[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.

           *       *       *       *       *       *       *


                                  
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