With the complexity of product safety requirements, the changing regulatory environment, and the ferocious plaintiffs’ bar, it is more important than ever for importers, manufacturers, and retailers to understand their obligation to comply with product safety laws and standards. In this recent webinar, Melissa L. Steinman, a partner in Venable’s Advertising and Marketing practice, explored current developments in product safety and warranty laws and examined common issues and pitfalls that organizations need to be aware of relating to product standards and safety. She also addressed some follow-up questions.
Q: How does the Consumer Product Safety Commission enforce its product safety standards?
A: The Consumer Product Safety Commission (CPSC) has created a public database to report consumer incidents, which can be found at www.saferproducts.gov. We generally recommend that any company that makes consumer products should register on that website. That way, the company can get reports or notices when an incident has been reported, and the company will have an opportunity to respond and have its say. That database is also searched by plaintiff’s counsel or the like, and its contents are public, so by being registered companies can also see who has filed complaints and so on. The CPSC has the authority to pursue recalls and even ban products that they think are very dangerous, and to impose significant civil monetary penalties on companies that fail to report safety incidents, product defects, and other violations in a timely manner. So, we do recommend that clients pay attention to the reporting activity on this database.
Q: What types of violations are typically reported, and is reporting mandatory?
A: Section 15(b) of the Consumer Product Safety Act (CPSA) requires mandatory reporting upon receipt of information that reasonably supports the conclusion that any product over which the agency has jurisdiction fails to comply with a product safety rule, regulation, standard, or ban; has a substantial risk of injury to consumers; or creates an unreasonable risk of serious injury or death. There are a few specific triggers or statutory violations, such as death from choking on toys or the presence of poisons or hazardous substances. So, any violation that indicates the product may be defective, or the occurrence of an injury caused by the product, may trigger that duty to report.
Q: Who has the duty to report, and what are the penalties for failure to comply?
A: Manufacturers, importers, distributors, and retailers – basically, anyone in the distribution chain – has a legal obligation to report. It may be that a manufacturer has more information and a higher duty to report that information, but even retailers that receive information that indicates a problem with the product they have sold have the legal obligation to report. The language of the CPSA says that you must report “immediately” upon receiving information that reasonably supports the conclusion that there’s a failure to comply with product safety standards. “Immediately” is defined as within 24 hours of obtaining reportable information, so that’s a pretty strict standard. But the affected party does get a reasonable time to investigate the claim and determine whether the information is valid and should be reported (generally 7-10 days). That said, failure to report in a timely manner may lead to a claim by the CPSC for significant civil monetary penalties, as well as increased compliance requirements.
Q: In terms of recalls on online marketplaces, is there any specific guidance on online marketplaces and distributors?
A: The thing to keep in mind with online marketplaces is that the retailers also have a duty to report under the CPSA. There are two ways that the retailer can fulfill the duty to report. The first is to actually file a section 15(b) report. The second is to write a letter to the manufacturer or importer, with a copy to the CPSC, saying it has received these reports of product incidents or defects and they need to be addressed.
Q: What are manufacturers’ and retailers’ obligations regarding warranties?
A: The Magnuson-Moss Warranty Act (the Act) applies to consumer products or combination sales of products or services and provides specific requirements that warrantors must meet when providing a written warranty. There are three essential rules or requirements to keep in mind under the Act. The first is the Disclosure Rule, which says that all consumer product warranties must be titled “full” or “limited,” and limited warranties must be made available in a single, clear, easy-to-read document. The second is the Presale Availability Rule, which stipulates that the warrantor and the seller must ensure that warranties are available wherever consumer products are sold – with the exception of products that retail for $15.00 or less. The third is the rule on Informal Dispute Resolution Procedures, which essentially makes it easier for consumers to take companies to court. The Magnuson-Moss Rule also prohibits specific types of conduct; for instance, you’re not allowed to disclaim or modify implied warranties (such as the warranty of merchantability) during the term of your express warranty or condition warranty service on registration or return of a warranty card. Moreover, the Act prohibits “tying” warranty coverage to use of the warrantor’s parts or service providers.
Q: Do warranty requirements vary by state?
A: Some states have warranty laws that apply only to specific types of products, such as cars or recreational vehicles, and are meant to provide additional protections to purchasers of those products. Other states have laws that specifically apply to extended warranties or service contracts, which really aren’t warranties at all, but rather are a form of insurance. California’s Song-Beverly Act is the strictest state warranty law in the country and has numerous specific requirements.
Guidance surrounding consumer product safety and warranties is ever evolving. For more information, watch the full webinar, or contact our panelist, Melissa L. Steinman, to learn more about our Advertising and Marketing services.