On March 25th, the CPSC announced an eye-popping $15.45 million dollar settlement with Gree Electric Appliance Companies (“Gree”), for numerous violations of the CPSA. Gree manufactured, imported and sold approximately 2.5 million dehumidifiers in the United States before December 2012. In July 2012, it is alleged that Gree had received reports of “smoking, sparking and fires” involving the dehumidifiers which caused property damage. Gree then implemented design changes to the dehumidifers to remedy the alleged concern. The CPSC asserts that Gree did not inform them of the issue until 8 months later in March 2013. Gree later implemented a voluntary recall. The CPSC noted that the information in Gree’s possession constituted “actual and presumed knowledge” and that Gree “knowingly” violated Section 19(a)(4) of the CPSA, 15 U.S.C.§2068(a)(4).
The CPSC also alleged that Gree sold and distributed the dehumidifiers bearing the UL Mark even though it knew or should have known that the dehumidifers were not compliant with UL standards and not authorized by UL. The CPSC asserts that Gree knowingly violated section 19(a)(12) of the CPSC, 15 U.S.C. 2068(a)(12).
Finally the CPSC asserts that Gree made “material misrepresentations to Commission staff that the dehumidifiers met UL flammability standards” when they knew the representation to be false. In addition it is alleged that Gree materially misrepresented to Commission staff the date that they realized the dehumidifiers were not compliant with UL standards. For these “knowing” violations, Gree was assessed penalties in the amount of $15,450,000. This is the highest settlement reached in CPSC history and the first time that the CPSC has reached the $15M in authority that Congress extended to the CPSC when it amended the Act in 2008.
As a condition of the settlement Gree was also required to implement a compliance program to ensure compliance with the CPSA. For more details regarding the compliance program, feel free to contact me.
The settlement was approved by the Commissioners in a 4-1 vote and can be found at www.cpsc.gov.
Through these penalties, the CPSC staff is sending a strong message to manufacturers that tardy reporting of potential product concerns and misrepresentations of any kind will not be tolerated. It will be interesting to see if this is the beginning of a trend towards double digit penalties to deter bad actors.