As 2022 came to a close, the U.S. Consumer Product Safety Commission (CPSC) had one last order of business. On December 28, 2022, the CPSC provisionally accepted a settlement agreement with Peloton Interactive, Inc. (“Peloton”), in which Peloton agreed to pay $19,065,000 in civil fines and penalties within 30 days. Peloton incurred $16,025,000 in civil fines for failing to timely notify the CPSC, as required by Section 15(b) of the Consumer Product Safety Act, that its product created a substantial product hazard or created an unreasonable risk of serious injury or death. Peloton paid the remaining amount of $3,040,000 in civil penalties for distributing Pelton products which had already been recalled. Peloton denied any wrongdoing, stating that it agreed to pay these fines and penalties to avoid “distraction, delay, uncertainty, and inconvenience of protracted litigation or other proceedings."

Shortly after the settlement, CPSC Commissioner Peter Feldman criticized the CPSC’s “lack of coherent enforcement policy when it comes to civil penalties.” He compared the Peloton settlement to the July 2022 agreement between the CPSC and Vornado Air, LLC pertaining to defective space heaters. In that agreement (which Commissioner Feldman opposed), Vornado agreed to pay $7,500,000 for “...arguably …worse facts than Peloton given Vornado’s stats as a repeat offender” with no “…coherent underlying doctrine or principal” to explain the difference in the two settlement amounts. Commissioner Feldman concluded: “Without principled decision-making, the product safety community will remain confused about the expectations the commission is setting for how we will deal with similar conduct.”

One thing is clear: The majority of the current Commission are raising the civil penalties imposed on consumer product manufacturers for failing to timely report potentially hazardous products. Section 15(b) of the CPSA mandates that every manufacturer (including importers), distributor or retailer of a consumer product shall immediately inform the commission about any product which:

1. Fails to comply with a product safety rule or voluntary standard, or 
2. Contains a defect which creates a substantial product hazard, or
3. Fails to comply with any other relevant rule, regulation, standard, or ban, or
4. Creates an unreasonable risk of serious injury or death.

The Commission considers “immediately” to mean within 24 hours even if investigation into the subject product is not complete, per 16 C.F.R. § 1115.14(e). Companies may take up to 10 days to report if there is actual uncertainty about whether filing a report is required, as set forth in 16 C.F.R. § 1115.14(d). But even 10 days can be a very short time to comply with section 15(b) reporting requirements and the consequences for not filing can be expensive.

So manufacturers, importers, distributors, and retailers should remain alert when it comes to reports and issues with consumer products they sell. Failure to timely report even a potential product defect could be a very costly mistake as the CPSC continues to raise the civil fines and penalties it imposes. And denying an actual defect exists will not save a company from its failure to report. Reporting to the CPSC under section 15(b) is a duty separate and distinct from recalling or otherwise fixing a defective product.

Questions about when and how this duty to report applies? We are here to help.

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