CPSC Imposes Largest-Ever Failure to Report Civil Penalty against Baja Inc.

By Alexander J. Varond –

In one of the clearest signs that the U.S. Consumer Product Safety Commission ("CPSC") is stepping up enforcement of CPSC requirements, the Commission recently announced that it had reached a record $4.3 million civil penalty settlement with Baja Inc., and its corporate affiliate, One World Technologies, Inc.   The settlement was in connection with the companies’ alleged failure to report defects involving 11 models of go-carts and minibikes.

According to the CPSC, Baja sold the go-carts and minibikes at issue from November 2004 to June 2010.  By 2010, the company had received four reports of fires from leaking gas caps and burn injuries to customers, including a serious burn injury to a child.  It had also, as the CPSC alleged, learned of a defect that caused the company’s throttles to stick and for the vehicles to unexpectedly accelerate.  CPSC alleged that, despite this, Baja failed to file a full report required under section 15(b) of the Consumer Product Safety Act ("CPSA") until June 2010.  The company also allegedly failed to notify CPSC or consumers of the design changes it made to the go-carts and minibikes to address the stuck throttle issue.

This settlement is an important reminder that, pursuant to 16 C.F.R. § 1115.14(e), manufacturers, distributors, and retailers of consumer products must immediately report (within 24 hours) to CPSC after learning that a product contains a defect that “could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or fails to comply with any consumer product safety rule or any other rule, regulation, standard, or ban enforced by CPSC.”

CPSC alleged that the company “knowingly failed to report to CPSC immediately . . . defects and an unreasonable risk of serious injury,” in violation of section 15(b) of the CPSA.  In addition, the Commission alleged that, in failing to inform CPSC about the products immediately, Baja knowingly violated CPSA section 19(a)(4), which makes it unlawful to fail to “furnish information required by section 15(b).”

In addition to the record $4.3 million civil penalty levied under CPSA section 20, 15 U.S.C. § 2069, Baja agreed to implement a program designed to ensure compliance with reporting requirements of section 15(b) of the Consumer Product Safety Act.  The compliance program includes:

• Written standards and policies;
• Systematic procedures for reviewing and referring consumer and retailer incident reports for potential safety issues;
• Confidential employee reporting of compliance concerns to a senior manager;
• Effective communication of compliance policies and procedures, including training;
• Senior manager responsibility for compliance and accountability for violations;
• Oversight of compliance by the firm’s governing body; and
• Records retention requirements.

Importantly, the settlement does not amount to an admission of defect, substantial product hazard, or unreasonable risk of serious injury or death.  It also expressly states that Baja does not admit that the company failed to notify the Commission in a timely manner.

As further evidence of the CPSC’s increasing enforcement in this area, the Commission imposed a $700,000 civil penalty against Williams-Sonoma on October 30, 2014 for its alleged failure to report defective Pottery Barn Kids Roman shades.