CPSC Issues Proposed Rule on the Factors to be Considered in Determining Civil Penalty Amounts

(The CPSA provides that a knowing violation of the prohibited acts enumerated in section 19(a) could subject a firm to a civil penalty under section 20 of the CPSA.)

The CPSC believes that the adoption of this proposed rule will result in a better understanding by the public of the CPSC's approach to determining the appropriateness and amount of a civil penalty.

CPSC Proposes to Enumerate Statutory Factors and Other Factors Used to Determine Civil Penalties

Proposed 16 CFR 1119.1 would set forth both the statutory factors and other factors that may be considered by the CPSC in determining the amount of a civil penalty:

Statutory factors. 16 CFR 1119.1(a) would state that section 20 of the CPSA specifies five factors that shall be considered by the CPSC in determining the amount of a civil penalty to be sought for violations of section 19(a), which includes failure to furnish information to the CPSC as required by section 15(b). Those factors are: the nature of the product defect, the severity of the risk of injury, the number of defective products distributed, the occurrence or absence of injury, and the appropriateness of [the] penalty in relation to the size of the business of the person charged. The CPSA also allows the CPSC to compromise any civil penalty under section 20. In determining the amount of a penalty settlement, the CPSC is instructed to consider the same five factors.

Other factors. 16 CFR 1119.1(b) would provide that in determining the appropriateness and the amount of any civil penalty to be pursued in negotiations when a violation of the reporting requirements of section 15(b) or other requirements of section 19(a) have occurred, in addition to the statutory factors set forth in section 20 of the CPSA, the CPSC and the staff may consider, as appropriate, one or more of the following:

Previous record of compliance. The CPSC and the staff may consider whether the firm has had previous safety, reporting or other violations, and, if so, whether the firm has taken action to address previous violations and to improve compliance with applicable CPSC safety requirements.

Timeliness of response. With regard to the matter under review, the CPSC and the staff may consider how quickly the firm responded to relevant information it obtained (or reasonably should have obtained), and the extent to which any injuries might reasonably have been prevented by more timely reporting or other required action.

Safety and compliance monitoring. The CPSC and the staff may consider the extent to which the firm has adopted a system for collecting and analyzing safety information and for evaluating reporting issues (including such system's application in the matter under review).

Cooperation and good faith. The CPSC and the staff may consider the degree to which the firm cooperated and acted in good faith to address reporting or other product safety violations or other issues, both generally and with regard to the specific matter under review.

Economic gain from non-compliance. The CPSC and the staff may consider the extent to which the firm profited or otherwise benefited from an improper delay in reporting or complying with other applicable CPSC safety requirements.

Product failure rate. With regard to the product and matter under review, the CPSC and the staff may consider the reasonably expected rate of failure for that type of product over time.

Any other pertinent factors. The CPSC and staff may consider any other pertinent factors.

-written comments must be received no later than August 11, 2006

CPSC Contact - John Gibson Mullan (301) 504-7626

CPSC Proposed New Interpretative Rule (FR Pub 07/12/06) available athttp://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-10963.pdf