The Irrational Federal War on Buckyballs

 

 

The Irrational Federal War on Buckyballs

 

The Consumer Product Safety Commission is skirting the law and making consumers less safe.

 

By Nancy Nord in the Wall Street Journal

 

The Consumer Product Safety Commission is a small federal agency with a large mission: to protect the public from unreasonable risks of injury by thousands of consumer products. As a former CPSC chairman, I believe in regulations and rigorous industry standards. But there is a line between safety regulation and overreach. That line has been crossed in the government's action against Buckyballs and their creator, Craig Zucker.

Buckyballs are tiny, powerful magnetic balls and cubes that were sold as an adult desk toy. I have a set on my desk. They became wildly popular after coming to market in 2009 and sold more than 2.5 million sets—until the CPSC banned future sales and, through a recall request, tried to force the product out of consumers' hands.

Why take away a popular product that consumers obviously wanted? Young children were getting their hands on Buckyballs and swallowing them, and teenagers were using them to simulate nose and lip piercings. When powerful magnets are swallowed, they can come together internally to cause perforations in the intestine walls. These are serious injuries that often may require surgery.

The CPSC sees countless reports of children choking on balloons, swallowing detergent pods or being injured from riding adult-size ATVs. We haven't banned these products—they come with warnings. Buckyballs were always marketed and sold for use by adults. Each set came with five conspicuous warnings to keep the product away from children.

Moreover, Maxfield & Oberton, the company headed by Mr. Zucker that manufactured Buckyballs, led a public-education campaign to tell consumers about the dangers of swallowing powerful magnets. These efforts and others were discussed with and encouraged by the CPSC.

In July 2012, however, the CPSC abruptly changed course. Rather than work with Maxfield & Oberton to address the issue of children being injured by an adult product, the agency demanded an immediate recall. When the company asked the agency to reconsider, the CPSC filed a lawsuit alleging that the product was defective because unintended users were misusing the product and suffering injuries. Instead of seeking an injunction against the sale of Buckyballs while the agency pursued its case, which the law allows, the agency approached retailers with an informal "request" that Buckyballs be removed from store shelves.

On Dec. 27, 2012, Maxfield & Oberton filed a certificate of cancellation with the state of Delaware, and the company was dissolved. In just five months, the CPSC had effectively put Maxfield & Oberton out of business without the company getting a chance to defend itself in court.

Shortly after the company dissolved, CPSC lawyers named Mr. Zucker, a 34-year-old entrepreneur and one of the founders of the company, as a party to the suit. The lawyers argue that he is personally liable for conducting a recall and refunding the purchase price of the recalled product to consumers. The agency estimates the cost of such a recall to be as much as $57 million.

The legal theory for this move is known as the "responsible corporate officer" doctrine, which says corporate officers may be held criminally liable for law violations even absent knowledge of or participation in the illegal act. Yet here we are not dealing with a criminal matter. We are dealing with a recall of a product that has not been proven to be defective and even now is legal to sell. It has never been suggested that Mr. Zucker, or Maxfield & Oberton, acted illegally.

The argument also neatly ignores the Consumer Product Safety Act, which states that manufacturers, distributors or retailers—not individual officers—are responsible for recalls. While the CPSA does impose criminal penalties on corporate officers and agents of a company who "knowingly and willfully" violate specified sections of the act, failing to undertake a recall is not one of those sections. Also troubling is that the agency's extraordinary decision to apply the responsible-officer doctrine to Mr. Zucker was made by agency lawyers without a vote of the commissioners.

The CPSC action to remove Buckyballs from the market raises serious questions about how the government acts to protect consumers. In its zeal to address a problem that it believes to be a serious safety concern, the CPSC seems to have adopted the philosophy that any action, no matter how heavy-handed and outside established practice, is warranted if it achieves the desired result.

Mr. Zucker, ever the entrepreneur, is fighting back. On Tuesday, he took unprecedented action by individually suing the CPSC. He has filed a formal complaint in the hope of receiving a declaratory judgment that the commission lacks jurisdiction over him in the proceeding and an injunction against the CPSC's exercise of jurisdiction. He also has a new line of magnetic "Liberty Balls" that are much larger than Buckyballs and do not present a swallow hazard for children. All the profits from their sale will go to finance his defense against the CPSC.

I hope he wins his suit. The Consumer Product Safety Commission's actions in this case are detrimental to creativity, innovation and entrepreneurship. But more troubling, they provide a powerful disincentive for companies to work cooperatively with the government to advance safety.

Ms. Nord is a former commissioner (2005-13) and acting chairman (2006-09) of the Consumer Product Safety Commission. Her blog on safety issues, "Conversations with Consumers," is at nancynord.net.