83 FR 50647 - Costco Wholesale Corporation, Provisional Acceptance of a Settlement Agreement and Order

CONSUMER PRODUCT SAFETY COMMISSION

Federal Register Volume 83, Issue 195 (October 9, 2018)

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 Costco Wholesale Corporation, containing a civil penalty in the amount of $3.85 million dollars ($3,850,000), to be paid within thirty (30) days of service of the Commission's final Order accepting the Settlement Agreement.

[Federal Register Volume 83, Number 195 (Tuesday, October 9, 2018)]
[Notices]
[Pages 50647-50650]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-21869]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 19-C0001]


Costco Wholesale Corporation, 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 Costco Wholesale 
Corporation, containing a civil penalty in the amount of $3.85 million 
dollars ($3,850,000), to be paid 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 October 24, 2018.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 19-C0001, Office of the 
Secretary, Consumer Product Safety Commission, 4330 East-West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Michele Melnick, Trial Attorney, 
Division of Compliance, Office of the General Counsel, Consumer Product 
Safety Commission, 4330 East-West Highway, Bethesda, Maryland 20814-
4408; telephone (301) 504-7592.

[[Page 50648]]


SUPPLEMENTARY INFORMATION: The text of the Agreement and Order appears 
below.

    Dated: October 3, 2018.
Alberta E. Mills,
Secretary.

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

    In the Matter of: COSTCO WHOLESALE CORPORATION
CPSC Docket No.: 19-C0001

SETTLEMENT AGREEMENT

    1. In accordance with the Consumer Product Safety Act, 15 U.S.C. 
Sec. Sec.  2051-2089 (``CPSA'') and 16 C.F.R. Sec.  1118.20, Costco 
Wholesale Corporation (``Costco'') 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. Sec. Sec.  2051-2089. By executing the Agreement, staff 
is acting on behalf of the Commission, pursuant to 16 C.F.R. Sec.  
1118.20(b). The Commission issues the Order under the provisions of the 
CPSA.
    3. Costco Wholesale Corporation is a corporation, organized and 
existing under the laws of the state of Washington, with its principal 
place of business in Issaquah, Washington.

STAFF CHARGES

    4. Between December 2013 and May 2015, Costco imported and sold 
approximately 367,000 EKO Sensible Eco Living Trash Cans (``Subject 
Products'' or ``Trash Cans'') at its warehouse stores throughout the 
United States.
    5. The Trash Cans are 80 liter stainless steel, metal-cylinder 
Trash Cans with a black plastic protective collar in the opening on the 
back of the Trash Can.
    6. The Trash Cans 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. Sec.  2052(a)(5) and (8). Costco is a 
``manufacturer'' and ``retailer'' of the Trash Cans, as such terms are 
defined in section 3(a)(11) and (13) of the CPSA, 15 U.S.C. Sec.  
2052(a)(11) and (13).
    7. The Trash Cans contain a defect which could create a substantial 
product hazard and create an unreasonable risk of serious injury 
because the black plastic protective collar in the opening on the back 
of the Trash Can can become dislodged and expose a sharp edge, posing a 
laceration hazard to consumers.
    8. Between December 2013 and May 2015, Costco received 92 
complaints about the Trash Cans, including 60 complaints from consumers 
who received injuries, including some serious injuries as defined in 16 
C.F.R. Sec.  1115.6(c).
    9. Despite having information that reasonably supported the 
conclusion that the Trash Cans contained a defect which could create a 
substantial product hazard or created an unreasonable risk of serious 
injury, Costco 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. Sec. Sec.  2064(b)(3) and (4).
    10. The Trash Cans were recalled on July 17, 2015.
    11. In failing to immediately inform the Commission about the 
defect or unreasonable risk associated with the Trash Cans, Costco 
knowingly violated section 19(a)(4) of the CPSA, 15 U.S.C. Sec.  
2068(a)(4), as the term ``knowingly'' is defined in section 20(d) of 
the CPSA, 15 U.S.C. Sec.  2069(d).
    12. Pursuant to Section 20 of the CPSA, 15 U.S.C. Sec.  2069, 
Costco is subject to civil penalties for its knowing violation of 
section 19(a)(4) of the CPSA, 15 U.S.C. Sec.  2068(a)(4).

RESPONSE OF COSTCO

    13. Costco's Product Safety Committee reviewed reports associated 
with the Trash Cans that Costco received over time. The large majority 
of reports that Costco received about the Trash Cans were comments from 
Members who were returning the Trash Cans to Costco for a refund. 
Further, in December 2014, the Safety Committee found that the black 
plastic protective collar in the opening on the back of the Trash Can 
could not be removed easily from the exemplar sample it reviewed. Based 
on the available information, the Safety Committee did not believe that 
Costco had a duty to notify CPSC pursuant to CPSA Section 15(b) before 
May 2015. Costco does not believe that it knowingly violated the CPSA 
as that term is defined in the statute.
    14. During May 2015, Costco identified additional reported 
incidents, and learned that the vendor had made a design change to 
prevent the black plastic protective collar in the opening on the back 
of the Trash Cans from becoming loose and exposing a sharp metal edge. 
The Safety Committee also learned that the exemplar sample it had 
previously reviewed included the modified protective collar. Based on 
all of the available information, Costco voluntarily notified CPSC in 
May 2015 pursuant to CPSA Section 15(b). At Costco's request, the 
vendor also notified CPSC pursuant to CPSA Section 15(b) and then 
recalled the Trash Cans in cooperation with CPSC.
    15. Costco's settlement of this matter does not constitute an 
admission of staff's charges as set forth in paragraphs 4 through 12 
above.

AGREEMENT OF THE PARTIES

    16. Under the CPSA, the Commission has jurisdiction over the matter 
involving the Trash Cans and over Costco.
    17. The parties enter into the Agreement for settlement purposes 
only. The Agreement does not constitute an admission by Costco or a 
determination by the Commission that Costco violated the CPSA's 
reporting requirements.
    18. In settlement of staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation, Costco shall pay a civil penalty in the amount of $3.85 
million (US $3,850,000) 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 Costco under this 
Agreement. Failure to make such payment by the date specified in the 
Commission's Order shall constitute Default.
    19. All unpaid amounts, if any, due and owing under the Agreement 
shall constitute a debt due and immediately owing by Costco to the 
United States, and interest shall accrue and be paid by Costco at the 
federal legal rate of interest set forth at 28 U.S.C. Sec.  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''). Costco 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 Costco agrees not to contest, 
and hereby waives and

[[Page 50649]]

discharges any defenses, to any collection action undertaken by the 
United States, or its agents or contractors, pursuant to this 
paragraph. Costco shall pay the United States all reasonable costs of 
collection and enforcement under this paragraph, respectively, 
including reasonable attorney's fees and expenses.
    20. After staff receives this Agreement executed on behalf of 
Costco, 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 C.F.R. Sec.  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 
C.F.R. Sec.  1118.20(f).
    21. 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 C.F.R. Sec.  1118.20(h). Upon the later of: (i) 
the Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon Costco, and (ii) the date of the issuance of 
the final Order, this Agreement shall be in full force and effect and 
shall be binding upon the parties.
    22. Effective upon the later of: (i) the Commission's final 
acceptance of this Agreement and service of the accepted Agreement upon 
Costco, and (ii) the date of the issuance of the final Order, for good 
and valuable consideration, Costco 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 Costco 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.
    23. Costco has and will maintain a compliance program designed to 
achieve compliance with the CPSA, and which shall contain the following 
elements: (i) written standards, policies and procedures, including 
those designed to ensure that information relevant to CPSA compliance 
is conveyed effectively to personnel responsible for 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 CPSA compliance-related policies and procedures to all 
appropriate employees through regular training programs or otherwise; 
(iv) Costco's senior management participation in a compliance committee 
responsible for the review and oversight of compliance matters related 
to the CPSA; (v) retention of CPSA compliance-related records for at 
least five (5) years, and availability of such records to staff upon 
request, provided that retention of cumulative copies of such records 
shall not be required; and (vi) procedures designed to ensure that: 
information required to be disclosed by Costco to the Commission is 
recorded, processed and reported in accordance with applicable law; 
that all reporting made to the Commission is timely, truthful, 
complete, accurate and in accordance with applicable law; and that 
prompt disclosure is made to Costco'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, Costco's ability to record, process and report to 
the Commission in accordance with applicable law.
    24. Upon reasonable request of staff, Costco shall provide written 
documentation of its internal controls and procedures, including, but 
not limited to, the effective dates of the procedures and improvements 
thereto. Costco shall cooperate fully and truthfully with staff and 
shall make available relevant non-privileged information and materials, 
and personnel deemed necessary by staff to evaluate Costco's compliance 
with the terms of the Agreement.
    25. The parties acknowledge and agree that the Commission may 
publicize the terms of the Agreement and Order.
    26. Costco 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 Costco, enforceable against Costco in 
accordance with its terms. Costco 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 
Costco pursuant to the Agreement and Order.
    27. The signatories represent that they are authorized to execute 
this Agreement.
    28. The Agreement is governed by the law of the United States.
    29. The Agreement and Order shall apply to, and be binding upon, 
Costco and each of its successors, transferees, and assigns, and a 
violation of the Agreement or Order may subject Costco, and each of its 
successors, transferees, and assigns, to appropriate legal action.
    30. The Agreement and the Order constitute the complete agreement 
between the parties on the subject matter contained therein. 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.
    31. The Agreement may not be waived, amended, modified or otherwise 
altered, except as in accordance with the provisions of 16 C.F.R. Sec.  
1118.20(h). The Agreement may be executed in counterparts.
    32. 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 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 Costco 
agree in writing that severing the provision materially affects the 
purpose of the Agreement and the Order.

COSTCO WHOLESALE CORPORATION

Dated:-----------------------------------------------------------------

By:--------------------------------------------------------------------

John Sullivan, Senior Vice President and General Counsel, Costco 
Wholesale Corp.

Dated: September 18, 2018

By:--------------------------------------------------------------------

Eric Rubel, Arnold & Porter Kaye Scholer, 601 Massachusetts Ave. N.W., 
Washington, D.C. 20001-3743, Counsel to Costco Wholesale Corp.

U.S. CONSUMER PRODUCT SAFETY COMMISSION

Patricia M. Hanz, General Counsel

Mary B. Murphy, Assistant General Counsel

Dated: September 20, 2018


[[Page 50650]]


By:--------------------------------------------------------------------

Michele Melnick, Trial Attorney, Division of Compliance, Office of the 
General Counsel

UNITED STATES OF AMERICA

CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of:

COSTCO WHOLESALE CORPORATION
CPSC Docket No.: 19-C0001

ORDER

    Upon consideration of the Settlement Agreement entered into between 
Costco Wholesale Corporation (``Costco'') and the U.S. Consumer Product 
Safety Commission (``Commission''), and the Commission having 
jurisdiction over the subject matter and over the parties, 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 Costco shall comply with the terms of the 
Settlement Agreement and shall pay a civil penalty in the amount of 
$3.85 million dollars ($3,850,000), 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 Costco to make 
the foregoing payment when due, interest on the unpaid amount shall 
accrue and be paid by Costco at the federal legal rate of interest set 
forth at 28 U.S.C. Sec.  1961(a) and (b). If Costco 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 3rd day of 
October, 2018.
By Order of the Commission:

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Alberta Mills, Secretary,
U.S. Consumer Product Safety Commission.

[FR Doc. 2018-21869 Filed 10-5-18; 8:45 am]
 BILLING CODE 6355-01-P