Federal regulators ordered a Chinese manufacturer to pay a $1 million penalty for failing to report defective trash cans that pose a laceration hazard.
The U.S. Consumer Product Safety Commission (CPSC) imposed the fine on EKO Development of Guangzhou, China, and its U.S. unit EKO USA in a 3-2 vote. According to the CPSC, 367,000 of the defective EKO trash cans were sold exclusively at Costco Wholesale stores throughout the U.S.
The EKO Sensible Eco Living Trash Cans pose an “unreasonable risk of injury,” the CPSC said, because they have a black plastic collar on the receptacle opening that could detach, exposing a sharp metal edge. Costco received 92 complaints about the trash can defect. Sixty of the complaints involved injuries, some of which were serious.
In response to the complaints, EKO redesigned the defective collar on the trash cans but failed to notify the CPSC as required by law. Similarly, Costco continued to sell the EKO trash cans without notifying the CPSC until July 17, when the companies finally issued a joint recall of the trash cans.
On Oct. 9, Costco agreed to pay a $3.85 million civil penalty for its failure to report the defective EKO trash cans to the CPSC. The company also agreed to maintain a program designed to keep it in compliance with the Consumer Product Safety Act and implement a series of controls and procedures to disclose problems to the CPSC as required by law.
Commissioners Robert Adler and Elliot Kaye voted against the proposed agreement with EKO because they thought the Chinese company’s penalty should be at least as high as Costco’s. In their dissenting opinion, the commissioners acknowledged an ability-to-pay provision of the Consumer Product Safety Act that directs the CPSC to “mitigate undue adverse economic impacts on small businesses” but said the fine still should have been higher than Costco’s, with the majority of it symbolic.
“We cannot support this settlement agreement because we believe the size of the proposed penalty is too small and does not adequately reflect the seriousness of EKO’s violation,” Commissioners Adler and Kaye wrote, adding they would set EKO’s penalty at $4.5 million “with all but $1 million suspended.”
The commissioners said that “by almost any measure of culpability, EKO … warrants a civil penalty at least equal to that imposed on [Costco].
“Regrettably, anyone not conversant with the facts of this case will automatically assume that EKO’s transgression is minor compared to Costco’s,” the commissioners argued.