Monday, February 24, 2014

Consumer Product Safety Commission Demon Regulatory Overlords vs Craig Zucker

I just finished reading an interesting article in Reason magazine chronicling the demise of Buckyballs at the hands of the Consumer Product Safety Commission and the followup lawsuit against the products creator Craig Zucker. For those who aren't familiar with the story, here is a quick rundown. Buckyballs were a popular desk toy comprised of a number of small, powerful magnets about the size of the pellets used in bb guns. The product was a big hit with sales reaching $10 million in 2009.

In July of 2012, Maxfield & Oberton, the company which produced Buckyballs, received notice of an administrative complaint filed by the Consumer Product Safety Commission (CPSC) to stop the production and sale of Buckyball magnets due to several incidents of injury to children that had swallowed them. The complaint states that the magenetic forces could pinch or trap the intestinal walls causing long-term health consequences, including the potential for inflammation, ulceration or perforation of the intestines. At the time of the complaint, CSPC indicated that approximately 22 children had been injured by the product but no fatalities were reported. It is important to understand that the product isn't marketed toward children. This was overtly expressed through the five prominent warning labels which came with each little package of the product. Also, as pointed out by Eli Federman of the Huffinton Post, banning the product was statiscally ridiculous. If there was 1 incident of Buckeyballs out of 100,000 sets sold requiring emergency medical treatment then that would mean dogs, tennis, & skateboarding were 129 times, 1228 times and 890 times respectively more risky.

Due to the ability of government regulators to make life difficult for business people, it isn't often that they openly resist such demands but that is exactly what Zucker did. He went to the public with the snarky "Save Our Balls" campaign in an attempt to win over support to stop the CPSC from shutting down his business. Some of those ads included cartoonish pictures of members of the CPSC as telephone psychics.


These ads were a response to the CPSC's predetermined decision to shut down buckyballs even though they were supposed to be given time to propose a corrective action plan first. On their Buckyballs webpage, they provide the following timeline of events:
  • July 10th: We were requested by the Commission to propose a Corrective Action Plan to make our products safer, with a deadline of July 24th.
  • July 24th, 4pm: We submitted a comprehensive Corrective Action Plan with numerous suggestions concerning the safety of our products and further educating consumers and retailers. Then we waited for feedback…
  • July 25th, 11am: CPSC filed an Administrative Complaint and ran to the media. In the hours between 4pm and 11am, the staff allegedly “fully” reviewed and rejected our CAP, the Commissioners voted, their lawyers drafted and then filed a lawsuit.
  • Here’s where it gets just plain spooky…Through a Freedom of Information request, we’ve discovered this document showing that the vote to sue our company was presented to the Commissioners on July 23rd, a day before our Corrective Action Plan was to be submitted. The vote to put us out of business was due before July 25th, giving the Commissioners or staff little or no time to actually consider our Corrective Action Plan submitted at 4 p.m. on the 24th. The vote was requested before they even received our plan. 
  • So, how to explain this overlap of such a crucial timeline? How could the CPSC say they considered our Corrective Action Plan when they may never have actually read it? We can only conclude one thing: Miss Inez & the Consumer Product Psychic Safety Commission can see into the future!
Unfortunately, with lost sales due to the CPSC shutting down their retail chain and mounting legal expenses, Zucker decided to close the company in December of 2012.

Now here is where it gets really outrageous. A few months after the company was dissolved, the CPSC decided to make the unprecedented move to include Zucker and his business partner as parties to the complaint thus making them personally liable for the cost of the recall. The agency initially estimated the cost at around $57 million though a spokesperson later said it would probably be less. 

According to Reason, "The case has drawn widespread attention in legal circles because it's the first time the Commission has attempted to hold a former officer personally responsible for the actions of a defunct corporation." Could you imagine what effect this would have on business and entrepreneurship if this became the norm? No one would ever want to develop new products out of fear that they would be held personally liable for a unpredictable future complaint by the CPSC.

So is this the start of the CPSC's new method of regulating producers or is there another explanation. Zucker thinks there is. He believes that the CPSC is using its power to carry out a personal vendetta against him by being the first company in 11 years to defy their orders. I'm guessing those funny ads they put out really pissed them off too.

Reason. The Feds vs. Craig Zucker: Are Regulators Carrying Out a Personal Vendetta Against the Creator of Buckyballs?

Huff Post: Banning Buckyball Magnets Is Statistically Ridiculous

Wall Street Journal: Irrational War on Buckyballs

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