WASHINGTON, D.C. â€“ The U.S. Consumer Product Safety Commission (CPSC) is announcing a major court victory that upholds one of CPSCâ€™s most potent weapons: the requirement for companies to report dangers and defects with consumer products to the government in a timely manner. The court ruled unanimously that companies who fail to abide by the reporting requirement can be held liable to pay substantial civil penalties (court ruling - PDF)
The ruling was made by the U.S. Court of Appeals for the Ninth Circuit in San Diego, Calif., and affirmed a $300,000 civil penalty against Mirama Enterprises Inc. Mirama, which does business as Aroma Housewares Co., failed to report a serious product hazard with its electric juicers that shattered and injured consumers.
â€śThis case is unprecedented, as no court has ever addressed CPSCâ€™s reporting requirement,â€ť said Chairman Hal Stratton. â€śThe Court agreed with CPSC that companies must tell us about potentially dangerous products even before they are found to be defective and that companies are liable for reporting every product they sell that poses a danger to consumers.â€ť
Specifically, the appellate court held that â€śa company commits a separate offense for every potentially dangerous unit it fails to report.â€ť As a result, the court ruled, â€śAroma was required to report not merely the twenty-three juicers that shattered, but the 30,000 to 40,000 juicers in the stream of commerce that might well pose an unreasonable risk of serious injury to consumers. When it failed to do so, Aroma committed 30,000 to 40,000 reporting offenses.â€ť
The Ninth Circuit also rejected Aromaâ€™s argument that proof of a defect was required before a civil penalty could be imposed for a failure to report under the Consumer Product Safety Act. The appellate court held that â€śCongressâ€™s decision to impose penalties for reporting violations without requiring proof of a product defect encourages companies to provide necessary information to the Commission.â€ť
â€śWhen companies inform us right away about a problem with a product, it allows CPSC to work quickly and cooperatively with the company to determine if the product is defective, and if it is, then we can warn consumers before anyone suffers harm,â€ť added Chairman Stratton.
The district court case was the first time that a federal court 1) found that a company had violated the reporting statute and 2) directly imposed a civil penalty. The U.S. Department of Justiceâ€™s Office of Consumer Litigation represented CPSC in the Aroma cases.