CPSC Takes Aggressive Enforcement Action in $19+ Million Penalty Settlement with Peloton
Mattress manufacturers should be aware of the Consumer Product Safety Commission’s (CPSC) continuing aggressive position on product safety enforcement. On January 5th, the CPSC released details of one of its largest ever civil penalty settlements, which involved a Peloton treadmill product. Peloton’s late reporting of its treadmill-related safety issues to the CPSC accounted for over $16 million of the $19 million penalty—the maximum allowed by law. Part of the CPSC’s rationale for this steep fine was the timing of Peloton’s product and warning label changes. CPSC staff often view changes to a product’s design or warning labels, particularly in response to incident reports, as evidence that the company had information it knew or should have known would trigger a legal obligation to report safety issues to the Commission.
The remaining $3 million in penalties stem from 38 recalled products sold by distributors post recall because Peloton did not inadequately block those sales. An additional aspect of this settlement requires Peloton to provide CPSC detailed annual compliance program reports for the next 5 years. This reporting burden goes far beyond the $19 million fine and could result in increasingly severe punishments for noncompliance.
This settlement signals that the CPSC will continue to be aggressive in enforcing federal product safety law and has a low tolerance for companies it believes have fallen short of meeting regulatory requirements. In light of this action, mattress manufacturers should (1) consult with legal counsel to understand their obligations under federal law to promptly report product safety problems to the CPSC and (2) review their internal controls and communications with retailers to confirm their ability to halt distribution of mattresses already in the marketplace once a recall has occurred. For a more detailed analysis of this settlement prepared by the law firm of Arnold & Porter, click here.