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Rare CPSC Penalty Referral to Department of Justice May Signal a More Aggressive Agency in the Biden Era

In a rare move, the U.S. Consumer Product Safety Commission (CPSC) has asked the Department of Justice (DOJ) to pursue and potentially litigate a civil penalty matter. In an even rarer move, the CPSC has publicly disclosed the request. Acting Chairperson Bob Adler has released a statement announcing that the Commission has voted – on a bipartisan basis – to refer a case to the DOJ, and although his statement does not identify the targeted company, its industry, or even the nature of the possible violation, the vote and announcement are certain to raise eyebrows across the CPSC-regulated community.

Penalty Primer

For background, the Consumer Product Safety Act (CPSA) sets forth a variety of prohibited acts, ranging from material misrepresentations to the agency to selling recalled products. Violating these prohibitions can expose a company to civil penalties – up to $16.025 million for some violations – or criminal enforcement. However, the CPSC cannot impose any penalties itself. Instead, if the agency believes a company has violated the CPSA and a penalty is due but cannot reach a settlement with the company, the CPSC has to pursue that penalty through litigation.

The CPSC cannot charge into court on its own. The agency must refer civil penalty actions to DOJ. Only if DOJ does not confirm within 45 days that it will move forward with a case can the CPSC litigate independently.[1]

An Infrequent Occurrence                    

The CPSC takes seriously the potential consequences of referring a case to DOJ. Litigation is, of course, slower and more resource-intensive than reaching a pre-litigation settlement, which is an unattractive prospect for a resource-constrained agency. The agency is also protective of its relationship with the DOJ and wary of sending cases that the career litigators would not find worthwhile, of being the agency that cried wolf.

Moreover, although the Commission has delegated many of its functions to the agency’s career staff, the power to ask DOJ to enforce the CPSA remains a Commission-only function, requiring a majority vote among the commissioners. Achieving consensus on any significant matter can be difficult; consensus on unleashing the DOJ on a regulated company even more so.

Finally, CPSC-regulated companies are also reluctant to litigate penalty matters. As unpleasant as a public penalty settlement with the agency is, it is generally preferable to years of expensive and equally public litigation against a health and safety agency that carries the prospect of a much higher penalty amount.

Altogether, it should be no surprise that the CPSC typically refers very few cases to DOJ. In our experience, one a year is about the average.

Going Public?

Traditionally, the CPSC has not publicly announced DOJ referrals. Part of the reason for this silence is Section 6(b) of the CPSA, which generally requires the CPSC to inform a company prior to disclosing information about that company or its products and allows the company to pursue an injunction against disclosure (though very few companies do).

Another concern is the risk that, if the CPSC announces a referral but the DOJ does not pursue the case, the CPSC could be subject to criticism or embarrassment. The CPSC’s attorneys and their colleagues at the DOJ generally work closely enough that this should be unlikely, as the Commission should have a good handle on DOJ’s thoughts on a case before referring it, but the risk cannot be ignored.

Stars Align

So, if a referral is rare enough, and a publicly announced referral is even more unusual, what has changed? Why now?

Without knowing more about the matter, it is difficult to theorize, but perhaps something about the facts of this case has the Commission both sufficiently incensed to call on its enforcers at DOJ and sufficiently confident in the outcome to plant a stake in the ground.

The referral is all the more remarkable because of the Commission’s current political situation: As we’ve noted previously, the Commission has spent nearly four years under acting chairs and the last year evenly split between Democrats and Republicans, with consensus even more elusive than normal. Presumably, Chairperson Adler’s describing the vote as “bipartisan” – which it necessarily had to be for there to be a majority – rather than “unanimous” suggests that one Commissioner did not support the referral, likely either Dana Baiocco or Peter Feldman, both Republicans. Still, pulling together three votes on as significant an issue as a DOJ referral is noteworthy.

An Epoch-Making Moment?

The referral may not be just about the facts of the matter referred. It may also be reflective of a new era at the Commission.

Chairperson Adler has long maintained that the CPSC does not bring enough cases against companies it regulates, either penalty litigation or recall actions. He believes that the agency was more effective in pushing companies toward safer products in its early days in the 1970s, when he was a staffer to one of the original commissioners. The CPSC of that era did litigate more frequently, in part because both the agency and its regulated community were trying to create precedent to feel out their relationship.

Chairperson Adler has also suggested that the agency wins just by being in court, even if it loses the case. His rationale is that each case is a reminder that the cop is on the beat, and that the reputational harm to companies from being publicly opposed to the CPSC in protracted litigation is such that a case against one company serves as a warning to all the others.

Commissioner Elliot Kaye has made similar comments, urging the agency’s staff to be more aggressive in their pursuit of penalties and higher settlement figures.

But that’s just two. While we don’t know – the vote tally hasn’t been made public – it seems likely the third vote came from Commissioner Feldman. Feldman has established himself as a law enforcer. He has repeatedly and loudly pushed for stronger enforcement of the Child Nicotine Poisoning Prevent Act, and he and Adler recently traded barbs about what Feldman described as a “troubling decline in CPSC enforcement activity.”

If Feldman’s was the third vote in favor of the referral, this may signal an era of more penalties and more litigation. As we’ve written recently, we expect that President-Elect Joe Biden will have the opportunity to nominate a chairperson on day one, presumably creating a Democratic majority, and then to cement that majority by nominating successors for Kaye and Adler, whose tenures will conclude no later than October of 2021 and 2022, respectively. Feldman’s term will last until at least through at least October 2026, creating the potential for a four-vote consensus for aggressive enforcement for years to come.

Given the wording of Adler’s announcement – and the fact that it was made only under his name – it’s not as clear that there’s a shift in the agency’s views on publicizing pending cases. Presumably, if whichever of Adler’s colleagues joined him in the referral vote felt it appropriate to break from traditional agency practice by announcing the referral, they would have joined his statement. Feldman certainly appears not to have endorsed the idea of the announcement, as he took to Twitter to call Adler’s statement “an outrageous breach of protocol” and made reference to ongoing recall litigation in which Adler’s statements about the subject product led a federal district court to rule that he should have recused from the case, though that ruling was later overturned by an appellate court.

However, even if it was not a move his current colleagues supported, Adler’s move may create precedent that a future Commission or commissioner could build on. With the prospect of significant Commission turnover, a new arrival may wish to follow Adler’s example to build their own law-enforcement brand.

Whether it’s a sign of a more contentious agency to come or just an aberration driven by aberrant facts is unclear at this point, but even the possibility of a CPSC that more frequently takes its regulated community to court means this referral is an action that regulated community should follow as closely as possible.

[1] The CPSC can only pursue criminal penalties through DOJ or with the Attorney General’s concurrence.

© 2021 Schiff Hardin LLPNational Law Review, Volume X, Number 325



About this Author

Mike Gentine Schiff Hardin Product Liability Lawyer Washington DC

With experience spanning federal government, private practice, and in-house roles, Mike advises clients on legal and regulatory matters particularly in the area of consumer goods and product safety.

Mike has held multiple positions at the U.S. Consumer Product Safety Commission (CPSC). He served as senior counsel for the Office of CPSC Commissioner Joseph P. Mohorovic from 2014-2017, where he advised on various policy, enforcement, and ethics issues. He led several efforts to reform rules and regulations, including an initiative to reduce the paperwork burden on CPSC-regulated...