That splintering noise you heard Tuesday was the sound of tens of thousands of safe cribs being thrown into Dumpsters by financially distressed retailers. We arrived here along the all-too-familiar path of congressional mandates and regulatory excess. For anyone who still doubts that our economy is being strangled by executive agencies churning out burdensome and unwarranted regulation, chilling proof can be found in the economic waste caused by the Consumer Product Safety Commission’s (CPSC) handling of the congressional mandate to promulgate retroactive safety standards for cribs.
Because of legitimate concerns about the safety of drop-side cribs, in 2008 Congress required the CPSC to issue new mandatory safety standards for all cribs and to apply the new standards retroactively; that is, to all cribs that were manufactured and/or sold before the new standard took effect. Prior to 2008, the CPSC had never engaged in retroactive rulemaking. The CPSC’s core function is to monitor the marketplace and to recall those products it deems to be hazardous. The CPSC already did that for unsafe drop-side cribs. But the other cribs caught up in this sweep of the market are safe and suitable for continued use.
Because the law for cribs is retroactive, it eliminates the second-hand market for safe cribs, resulting in economic waste and causing a hardship to those of modest income.
The CPSC bears responsibility for unnecessarily spreading the harm to already struggling crib retailers.
While the law compelled the CPSC to make the new crib standards retroactive, it gave the commission the discretion to set the effective date. In doing so, the CPSC should have sought to minimize unnecessary economic waste by carefully considering the impact on crib retailers of the rule’s novel retrospective application. Instead, it focused on ensuring that manufacturers would have sufficient time to produce an adequate market supply of cribs by the effective date. Based on input from manufacturers, six months was deemed adequate. Yet the commission set the same six-month effective date for retailers as well, glossing over the cost with the unsupported opinion included in the preamble to the rule that “most retailers” would have “little difficulty” adjusting to the date.
The commission should have known that setting the same date for manufacturers and retailers made little sense in light of the chain of commerce. If the commission believed that the continued manufacture and delivery to retailers until June 28 of cribs not compliant with the new standard was reasonable and safe, then it should have provided retailers additional time beyond that date to sell them. There is no doubt that safety was not a consideration. Had it been, the commission would not also have permitted day care centers, crib rental companies and the hospitality industry to continue using their older cribs for two years, until Dec. 28, 2012.
Not surprisingly, the poorly considered and ill-conceived decision to set a six-month effective date for both manufacturers and retailers had precisely the expected consequences. Some retailers were able to avoid noncompliant inventory overhang after June 28 by selling their noncompliant cribs at fire sale prices and not replenishing their stock until compliant cribs became available toward the end of the six-month period.
This group, with no return on their prior investment and insufficient new product to sell, struggled to pay their overhead and in some cases went deeply into debt to remain in business. Most retailers were simply unable to unload their stock of noncompliant cribs and those were the cribs destroyed Tuesday.
Even avoidable mistakes can be forgiven, but the commission’s response upon learning of the hardship visited upon crib retailers is inexcusable. In late April and early May, two trade groups representing hundreds of crib retailers begged the commission to allow them more time to sell their safe but noncompliant cribs. One group representing a small subset of the total even submitted survey results, which, combined with a very limited survey of five retailers conducted by the CPSC, demonstrated that group alone had 117,800 safe cribs wholesale valued at approximately $32 million that would need to be destroyed if the June 28 deadline was not extended. Other crib retailers notified the CPSC that they believed they had already taken huge losses on heavily discounted sales, but that the CPSC’s failure to clarify the rule’s impact left them uncertain as to the compliance of many of their crib models.
In response to these appeals, the CPSC neither quantified the total number of cribs at issue nor clarified which of those cribs could and could not be sold. Indeed, the CPSC did not even issue official written guidance on how noncompliant cribs could be made compliant, until June 14 - two weeks before the effective date. Two days later, the commission voted along party lines not to grant crib retailers any additional time to avoid throwing out tens of thousands of safe cribs, valued at tens of millions of dollars.
Which brings us back to Tuesday. Just another day in a long string of days filled with overzealous executive agencies doing their best to pump out as many as possible of the widgets they make: regulations. When you hear that regulations are killing jobs and the economy, here is one example that will never make headlines, but is costing small businesses a fortune.
Anne M. Northup is a member of the Consumer Product Safety Commission.