, and that may cause substantial personal injury or illness, are regulated by CPSC under the Hazardous Substances Act. Early indications are that CPSC intends to interpret its jurisdiction liberally in determining what products its database should capture. For example, in response to objections from a commenter during rulemaking about including reports for over-the-counter drugs and dietary supplements in the database, the CPSC responded, "We have no intention of including reports of harm solely involving products or substances not within our jurisdiction, but will include all products and substances that do fall within our jurisdiction, including complaints about drug product labeling."

Designed to provide an early warning system to consumers about product defects, the new database opens a Pandora's box of significant questions and potential problems for manufacturers and private labelers. These include:

• How can I investigate a safety report when I receive only brief details about it and no contact information from the submitter?
• What do I do about reports about products I don't make—or don't make any longer—so that my name doesn't wrongly appear in the database?
• How can I complete an investigation and submit a meaningful comment refuting the report within ten days when I get only a thumbnail sketch of the problem?
• How can I convince the CPSC not to publish a report or to correct information in it that is inaccurate if I don't get enough details about the safety problem to properly investigate it?
• How will the CPSC ensure that safety reports in the database are legitimate and not a campaign backed by one of my competitors to damage my reputation?
• How will CPSC ensure that the primary beneficiaries of the database are not my competitors or the private plaintiffs' bar who may see it as a rich lode of information to mine for mass product liability and state unfair business competition actions?
• How do I comply with other non-CPSC reporting obligations and regulations without increasing my regulatory and product liability exposure?

For more on these and other questions or issues, please see the full article.

Managing new risks that are likely to be created by the new database will require significant advance planning. Manufacturers and private labelers should determine which of their products and substances are subject to CPSC jurisdiction and thus potentially the subject of safety reports to CPSC. Those doing the inventory should interpret CPSC's jurisdiction broadly, particularly as CPSC is required to make an annual report to Congress about the database, with an additional report to be prepared by the General Accounting Office within two years of the beginning of operations. Under these circumstances, CPSC will likely be motivated to amass a large database to satisfy Congress that it is doing its job of protecting consumers from defects. These reporting requirements also mean that CPSC is likely to be aggressive in publicizing the website and encouraging consumers to use it frequently, so that the volume of reports submitted is likely to be large. Manufacturers and private labelers should register with the Commission to be in a position to monitor and respond to any reports transmitted as soon as the database commences operations. They should also consult with counsel responsible for other non-CPSC reporting obligations, CPSC counsel and product liability counsel before the database becomes operational. Proper steps need to be taken in advance, such as drafting of standard operating procedures for responding to safety reports, analyzing CPSC jurisdiction (or lack thereof) over products, and appointment of individuals responsible for monitoring and interfacing with the website in order to ensure compliance with CPSC and non-CPSC regulatory requirements, as well as to minimize product liability exposure.

Click here for the full text of this alert, which summarizes the regulations and new risks in greater detail.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.