By Colleen Kave, J.D.
On October 26, 2017, the U.S. Consumer Product Safety Commission (CPSC) issued a final decision and order holding that Zen Magnets and Neoballs rare-earth magnet sets (Zen Magnets) are a substantial product hazard. This decision set aside a March 2016 ruling that these magnet sets did not present a substantial product hazard when accompanied by warnings and proper age recommendations. CPSC ordered a stop sale of Zen Magnets and ordered the parties to submit to the Commission within 30 days a proposed corrective action plan that includes a refund and notice to the public (CPSC News Release, November 3, 2017, In the Matter of Zen Magnets, LLC, CPSC Docket No: 12-2, October 26, 2017).
Background. The final decision and order resolve an appeal of an initial decision and order pursuant to which Administrative Law Judge Dean C. Metry (the "ALJ") granted in part and denied in part Complaint Counsel’s request for relief against Zen Magnets, LLC under Sections 15(c) and (d) of the Consumer Product Safety Act (CPSA). The original August 2012 administrative complaints filed by Complaint Counsel against Zen Magnets, Maxfield and Oberton Holdings, LLC (Maxfield), and Star Networks USA, LLC (Star) sought (1) orders declaring that small rare-earth magnet sets (SREMs) imported and distributed by these firms constituted a substantial product hazard and (2) orders directing the firms to take certain remedial actions with respect to the products. The cases were subsequently consolidated, and in 2014, CPSC entered into consent agreements with Maxfield and Star.
The Second Amended Complaint against Zen Magnets alleged that SREMs are a substantial product hazard under Section 15(a)(2) of the CPSA because they contain product defects that create a substantial risk of injury to the public and under Section 15(a)(1) of the CPSA because they fail to comply with ASTM International Standard F963-11, Standard Consumer Safety Specification for Toy Safety(the Toy Standard), and such failure creates a substantial risk of injury to the public. Following an administrative hearing, the ALJ issued an initial decision and order in March 2016, ruling that SREMs do not contain a defect that creates a substantial risk of injury to the public. Specifically, the ALJ held that while ingesting these products creates a real risk of injury and can result in severe injury or death, proper use of SREMs creates no exposure to danger whatsoever. The ALJ also found that SREMs sold without warnings and/or marketed or labeled for use by children under 14 years of age are toys under the Toy Standard and constitute a substantial product hazard; however, SREMs sold with warnings and "appropriate age recommendations" are not toys under the Toy Standard and do not constitute a substantial product hazard. The ALJ ordered Zen Magnets to provide CPSC with a list of consumers who purchased SREMs without warnings and with any information suggesting that the appropriate age of use is 12 years or under. Additionally, the order required Zen Magnets to contact all known purchasers and retailers identified on that list, provide specific warnings about magnet ingestion hazards, give the purchasers an opportunity to return the product for a full or partial refund, and provide CPSC with information concerning all responses the company received.
Appeal and final order. In May 2016, Complaint Counsel filed an appeal, and CPSC heard oral argument on the matter in June 2017. According to the resulting final decision and order, CPSC Commissioners Marietta S. Robinson, Robert S. Adler and Elliot F. Kaye held that Zen Magnets are defective, that the defect creates a substantial risk of injury to the public, and that warnings do not mitigate the risk. The majority found that it is reasonably foreseeable that children will ingest SREMs, and if two or more magnets are ingested, they can attract to each other or to other metallic objects that are ingested and cause catastrophic injuries and death. Children have required surgery to remove multiple magnets from their gastrointestinal tracts, and one 19-month-old child died after ingesting similar high-powered magnets.
Acting Chairman Ann Marie Buerkle released an opinion concurring with the majority with respect to SREMs sold without warnings and with a suggestion that they were appropriate for age 12 and under. However, Chairman Buerkle dissented with respect to SREMs sold with warnings and appropriate age recommendations. Specifically, she disagreed with the majority that the defect regulation, 16 C.F.R. § 1115.4, recognizes a design defect that arises solely as a result of product misuse. Further, she agreed with the ALJ that Complaint Counsel failed to prove that the warnings accompanying certain magnet sets were defective.
The final order, among other things, set aside the ALJ’s initial decision in full and prohibited Zen Magnets from manufacturing for sale, offering for sale, distributing in commerce, or importing into the customs territory of the United States, any Zen Magnets and Neoballs. Additionally, Zen Magnets is required to draft public notifications that comply with the Guidelines and Requirements for Mandatory Recall Notices, as set forth at 16 C.F.R. part 1115, subpart C, and an action plan providing for refund of the purchase price of the subject products, less a "reasonable allowance for use."
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