October 21, 2019

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CPSC Sends Another Shot Across Bow of Retailers with $3.8 Million Civil Penalty Against Best Buy for Sale of Recalled Products

On Tuesday, the U.S. Consumer Product Safety Commission (CPSC) announced that Best Buy Co., Inc. entered into a settlement agreement with the CPSC to pay a $3.8 million civil penalty to resolve allegations that it “knowingly sold, offered for sale, and distributed in commerce recalled consumer products.” This civil penalty is significant because the alleged violation of the Consumer Product Safety Act (CPSA) had nothing to do with timely reporting under Section 15(b)—the usual suspect in civil penalty cases. Rather, the allegation against Best Buy is that it violated CPSA Section 19, which prohibits the sale, distribution, or importation of any product that has been recalled.

This penalty is just the second such penalty in recent years (see Meijer 2014 civil penalty). In a tweet commenting on the penalty and noting the reason for it, CPSC spokesman Scott Wolfson said “[The] challenge is great enough to get recalled products out of homes.  We need retailers to keep them out of their stores.”

Civil Penalty, ProductsIn a complicated and massive supply chain, these issues are not unheard of. However, where such issues lead to the sale of recalled products, the CPSC is clearly not accepting them as excuses or defenses, and will not hesitate imposing a hefty civil penalty.

The CPSC alleged here that Best Buy knowingly sold and distributed sixteen different recalled products between 2010 and 2015, including washing machines and dryers, ovens, televisions, surge protectors, computers and other electronics.  Notably, according to the CPSC’s allegations, sales of recalled products continued even after Best Buy had told the Commission that measures were put in place to catch such products and reduce the risk of sales of recalled products.

Importantly, the CPSC imposed the penalty and highlighted in its press release that internal logistics issues caused the sale of the recalled products. Specifically, the CPSC alleged “Best Buy, in some cases, failed to permanently block product codes due to inaccurate information that signaled that the recalled product was not in inventory.  At other times, the blocked codes were reactivated prematurely, and in a few cases, overridden.”

In response to the civil penalty announcement, Best Buy stated the following: “We regret that any products within the scope of a recall were not removed entirely from our shelves and online channels.  While the number of items accidentally sold was small, even one was too many.  We have taken steps—in cooperation with the CPSC—to help prevent these issues from reoccurring.”

Along with paying the $3.8 million civil penalty, Best Buy has agreed to maintain a product safety compliance program with the common program elements we have seen in recent timeliness penalties to ensure that the Company complies with product safety standards and regulations enforced by the Commission.  Not surprisingly, the compliance program also contains elements related to the “appropriate disposition of recalled goods,” and management and oversight of that program.

As we frequently advise, companies in the consumer products arena should remain mindful of and attentive to their obligations under the Consumer Product Safety Act—not just Section 15(b) reporting (as that, deservedly, receives a lot of attention)—but also to the CPSA’s many other requirements and prohibitions, including the prohibition on the resale of recalled products.

This civil penalty is a good reminder that companies, large or small, must have robust procedures in place to identify and set aside recalled products whether on the shelves, in inventory, or otherwise, and to control all supply channels to prevent this from happening.

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About this Author

Charles Samuels, Mintz Levin Law Firm, Washington DC, Tax and Environmental Law Attorney
Member

Chuck is engaged in a federal and international regulatory and legislative practice. He has been extensively involved in product safety, environmental, tax, health care, technology, and energy issues, and public finance legislative and regulatory matters for a variety of trade associations, corporations, local governments, and state agencies.

His practice encompasses work before the US Consumer Product Safety Commission, Departments of State, Health and Human Services, Energy, and Treasury, US Trade Representative, Environmental Protection...

202-434-7311
Matthew Howarse, Consumer Safety, Attorney, Mintz Levin, Law Firm
Member

Matt is a prominent consumer product safety lawyer who advises manufacturers, retailers, importers, distributors, trade associations, and test laboratories. He has extensive experience with compliance, regulatory enforcement, recalls, and other product safety related issues. He represents clients before the Consumer Product Safety Commission (CPSC), Health Canada, the Federal Trade Commission, Congress, and state agencies. Matt draws on his four-year tenure as the CPSC chief of staff and his many years advising clients in private practice to devise practical and resourceful solutions for clients. He serves as Chair of Mintz’s Consumer Product Safety Practice and president-elect of the International Consumer Product Health and Safety Organization (ICPHSO).

Based in Washington, DC, Matt is the Chair of the firm’s Consumer Product Safety Practice. He focuses his practice on consumer product compliance and enforcement issues involving the US Consumer Product Safety Commission (CPSC), individual US states, the Federal Trade Commission, and Health Canada.

Matt previously served as the Chief of Staff of the CPSC from 2010 to 2013 and as the Chairman’s Senior Counsel in 2009. Matt is very involved in the national and international product safety community and currently serves as Vice President on the Board of Directors for the International Consumer Product Health and Safety Organization (ICPHSO).

Matt regularly helps companies seeking representation on product safety reporting obligations, recalls, regulatory compliance, product safety investigations, civil penalties, import investigations, internal compliance programs and training, the CPSC’s public database, and other regulatory and enforcement matters involving the Consumer Product Safety Act (CPSA), Consumer Product Safety Improvement Act (CPSIA), Federal Hazardous Substances Act (FHSA), Flammable Fabrics Act (FFA), Poison Prevention Packaging Act (PPPA), the Canada Consumer Product Safety Act (CCSPA), and other federal and state product safety laws. He assists clients with navigating complex product safety compliance issues and avoiding unwarranted recalls or enforcement actions.

Matt’s experience includes representing manufacturers, distributors, and retailers of apparel, children’s toys, fitness equipment, office supplies, household furniture, juvenile products, power tools, products requiring child resistant packaging, audio video equipment, arts & crafts materials, books, recreational and sporting equipment, safety equipment, hair care tools, kitchen appliances, lighters, candles, heating and cooling equipment, home decorations, promotional products, household cleaners, and many other types of consumer products. Matt also advises trade associations, testing laboratories, and various other types of clients on product safety issues and represents them before product safety regulators and Congress.

With over 10 years of experience in product safety, including the representation of a wide range of consumer product industries and working in a senior leadership position at the CPSC, Matt is able to provide well rounded, efficient, and thorough advice on the full spectrum of product safety issues.

202-434-7446