When businesses learn of potential safety issues regarding their products, they must determine whether they have a reporting obligation to the CPSC or another agency.
In our first CPSC 101 post, we explained that generally, if another federal agency has jurisdiction over a product, as is the case with food, drugs, or cars, then the CPSC will not be involved.
If the product does not fall under another agency, then the question becomes: Is my product a “consumer product” under federal law?
In many instances–toys, children’s clothing, cribs, bike helmets, strollers or any product for which there is a specific CPSC rule or standard–the answer to this question is clear: yes. When a product is predominantly sold to businesses, has multiple uses, or is not marketed to consumers, however, product sellers enter a gray area.
Here are some factors the CPSC and courts consider when determining whether your product is a” consumer product” that raises a reporting obligation (as well as other CPSC regulatory compliance requirements).
What is a Consumer Product?
The Consumer Product Safety Act defines a “consumer product” as:
any article, or component part thereof, produced or distributed (i) for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or (ii) for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise; but such term does not include—(A) any article which is not customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer….
After Congress enacted the Consumer Product Safety Act in 1972, businesses struggled to determine whether CPSC regulations governed their products and practices. The CPSC’s general counsel candidly acknowledged, “there are many products that will present a difficult problem categorizing as a consumer or non-consumer product.” Manufacturers of lawn mowers, for example, made several inquiries to the CPSC asking for clarification, particularly those that made products viewed as industrial models, rather than those marketed for the typical homeowner’s backyard.
In response, the CPSC decided that it would make a case-by-case evaluation of the product. “We have established no specific criteria to determine whether consumers use a product more than occasionally, instead we review all available information relevant to a particular determination,” the CPSC wrote to one manufacturer. CPSC advisory opinions provide businesses with some understanding as to how the agency approaches the issue. A handful of court decisions provide further guidance.
Factors for Determining a Consumer Product
It would be easy to say that a product that is primarily marketed and sold to businesses is not a “consumer product,” but it is not that simple. As the D.C. Circuit has observed, “Apparently one motivation for [the definition of consumer product] was to exclude ‘industrial products’ from the Commission’s jurisdiction, but the provision is not so defined.” The CPSC has considered the following factors when evaluating whether a product is a “consumer product”:
- Distribution Pattern. Does the manufacturer sell the product directly to consumers or retailers who sell to consumers, or is the product sold exclusively or primarily for commercial uses?
- Marketing. Is the product advertised in consumer publications, or is the product advertised in special interest publications for commercial, industrial, or government users?
- Design and Cost. Is a consumer or a business likely to buy a model with the features and at the price level of this product? For example, is the lawnmower designed for industrial or homeowner use?
- Production. Does the quantity of the product made suggest that it is special ordered for commercial use or mass marketed to consumers?
- Use. If a product is used by consumers, even if predominantly used by businesses, then the CPSC may consider it a consumer product.
- Presentation. Do distributors generally view the products as items intended for, and used by, commercial users?
In early rulings, the D.C. Circuit found that the CPSC’s jurisdiction over products is broad, but not unlimited:
- The enumeration of locations and activities in which a consumer product may be used (“in or around a permanent or temporary household or residence, a school, in recreation, or otherwise”) “is not a limitation on jurisdiction, but rather an assurance of comprehensiveness.”
- “The foremost limitation on the core definition of ‘consumer product’ specifies a requirement that the product must be ‘customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer.’… [A] product must be ‘customarily’ not just occasionally produced or distributed for the use of consumers.”
- “Jurisdiction does not require a showing that a majority of product-sales are to consumers, but there must be a significant marketing of the product as a distinct article of commerce for sale to consumers or for the use of consumers before the product may be considered as ‘customarily’ produced or distributed in that manner.”
- When use of the product by consumers is “occasional and is not customary,” the CPSC’s jurisdiction is limited.
- “Conversely, if a product is customarily sold or otherwise distributed to consumers, then it remains a ‘consumer product’ notwithstanding that a large portion of the product’s distribution is for industrial purposes. Jurisdiction does not require a showing that a majority of product sales are to consumers, but there must be a significant marketing of the product as a distinct article of commerce for sale to consumers or for the use of consumers before the product may be considered as ‘customarily’ produced or distributed in that manner.”
Special considerations arise when a product is sold to other businesses for use as a component of other products that they may, or may not, ultimately market to consumers. For example, the D.C. Circuit has found that when Congress gave the CPSC jurisdiction to regulate component parts of consumer products, “Congress contemplated an object produced or distributed as a distinct article of commerce, rather than any physical entity that might exist only at an intermediate stage of production.”
The CPSC has made its view clear that if a company is in doubt as to whether a product is a consumer product, it err on the side of inclusion. This generally reflects the Commission’s mindset that “over-compliance” is more desirable than companies not reporting safety incidents or recalling a potentially dangerous product based on a narrow reading of the statute.
When questions arise as to whether your company has a reporting or other compliance obligations, consult with experienced CPSC counsel.