[House Report 110-364]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-364
======================================================================
PRODUCT SAFETY CIVIL PENALTIES IMPROVEMENT ACT
_______
October 9, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Dingell, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
[To accompany H.R. 2474]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 2474) to provide for an increased maximum civil
penalty for violations under the Consumer Product Safety Act,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 3
Hearings......................................................... 4
Committee Consideration.......................................... 5
Committee Votes.................................................. 5
Committee Oversight Findings..................................... 5
Statement of General Performance Goals and Objectives............ 5
New Budget Authority, Entitlement Authority, and Tax Expenditures 5
Earmarks and Tax and Tariff Benefits............................. 6
Committee Cost Estimate.......................................... 6
Congressional Budget Office Estimate............................. 6
Federal Mandates Statement....................................... 6
Advisory Committee Statement..................................... 6
Constitutional Authority Statement............................... 6
Applicability to Legislative Branch.............................. 6
Section-by-Section Analysis of the Legislation................... 6
Changes in Existing Law Made by the Bill, as Reported............ 7
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Product Safety Civil Penalties
Improvement Act''.
SEC. 2. MAXIMUM CIVIL PENALTIES OF THE CONSUMER PRODUCT SAFETY
COMMISSION.
(a) Initial Increase in Maximum Civil Penalties.--
(1) Temporary increase.--Notwithstanding the dollar amounts
specified for maximum civil penalties specified in section
20(a)(1) of the Consumer Product Safety Act (15 U.S.C.
2069(a)(1)), section 5(c)(1) of the Federal Hazardous
Substances Act, and section 5(e)(1) of the Flammable Fabrics
Act (15 U.S.C. 1194(e)(1)), the maximum civil penalties for any
violation specified in such sections shall be $5,000,000,
beginning on the date that is the earlier of the date on which
final regulations are issued under section 3(b) or 360 days
after the date of enactment of this Act.
(2) Effective date.--Paragraph (1) shall cease to be in
effect on the date on which the amendments made by subsection
(b)(1) shall take effect.
(b) Permanent Increase in Maximum Civil Penalties.--
(1) Amendments.--
(A) Consumer product safety act.--Section 20(a)(1) of
the Consumer Product Safety Act (15 U.S.C. 2069(a)(1))
is amended by striking ``$1,250,000'' both places it
appears and inserting ``$10,000,000''.
(B) Federal hazardous substances act.--Section
5(c)(1) of the Federal Hazardous Substances Act (15
U.S.C. 1264(c)(1)) is amended by striking
``$1,250,000'' both places it appears and inserting
``$10,000,000''.
(C) Flammable fabrics act.--Section 5(e)(1) of the
Flammable Fabrics Act (15 U.S.C. 1194(e)(1)) is amended
by striking ``$1,250,000'' and inserting
``$10,000,000''.
(2) Effective date.--The amendments made by paragraph (1)
shall take effect on the date that is 1 year after the earlier
of--
(A) the date on which final regulations are issued
pursuant to section 3(b); or
(B) 360 days after the date of enactment of this Act.
SEC. 3. DETERMINATION OF PENALTIES BY THE CONSUMER PRODUCT SAFETY
COMMISSION.
(a) Factors To Be Considered.--
(1) Consumer product safety act.--Section 20(b) of the
Consumer Product Safety Act (15 U.S.C. 2069(b)) is amended--
(A) by inserting ``the nature, circumstances, extent,
and gravity of the violation, including'' after ``shall
consider'';
(B) by striking ``products distributed, and'' and
inserting ``products distributed,''; and
(C) by inserting ``, and such other factors as
appropriate'' before the period.
(2) Federal hazardous substances act.--Section 5(c)(3) of the
Federal Hazardous Substances Act (15 U.S.C. 1264(c)(3)) is
amended--
(A) by inserting ``the nature, circumstances, extent,
and gravity of the violation, including'' after ``shall
consider'';
(B) by striking ``substance distributed, and'' and
inserting ``substance distributed,''; and
(C) by inserting ``, and such other factors as
appropriate'' before the period.
(3) Flammable fabrics act.--Section 5(e)(2) of the Flammable
Fabrics Act (15 U.S.C. 1194(e)(2)) is amended--
(A) by striking ``nature and number'' and inserting
``nature, circumstances, extent, and gravity'';
(B) by striking ``absence of injury, and'' and
inserting ``absence of injury,''; and
(C) by inserting ``, and such other factors as
appropriate'' before the period.
(b) Regulations.--Not later than 1 year after the date of enactment
of this Act, and in accordance with the procedures of section 553 of
title 5, United States Code, the Commission shall issue a final
regulation providing its interpretation of the penalty factors
described in section 20(b) of the Consumer Product Safety Act (15
U.S.C. 2069(b)), section 5(c)(3) of the Federal Hazardous Substances
Act (15 U.S.C. 1264(c)(3)), and section 5(e)(2) of the Flammable
Fabrics Act (15 U.S.C. 1194(e)(2)), as amended by subsection (a).
Purpose and Summary
The purpose of H.R. 2474 is to enhance the ability of the
Consumer Product Safety Commission (CPSC) to protect the
American public from serious injury or death as a result of
hazardous products under the agency's jurisdiction. H.R. 2474
would amend the Consumer Product Safety Act, the Flammable
Fabrics Act, and the Federal Hazardous Substances Act to
increase the cap on civil penalties that the CPSC may assess
for knowing product safety violations from the current level of
$1.825 million to $10 million. This increase would be phased in
over a two-year period. H.R. 2474 also would expand the factors
that the CPSC must consider in assessing the amount of such
penalty, including whether a violator is a recidivist or a
first-time offender.
Background and Need for Legislation
The CPSC can impose civil penalties on manufacturers,
distributors, and retailers for knowing violations of the
Consumer Product Safety Act (CPSA). The current statutory cap
on total civil penalties is $1.825 million. The original
statutory maximum was $500,000 and dates back to the original
passage of CPSA in 1973. Section 20 of the Act was amended in
1990, setting the limit at $1.25 million and building in
escalators to account for inflation. As such, the cap on civil
penalties has been increased a total of $1.325 million over the
past 34 years.
As a result, the cost of civil penalties may be outweighed
by the cost of compliance with the prohibitions (and
requirements) of the CPSA. For many large companies, a civil
penalty of $1.825 million is a relatively small amount, and
thus does not always provide sufficient incentive for companies
to report problems to the Commission. For instance, the
$750,000 fine that was assessed by the CPSC against Wal-Mart
for failing to report a defect in fitness machines represented
1 minute, 33 seconds worth of sales for the retail giant.
Section 15(b) of the CPSA requires every manufacturer,
distributor, or retailer of a consumer product distributed in
commerce to notify the CPSC immediately upon obtaining
information that reasonably supports the conclusion that a
given product (1) violates a safety standard promulgated by
CPSC, (2) contains a defect that could pose a substantial
hazard, or (3) otherwise creates an unreasonable risk of
serious injury or death. Enforcing the requirement for
companies to self-report within 24 hours is a challenge for
this small agency, which has limited resources and is only
authorized to levy fines of less than $2 million, even in
egregious cases. Most companies behave responsibly, and the
CPSC has indicated that the number of reports it receives has
increased in recent years. One witness, however, raised
concerns about whether product hazards are adequately reported
and scofflaws are punished. See testimony of Dr. E. Marla
Felcher, Kennedy School of Government, Harvard University, and
her paper, ``The U.S. Consumer Product Safety Commission: The
Paper Tiger of American Product Safety,'' April 3, 2002.
Lack of reporting is particularly disturbing when it comes
to children's products. In July of 2006, Tiffany & Co. agreed
to pay a $262,500 civil penalty to settle allegations that the
company failed to report to the Government in a timely manner a
hazard created by its infant teether rattles. Tiffany had
received reports of defective solder joints during the period
of November 2003 to February 2004, but failed to notify
consumers who had purchased the teethers, nor did the company
report the defects to the CPSC until after the Commission
launched its own investigation.
According to CPSC records and press reports, ``Safety
Agency, Mattel Clash Over Disclosures,'' Wall Street Journal,
Tuesday, September 4, 2007, Mattel was fined $1.1 million in
2001 for failing to promptly report a fire hazard involving its
Power Wheels line of motorized minicars, designed to be ridden
by children as young as two years old. Ten million of the cars
had to be pulled from the market in 1998. The CPSC's
investigation found that there were reports of 116 fires
involving the minicars and more than 10 times as many reports
of electrical components overheating, melting, short-
circuiting, or failing. In another case involving Mattel, its
subsidiary, Fisher-Price, received 10 reports between September
and November of 2002 regarding a swallowing hazard posed by a
nail fastener that could separate from the toy in its popular
Little People Animal Sounds Farm. Fisher-Price received two
reports by February 2003 of parents concerned the problem posed
a choking hazard and a report of a December 2002 case, where a
nail fastener punctured the lung of a 14-month-old baby who had
inhaled it. Fisher-Price did not report the safety hazard until
March 2003, after it had received 32 reports of the nail
fastener coming loose. Denying any wrongdoing, Fisher-Price
signed a settlement in March 2007, agreeing to pay a fine of
$975,000.
Other examples of civil penalties imposed on the
manufacturers and retailers of children's products include:
$225,000 in 1996 against J.B.I. for dangerous playground
equipment; $725,000 in 1996 against COSCO for toddler beds and
rails that caused strangulation; $150,000 in 1998 against Binky
Griptight for pacifiers that posed a choking hazard; $225,000
against Century Products for cribs and strollers that posed a
suffocation hazard; $400,000 in 2000 against Hasbro for infant
carriers that posed hazards of serious head injuries and other
infant hazards; and $200,000 in 2000 against Baby's Dream
Furniture for cribs that posed fingertip amputation hazards.
In the 108th Congress, the Senate passed the ``Consumer
Product Safety Commission Reauthorization Act of 2003,'' which
included a unanimously approved measure to increase the civil
penalty cap to $20 million. No action was ever taken in the
House of Representatives on the Senate legislation, and the cap
remains at $1.825 million. The Committee believes that it is
necessary and appropriate to increase the cap on civil
penalties at this time.
Hearings
The Subcommittee on Commerce, Trade, and Consumer
Protection held a hearing on Tuesday, May 15, 2007, entitled
``Protecting Our Children: Current Issues in Consumer Product
Safety.'' The hearing examined the performance of the CPSC in
safeguarding consumers, particularly children, from hazardous
products. Testimony was received from the Honorable Nancy A.
Nord, Acting CPSC Chairman; Mr. Alan Korn, Public Policy
Director and General Counsel, Safe Kids Worldwide; Ms. Rachel
Weintraub, Director of Product Safety and Senior Counsel,
Consumer Federation of America; Mr. Frederick Locker, General
Counsel, Toy Industry Association; Ms. Marla Felcher, Adjunct
Lecturer, Kennedy School of Government, Harvard University; Mr.
James A. Thomas, President, ASTM International; and Ms. Nancy
A. Cowles, Executive Director, Kids in Danger.
The Subcommittee also held a legislative hearing on
Wednesday, June 6, 2007, entitled ``Legislation to Improve
Consumer Product Safety for Children: H.R. 2474, H.R. 1699,
H.R. 814, and H.R. 1721.'' Testimony was received from Mr.
Edmund Mierzwinski, Consumer Program Director, United States
Public Interest Research Group and Ms. Sally Greenberg, Senior
Product Safety Counsel, Consumers Union.
Committee Consideration
On Tuesday, July 31, 2007, the Subcommittee on Commerce,
Trade, and Consumer Protection met in open markup session and
favorably forwarded H.R. 2474, amended, to the full Committee
for consideration, by a voice vote. On Tuesday, September 25,
2007, the full Committee met in open markup session and ordered
H.R. 2474 favorably reported to the House, as amended, by a
voice vote, a quorum being present. No amendments were offered
during full Committee consideration.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
There were no record votes taken during consideration of H.R.
2474 or in ordering the bill reported. A motion by Mr. Dingell
to order H.R. 2474 favorably reported to the House, as amended,
was agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the oversight findings of the
Committee are reflected in this report.
Statement of General Performance Goals and Objectives
The purpose of the legislation is to enhance the protection
of consumers from serious injury or death by providing for
increased maximum civil penalties that may be assessed by the
CPSC for knowing product safety violations.
New Budget Authority, Entitlement Authority, and Tax Expenditures
Regarding compliance with clause 3(c)(2) of rule XIII of
the Rules of the House of Representatives, the Committee finds
that H.R. 2474 would result in no new or increased budget
authority, entitlement authority, or tax expenditures or
revenues.
Earmarks and Tax and Tariff Benefits
Regarding compliance with clause 9 of rule XXI of the Rules
of the House of Representatives, H.R. 2474 does not contain any
Congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.
Committee Cost Estimate
The Committee will adopt as its own the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
Congressional Budget Office Estimate
Regarding clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, a cost estimate on H.R. 2474 by the
Congressional Budget Office pursuant to section 402 of the
Congressional Budget Act of 1974 was not available as of the
time of the filing of this report by the Committee.
Federal Mandates Statement
The Committee will adopt as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1--Short title
The short title of the bill is the ``Product Safety Civil
Penalties Improvement Act''.
Sec. 2--Maximum civil penalties of the Consumer Product Safety
Commission
Section 2 of the bill increases the cap on civil penalties
from $1.825 million to $10 million for violations of the
Consumer Product Safety Act, the Flammable Fabrics Act, and the
Federal Hazardous Substances Act. The increase is phased in
over two years. Initially, the cap rises to $5 million as soon
as CPSC issues interpretive guidance, or 360 days after
enactment, whichever occurs first. The cap will then rise to
$10 million 1 year after the first increase.
Sec. 3--Determination of penalties by the Consumer Product Safety
Commission
Section 3 gives CPSC more flexibility in determining the
appropriate level of civil penalties that it levies on
manufacturers, distributors and retailers that violate the
three applicable statutes discussed in Section 2. Section 3
renders the factors that the Commission must consider more
expansive than the five specific factors to which the CPSC is
currently limited. Furthermore, these factors are not
exclusive. For example, while CPSC currently is not permitted
to consider whether a violator is a recidivist or a first-time
offender, the amendments made by this section will permit that
important consideration in assessing a penalty. Lastly, Section
3 requires the Commission to issue regulations providing its
interpretation of these new, restated penalty factors within
360 days of enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
CONSUMER PRODUCT SAFETY ACT
* * * * * * *
CIVIL PENALTIES
Sec. 20. (a)(1) Any person who knowingly violates section 19
of this Act shall be subject to a civil penalty not to exceed
$5,000 for each such violation. Subject to paragraph (2), a
violation of section 19(a) (1), (2), (4), (5), (6), (7), (8),
(9), (10), or (11) shall constitute a separate offense with
respect to each consumer product involved, except that the
maximum civil penalty shall not exceed [$1,250,000] $10,000,000
for any related series of violations. A violation of section
19(a)(3) shall constitute a separate violation with respect to
each failure or refusal to allow or perform an act required
thereby; and, if such violation is a continuing one, each day
of such violations shall constitute a separate offense, except
that the maximum civil penalty shall not exceed [$1,250,000]
$10,000,000 for any related series of violations.
* * * * * * *
(b) In determining the amount of any penalty to be sought
upon commencing an action seeking to assess a penalty for a
violation of section 19(a), the Commission shall consider the
nature, circumstances, extent, and gravity of the violation,
including the nature of the product defect, the severity of the
risk of injury, the occurrence of absence of injury, the number
of defective [products distributed, and] products distributed,
the appropriateness of such penalty in relation to the size of
the business of the person charged, and such other factors as
appropriate.
* * * * * * *
----------
FEDERAL HAZARDOUS SUBSTANCES ACT
* * * * * * *
PENALTIES
Sec. 5. (a) * * *
* * * * * * *
(c)(1) Any person who knowingly violates section 4 shall be
subject to a civil penalty not to exceed $5,000 for each such
violation. Subject to paragraph (2), a violation of subsections
(a), (b), (c), (d), (f), (g), (i), (j), and (k) of section 4
shall constitute a separate offense with respect to each
substance involved, except that the maximum civil penalty shall
not exceed [$1,250,000] $10,000,000 for any related series of
violations. A violation of section 4(e) shall constitute a
separate violation with respect to each failure or refusal to
allow or perform an act required by section 4(e); and, if such
violation is a continuing one, each day of such violation shall
constitute a separate offense, except that the maximum civil
penalty shall not exceed [$1,250,000] $10,000,000 for any
related series of violations.
* * * * * * *
(3) In determining the amount of any penalty to be sought
upon commencing an action seeking to assess a penalty for a
violation of section 4, the Commission shall consider the
nature, circumstances, extent, and gravity of the violation,
including the nature of the substance, the severity of the risk
of injury, the occurrence or absence of injury, the amount of
the [substance distributed, and] substance distributed, the
appropriateness of such penalty in relation to the size of the
business of the person charged, and such other factors as
appropriate.
* * * * * * *
----------
FLAMMABLE FABRICS ACT
* * * * * * *
ADMINISTRATION AND ENFORCEMENT
Sec. 5. (a) * * *
* * * * * * *
(e)(1) Any person who knowingly violates a regulation or
standard under section 4 shall be subject to a civil penalty
not to exceed $5,000 for each such violation, except that the
maximum civil penalty shall not exceed [$1,250,000] $10,000,000
for any related series of violations.
(2) In determining the amount of any penalty to be sought
upon commencing an action seeking to assess a penalty for a
violation of a regulation or standard under section 4, the
Commission shall consider the [nature and number] nature,
circumstances, extent, and gravity of the violations, the
severity of the risk of injury, the occurrence or [absence of
injury, and] absence of injury, the appropriateness of such
penalty in relation to the size of the business of the person
charged, and such other factors as appropriate.
* * * * * * *