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CIVIL PENALTIES UNDER THE CONSUMER PRODUCT SAFETY ACT — IS A CHANGE COMING?
Section 217 of the Consumer
Product Safety Improvement Act of
2008 (CPSIA), Public Law 110-314,
122 Stat. 3016 (August 14, 2008)
significantly increased the amount
of penalties that could be imposed.
Prior to its passage, the penalty
was US$8,000 per violation, with
a maximum penalty of US$1.825
million for a related series of
violations. The CPSIA raised these
amounts to US$100,000 per violation, with a maximum penalty of
US$15 million for a related series of
violations. 15 U.S.C. § 2069(a)( 1).
The maximum penalty is adjusted
for inflation, id. § 2069(a)( 3)(A),
and is currently US$110,000 per
violation and US$16,025,000 for a
related series of violations. 81 Fed.
Reg. 84559 (November 23, 2016).
Although the commission is
authorized to compromise any civil
penalty, 15 U.S.C. § 2069(c), in order
to obtain a penalty without a compromise, the CPSC is required to
file an action in US District Court.
Advance Machine Co. v. Consumer
Product Safety Commission, 666 F.2d
1166 (8th Cir. 1981).
Factors for assessing a penalty
The penalties that can be assessed
under the CPSA are substantial,
and raise the important question
of how the amount is determined.
The CPSA itself, as amended by the
CPSIA, sets forth several factors to
The appropriateness of such penalty to
the size of the business of the person
charged, including how to mitigate undue
adverse impacts on small businesses,
the nature, circumstances, extent, and
gravity of the violation, including, the
nature of the product defect, the severity
of the risk of injury, the occurrence or
absence of injury, and the number of
defective products distributed, and such
other factors as appropriate.
15 U.S.C. § 2069(c). The CPSIA
also mandated that the CPSC issue a regulation providing its own
interpretation of these penalty
factors. CPSIA § 217(b)( 2). In addition to the statutory factors found
in the CPSA, the commission’s rule
includes as factors whether or not
a company has a safety compliance program, a history of non-compliance or economic gain from
non-compliance, and whether the
company responded to the CPSC’s
inquiry in a timely and complete
manner. See 16 CFR Part 1119.
Rising penalty settlements
Since the maximum penalty
amounts were raised by the CPSIA
in 2009, penalty settlements have
been rising significantly. In calendar year 2009, when all of the penalty settlements involved conduct
subject to the pre-CPSIA maximum
penalty cap, the average settlement
amount was about US$275,000,
with the largest penalty being
US$2.3 million. After 2009, the average penalty settlement increased
as depicted in the chart below. Even
accounting for the fact that most
penalties settled before 2014 dealt
with conduct occurring before the
maximum penalty increased under
the CPSIA, the increase is dramatic.
In 2016, the CPSC obtained
its first penalty settlement in the
maximum amount permitted under
the CPSIA amendments, increasing
the penalties (then US$15,450,000).
Partly as a result, the average pen-
The Tenenbaum and
alty settlement in 2016 soared to
over US$6.2 million. In addition, in
2016 CPSC initiated two suits seek-
ing penalties, the first such suits
The most recent Democratic
chairs of the CPSC used the
CPSIA amendments to usher in
this increase in penalties. Inez
M. Tenenbaum served as chair of
the CPSC from June 23, 2009, to
November 30, 2013, and thus led
the commission when enhanced
CPSIA penalties were first available.
On January 23, 2012, the CPSC announced a civil penalty settlement
with Hewlett-Packard Company
in the amount of US$425,000, a
penalty subject to the lower maximum amounts prior to the CPSIA.
Although CPSC Chair Tenenbaum
voted to approve the settlement,
she indicated that her vote was “not
without significant reservation.”
(Statement of Chairman Inez Tenenbaum, January 19, 2012, available at www.cpsc.gov/s3fs-public/
pdfs/tenenbaum01192012.pdf.) In a
statement explaining her vote, she
clearly signaled that an increase in
penalties was coming:
[I]t is my strong hope and expectation
that future enforcement actions, particularly those that arise under our enhanced
authorities, will (as Congress intended)
The penalties that can be
assessed under the CPSA
are substantial, and raise the
important question of how
the amount is determined.