On November 21, 2013, the Consumer Product Safety Commission (CPSC) published in the Federal Register a Notice of proposed rulemaking to set forth principles and guidelines for the content and form of voluntary recall notices that firms provide as part of corrective action plans under Section 15 of the Consumer Product Safety Act (CPSA). The CPSC announced a number of controversial amendments at a hearing last Wednesday, and unveiled the full text of the proposed rule this morning.
The most controversial portion of the rule makes corrective action plans legally binding. Companies have routinely worked with the CPSC to design corrective action plans for public notification and implementation of voluntary recalls in the past. The current rule defines a corrective action plan as “a document, signed by a subject firm, which sets forth the remedial action which the firm will voluntarily undertake to protect the public, but which has no legally binding effect.” 16 CFR 1115.20(a).
During the hearing last Wednesday, the democratic Commissioners characterized the proposal as a minor tweak to the current rules. Many are concerned, however, that making corrective action plans legally binding could lead to a more adversarial relationship between the CPSC and businesses. Additionally, the implementation of recalls could be delayed while such plans are negotiated, and prolonged court battles could result if the CPSC chooses to sue over the implementation of corrective action plans, thereby potentially delaying the recall process. Companies may also be unable to adapt to problems that are discovered as a recall is taking place.
Another controversial aspect of the proposed rule is that the CPSC may now negotiate whether corrective action plans constitute an admission that a product hazard exists. This provision adds another point for companies and the CPSC to negotiate, and certainly provides leverage to the CPSC.
The proposal also authorizes the CPSC to institute compliance programs that generally require companies to put in place internal procedures and provide for additional reporting and CPSC oversight. Compliance programs may be warranted where companies have had prior recalls, have failed to report hazards, or had insufficient protections and controls in place.
The proposed rule also sets forth some less controversial provisions that are intended to standardize the contents of recall notices and to increase the dissemination of those notices to the public.
The proposed rule is open for comments for 75 days – until February 4, 2014. Comments may be submitted in writing to the CPSC or electronically at www.regulations.gov. The text of the proposed rule can be found on the Federal Register’s website by clicking here.
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