“Governments Tend not to Solve Problems, Only Rearrange Them:”
The Consumer Product Safety Improvement Act
-Mr. Michael Maletic
President Reagan said that, “governments tend not to solve problems, only rearrange them.” The Consumer Product Safety Improvement Act reminds us of the truth in these words. Passed in response to last summer’s toy lead-paint scare, this sprawling new regulatory scheme has created a complex regulatory regime that threatens to shutter small businesses, curtail competition and undermine the future development of safe children’s products.
Surprisingly, this onerous regulatory regime was created with the full support of Republican lawmakers – only one congressman and three senators voted against it. The Republican Party has traditionally been the party that stands against excessive government regulation, so it is only natural to ask whether a party that could support the obviously overreaching and burdensome CPSIA, has not completely abandoned this principle.
Certainly, these days principled opposition to regulation has fallen out of favor. Those who support ever-increasing government intrusiveness have convinced the public that comprehensive regulation is the only way to prevent harmful events. And those who resist new regulatory schemes are seen as tacitly complicit in any harm that the regulation seeks to prevent.
But the dichotomy between regulating on one hand and harm on the other is, as our current President might say, a false choice. As the CSPIA shows, regulatory regimes burden activities that have little or no risk of harming the public, fail to foresee and prevent future harms, and create an increasingly symbiotic – and perhaps troubling – relationship between government and private enterprise. They also often fail to meaningfully address the harm they seek to prevent. Simply put, the CSPIA and similar regulatory schemes cost our society more than they are worth.
The CPSIA aims to reduce toxic substances in children’s products – unquestionably a worthwhile goal. But the trouble is not the act’s intent, but rather its means. Last summer’s scare was the result of the surprising discovery of lead paint in major toy manufacturer’s products – toys that were produced by Chinese subcontractors. But the CPSIA is not directed merely at imported toys, or subcontracted toys, or even painted toys. Instead, it requires all manufacturers of any product intended for a child 12 or younger to certify that their products comply with the statutory requirements, as determined by a third-party testing lab. The lab tests cost hundreds of dollars, and must be conducted on samples that are “materially identical” to any product distributed.
The major manufacturers – i.e., the ones who imported the lead-tainted products – will have little trouble paying for this testing. These companies sell enormous quantities of identical toys, and the testing costs are insignificant compared to their per product revenue. Essentially, the CPSIA was designed with their business practices in mind.
But many small manufacturers will be put out of business by these new testing costs. For low-volume toys, the testing costs are not justifiable. Moreover, small manufacturers often offer highly customized toys. Testing a “materially identical” sample in those cases is tantamount to requiring testing on every toy produced. Obviously, entrepreneurs – including those who seek to take advantage of the new demand for safe products resulting from the lead-paint scare – will be discouraged from entering the market because of compliance costs.
The products subjected to the CPSIA go far beyond toys, and include “clothes, furniture, books, jewelry, blankets, games, CDs/DVDs, strollers, and footwear.” Retailers, second-hand shops and charities, while not required to conduct testing, are potentially liable for distributing products that violate the statute. And, while there are limited exemptions, many common materials that present no known risk for lead contamination – for instance, cotton clothing – must be tested.
The irony here is that the manufacturers who suffer the most under the CPSIA are those who are the least culpable for the initial lead scare, and who create products that present a low risk of containing toxic substances.
The Problem with Regulation
The CPSIA typifies the manifold problems caused when the government seeks to prevent harm through prophylactic regulation. Such regulatory schemes are inevitably over-inclusive. Spurred into action by a single harmful event, legislators attempt to regulate every conceivable source of the harm they seek to curtail. This impulse is predictable: it is easier to write a sweeping regulation than a narrowly tailored one. And no legislator wants to fail to regulate an activity, only to be confronted with some future harm that could be related to that failure.
Regulations are also inevitably under-inclusive. Legislators regulate in reaction to past harms, but they are poor predictors of future challenges. The fact that our legislators did not possess the foresight to sufficiently protect us against lead-paint in toys before last summer is testament enough to this truth. We can safely assume, then, that the CSPIA fails to imagine whatever the next harm to our children might be. And, when that harm is revealed, yet another regulatory scheme will need to be devised.
As this cycle repeats itself, and as regulation is piled upon regulation, Washington becomes more powerful. And individuals with the ability to influence the course of regulation will become more and more valuable. (What did Tom Daschle, a non-lawyer, do to justify a $1 million dollar-a-year salary from a law firm, anyway?) Success in lobbying for regulation will eventually eclipse success in the marketplace as a predictor of business success – and perhaps this is already the case today.
The CSPIA is bad regulation in its specifics, and it embodies many of the elements that make regulation generally distasteful. Yet why did so many Republicans support its passage? I can only suppose that they felt the need to “do something” to address the real public safety problems presented by the lead-paint scare, but somehow failed to imagine a thoughtful, targeted, and conservative alternative.
But “doing something” shouldn’t mean being complicit in the expansion of an over-regulating government. Republicans should dust off our now-unfashionable resistance to government regulation. But we must also offer positive alternatives that effectively address the real problems facing our society, while building on our core conservative values – accountability, individual freedom and personal responsibility.
For example, a response to the lead-paint scare that focused on accountability might regulate, but in a targeted manner. For instance, the large manufacturers who imported the toys with lead paint should be the ones subjected to elaborate testing regimes. But the home-based doll maker who uses domestic, organic materials specifically because of a concern for product safety should be free from those additional regulatory costs. Targeted, punitive regulations would impose costs on the wrongdoer, set an example for the rest of the industry, and reward those who have been conscientious. More generally, a reformed tort law system – one that is fair, consistent and reasonable – would give the public a heightened sense that those who caused harm would be held to account, and would give businesses a sense that they were being treated fairly.
These types of solutions would enhance individual freedom – as noted above, entrepreneurs could seize the opportunity presented by the lead-paint scare to develop toys made with safe materials and superior craftsmanship, but free from the regulatory burdens placed on those who produced less-safe toys in the past. Parents and children would benefit from manufacturers who would now compete to provide a broader selection of safe, affordable products.
Another response could enhance personal responsibility through supporting independent, scientific research and testing of consumer goods, combined with a meaningful education program. Industries could build off of this research to set communal standards for their products. Parents could make purchasing decisions based upon sound information coupled with their tolerance for risk.
These ideas certainly are not exhaustive – and they will likely present their own host of challenges. But the CSPIA reminds us that ever-expanding regulations impose enormous costs on society. We, as Republicans, must champion an alternative, one where government action supports accountability, responsibility and freedom.
Michael T. Maletic is an RNLA member and an associate in the Litigation Department of Weil, Gotshal & Manges’ Silicon Valley office. His practice focuses on copyright, trade secret and contract disputes with a particular emphasis on technology, internet and media matters.