The U.S. Consumer Product Safety Commission (CPSC) and Peloton Interactive, Inc. (Peloton) are clashing over whether the media, technology, and fitness company should issue a recall of its treadmill, the Peloton Tread+. The disagreement came to a head on Saturday, April 17, when the CPSC and Peloton issued competing statements after failing to agree on language to be used in a joint announcement regarding the Tread+. This dispute raises the question, “What now?”
On March 18, 2021, Peloton’s CEO issued a letter on its website notifying the public that Peloton had recently learned of a “tragic accident involving a child and the Tread+, resulting in, unthinkably, a death.” Consistent with the Consumer Product Safety Act (CPSA), Peloton reported the incident to the CPSC within a day of being notified. 15 U.S.C.A. § 2064 (b).
The report prompted an investigation by the CPSC. After the investigation started, Peloton became aware of additional reports that children and pets were pulled underneath the treadmill and sustained broken bones and abrasions. One incident alleged a three-year-old boy had become trapped under the treadmill and suffered brain injuries. To date, the CPSC knows of 39 incidents involving the Tread+. Peloton has reported each of the incidents to the CPSC. The agency subsequently issued an administrative subpoena to investigate the incidents.
On April 17, the CPSC issued an urgent warning, advising consumers to stop using the treadmill if small children or pets are at home. The agency noted the hazard “cannot be avoided simply by locking the device when not in use” and indicated its investigation was ongoing.
Peloton issued its own unilateral statement the same day calling the CPSC’s press release “inaccurate and misleading.” Peloton indicated that there “is no reason to stop using the Tread+, as long as all warnings and safety instructions are followed.” But Peloton assured it “remains open to working with CPSC.”
Given the disagreement between the CPSC and Peloton, what happens now? The CPSC customarily works in conjunction with the manufacturer to negotiate voluntary corrective actions, i.e., recalls. This is largely because the CPSC’s procedure for forcing involuntary recalls is time-consuming and can result in protracted litigation. Consequently, mandatory recalls are a rare creature. Indeed, the CPSC last sought a mandatory recall in 2018. The process for mandatory recalls by the CPSC is therefore not as familiar as the voluntary recall process. To fully understand their crisis management options, product manufacturers, distributers, and retailers need to know how that process works.
The CPSC can order manufacturers, distributors, and retailers to take certain corrective actions only by commencing an enforcement proceeding against the relevant entities consistent with the Rules of Practice for Adjudicative Proceedings. 16 C.F.R. § 1025. Following initiation, the CPSC can then seek a preliminary injunction from a federal district court to prevent continued distribution of the product during the pendency of the proceedings. 15 U.S.C.A. § 2064 (g). This power should be the most concerning to the target as enforcement proceedings can drag out for years.
The adjudicative process itself is tedious. It requires the CPSC to, among other things, allow an opportunity for a public hearing at which the companies, consumers, and consumer organizations may all be heard. Id. at § 2064(f). After the hearing, the CPSC must determine whether the product presents a “substantial product hazard.” A substantial product hazard is “a product defect which (because of the pattern of defect, the number of defective products distributed in commerce, the severity of risks, or otherwise) creates a substantial risk of injury to the public.” Id. at § 2064(a). A final decision finding a substantial product hazard can be challenged in federal court, further prolonging the process. Id. at § 2073. For example, in the CPSC’s attempt to seek a mandatory recall against Zen Magnets, the CPSC filed its administrative complaint in August of 2012. The Administrative Law Judge did not issue an order until March of 2016. Appeals kept the case active into 2019.
A slightly faster approach is available if the CPSC deems the product an “imminently hazardous consumer product,” defined as a consumer product that presents imminent and unreasonable risk of death, serious illness, or severe personal injury. 15 U.S.C.A. § 2061. The CPSC can initiate an action in a federal district court asking for “such temporary or permanent relief as may be necessary to protect the public from such risk.” Id. at § 2061(b)(1). The CPSC can seek a mandatory order requiring notice to purchasers known to the defendant and public notice, and the recall, repair or replacement of, or refund for, the product. The CPSC can also order the target to take corrective actions without holding a public hearing after determining that the product presents a substantial product hazard. Id. at § 2064(f). Again, the finding and order are subject to challenge in federal district court. Id. at § 2073. Consequently, this path can still result in drawn-out litigation.
So where does this leave Peloton? The CPSC is unlikely to seek a mandatory recall of Peloton’s treadmill due to the lengthy process involved. The far easier path is to encourage or coerce “voluntary” action. The CPSC will likely continue to negotiate voluntary corrective actions with Peloton. Should the brewing stalemate between the CPSC and Peloton continue, however, we may see the first mandatory recall action taken by the CPSC since 2018.