Teavana Corp., which is owned by Starbucks, has agreed to a $3.75 million civil penalty to settle allegations it failed to report complaints of exploding tea tumblers. The company’s agreement came after a “contentious settlement” that prompted one commissioner to criticize the agency’s “opaque penalty process.” The U.S. Consumer Product Safety Commission (CPSC) had provisionally accepted the settlement agreement with Teavana, in a 3-2 vote. The agreement would put an end to claims the tea retailer violated federal laws by failing to report that its glass tea tumblers contained a defect after receiving complaints about the products exploding in consumers’ hands.
Commissioner Joseph P. Mohorovic, opposing the settlement, said he did not think Teavana had made a mistake and that the agency failed to spell out enough facts and evidence to justify fining the company. He said the CPSC does not go far enough to “publicly justify” such penalties and thereby creates “distrust” between the agency and its stakeholders. Commissioner Mohorovic said in a statement accompanying the CPSC’s official announcement:
When that distrust becomes deep enough and broad enough, more companies will force us to make our penalty cases in court, a dynamic that benefits only their lawyers’ billable hours.
Mohorovic, who has served on the commission since July 2014, has previously criticized the way the CPSC calculates fines and explains decisions, saying the agency could do a better job informing the public and the regulatory industry of its reasoning.
In this case, the CPSC accused Teavana of failing to immediately inform it about the defect or unreasonable risks associated with the tumblers after it received consumer complaints, and said the company knowingly violated the Consumer Product Safety Act. The CPSC alleged:
Teavana had information reasonably supporting the conclusion that the tumblers are defective or created an unreasonable risk of serious injury or death because they can unexpectedly explode, shatter or break during normal use, posing a laceration and burn hazard.
It appears that Teavana received “numerous reports” of the tumblers exploding, shattering or breaking between 2010 and 2013. There had been six reports of consumers being cut by broken glass or burned by hot liquid while holding a tumbler when it exploded. Teavana issued a recall of 445,000 tumblers in May 2013.
The settlement agreement also says that Teavana’s voluntary recall of the tumblers was initiated out of an abundance of caution, and the company never determined or concluded that any models contained a defect, posed a substantial product hazard, or created an unreasonable risk of serious injury or death. The CPSC said that while Teavana does not admit to the charges, the penalty agreement also requires the company to comply and maintain a compliance program in accordance with the Consumer Product Safety Act.
The dissenting commissioner made a good point when he suggested that the CPSC should make clear to the industry about what the agency’s expectations are. I agree that the CPSC should make it abundantly clear when a company has a reporting obligation. That may be happening now, but at least one commissioner doesn’t believe it is.
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