On January 25, 2024, Representative Jan Schakowsky (D-IL-09), Ranking Member of the House Innovation, Data, and Commerce Subcommittee and former Chairwoman of the Consumer Protection Subcommittee of the House Energy and Commerce Committee (E&C), and Senator Peter Welch (D-VT), Member of the Senate Commerce Committee (Commerce), introduced legislation[1] to bolster the enforcement tools available to the Consumer Product Safety Commission (CPSC) for deterring violations of the Consumer Product Safety Act (CPSA). This bicameral legislation has five original cosponsors,[2] one in the House and four in the Senate, and is endorsed by the Consumer Federation of America, Consumer Reports, Kids in Danger, Public Citizen, and the U.S. Public Interest Research Group. The legislation, known as the Consumer Advocacy and Protection (CAP) Act, was referred to the House E&C and Senate Commerce Committees. If enacted, among other things, it would:
- Significantly increase the Consumer Product Safety Commission’s civil penalty authority; and
- Provide for more regular inflation adjustments to civil penalty maximums using a new adjustment formula.
The CAP Act signifies Democratic support in Congress for the CPSC’s recent efforts to more aggressively enforce the CPSA. While this legislation is unlikely to move forward without bipartisan support, manufacturers, importers, and distributors should take notice of the growing interests among certain lawmakers to increase the CPSC’s penalty authority and be aware of the potential for increased civil penalties in the future; points consistent with the CPSC’s increased use of civil (and even criminal) penalties.
Proposed Civil Penalty Changes
Currently, the CPSA requires manufacturers, importers, and distributors to timely report to the CPSC known product defects. Manufacturers, importers, and distributors who fail to comply with this requirement risk steep civil penalties of up to $120,000 per knowing violation and $17,150,000 for a series of related violations, as adjusted for inflation in 2021.[3]
If adopted, the CAP Act will increase the limit on civil penalties for individual violations of the CPSA to more than twice the current maximum, from $120,000 to $250,000. The CAP Act will also eliminate the current cap on civil penalties for a series of related violations, resulting in the potential for the CPSC to assess civil penalties that are substantially higher than those leveraged to date. This could mean civil penalties in the tens to hundreds of millions of dollars that could seriously impact a company’s financial standing. Indeed, in introducing the legislation, Congresswoman Schakowsky noted her intent to significantly increase civil penalties. She explained, “The current cap limits on civil penalties have allowed big corporations to skirt real responsibility when their products are found to be harmful, and in some cases, deadly. Companies must feel the effects when they violate consumer safety protections.”
The CAP Act further provides for more regular inflation adjustments to the civil penalty maximum for individual violations. If enacted, the bill will increase the frequency of inflation review from every five years to every year and will require the CPSC to utilize a new formula for calculating inflation adjustments.
Next Steps for Manufacturers, Importers, and Distributors
Though the changes introduced in the proposed CAP Act hold no current legal effect, the bicameral introduction of this bill does indicate some congressional support for the CPSC’s recent aggressive enforcement actions. Potential stakeholders should monitor for congressional action on the CAP Act in both the House of Representatives and Senate, as passage of this legislation could result in an increased risk of significantly higher civil penalties for violations of the CPSA. Manufacturers, importers, and distributors should also ensure they have robust compliance programs and processes in place to limit the risk of CPSA violations, potential CPSC enforcement actions, and the assessment of civil penalties in the first instance.
[1] H.R. 7096, https://www.congress.gov/bill/118th-congress/house-bill/7096?s=1&r=4; S.3667, https://www.congress.gov/bill/118th-congress/senate-bill/3667?s=1&r=1.
[2] The bills have original co-sponsorship from Rep. Bonnie Watson Coleman (D-NJ-12) in the House of Representatives and Sens. Richard Blumenthal (D-CT), Ed Markey (D-MA), Brian Schatz (D-HI), and Ben Ray Lujan (D-NM).
[3] Civil Penalties, Notice of Adjusted Maximum Amounts, 86 F.R. 68244 (Dec. 1, 2021), https://www.govinfo.gov/content/pkg/FR-2021-12-01/pdf/2021-26082.pdf.
[View source.]
