What's Next: The Bulletproof Interview - David Schmeltzer of Stericycle's Expert RECALL on a Rapidly Changing Regulatory Landscape
Each week, Bulletproof Blog features exclusive interviews with thought leaders on issues of critical importance to companies and countries. This week, as key provisions of the Consumer Product Safety Improvement Act are scheduled to go into effect by Friday, we interview David Schmeltzer of Stericycle’s industry-leading Expert RECALL team.
Mr. Schmeltzer is a veteran of the Consumer Product Safety Commission (CPSC) who served as the CPSC’s Director of Compliance for more than 20 years. As Director, he supervised the enforcement of all Commission regulations, monitored investigations of potentially dangerous defective products, and reviewed the adequacy of recalls. A nationally recognized expert on recall communications and logistics who helps businesses navigate product liability crises in the most cost-effective, efficient, and brand-protective manner possible, Mr. Schmeltzer shared his insights on an impending regulatory sea change that will dramatically raise the recall stakes.
With key punitive measures of the Consumer Product Safety Improvement Act taking effect this week, what do companies need to know about their new liabilities in product recall situations?
David Schmeltzer: The CPSC is a changed agency. It has more people, more money, and a mandate from the Washington power structure to better protect consumers from potentially harmful products. That means companies should be more vigilant than ever in ensuring that every aspect of a product recall is in order. If not, an inadequate recall that results in serious injuries to consumers has a far greater chance to bring about product liability law suits, government criticism, and harsh oversight.
On August 14, the maximum civil penalty the CPSC can impose will rise from $1.8 million to $15 million. Corporations will be subject to criminal penalties and asset seizureâ€¦Their board members can also now be held personally liable if product safety is called into question. Criminal penalties will rise from $8,000 to $100,000. State attorneys general will be empowered to bring independent investigations.
To make a long story short, the monetary and reputational costs of product safety shortfalls are reaching unprecedented heights. Furthermore, I am fairly confident that the CPSC isn’t going waste any time identifying message cases that will burnish its watchdog credentials.
Will consumer product companies now be held liable, not only for the problems that led to a recall, but for the effectiveness of a recall itself?
David Schmeltzer: Probably not by the government – but you can be sure that the plaintiffs’ bar will be watching recalls very closely to leverage any perceived shortcoming into a big-dollar award or settlement.
Because the Consumer Product Safety Improvement Act includes measures aimed at boosting the effectiveness of recalls themselves, there are more hurdles to clear and more opportunities to make mistakes. If the government finds fault with any aspect of a company’s recall, that strengthens the case of plaintiffs who will argue that ““had your recall been more effectively carried out, my client wouldn’t have suffered an injury.”
What’s next with respect to product safety regulation? Are there more issues emerging on the horizon that companies should be aware of?
David Schmeltzer: Legislators and regulators have a hot issue on their hands, so I wouldn’t expect the government’s focus on product safety to wane any time soon. Congressman Henry Waxman is the new Chairman of the House committee on Energy and Commerce – and we all know that he’s going to have a lot to say about how recalls are conducted and monitored. Congressman John Lewis has already introduced new legislation focused on improving recall notification procedures. And consumer groups are already clamoring for stricter guidelines, tougher penalties, and increased government oversight.
The advice to companies moving forward is simple: Be ready to meet the stringent new standards in product recall situations or be ready to face the harsher punitive and reputational penalties that are lurking just around the corner.
Larry Smith is Senior Vice President of Levick Strategic Communications and a contributing author to Bulletproof Blog.