The Consumer Product Safety Commission (CPSC) overstretched its legal powers in 2014 when it essentially banned a class of small round toy magnets from the market, declared a 2-1 decision last week from the U.S. 10th Circuit Court of Appeals.
The case involved a seller of such balls, Zen Magnets, suing over the safety standard imposed by the agency.
The background, with summations and excerpts from the decision:
These small magnets have been sold by various companies in the U.S. since 2009, and if you swallow more than one of them they can clamp internal tissue between them with dangerous results.
Federal law as of 2008 barred the sale of such magnets "marketed as a plaything" to children under 14, but permitted them as "hobby, craft, or science kit-type" applications for children over 8, with specific restrictions designed to "ensure that permissible magnets are either large enough to discourage ingestion or weak enough to avoid tissue strangulation upon ingestion."
Those restrictions are known as the "toy standard," and CPSC tried to ensure no one sold such magnets to kids in violation of them. In 2012 CPSC leaned on the 13 companies then selling them to report on safety data, and by July 2012 the agency:
had negotiated agreements with ten of those companies to cease importation and distribution of magnet sets. Commission staff then initiated administrative complaints against the remaining three companies (including Zen), arguing that their magnet sets constituted "substantial product hazards" that must be prohibited and recalled because they failed to comply with the toy standard and/or contained a product defect.
The "toy standard" was then essentially extended to all sale of such magnets by CPSC in a 2014 rule. Zen Magnets petitioned the Court to review the validity of those safety standards, after labeling and instructing their retailers to keep them from prohibited ages.
To decide on the legality of the rules, a judicial balancing test has to be involved, considering the "degree and nature of the risk of injury" as well as the "probable effect of the rule on the utility, cost, and availability of the products; and any means of reducing the risk of injury while minimizing adverse effects on competition or other commercial practices."
In the opinion of the 10th Circuit panel this particular CPSC regulation falls short; CPSC's
analysis neglected to address critical ambiguities and complexities in the data underpinning the Commission's findings as to (1) the degree of the risk of injury caused by magnet sets, and (2) the public's need for the sets and the rule's effect on their utility and availability….As a result of those omissions, the Court is unable to ascertain whether the Commission's findings meet the substantial evidence standard—let alone to proceed to the next step of reviewing the Commission's balancing of the safety standard's costs and benefits.
The CPSC is legally required to rely on factual findings when promulgating such regulations, and the 2-1 opinion of the 10th Circuit finds that those were "incomplete and inadequately explained."
Specifically, the CPSC's injury time frame, January 2009-July 2012, was from before their own efforts had driven 10 of the 13 largest companies out of the market.
Thus their estimate of 900 magnet ingestion injuries costing $28.6 million overstated the more current situation, when in "the eighteen months following June 2012, the estimated number of emergency room visits due to magnet sets dropped by about 100 incidents a year…..the Commission estimated that an average of only 580 emergency room-treated injuries per year occurred during the five years from January 2009 through December 2013."
Essentially, enforcement of the "toy standard" seemed as if it was already greatly reducing the incidents; those larger numbers are from CPSC estimates, but in terms of actual incidents reported to the agencies, those "receded from 52 in 2012, to 13 in 2013, to only 2 in 2014."
The Commission's benefits findings, however, do not adequately account for the reduced injury rate (and therefore reduced need for a new standard) resulting from its recent apparent enforcement of the existing safety standard addressed specifically to toys and children. In general, where there is a known and significant change or trend in the data underlying an agency decision, the agency must either take that change or trend into account, or explain why it relied solely on data pre-dating that change or trend….Here, the downward trend in injury rates is obvious, and appears to speak directly to the question of whether the new rule is "reasonably necessary."
But that wasn't the 10th Circuit panel's only problem with CPSC's decision-making:
The second problem….arises from the imprecision of the injury report narratives. The Commission used a keyword search to identify magnet set-related injuries within a representative sample of emergency room reports….To the resulting injury count, the Commission applied a cost model to extrapolate the overall number of injuries nationwide….
We take issue not with the Commission's methodology, but rather with the degree of uncertainty the Commission condoned when implementing it: According to the Commission, ninety percent of the injury reports on which it ultimately relied only "possibly" involved the subject magnets sets….Almost anything is "possible." Therefore, the Commission's finding that 90% of the predicate injuries only "possibly" involved magnet sets provides the Court with little guidance as to where, on the spectrum from ninety to 900 annual injuries, the real injury rate lies…..
While the Commission is certainly free to rely on the emergency room injury report data set, it may not do so in a way that cloaks its findings in ambiguity and imprecision, and consequently hinders judicial review. We leave it to the Commission to determine whether its methodology and data set can in fact support a higher standard. We find only that the Commission's benefits statistics must instill in the Court a greater degree of confidence in their accuracy than is currently present here….
For those, and other reasons detailed in the full decision, the Court says "we VACATE and REMAND the Consumer Product Safety Commission's magnet set safety standard…to the Commission for further proceedings consistent with this opinion."
A Zen Magnets press release claims that this is "the first time a CPSC rule has been vacated in what appears to be 33 years."
Another Zen Magnets press release announces that they are ready to take orders again, and compares their product to the much-more-dangerous-to kids toy balloon. Zen Magnets owner Shihan Qu says, "I'd rather use our resources to fight alongside the CPSC for successful educational and awareness campaigns focused on consumers and medical professionals."
Zen Magnets is fighting with CPSC on many fronts, including two different suits over a previous recall of the products, and a full summation of the status of all those battles can be found at the bottom of this statement from the company.
My initial reporting on Zen Magnet's legal fight, loaded with links to more information and background on the legal war against these magnets. When reporting that story, Shihan Qu told me "I want the CPSC to LOSE. I really really want them to lose. They need some humility and to be reminded of the standard of liberty in this country."
For now, they have lost, and Qu has won.
ReasonTV also reported on the CPSC's war on these small magnet balls back in 2012: