CPSC Notice of Proposed Rulemaking - Voluntary Remedial Actions and Guidelines for Voluntary Recall Notices (CPSC Docket No.

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1 February 4, 2014 Mr. Todd Stevenson Secretary U.S. Consumer Product Safety Commission 4330 East West Highway Bethesda, MD RE: CPSC Notice of Proposed Rulemaking - Voluntary Remedial Actions and Guidelines for Voluntary Recall Notices (CPSC Docket No. CPSC ) Dear Mr. Stevenson: The National Retail Federation (NRF) appreciates the opportunity to comment on this important, proposed rule. NRF is the world s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation s largest private sector employer, supporting one in four U.S. jobs 42 million working Americans. Contributing $2.5 trillion to annual GDP, retail is a daily barometer for the nation s economy. NRF s This is Retail campaign highlights the industry s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. Summary of Comments NRF understands and appreciates the goal espoused by the proposed rule of making the development and implementation of voluntary corrective action plans ( CAPs or recalls) more efficient and therefore effective for consumer safety. Indeed, it is very often retailers that proactively offer to undertake and implement product recalls, despite the fact that others in the supply chain may have more direct knowledge about the content, design and manufacture of the products at issue. Retailers want dangerous and defective products taken off of store shelves just as quickly and effectively as does the CPSC. However, NRF and its members are concerned that the proposed rule may in fact have the opposite effect, by making discussions over voluntary recalls more protracted and complex, thereby causing delays to removing violative and hazardous products from the market. Therefore, before undertaking any significant changes to the currently successful CPSC voluntary recall system that has worked extremely well for decades, the agency should first undertake a broad-based effort to engage industry groups, consumers and other stakeholders to

2 identify and fix whatever problems with the existing system the CPSC believes need to be addressed. There is simply too much at stake for American consumers for the CPSC to undertake such a significant overhaul of the current system, without first directly engaging all its stakeholders beyond just the current public comment solicitation. 1 As with the recently finalized testing and certification rules and a number of other significant rules the CPSC has issued in recent years, many if not most of the objectives sought by the agency can likely be achieved in a cooperative way with stakeholders. The history of the agency is in fact replete with examples of doing just this. For example, the successful CPSC Retailer Reporting Program was instituted in cooperation with retailers to address concerns that some product safety issues may have been missed when analyzing consumer complaint information. Since its inception, this Program has resulted in the identification and recall of many unsafe products that might otherwise not have occurred. Similarly, if there are issues with delays over certain elements of recall remedy, press release content or other aspects of a voluntary recall, NRF would strongly urge the CPSC to first identify those and determine whether there might be means to address those outside the context of such a sweeping new regulation as that currently proposed. 2 The existing voluntary recall process is just that voluntary and it serves as the lynchpin of the overall public-private product safety partnership intended by Congress and that has worked so well for over 40 years to improve product safety. This system avoids costly and protracted litigation by the CPSC to force companies to undertake recalls or other remedial actions, delays that directly put consumers at risk and strain limited agency resources. The current Acting Chairman of the CPSC recently described the agency s voluntary recall system extraordinarily effective. 3 It generally removes violative and potentially hazardous products from the marketplace quickly and efficiently by recognizing and reflecting the fact that the vast majority of companies want to do the right thing when it comes to product safety. Indeed, it is in their best interests to do so. Yet CPSC s existing authorities (including seeking mandatory recalls and binding consent agreements with recalcitrant firms) still enables the agency to aggressively pursue rare bad actors that refuse to recall truly dangerous products or to live up to their recall agreements. 4 If this highly effective, voluntary system is transformed by this rule or otherwise into a compulsory and punitive process fraught with legal questions and haggling, it will likely diminish 1 NRF would also like to note for the record that it is questionable as to whether the CPSC has the statutory basis or authority to issue this incorrectly styled interpretive rule, which far exceeds the nature and scope of both the existing Voluntary Remedial Actions regulation (16 CFR ), as well as the scope of what the CPSC is authorized to mandate in the context of a mandatory recall under Section 15 of the CPSA (which limits mandatory recall remedies, for example, to a refund, repair or replacement of the subject product and does not authorize the imposition of internal compliance programs by the recalling firm). 2 It should also be noted that the continued relevance of the influential and highly utilized CPSC Recall Handbook is very much called into question should this proposed rule become final. With such a comprehensive and effectively mandatory rule enshrined into regulation, the current and any subsequent versions of the Handbook would be of questionable authority. Indeed, NRF would argue that as technology and other factors evolve over time, the Voluntary Recall Rule itself would need to be regularly amended, burdening agency staff and relegating the rule to continually attempting to reflect current agency expectations and industry practices. 3 See September 25, 2013 CPSC public staff briefing to Commission on voluntary recall proposed rule. 4 See Section 15 of the CPSA (authority to order mandatory recalls) and 16 CFR (b) (authority to seek binding consent order agreements). 2

3 the speed with which recalls are undertaken and therefore unnecessarily put consumers at risk. It may also depress consumer response to recalls by cluttering recall press releases with extraneous new information, thereby diminishing the likelihood that consumers will understand and respond to them. At a minimum, NRF urges it to make the following changes to the proposed rule: 1. Enforceability of CAP Agreements. Delete the proposed rule s assertion ( (a)) that corrective action plans are legally binding. When coupled with the other provisions of the rule, this may discourage firms from entering into CAPs with the CPSC, without significantly enhancing the agency s existing authority to force firms to undertake agreed upon or desired recall actions which, as noted, the agency has ample authority to now do. It is also unclear what other effects this proposal would have, including with regard to whether non-recalling firms (e.g., retailers) may be bound or sought to be bound by voluntary actions in support of a CAP agreement by other, recalling firms, as well as the potential impact of this provision on the presumed protection from third party disclosure under Section 6(b) of the Consumer Product Safety Act (CPSA) of voluntary reports submitted under Section 15(b) of the CPSA. In short, this rule will create unnecessary legal doubt among firms contemplating undertaking voluntary recalls, without enhancing the ability of the CPSC to force recalcitrant companies to take action, since any firm resisting CPSC requests will still get their day in court. 2. Disclaimers. Retain in the final rule the long-standing regulatory ability of recalling firms (16 CFR (a)(1)(xiii)) to include in their proposed statements that undertaking a recall or other corrective action does not constitute an admission that the product is legally subject to report or recall. To now allow agency staff to reject such statements as part of CAP agreements runs counter to the legal and Constitutional rights of recalling firms, particularly in the context of the many Fast Track Program and other recalls undertaken where no determination of a product defect has been made. 3. Compliance Programs. Eliminate reference in the proposed rule ( (b)) to voluntary compliance program agreements as an anticipated element of recall agreements and recall press releases. This vague provision has the potential to significantly slow corrective action plan negotiations and recalls, contrary to the stated, overall intent of the proposed rule. This provision may also unfairly enable agency staff to later assert that any subsequent product safety violation or issue found after such side agreements are entered into was the result of a firm s failure to fulfill its internal compliance program, even if such was not the case. 4. Extraneous Information in Releases. Delete those provisions in the proposed rule requiring information on recall press releases that will not assist consumers in effectively responding to a recall, including: Identification (including city) of the manufacturer(s) and importer of the product (when not the recalling firm), which information is typically known to the CPSC but of little value to consumers and which is often protected confidential business information; Listing of significant retailers of the product ( (j)), a vague term that unfairly singles-out retailers as a supply-chain entity; and Listing the state of residence and age of all persons killed in association with use of the product ( (n)), which is ambiguous, may unnecessarily confuse consumers or 3

4 diminish consumer response, and would unfairly state allegations as facts in the recall release, again with little or no countervailing benefit to consumers. 5. New Reporting Requirements. Remove from the rule the new and extra-statutory reporting requirements ( (n)(1)(2)) that all newly reported injuries must be immediately reported ( notified ) to the CPSC, and that there must be public website notice of any significant number of additional (post-recall) incidents or one or more fatalities associated with the product. These broad new reporting requirements apparently would require the reporting of incidents regardless of whether those incidents relate to any significant product safety issue or whether they relate to the hazard at issue in the recall. As such, these provisions exceed the scope of the existing (and adequate) statutory 15(b) reporting obligation and would require the reporting of information that is likely to be of little or no use to the CPSC or to consumers. 6. Other Required Actions. The proposed rule should also be modified to clarify several of the new CPSC requirements/expectations of recalling firms, including those requiring: That direct recall notification to consumers include retrieval of consumer contact information from third parties where reasonably obtainable, which should first be explored further with stakeholder and other relevant groups, and then at least clarified in the rule to reflect legal, privacy and related issues with respect to the retrieval and use of such information; That recall announcements (releases) be posted on the firm s first entry point, such as a home page of its website should be clarified to accommodate the many considerations at issue with respect to website home pages and uniqueness of each firm s website; That releases be published in languages other than English where necessary and appropriate should be further clarified to ensure that recall effectiveness is not diluted by consumer confusion by potentially multiple language postings where not necessary to affect the recall; and That recall remedies should always include incentives to consumers above the repair, replacement or refund of the recalled product should be clarified to convey that incentives are sometimes but not always necessary or appropriate, in addition to the recall remedy. These and NRF s other comments on this proposed rule are set forth in detail, below. Detailed Comments 1. Enforceability of CAP Agreements. Proposed (a) would assert that CAP agreements are legally binding. This would of course reverse the long standing regulatory statement that such agreements have no legally binding effect. The stated purpose of this reversal is that it will enable the agency to actually enforce recall agreements (presumably as a matter of breach of contract in federal court), in order to address the admittedly rare instances of firms deliberately and unnecessarily delaying the timely implementation of their corrective action plans. It has been asserted by the majority of the Commission that a CAP agreement, like any written or oral contract, ought to be legally binding in court. If an agreement to purchase a package of chewing gum is enforceable in court, as the 4

5 argument was recently made by the Acting Chairman of the Commission, 5 should not a CAP agreement be equally enforceable? There are several critical omissions and flaws with this purported rationale for this dramatic change to the voluntary CPSC recall regulation and system. First, this argument ignores the fact that the CPSC currently has ample legal tools to either mandate a recall and/or seek a binding consent agreement by a company to undertake a specific recall or other corrective action. Section 15 directly authorizes the agency to order a company to undertake a recall, but of course affords a company the necessary right under the Constitution to resist such actions in administrative proceedings and, ultimately, in Federal court. Any assertion that such actions are only rarely undertaken by the CPSC indicates both that instances of firms resisting a CPSC request to undertake or implement a voluntary recall are rare, and ignores the fact that a lawsuit at contract in federal court may take just as long and raise just as many factual issues as an action to issue a mandatory recall order under the CPSA. Alternatively, the agency may, under existing 16 CFR (b), seek a binding consent order agreement with a recalling firm if it believes that the firm has violated or is likely to violate a voluntary CAP agreement. While such binding agreements are ultimately enforceable only in a judicial proceeding, this does provide the CPSC with an alternative to the lengthy process of issuing and seeking to enforce a mandatory recall. Under either scenario, a company not wishing to either enter into or carry-out a recall will be able to fully litigate those issues. In other words, every company resisting the CPSC s desire for that company to initiate or complete a recall will get its day in court. Thus, the net effect of this provision may simply be to cause further delay in the negotiations over a voluntary recall agreement which would not benefit consumers and may in fact put them at risk. Second, neither the rule, its preamble nor any of the arguments stated thus far in support of this provision establish or explain whether or to what extent perceived delay by recalling firms in carrying-out a recall (i.e., dragging their feet in executing a recall) is an actual problem, or at least one that is likely to or should be solved in this manner. In fact, it has generally been asserted by commissioners and staff in open hearing such delays by recalling firms are uncommon. 6 Nor has the agency sought to establish in the present rule or otherwise just when such perceived or actual delays by recalling companies will be considered to be significant enough to warrant attempted contractual enforcement of CAPs. Putting aside for the moment the maxim that agencies should not regulate to the exception, it is difficult to therefore to imagine how effective such a vague, albeit enforceable, expectation of timeliness is likely to be. Currently, most recall agreements do not establish deadlines for implementation of the recall, and for good reason. Any number of factors can and often do arise that may delay or hinder various elements of a recall (failure of a supplier to deliver replacement parts on time; technical problems at a service center taking consumer calls; failure of a non-recalling firm in the supply chain undertaking some necessary element of the recall, etc). When the CPSC staff may determine that these and similar occurrences constitute a violation of the recalling firm s CAP agreement is anyone s guess. Moreover, it should be noted that delays of all aspects of the CAP negotiation and 5 See November 13, 2013 Commission decisional meeting approving the proposed rule. 6 Most recently, at the November 13, 2013 Commission decisional meeting on proposing this rule, Commissioner Adler stated in this context that, The fact is we have, over time, very few non-compliant companies. 5

6 implementation processes are very often attributable to the often overwhelmed CPSC staff, not the recalling firm. This provision of the proposed rule raises other legal issues and questions as well, including the potential for the agency to seek to enforce agreed-upon actions by non-recalling firms that assist with a recall, as retailers are often called upon to do with regard to recalls undertaken by other firms in the supply chain. Thus, in the not uncommon example of a retailer agreeing to help facilitate a recall by a manufacturer by receiving and processing returned products at their stores, the question arises as to whether that voluntary action by the retailer can later be asserted to be or be a part of another firm s binding CAP, enforceable in court or otherwise. In addition, it is an open question as to whether this provision might eliminate the presumed 6(b) (third party disclosure) protection of information supplied in and subsequent to a Section 15(b) report where the reported information ultimately leads to a CAP agreement. By attempting to make CAP agreements legally binding, it may raise the question as to whether in fact 15(b) reports (and possibly other information) provided by firms to the CPSC that do result in a voluntary recall would be protected from third party disclosure. In turn, this may raise yet another uncertainty and legal issue in the recall negotiation process, further delaying what should be the central objective of the agency, to remove potentially hazardous products from the marketplace and from consumer use as quickly as possible. Thus, while this provision is not likely to significantly (if at all) enhance the actual ability of the CPSC to see to it that recalls are implemented swiftly, what is certain is that this provision will sow additional confusion among firms either undertaking or contemplating undertaking a voluntary recall. NRF therefore strongly urges that this language be removed from the proposed rule. 2. Liability Disclaimers. The proposed rule also reverses the long standing Voluntary Recall Rule provision ( (a)(1)(xiii)) allowing recalling firms to state in CAP agreements that the agreement does not constitute an admission that either reportable information exists or a substantial product hazard exists. Under the proposed rule, such statements would be included in the CAP only if agreed to by all the parties. The only explanation of this provision offered by the agency in the rule preamble is that it will facilitate an opportunity for the Commission to negotiate and agree to appropriate admissions in each particular corrective action plan. Disclaimer statements of this type are routinely allowed in other CPSC contexts (notably including penalty settlement agreements and attendant press releases), as well as in other Federal agency contexts. 7 And the reason for such statements is clear: they generally encourage firms to 7 The National Highway Transportation Safety Administration, for example, as recently as August 2013 considered and reestablished the right of automobile manufacturers to assert such disclaimers with regard to car safety defects. In rejecting the proposal to disallow disclaimers, NHTSA concluded that it agrees that consumers are best served when safety recalls are announced and free remedies are administered as quickly as possible, irrespective of whether we and a manufacturer have reached an accord over the nature or severity of the issue that results in a safety recall. 70 Fed. Reg. 51,400 (Aug. 20, 2013) (to be codified at 49 C.F.R. pt. 573, et seq.). 6

7 undertake voluntary recalls and other actions, without unduly enhancing the potential liability the firm may face in private litigation. Refusing to allow such statements in the context of a voluntary recall is likely to further chill firms likelihood to undertake cooperative recalls and other actions with the CPSC. To the point, negotiations over whether and what kind of disclaimer statement may be made will likely be a point of strong contention and negotiation between the recalling firm and the agency, further delaying a process that this proposed rule asserts it is intended to expedite. 3. Internal Compliance Programs. The next key provision of the proposed rule is the establishment of voluntary compliance program agreements as an entirely new subsection (b) of the existing Voluntary Remedial Actions regulation ( ). This vague new provision will enshrine into federal regulation a discretionary tool that it has always had, but that has only rarely been utilized only where a company has exhibited a pattern of gross and repeated violations of CPSC laws. If such agreements begin to be regularly sought by the agency in the context of voluntary recalls, this will likely significantly complicate and lengthen discussions and negotiations over voluntary corrective action plans, delaying the time it takes to remove potentially dangerous products from commerce and putting consumers at greater risk of injury. The mere threat that the CPSC may demand such agreements to seek such intrusive internal compliance programs and processes is itself likely to create a chilling effect on the willingness of companies to enter into voluntary recalls. As the agency seeks to later enforce such agreements (although it remains unclear how exactly they would seek to do so), and as such agreements are subsequently used against companies in product liability or other private lawsuits, this chilling effect is likely to compound over time, putting the entire CPSC voluntary recall system in jeopardy. In addition to the unwise adoption of any provision of this type in the CPSC Voluntary Recall Rule, the actual language of the proposed provision is equally troubling. The proposed language sets forth the circumstances that CPSC staff should consider when determining whether to seek internal compliance agreements in the context of a voluntary recall, including where there are multiple previous recalls and/or violations of Commission requirements over a relatively short period of time; or evidence of insufficient or ineffectual procedures and controls for preventing dangerously defective or violative products. These circumstances are not only vague but also have the potential to penalize responsible companies, not just rare bad actors, should the CPSC staff believe, for example, that multiple recalls warrant such internal compliance agreements, even if all of prior recalls reflected responsible and appropriate behavior by that company. 8 With regard to evidence of insufficient or ineffectual procedures by firms proposing to undertake a voluntary recall, it is entirely unclear by what standards or criteria the agency will seek to establish or measure such internal procedures. The CPSC has never set-forth (and the proposed rule does not make reference to) any model industry product safety compliance program 8 Indeed, under both the CPSC Retailer Reporting and Fast Track Recall programs, rapid identification of product safety issues and recall of products are generally encouraged and evidence of multiple recalls, then is often directly viewed as good conduct that should be rewarded, not discouraged. The continued success of both of these important programs, then, is called into question by this and other provisions of the proposed rule. 7

8 or process (e.g., International Standards Organization [ISO] product safety or other process management standards), let alone any individual company programs. 9 Even assuming that the CPSC were to establish a general model internal compliance program or that the elements of sufficient programs would be otherwise elucidated over time, just how the CPSC is to determine whether a company in fact later adhered to its agreed-up program is equally unclear. Since it cannot be that merely undertaking a subsequent recall would warrant the agency finding that a violation of a company s internal compliance program existed (as that would violate fundamental fairness and undermine entirely the purpose and nature of voluntary recalls), it must be that the agency would initiate lengthy and complex investigations into the internal communications and actions of a firm relative to such agreements and programs. This, then, would require the commitment of significant investigatory resources by the CPSC, resources this small agency might better use to identify and remove from the market unsafe consumer products. In addition, it remains unclear just what the agency remedy would be if the CPSC is able to determine that an internal compliance program agreement in association with a product recall was subsequently not adhered to. Will the CSPC seek monetary damages at contract under the legally binding provision of the proposed rule? If so, how will such damages be established? Will the CPSC later seek injunctive relief to force companies to follow their agreed-upon compliance programs and will court-appointed special masters be necessary to monitor and/or direct internal corporate communications and other activities? In either case, the NRF believes strongly that the juice is not worth the squeeze with regard to this provision, and that the lack of any meaningful ability or willingness by the agency to establish, review or enforce such side agreements in the context of voluntary recalls will do little to further consumer safety, but could do much to hinder the timeliness and therefore the effectiveness of product safety recalls. Finally, the proposed (p) provision to have, as appropriate, voluntary recall press releases contain reference to applicable compliance programs or requirements cannot possibly benefit consumers seeking to respond to recall announcements and will therefore only serve to further exacerbate the negative impacts of this provision. This entire subsection should therefore be removed from the proposed rule. 4. Extraneous Information in Recall Press Releases. The proposed rule sets forth a number of new elements of information that should be included in voluntary recall notices (press releases). These new requirements track very closely the requirements established by the CPSC in promulgating its 2010 Mandatory Recall Rule ( Guidelines and Requirements for Mandatory Recall Notices, 16 CFR et seq.). Thus, this and the other elements of the proposed rule appear to be an effort by the agency to effectively eliminate differences between mandatory and voluntary recalls, which objective NRF believes will serve only to undermine the effectiveness of the current voluntary recall system. While many of the new informational and press release content provisions of the proposed rule in fact reflect current regulation and practice, there are others that are new and that will require 9 In fact, NRF would note that it is aware that the CPSC has generally refused to date to affirmatively opine on an individual company s proposed internal compliance program, leaving regulated stakeholders with the general understanding that the CPSC knows it when they see it with regard to an adequate internal compliance program. 8

9 press releases to contain extraneous information that is of little or no use to consumers. Those include: (a) Identification (including city) of the manufacturer(s) and importer of the product (when not the recalling firm) ( (h)). As the Commission well knows, such information is often highly sensitive and may in fact be prevented from disclosure by other federal laws protecting proprietary, trade secret and business confidential information. While this information is almost always and appropriately provided to the CPSC so that they may contact other firms in the supply chain, such information contained in a recall press release is typically of little or no use to consumers seeking to respond to the recall. Consumers look to the recalling (or other specified) firm to obtain a refund, repair or replacement of the recalled product. While this is sometimes the manufacturer of the product, very often it is the importer or retailer of the product undertaking the recall. To require that the name, for example, of an obscure factory in Asia or U.S. import broker to be listed on the recall will simply not help consumers respond to recalls, and in fact is likely to confuse them. As the CPSC staff frequently admonishes recalling firms today, recall press releases should be brief, clear, and contain only information the consumer needs to make an informed decision regarding whether and how to respond to the recall. This and other new informational release requirements in the proposed rule run directly counter to this objective and may therefore diminish consumer recall response rates and make responding to recalls more difficult. Finally, requiring that the recall release include the recalling firm s Web domain or other effective and reasonably accessible electronic mechanism through which consumers and others can communicate with the firm is vague and unnecessary. If the intent of this requirement is to ensure that recall press releases contain a means for consumers to communicate to undertake the recall remedy, that should be clarified in the rule (and is of course standard practice and necessary in a recall press release). Otherwise the provision is superfluous to the purpose of the recall and will serve only to further clutter releases and dilute the necessary information they contain. (b) Identification of significant retailers of the product ( (j)). As with the new requirement that the manufacturer and importer (when not the recalling firm) be named on press releases, this vague provision is likewise unnecessary to aid consumers to undertake the recall remedy and would serve only to unfairly penalize retailers that happen to meet one or more of the listing criteria, including that identification of the retailer is in the public interest, (the meaning of which is unclear, and, if intended to relate to other than any of the statutorily authorized purposes of the CPSC, is ultra vires on its face). Moreover, singling out retailers as a supply chain category, and specifically targeting significant (which NRF anticipates will generally be interpreted by staff to mean large ) retailers of a recalled product in a recall release is both inherently unfair and unnecessary to properly and fully inform consumers of a recall and the steps they should take to respond to the recall, again where the retailer is not the recalling entity. NRF understands and agrees with the proposition that a retailer should generally be named in a recall release where it is the exclusive seller of the recalled product. But for the CPSC staff to begin to try and differentiate between categories of retailers that sold the product, especially when there are many such retail sellers, will again further complicate and delay the development of corrective action plans and will clutter recall press releases. Thus, this provision of the proposed rule should be deleted. 9

10 (c) Listing the state of residence and age of all persons killed ( (n)). It is unclear to the NRF what the purpose of this proposed provision is. This information would seem to be of little or no use to consumers in the context of a recall press release. (Is a consumer more likely to find a recall press release more informative or useful because a greater number of consumers died in association with use of a product in their state as opposed to other states or closer to age to them)? Indeed, such information is at least as likely to confuse consumers as it is to enhance recall effectiveness. (Is a resident of Maine less likely to respond to a recall if the only two deaths listed occurred in California)? Nor does this provision clarify what threshold, if any, is to be used to determine whether or to what degree the consumer deaths listed on the recall release must or should be limited to those that had some connection to the purpose of the recall, i.e., the product hazard at issue. Many Americans each year die in bed. Should, therefore, the press release for a bed recall due to a falling hazard be required to list all the ages and states of consumers who died in those beds from natural causes? Because of these and other unanswered questions regarding this stark new proposal, it should be removed from the rule. If this or other information set-forth in the proposed rule is, in fact, necessary and useful to be placed on the recall press release, then CPSC staff is perfectly able now and in the future to seek it to be placed in the release. But the present proposal is likely to create the presumption by staff that it should or even must be in the release, which is unnecessary and may be counterproductive to recall effectiveness. 5. New Reporting Requirements. The authorizing statues of the CPSC have very specific and congressionally-mandated reporting obligations for regulated companies, of course including under Section 15(b) of the CPSA. These are well established and critical to the agency s mission. These new reporting requirements (and they appear to be just that, as opposed to expectations or similar discretionary actions) are therefore either duplicative of existing law or, to the extent they establish new reporting obligations, exceed the agency s regulatory authority. At a minimum, they should be clarified as to their scope, intent and likely application/enforcement: (a) Immediate CPSC Notification of Newly Reported Injuries ( (n)(2). This requirement that recalling firms immediately notify the Commission of all newly reported injuries and/or fatalities in order to permit the issuance of an updated voluntary recall notice is both vague and duplicative of the existing 15(b) reporting obligation (which of course continues for a firm even after a recall has occurred). It is also unclear how this requirement may relate, in practice, to the existing Office of Compliance policy that recalling firms submit to it monthly, post-recall Progress Reports. Moreover, it is unclear from either the rule or rule preamble what, exactly, the expectations of the agency are or will be in this regard: Does all newly reported injuries relate to only those injuries of which the recalling firm is directly notified (as opposed to may be aware of that have been reported to others, including that the firm knows the CPSC is already aware of)? Does it relate to both allegations of injuries as well as the company is able to verify? Does it require the reporting of consumer injuries that may be unrelated to the hazard that precipitated the recall? Does it literally require a new, immediate notice to the CPSC for every new injury or periodic reports (e.g., via existing, monthly progress reports)? And what criteria will the CPSC use to determine when, in fact, a new recall notice is warranted based on such reports? Will such new recall announcements be subject to the same requirements and expectations of the original release? These and other 10

11 questions all indicate that this provision will create more confusion, and therefore delay, in negotiating and undertaking recalls. (b) Website posting of significant number of additional incidents or one or more fatalities associated with the product ( (n)(1). This new requirement is likewise ambiguous and of dubious value to either the CPSC or to consumers, and raises many similar questions as the above requirement does. What, in fact, will be considered a significant number of additional incidents? What is the meaning of the term incident, and does it necessitate a consumer injury or near-injury? What does associated with mean? (To this latter question, it should be well noted that there are each year literally millions of consumer injuries associated with the use of a consumer product, e.g., sports injuries, stair falls, etc., which are not related to any defect of the associated product, the reporting of which to either the CPSC or to consumers would be of little or no value, either generally or in connection with a specific product recall). Equally unclear is what the actual requirements or expectations of the CPSC will be under the new requirement that additional incidents be reflected in an update to the notice on the firm s Web site. What is the threshold for a firm to determine when such updates are required, how prominently need they be posted on the website and what does reflected in mean exactly? What content is required for such new postings, etc.? These new obligations of recalling firms will, again, sow unnecessary confusion with regard to both the negotiation and execution of recalls. As such, they can only serve to hinder the purpose, timeliness and effectiveness of voluntary recalls and should therefore be deleted from the final rule. 6. Other Required Actions. The proposed rule would establish other expectations/requirements that should either be removed or fully clarified in the rule language itself: (a) Direct consumer notification (notice) (b)(2). This provision would require that direct voluntary recall notice shall be used for each consumer for whom a firm has direct contact information, or when such information is reasonably obtainable from third parties.... (Emphasis added). While NRF and its members support the notion that consumers should generally be directly contacted and informed of recalls where possible, establishing this new provision as a uniform requirement is unnecessary and raises a number of complex legal and other issues with respect to information from third parties that could, again, significantly complicate and lengthen the recall negotiation and execution process. With regard to making this a mandatory provision (as the language of the provision clearly seeks to do) of all corrective action plans belies the fact that every recall is different and that recalls of higher hazard products do and should entail certain actions that low hazard recalls may not. A recall of a product that poses an immediate and life-threatening hazard to children should, in fact, require many actions by both the recalling company and by the CSPC to make sure consumers are aware of and respond to that recall as quickly as possible. A low-level hazard, however, that poses only minor injury threat to consumers, may not require the same level of activity. This is a long standing CPSC principle guiding recalls and one that benefits consumers by helping to minimize consumer recall fatigue. To the point, if all CPSC product safety recalls become the same, in this and other respects, consumer recall fatigue can be expected to increase and recall responsiveness overall to decrease, which would run directly counter to mutual objectives of the agency as well as NRF and its members. 11

12 Moreover, with regard to obtaining consumer contact information from third parties (presumably including financial institutions) wherever reasonably obtainable creates a vague standard as to what the CPSC staff expectations will be, including with regard to the many contractual, consumer privacy, information security, cost obligation and other issues and considerations that may be addressed. This provision, therefore, necessitates direct stakeholder and other interested party engagement by the agency prior to finalizing the proposed rule. NRF members do often have contact information for their consumers and typically do utilize that to contact their customers in the case of a safety recall. However, enshrining this practice as a mandatory requirement in all cases, and seeking to involve third party financial and other institutions, NRF believes is premature at best. (b) Website Recall Notice (b)(3). Requiring that recall announcements (releases) be posted on the firm s first entry point, such as a home page of its website appears to ignore the unique characteristics of the many thousands of individual company websites and home pages. As the CPSC no doubt appreciates (and continues to attempt to address) with respect to its own website, a company s home page is its public face to its customers and to the general public. Website home pages, then, are typically carefully crafted to impart necessary and desired information, but without being cluttered with too many words, visuals, or other content that may make them unattractive or unhelpful to customers. Assuming for the moment that the CPSC does not actually intend what the proposed rule seems to suggest, that the full text of all recall press releases be literally posted on a recalling firm s home page (which would be flatly untenable for any company), what information must or should be on a home page ( first entry point ) should be clarified in the rule if this provision is to remain. Current practice generally is that the CPSC Compliance staff requests and expects that consumers be reasonably able to retrieve product recall information from recalling firms websites, and generally tailors those expectations to each recall. So, for example, some companies may have Product Safety or simply Product Information tabs, etc., which link to other information about that companies products, including recall and other safety information. For this proposed rule and the CPSC to now set aside this needed flexibility and establish the blanket expectation that there be direct links to the text of recall releases or other product safety information on all home pages of all recalling firms would be extremely burdensome, disruptive and of questionable value to consumers. The provision should either be deleted or revised to establish that recall information be reasonably obtainable by consumers, but not necessarily via the company s website home page/ first entry point. (c) Language of Recall Releases ( (c)). Requiring that recall announcements be published in languages other than English where necessary and appropriate should be further clarified in the rule. NRF of course fully endorses and shares the view that product recalls need to be effectively communicated to consumers, including those who do not understand English. However, the proposed rule provision in this respect again raises more questions than it answers and begs for clarification, including what is meant by the requirement that recall notice translations be transmitted in the same manner as, and along with, English language voluntary recall notices. On its face, this would appear to require that Spanish (or possibly other translations), at the discretion of the Commission need to be simultaneously posted or otherwise communicated with the English version, regardless of the particular circumstances at hand. For example, if a recalling firm wished to post only a Spanish version of a recall poster in a heavily Spanish-speaking neighborhood, owing to limited space to post such notices, would that be considered by the agency to be a violation of 12

13 this provision? Again, NRF would strongly suggest direct stakeholder engagement on this issue prior to issuing any final requirement in this regard. (d) Recall Incentives ( (o)(1)). Finally, while NRF understandss and endorses the current practice of the CPSC to sometimes request incentives (including rebates, coupons, gifts, premiums and other incentives, this proposed section appears to indicate that recall remedies must always include such incentives, which is not now the case and should not be the case going forward. If the intent of this section is to merely indicate that incentives are sometimes appropriate to affect a recall, then such should be clarified in the final rule. Conclusion The National Retail Federation again appreciates the opportunity to comment on this important new Voluntary Recall Rule proposal. NRF and its members are strongly committed to not only making sure consumer that products are safe before they are sold to consumers, but are equally committed to making sure that unsafe or violative products are removed quickly and efficiently from commerce after a recall. Indeed, the CPSC and its leaders have regularly remarked that retailers are very often the first to identify product safety issues, to seek recalls, and to make sure that those recalls are implemented effectively. With that in mind, NRF again urges that the Commission significantly revise the proposed rule to delete, modify or further explain the rule s many provisions that either fail to describe why they are being proposed and/or how they will be implemented and which collectively are likely to slow-down rather than expedite the recall negotiation and implementation processes. If you have any questions, please contact Jonathan Gold, NRF s Vice President, Supply Chain and Customs Policy. Sincerely, David French Senior Vice President Government Relations 13