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CPSC Reporting Requirements: Knowing When to Report a Product Defect

Knowing when to report a potential product defect to the Consumer Product Safety Commission (CPSC) is never an easy task. Federal law requires reporting claims within 24 hours after obtaining information reasonably supporting the conclusion that a product contains a defect. These “obtaining information” and “reasonably supporting” type phrases are not easy to decipher in the context of product defects. It is almost inevitable that a manufacturer, distributor and/or retailer will receive telephone calls or letters stating that a product caused a consumer injury at some point. Knowing whether the complainant is providing you with “information” about a product defect versus being a dissatisfied or irrational customer who is looking for a refund for the product is something that our clients have continued problems with. The language offered by the CPSC is vague at best, and there is room for interpretation at every level of the analysis. I have found that the best way to determine what the CPSC will consider a “failure to report” is to look to other organizations who have been penalized by the CPSC and the circumstances of their reporting (or lack thereof).

Build-A-Bear

On December 16, 2011, the CPSC announced a settlement with Build-A-Bear, where Build-A-Bear paid a civil penalty in the amount of $600,000 for its failure to timely report. According to the settlement agreement, the “defective” consumer product was a wooden frame toy beach chair which could pinch, lacerate or amputate a child’s fingertip if the finger was caught between the frame and the chair. Build-A-Bear, received its first complaint of injury in July, 2007. Between July, 2007 and January, 2009, Build-A-Bear was “aware” of 10 injury complaints caused by the chair. Build-A-Bear did not report to the CPCS until March 10, 2009 and recalled the chairs on May 14, 2009. The interesting aspect of this matter relates to the fact that, according to Build-A-Bear, it sold approximately 200,000 chairs over a six year period before it received its first complaint of injury.

From Build-A-Bear’s perspective, it was rational, in my opinion, to assume that the product at issue was not “defective” due to the lack of injury complaints it received for the 200,000 units sold over the six year period. However, once a “cluster” of complaints came in, it is time to report. In other words, the first July, 2007 complaint could have been an isolated incident which would not render the product “defective” per se. When it received the second notice (the public information does not disclose when that was) of a similar injury under similar circumstances, the company should have been more aggressive about reporting the potential defect. Understandably, from Build-A-Bear’s perspective, reporting to the CPSC is not always an easy business decision and the facts of each unique situation require a different analysis.

If your organization is in the unfortunate position of determining if and when to report a potential defective product to the CPSC, here are some factors I believe are relevant:

  • The severity of injury – obviously, this is the biggest factor and transcends any business-related analysis. If the product is causing death or serious injury due to the potential defect, you must report and recall the product immediately.
  • The end user – organizations manufacturing, selling or importing products that will be utilized by children should be on higher alert to injury related complaints and must have an established internal compliance program to quickly address any potential product defects.
  • The “reasonableness” of the risk – some products are more inherently dangerous than others and this should be a factor to consider when reporting. For example, in the Build-A-Bear matter, the defective product at issue was a toy chair for stuffed animals and it can be assumed that the child playing with it did not believe it to be dangerous. Had the 10 injury complaints been related to a power tool, it should be evaluated differently, as it is assumed that certain injuries will occur by using certain power tools.
Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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