CPSC continues to show its intention to use Section 15(b) reporting claims as a tool to punish companies and deter the consumer products industry from taking its reporting obligations lightly. Earlier this year, CPSC Chairman Kaye stated that he is directing CPSC staff to push for significantly higher civil penalties for reporting violations settlements to let companies know that civil penalties are not just the “cost of doing business.” So far in 2015, it appears Chairman Kaye means business, with the only two civil penalty settlements to date totaling $2.6 and $3.5 million, respectively.
CPSC followed this up earlier this week by filing a complaint against Michael’s Stores in connection with allegations that Michael’s did not timely report a substantial product hazard. The complaint alleges that Michael’s failed to report the product at issue for more than a year after the company had knowledge of the product hazard. The complaint also alleges that when Michael’s did report, it gave the impression that a different company was the importer, allowing Michael’s to avoid responsibility for the product recall. Presumably, CPSC’s resort to filing a complaint means settlement talks reached an impasse, and CPSC’s monetary demand may have been one of the causes.
In connection with reporting, CPSC continues to show the importance it places on internal controls for reporting, as the complaint seeks injunctive relief requiring Michael’s to establish an internal record keeping and compliance monitoring system, including related internal controls, designed to provide timely reports to CPSC.
