June 9, 2016

With our annual “public hearing on the [Commission’s] agenda and priorities”[1] less than a week away,[2] I would like to add to the Commission’s agenda some potential elements of a way forward on what should be among our highest priorities: The fair, just, and orderly calculation and imposition of civil penalties for alleged violations of our rules.


I have made no secret of my concerns about lack of any rigorous analysis underlying the sums we demand from companies we believe have strayed outside the law,[3] the scarce public disclosure or discussion about our expectations for companies’ future compliance,[4] and the resulting missed opportunities to protect consumers.[5] Rather than just lamenting the things we are not doing, I would like to suggest things we should be doing.


To that end, I have prepared a list of concrete, practical steps the agency could take during the remainder of 2016 that I believe would help us chart a clearer, fairer, and sounder path. None of these should be read as demands, but rather as ideas that, I hope, will be supplemented – and perhaps supplanted – by good ideas from across our stakeholder community as we move toward a penalty framework that better serves the agency, our regulated industries, and consumers.


To begin righting its penalty ship, CPSC could:

  1. Direct CPSC’s Office of General Counsel (OGC) (or from an outside entity, such as the Administrative Conference of the United States (ACUS)) to produce a publicly available report comparing our statutory and regulatory penalty constructs with those of peer agencies, such as the Food & Drug Administration, the Federal Communications Commission, the Federal Energy Regulatory Commission, or the National Highway Traffic Safety Administration;
  2. Hold one or more open meetings or workshops on CPSC penalties, their purposes, and their ideal function and present dysfunction;
    • Possible topics:
      • Pros and cons of the current purely subjective approach;
      • Pros and cons of a purely empirical, matrix-like approach;
      • Creating a more objective scheme while still leaving staff sufficient leeway; and
      • Transparency and predictability versus useful uncertainty
    • Possible attendees
      • Members of the unofficial “CPSC Bar;”
      • Representatives of ACUS;
      • Scholars who have studied penalties at health and safety agencies; and
      • Professionals from peer agencies;
  3. Hold regular (perhaps semi-annual), open, webcast meetings to allow the Office of Compliance and Field Operations (EXC), the Office of Import Surveillance and Inspection (EXIS), and OGC to discuss with the regulated community what trends – positive or negative – the agency is seeing across all of its compliance and enforcement channels, ranging from penalties to imports;
  4. Produce publicly available guidance documents advising the public more fully of the Commission’s perspectives on penalties, such as:
    • A policy statement more fully elucidating the penalty factors identified in the regulation (16 C.F.R. part 1119), including specifying what the Commission believes would make any of those factors aggravating or mitigating, as the facts warranted ;
    • OGC or Commission analyses of recent civil penalties in the aggregate, with application of factors as OGC saw them, anonymized to prevent inappropriate disclosure;
    • OGC or Commission analyses of anonymized case studies or hypothetical cases; and
    • An outline of what key facts and factors the Commission expects will be identified in the public information for each settlement, such as:
      • Number of incidents, injuries, injuries requiring medical treatment, deaths;
      • Date when reporting was expected, date when firm actually reported; and
      • Number of units distributed; or
    • Anonymized Preliminary Determinations (PDs) to better inform the public regarding what the Commission views as products that:
      • Clearly do present Substantial Product Hazards (SPHs) that must be reported;
      • May present SPHs that should be reported but may not necessitate recalls; or
      • Clearly do not present SPHs but may be reported out of an abundance of caution;
  5. Begin (perhaps with an Advance Notice of Proposed Rulemaking) formal revision of 16 C.F.R. part 1119 – Civil Penalty Factors;
  6. Develop and propose statutory or regulatory changes to add greater clarity and certainty to the reporting obligation imposed by Section 15 of the Consumer Product Safety Act (CPSA), which is the basis for the vast majority of our penalties and which contains substantial ambiguity, exacerbating the deficiencies in our penalty policy;
  7. Seek a public, inter-agency meeting through ACUS or its Council of Independent Regulatory Agencies (CIRA) about civil penalties across the federal government;

Again, our penalties and the policies that underlie them are in such a disordered state that I am very much open to ideas from any source. I hope this list can be the catalyst for a long-overdue conversation. Our priorities hearing – by design, an opportunity for our stakeholders to tell us how we should be spending our time and the taxpayers’ dime – is the ideal place for this conversation to begin, but in no way should it end there. The problem is too large and the need too critical.

[1] 15 U.S.C. § 2053(j).

[2] Commission Agenda and Priorities; Notice of Hearing, 81 Fed. reg. 28,053 (May 9, 2016).

[3] Joseph Mohorovic, Statement of Commissioner Joseph P. Mohorovic Regarding the Vote to Approve Provisionally a Civil Penalty Settlement with Office Depot (May 22, 2015), available at http://go.usa.gov/cSMA9.

[4] Joseph Mohorovic, Statement of Commissioner Joseph P. Mohorovic Regarding the Commission’s Provisional Acceptance of a Settlement Agreement with Gree Electric (Mar. 24, 2016), available at http://go.usa.gov/cSMAm.

[5] Joseph Mohorovic, Statement of Commissioner Joseph P. Mohorovic Regarding the Commission’s Provisional Civil Penalty Settlement with Teavana Corporation (May 26, 2016), available at http://go.usa.gov/cSMsB.