It is no news that Section 15(b) of the Consumer Product Safety Act (the Act) requires immediate reporting to the Consumer Product Safety Commission (CPSC) of any information which could support the conclusion that a product contains a defect which could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or fails to comply with any other consumer product safety rule. It is also no news that failure to timely report is a violation of Section 19 of the Act, and subjects a company to civil penalties under Section 20 of the Act. What is news is that in the last two months, the CPSC has begun to impose comprehensive compliance systems on companies accused of untimely reporting potential product defects. The first such instance occurred in March, and the second occurred this week, imposing virtually identical internal and external compliance requirements in addition to the more standard monetary penalties.
On March 11, 2013, the CPSC announced that Kolcraft Enterprises, Inc. agreed to pay a civil penalty of $400,000 for failing to report a defect in its play yards (the side rail of the play yards can fail to latch properly and can unlatch, posing a fall hazard). Although between January 2000 and July 2009 Kolcraft received about 350 reports of the play yard collapsing, resulting in 21 injuries to young children, Kolcraft did not report to the CPSC until January 2009. The $400,000 penalty the only allegation was untimely reporting, not a violation of any spin and of itself was significant, as Kolcraft is a small business andecific safety standard. But the most striking provision was not the monetary penalty—it was the agreement to the following intrusive and expansive internal and external compliance system obligations...
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