Copyright © 2011 by K&L Gates LLP. All rights reserved. Analysis of Recall Law and Procedures Eric L. Stone K&L Gates, LLP

1 How the CPSIA Changed the Rules  Section 15-Reporting & recalls.  Section 6(b)-Streamlined information disclosure.  Section 19-New violations of law.  Section 20-Increased penalties & “new” penalty factors.  Section 24-Enforcement by State AGs.

2 Section 15(a)-Substantial Product Hazards Violation of CPSC rules that create a substantial risk of injury. -No longer limited to standards or bans issued under the CPSA for “consumer products.” Defect that creates (because of the pattern of defect, the number of defective products distributed, the severity of the risk, or otherwise) a substantial risk of injury.

3 Section 15(b) “Reporting” Provision Extends notification requirement to products regulated under any of the CPSC’s laws.

4 Section 15(c) Notification Provisions CPSC may issue notice and order an end to product distribution—apparently without any hearing—by deciding to file an imminent hazard case & give “notice” to the manufacturer.  If District Court does not find an “imminent hazard” CPSC must “rescind any [such] order.” No requirement that CPSC say “never mind?”

5 Section 15 Notice Continued After offering opportunity for a hearing, and SPH finding, CPSC may require notice. CPSIA extended notice provision to include internet notice, notice to state and local authorities, notice in a language besides English. Added extensive details about what should be in ordered recall notices to section 15(i). See also 16 CFR

6 Remedies Eliminated the “election of remedies.” CPSC now has discretion to insist on repair, replacement, or refund. CPSC may have more discretion in accepting or rejecting action plans submitted to remedy the SPH.

7 Section 15(j) Substantial Hazard Lists CPSIA added rulemaking provision to determine a substantial hazard. Prerequisites include:  characteristics are readily observable,  have been addressed by a voluntary standard, and  such standards have been effective.

8 Section 6(b) Information Disclosure  Georgia Ravitz will discuss the changes to section 6(b) and the impact on recalls.

9 New Violations of Law Section 19(a)(2)(B)-now a violation of law to sell product subject to even a voluntary CAP if  CPSC notified public, or  Seller knew or should have known about the CAP. Section 19(a)(13) makes it illegal to mislead a CPSC employee about the scope of products “subject to an action” under section 12 or 15, or to make a “material misrepresentation in an investigation under any act enforced by CPSC.

10 Section 20 New Maximum Penalty Amount-$15 million. New criteria for civil penalty. CPSC penalty rule says they would consider: “Failure of the violator to respond in a timely and complete fashion to the CPSC’s requests for information and remedial action.” 16 CFR (b)(4).

11 Section 24-State Enforcement State Attorneys General may enforce even voluntary recalls through injunctive actions after 30 day notice to CPSC. Eric L. Stone