Chinese Company to Pay Largest Ever CPSC Penalty to Settle Reporting, Certification Violations

A Chinese appliance company will pay $15.45 million -- the largest penalty ever assessed by the Consumer Product Safety Commission -- to settle charges that it failed to report consumer safety hazards and lied to the agency about product defects and certifications, said the agency (here). CPSC alleges Gree Electric failed to report dangerous flammability issues in dehumidifiers it sold under 13 different brand names, including Frigidaire, GE, Gree, Kenmore. The settlement marks the first time a company has paid the per-violation maximum for CPSC penalties.

According to CPSC, Gree received multiple reports of dehumidifiers overheating and catching fire, but failed to report the defect to CPSC immediately despite making design changes to fix the problem. The incidents began in July 2012 and caused nearly $4.5 million in property damage, said the agency. The dehumidifiers were eventually recalled in September 2013 and expanded over the subsequent year.

Gree also made unauthorized use of the UL safety certification mark, even though it knew that the dehumidifiers did not comply with the applicable UL flammability standards, said Commissioner Marietta Robinson in a statement (here). “Gree made material misrepresentations to staff, when it told staff that the dehumidifiers met the UL flammability standards and in its statements regarding when Gree became aware that the dehumidifiers in fact were not compliant with UL standards,” she said.

Under the settlement, Gree will implement a compliance program that requires written standards and policies and written procedures to ensure that all compliance information, is reported to the firm’s responsible employees. The compliance program also must address record retention, confidential employee reporting, training and senior employee and board oversight. Gree did not admit its guilt as part of the settlement.

Though he voted to approve the settlement, which was accepted 4-1, Commissioner Joseph Mohorovic criticized the lack of details on the alleged violations that was included in the settlement. “If part of the goal of a penalty is to make an example of a company for alleged bad acts, we need to let people know what the example is,” he said (here). “Without some level of candor, the only effect on the CPSC community will be a few moments’ fear and paranoia, with no lasting lessons learned. To fail to make more instructive use of the first … maximum penalty is a missed teachable moment, and an agency with the limited resources we have cannot afford to miss moments. I hope we can make better use of future moments.”