[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)]
[Notices]
[Pages 81086-81089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27644]
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CONSUMER PRODUCT SAFETY COMMISSION
[CPSC Docket No. 17-C0001]
PetSmart, Inc., Provisional Acceptance of a Settlement Agreement
and Order
AGENCY: Consumer Product Safety Commission
ACTION: Notice.
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SUMMARY: It is the policy of the Commission to publish settlements
which it provisionally accepts under the Consumer Product Safety Act in
the Federal Register in accordance with the terms of the Consumer
Product Safety Commission's regulations. Published below is a
provisionally-accepted Settlement Agreement with PetSmart, Inc.,
containing a civil penalty in the amount of four million, two hundred
fifty thousand dollars ($4,250,000) within thirty (30) days of service
of the Commission's final Order accepting the Settlement Agreement.
DATES: Any interested person may ask the Commission not to accept this
agreement or otherwise comment on its contents by filing a written
request with the Office of the Secretary by December 2, 2016.
ADDRESSES: Persons wishing to comment on this Settlement Agreement
should send written comments to the Comment 17-C0001, Office of the
Secretary, Consumer Product Safety Commission, 4330 East-West Highway,
Room 820, Bethesda, Maryland 20814-4408.
FOR FURTHER INFORMATION CONTACT: Philip Z. Brown, Trial Attorney,
Division of Compliance, Office of the General Counsel, Consumer Product
Safety Commission, 4330 East-West Highway, Bethesda, Maryland 20814-
4408; telephone (301) 504-7645.
SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears
below.\1\
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\1\ The Commission voted (4-1) to provisionally accept the
Settlement Agreement and Order regarding PetSmart, Inc. Chairman
Kaye, Commissioner Adler, Commissioner Robinson and Commissioner
Mohorovic voted to provisionally accept the Settlement Agreement and
Order. Commissioner Buerkle voted to reject the Settlement Agreement
and Order.
[[Page 81087]]
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Dated: November 14, 2016.
Todd A. Stevenson,
Secretary.
UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION
In the Matter of: PETSMART, INC. CPSC Docket No.: 17-C0001
SETTLEMENT AGREEMENT
1. In accordance with the Consumer Product Safety Act, 15 U.S.C.
2051-2089 (``CPSA'') and 16 CFR 1118.20, PetSmart, Inc. (``PetSmart''),
and the United States Consumer Product Safety Commission
(``Commission''), through its staff, hereby enter into this Settlement
Agreement (``Agreement''). The Agreement and the incorporated attached
Order resolve staff's charges set forth below.
THE PARTIES
2. The Commission is an independent federal regulatory agency,
established pursuant to, and responsible for, the enforcement of the
CPSA, 15 U.S.C. 2051-2089. By executing the Agreement, staff is acting
on behalf of the Commission, pursuant to 16 CFR 1118.20(b). The
Commission issues the Order under the provisions of the CPSA.
3. PetSmart is a corporation, organized and existing under the laws
of the state of Delaware, with its principal place of business in
Phoenix, AZ.
STAFF CHARGES
4. Between April 2009 and September 2013, PetSmart imported and
offered for sale in the United States, approximately 127,444 ``Great
Choice'' or ``Top Fin'' brand 1.75 gallon, brandy snifter-style glass
fish bowls (``Fish Bowls'' or ``Subject Products'') .
5. The Fish Bowls are a ``consumer product,'' ``distribut[ed] in
commerce,'' as those terms are defined or used in sections 3(a)(5) and
(8) of the CPSA, 15 U.S.C. 2052(a)(5) and (8). PetSmart is an
``importer,'' ``manufacturer'' and ``retailer'' of the Fish Bowls, as
such terms are defined in sections 3(a)(11) and (13) of the CPSA, 15
U.S.C. 2052(a)(11) and (13).
Violation of CPSA Section 19(a)(4)
6. The Fish Bowls contain a defect which could create a substantial
product hazard and create an unreasonable risk of serious injury
because they can crack, shatter, or break during normal use, posing a
laceration hazard to consumers.
7. Between August 2011 and January 2014, PetSmart received at least
19 incident reports of Fish Bowls cracking, breaking, or shattering
during normal use, which, in at least 12 instances, resulted in serious
injuries, including deep lacerations requiring stitches and severed
tendons necessitating surgery.
8. PetSmart received at least three reports of consumers sustaining
serious injuries during normal use of the Fish Bowls between August
2011 and September 2011 but neither initiated an investigation into the
Subject Products in response to these reports of serious injury nor
immediately reported to the Commission.
9. In May 2013, after receiving additional reports, including two
reports of serious injuries to consumers, PetSmart initiated an
investigation and evaluation of the defect and risk associated with the
Fish Bowls. That investigation, which concluded in July 2013,
identified deficiencies in the thickness and distribution of the glass
in the Fish Bowls. During its investigation, PetSmart continued to
receive reports of serious injury caused by the Fish Bowls. Firms may
conduct a reasonably expeditious investigation, not normally exceeding
10 days, to evaluate their reporting obligations. See 16 CFR
1115.14(d). PetSmart's investigation took over two months to complete.
10. PetSmart stopped sale of the Fish Bowls in September 2013. At
the time PetSmart stopped sale of the Fish Bowls, PetSmart had received
at least 12 reports of consumers being injured during normal use of the
Subject Products.
11. PetSmart did not file a Full Report with the Commission until
January 31, 2014, pursuant to 15 U.S.C. 2064(b). PetSmart and the
Commission jointly announced a recall of 10,200 Fish Bowls on April 24,
2014.
12. PetSmart's Full Report contained information on only 10,211
Fish Bowls imported and sold between February 2013 and September 2013.
However, information produced by PetSmart during staff's civil penalty
investigation revealed that PetSmart had actually sold a total of
91,500 Fish Bowls between March 2010 and September 2013 that posed the
same laceration hazard. PetSmart and the Commission jointly announced
an expanded recall of 91,500 Fish Bowls on November 17, 2015.
13. By the date of the expanded recall, PetSmart received at least
32 reports of Fish Bowls cracking, breaking or shattering during normal
use, including 18 reports of injury. PetSmart received at least six of
these reports of injury after the first recall.
14. Despite having information that the Fish Bowls contained a
defect and created an unreasonable risk of serious injury, PetSmart did
not notify the Commission immediately of such defect or risk, as
required by sections 15(b)(3) and (4) of the CPSA, 15 U.S.C. 2064(b)(3)
and (4), in violation of section 19(a)(4) of the CPSA, 15 U.S.C.
2068(a)(4).
15. Because the information in PetSmart's possession constituted
actual and presumed knowledge, PetSmart knowingly violated section
19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4), as the term ``knowingly''
is defined in section 20(d) of the CPSA, 15 U.S.C. 2069(d).
16. Pursuant to Section 20 of the CPSA, 15 U.S.C. 2069, PetSmart is
subject to civil penalties for its knowing violation of section
19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4).
Violation of CPSA Section 19(a)(13)
17. PetSmart's January 31, 2014 Full Report identified the Subject
Products as 10,211 Fish Bowls, sold between February 2013 and September
2013, which posed a laceration hazard to consumers. The Full Report did
not identify an additional 81,300 units of Subject Products that were
sold prior to February 2013 that posed the same hazard and had been the
subject of incident and injury reports received by PetSmart.
18. By failing to identify the correct amount and distribution
dates of the Subject Products in PetSmart's Full Report, PetSmart
knowingly misrepresented the scope of consumer products subject to an
action required under section 15 of the CPSA. As a result of PetSmart's
misrepresentation, the April 24, 2014 CPSC press release announcing the
recall inaccurately stated that ``[a]bout 10,200'' Fish Bowls were
affected by the hazard posed by the Fish Bowls. An expansion of the
recall was announced on November 17, 2015.
19. By knowingly misrepresenting the scope of consumer products
subject to an action under section 15 of the CPSA, PetSmart knowingly
violated section 19(a)(13) of the CPSA, 15 U.S.C. 2068(a)(13), as the
term ``knowingly'' is defined in section 20(d) of the CPSA, 15 U.S.C.
2069(d).
20. Pursuant to section 20 of the CPSA, 15 U.S.C. 2069, PetSmart is
subject to civil penalties for its knowing violation of section
19(a)(13) of the CPSA, 15 U.S.C. 2068(a)(13).
RESPONSE OF PETSMART
21. PetSmart's settlement of this matter does not constitute an
admission of staff's charges in paragraphs 4 through 20 above.
22. Between November 2013 and January 2014, PetSmart corresponded
with CPSC staff regarding certain Fish
[[Page 81088]]
Bowl incidents. In this correspondence, PetSmart clearly stated that it
first began selling the Fish Bowls in 2009. PetSmart also stated that
it believed any product issues were limited to Fish Bowls manufactured
for sale in 2013. CPSC staff did not ask PetSmart anything further
regarding PetSmart's determination that the issues were limited to Fish
Bowls sold between February 2013 and September 2013.
23. Following this correspondence, in January 2014, PetSmart
provided the Commission with its report under section 15(b) of the
CPSA, 15 U.S.C. 2064(b) concerning PetSmart's receipt of complaints and
incident reports about the Fish Bowls. PetSmart's report provided
information related only to Fish Bowls manufactured for sale in 2013,
consistent with its communications to CPSC staff. CPSC staff did not
ask PetSmart anything further regarding Fish Bowls sold prior to 2013.
24. On April 24, 2014, in conjunction with the Commission, PetSmart
voluntarily announced a recall of Fish Bowls sold at PetSmart between
February 2013 and September 2013.
25. PetSmart conducted the April 24, 2014, voluntary recall of the
Fish Bowls, as well as the section 15(b) reporting, out of an abundance
of caution and without PetSmart having concluded that the Fish Bowls
contained a defect, posed a substantial product hazard, or created an
unreasonable risk of serious injury or death.
26. On November 17, 2015, in conjunction with the Commission,
PetSmart voluntarily expanded the recall of Fish Bowls to include units
sold at PetSmart between March 2010 and February 2013. PetSmart
disputes Staff's allegation that PetSmart had information that the Fish
Bowls manufactured prior to 2013 contained a defect and created an
unreasonable risk of serious injury.
27. PetSmart denies Staff's allegations that PetSmart knowingly
misrepresented the scope of consumer products subject to an action
under section 15 of the CPSA and that PetSmart knowingly violated
section 19(a)(13).
AGREEMENT OF THE PARTIES
28. Under the CPSA, the Commission has jurisdiction over the matter
involving the Fish Bowls and over PetSmart.
29. The parties enter into the Agreement for settlement purposes
only. The Agreement does not constitute an admission by PetSmart or a
determination by the Commission that PetSmart violated the CPSA's
reporting requirements.
30. In settlement of staff's charges, and to avoid the cost,
distraction, delay, uncertainty, and inconvenience of protracted
litigation or other proceedings, PetSmart shall pay a civil penalty in
the amount of four million, two hundred fifty thousand dollars
($4,250,000) within thirty (30) calendar days after receiving service
of the Commission's final Order accepting the Agreement. All payments
to be made under the Agreement shall constitute debts owing to the
United States and shall be made by electronic wire transfer to the
United States via: http://www.pay.gov, for allocation to, and credit
against, the payment obligations of PetSmart under this Agreement.
Failure to make such payment by the date specified in the Commission's
final Order shall constitute Default.
31. All unpaid amounts, if any, due and owing under the Agreement,
shall constitute a debt due and immediately owing by PetSmart to the
United States, and interest shall accrue and be paid by PetSmart at the
federal legal rate of interest set forth at 28 U.S.C. 1961(a) and (b)
from the date of Default, until all amounts due have been paid in full
(hereinafter ``Default Payment Amount'' and ``Default Interest
Balance''). PetSmart shall consent to a Consent Judgment in the amount
of the Default Payment Amount and Default Interest Balance, and the
United States, at its sole option, may collect the entire Default
Payment Amount and Default Interest Balance, or exercise any other
rights granted by law or in equity, including, but not limited to,
referring such matters for private collection, and PetSmart agrees not
to contest, and hereby waives and discharges any defenses to, any
collection action undertaken by the United States, or its agents or
contractors, pursuant to this paragraph. PetSmart shall pay the United
States all reasonable costs of collection and enforcement under this
paragraph, respectively, including reasonable attorney's fees and
expenses.
32. After staff receives this Agreement executed on behalf of
PetSmart, staff shall promptly submit the Agreement to the Commission
for provisional acceptance. Promptly following provisional acceptance
of the Agreement by the Commission, the Agreement shall be placed on
the public record and published in the Federal Register, in accordance
with the procedures set forth in 16 CFR 1118.20(e). If the Commission
does not receive any written request not to accept the Agreement within
fifteen (15) calendar days, the Agreement shall be deemed finally
accepted on the 16th calendar day after the date the Agreement is
published in the Federal Register, in accordance with 16 CFR
1118.20(f).
33. This Agreement is conditioned upon, and subject to, the
Commission's final acceptance, as set forth above, and it is subject to
the provisions of 16 CFR 1118.20(h). Upon the later of: (i)
Commission's final acceptance of this Agreement and service of the
accepted Agreement upon PetSmart, and (ii) the date of issuance of the
final Order, this Agreement shall be in full force and effect, and
shall be binding upon the parties.
34. Effective upon the later of: (i) the Commission's final
acceptance of the Agreement and service of the accepted Agreement upon
PetSmart, and (ii) and the date of issuance of the final Order, for
good and valuable consideration, PetSmart hereby expressly and
irrevocably waives and agrees not to assert any past, present, or
future rights to the following, in connection with the matter described
in this Agreement: (i) an administrative or judicial hearing; (ii)
judicial review or other challenge or contest of the Commission's
actions; (iii) a determination by the Commission of whether PetSmart
failed to comply with the CPSA and the underlying regulations; (iv) a
statement of findings of fact and conclusions of law; and (v) any
claims under the Equal Access to Justice Act.
35. PetSmart represents and agrees that it has enhanced its
compliance program to ensure compliance with the CPSA with respect to
any consumer product imported, manufactured, distributed or sold by the
Firm and will maintain said compliance program. PetSmart represents
that the ongoing compliance program contains: (i) written standards,
policies and procedures including those designed to ensure that
information that may relate to or impact CPSA compliance (including
information obtained by quality control personnel) is conveyed
effectively to personnel responsible for CPSA compliance, whether or
not an injury is referenced; (ii) a mechanism for confidential employee
reporting of compliance-related questions or concerns to either a
compliance officer or to another senior manager with authority to act
as necessary; (iii) effective communication of company compliance-
related policies and procedures regarding the CPSA to all applicable
employees through training programs or otherwise; (iv) management
oversight of and responsibility for compliance; and (v) retention of
all CPSA compliance-related records for at
[[Page 81089]]
least five (5) years, and availability of such records to staff upon
reasonable request.
36. PetSmart represents and agrees that it has designed and
implemented internal controls and procedures designed to ensure that,
with respect to all consumer products imported, manufactured,
distributed or sold by PetSmart: (i) information required to be
disclosed by PetSmart to the Commission is recorded, processed and
reported in accordance with applicable law; (ii) all reporting made to
the Commission is timely, truthful, complete, accurate and in
accordance with applicable law; and (iii) prompt disclosure is made to
PetSmart's management of any significant deficiencies or material
weaknesses in the design or operation of such internal controls that
are reasonably likely to affect adversely, in any material respect,
PetSmart's ability to record, process and report to the Commission in
accordance with applicable law.
37. Upon reasonable request of staff, PetSmart shall provide
written documentation of its internal controls and procedures,
including, but not limited to, the effective dates of the procedures
and improvements thereto. PetSmart shall cooperate fully and truthfully
with staff and shall, upon reasonable notice make available all non-
privileged information and materials, and personnel with direct
involvement in such procedures and deemed necessary by staff to
evaluate PetSmart's compliance with the terms of the Agreement.
38. The parties acknowledge and agree that the Commission may
publicize the terms of the Agreement and the Order.
39. PetSmart represents that the Agreement: (i) is entered into
freely and voluntarily, without any degree of duress or compulsion
whatsoever; (ii) has been duly authorized; and (iii) constitutes the
valid and binding obligation of PetSmart, enforceable against PetSmart
in accordance with its terms. PetSmart will not directly or indirectly
receive any reimbursement, indemnification, insurance related payment,
or other payment in connection with the civil penalty to be paid by
PetSmart pursuant to the Agreement and Order. The individuals signing
the Agreement on behalf of PetSmart represent and warrant that they are
duly authorized by PetSmart to execute the Agreement.
40. The signatories represent that they are authorized to execute
this Agreement.
41. The Agreement is governed by the laws of the United States.
42. The Agreement and the Order shall apply to, and be binding
upon, PetSmart and each of its successors, transferees, and assigns;
and a violation of the Agreement or Order may subject PetSmart, and
each of its successors, transferees, and assigns, to appropriate legal
action.
43. The Agreement and the Order constitute the complete agreement
between the parties on the subject matter contained therein.
44. The Agreement may be used in interpreting the Order.
Understandings, agreements, representations, or interpretations apart
from those contained in the Agreement and the Order may not be used to
vary or contradict their terms. For purposes of construction, the
Agreement shall be deemed to have been drafted by both of the parties
and shall not, therefore, be construed against any party, for that
reason, in any subsequent dispute.
45. The Agreement may not be waived, amended, modified, or
otherwise altered, except as in accordance with the provisions of 16
CFR 1118.20(h). The Agreement may be executed in counterparts.
46. If any provision of the Agreement or the Order is held to be
illegal, invalid, or unenforceable under present or future laws
effective during the terms of the Agreement and the Order, such
provision shall be fully severable. The balance of the Agreement and
the Order shall remain in full force and effect, unless the Commission
and PetSmart agree in writing that severing the provision materially
affects the purpose of the Agreement and the Order.
PETSMART, INC.
Dated: October 28, 2016
By:--------------------------------------------------------------------
Michael J. Massey
President and Chief Executive Officer
PetSmart, Inc.
Dated: October 28, 2016
By:--------------------------------------------------------------------
Jeffrey B. Margulies, Esq.
Norton Rose Fulbright US LLP
Counsel to PetSmart, Inc.
U.S. CONSUMER PRODUCT SAFETY COMMISSION
Mary T. Boyle
General Counsel
Mary B. Murphy
Assistant General Counsel
Dated: October 27, 2016
By:--------------------------------------------------------------------
Philip Z. Brown
Trial Attorney
Division of Compliance
Office of the General Counsel
UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION
In the Matter of: PETSMART, INC. CPSC Docket No.: 17-C0001
ORDER
Upon consideration of the Settlement Agreement entered into between
PetSmart, Inc. (``PetSmart''), and the U.S. Consumer Product Safety
Commission (``Commission''), and the Commission having jurisdiction
over the subject matter and over PetSmart, and it appearing that the
Settlement Agreement and the Order are in the public interest, it is:
ORDERED that the Settlement Agreement be, and is, hereby, accepted;
and it is
FURTHER ORDERED that PetSmart shall comply with the terms of the
Settlement Agreement and shall pay a civil penalty in the amount of
four million, two hundred fifty thousand dollars ($4,250,000), within
thirty (30) days after service of the Commission's final Order
accepting the Settlement Agreement. The payment shall be made by
electronic wire transfer to the Commission via: http://www.pay.gov.
Upon the failure of PetSmart to make the foregoing payment when due,
interest on the unpaid amount shall accrue and be paid by PetSmart at
the federal legal rate of interest set forth at 28 U.S.C. 1961(a) and
(b). If PetSmart fails to make such payment or to comply in full with
any other provision of the Settlement Agreement, such conduct will be
considered a violation of the Settlement Agreement and Order.
Provisionally accepted and provisional Order issued on the 14th
day of November, 2016.
BY ORDER OF THE COMMISSION:
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Todd A. Stevenson, Secretary
U.S. Consumer Product Safety Commission
[FR Doc. 2016-27644 Filed 11-16-16; 8:45 am]
BILLING CODE 6355-01-P