On July 26, 2012, the US Consumer Product Safety Commission (CPSC) announced that the national apparel retailer Burlington Coat Factory has agreed to pay a civil penalty of $1.5 million for selling numerous styles of children’s upper outerwear garments with neck drawstrings (which are considered hazardous by CPSC due to potential risks of entanglement and strangulation) over an 8-year period. The $1.5 million penalty is the largest ever assessed by CPSC for a violation involving children's upper outerwear with drawstrings.

Aside from the substantial monetary penalty, this enforcement action by the CPSC is very significant for the following reasons:

• Burlington Coat Factory was merely the retailer of the numerous brands and styles of children’s upper outerwear (including sweatshirts, jackets and sweaters) that had neck drawstrings, and the garments were all designed, manufactured and imported by other companies.
   
• Despite Burlington Coat Factory’s vendor policy requiring compliance with all federal laws, regulations and standards, as well as the company’s own internal policies prohibiting its buyers from purchasing children’s upper outerwear with drawstrings, these products ended up being purchased and offered for sale at its stores.
   

In our opinion, CPSC is sending a clear message to retailers that even if they are not the manufacturer or importer of products they sell, they nevertheless must take significant steps toward assuring compliance of those products with federal safety laws, regulations and standards. This case illustrates the need for retailers to actively monitor and audit their supply chain to assure that products meet all relevant safety standards, and that the existence of written policies and procedures is insufficient without a corresponding mechanism for assuring compliance, such as robust audit and inspection procedures.

In addition to the allegations that Burlington Coat Factory knowingly sold products with prohibited neck drawstrings, CPSC asserts that the company should have known that many of these products had been subject to CPSC recalls and should have stopped selling those products when those recalls were announced by the importers. CPSC has been very active lately in policing retailers who may continue to sell recalled products, or who may resell products that had been previously recalled. It is likely that the substantial penalty amount in this case was attributable in large measure to this fact.

As to the restrictions and prohibitions concerning the use of neck drawstrings in children’s upper outerwear, CPSC has been on the forefront of this issue since 1996 when it issued its own guidelines, which were later incorporated into the 1997 industry standard known as ASTM F1816-97. The CPSC guidelines and the ASTM standard have now been incorporated into CPSC’s own regulations that ban the use of neck (and certain waist) drawstrings in children’s upper outerwear.

The large penalty imposed on Burlington by CPSC follows a trend of larger and larger penalties being imposed on members of industry in response to significant regulatory violations. This trend will likely continue under the current CPSC leadership. For additional information concerning this issue, please contact Georgia C. Ravitz, James R. Ravitz, or Scott A. Cohn at Arent Fox LLP.