Peloton initially refused to recall its treadmills. Here's why it can do that
New York(CNN Business) You would think that federal safety regulators would have broad powers to order the recall of products they find dangerous or even deadly.
You would be wrong.
Agencies such as the Consumer Product Safety Commission and the National Highway Traffic Safety Administration typically can only request — not demand — that companies order a recall when problems arise. If the company says no, the safety watchdogs have to file lawsuits to force a recall, a step they are loath to take, according to experts.
"You do see a lot of companies recognize that it is in their interest to do a recall. But there are a lot of times companies don't do a recall, and you have a fight that largely takes place outside the public eye," said William Wallace, manager of safety policy for Consumer Reports.
The relative toothlessness of the regulators' power was on full display over the past month in the case of Peloton treadmills.
The CPSC came out with a graphic video showing a young child getting his arms trapped under the treadmill when a slightly older child was playing on the track. While that child wasn't injured, according to the agency, it confirmed one child's death and 70 other reports of injuries. And it issued an "urgent warning" for people with young children or pets to top using the treadmills.
Peloton confirmed the child's death, but initially refused to order a recall. It took nearly three weeks for the company, which estimates the recall will cost it about $165 million in lost sales, to essentially be shamed into action. Its CEO apologized this week for delaying the recall.
The nation's consumer laws are written to protect the companies as much as the public, according to safety experts, and they include limits on what safety investigators can say publicly about products they deem dangerous.
When the CPSC announced the problem with Peloton's treadmill, it was required by federal law to publicly include the company's view that the agency's warning was "inaccurate and misleading," and that the treadmills could be safely used by the public — undercutting the commission's own initial warning. What's more, a company can sue if an agency makes public its request for a recall.
"The companies have a lot of leverage," said Ed Mierzwinski. senior director for federal consumer programs for US Public Interest Research Group. "If a company continues to refuse, it could take years and cost the agency a lot of money to go to court and force a recall. They don't have the money or people to do that."
Calls to give safety agencies greater powers
Bob Adler, the CPSC's new acting director, agrees with the safety experts that his agency needs more powers, more resources and the removal of the limits on what it can say publicly.
"The CPSC faces a nearly insurmountable hurdle each and every time the agency wants to warn the public about a hazardous product," he said when announcing the Peloton recall. "It is plain to see how bad it is for consumers that we are so limited in how we can protect them."
There is legislation, sponsored by Representatives Jan Schakowsky and Bobby Rush of Illinois and Senator Richard Blumenthal of Connecticut to change the law.
"It's critically important for Congress to step in to make the agencies more powerful, to make sure that hazardous cars and household products are taken off the market quickly," said Wallace.
Recalls can take years, even with multiple deaths
It took years to recall 4.7 million Fisher-Price Rock 'n Play Sleepers, even though the CPSC records showed more than 30 infant deaths were tied to the product. The recall happened in April 2019, only after Consumer Reports revealed the deaths.
Recalls can be costly
The recalls also can be costly, giving the companies an incentive to fight government action.
In the last six months, General Motors (GM) and Ford (F) were forced by NHTSA to recall a combined 10 million vehicles with Takata airbags that the agency ruled posed a hazard of exploding and killing, blinding or otherwise maiming those in both front seats. The recalls will cost GM $1.2 billion and Ford $610 million.
The only reason NHTSA even had the authority in that case was because it previously reached a settlement with Takata in 2015 on a broader Takata recall, the largest in automotive history and one which bankrupted the airbag maker. The automakers had argued their testing showed these airbags were different enough from the ones that caused deaths to negate the need for a recall. NHTSA rejected that analysis.
In other cases when NHTSA and an automaker disagree on a recall, such as the case of the Jeep gas tanks that the agency said posed a fire hazard in a rear-end accident, NHTSA can only "request" a recall. In that case, Fiat Chyrsler initially fought the request for the recall.
Public pressure can force recall
But both the Jeep and Peloton cases illustrate how bad publicity can eventually force a company to change its position. Fiat Chrysler eventually gave in and recalled 2.7 million Jeeps. Peloton CEO John Foley was forced to admit the company was wrong to fight the recall request.
"We feel like we have some work to do to get back on the right side of the line with trust and safety," he said Thursday, the day after agreeing to the "voluntary" recall.
Wallace and Mierzwinski both are encouraged that CPSC, under new acting chairman Adler, is more willing to speak publicly.
"The agency has been reluctant to come out with warnings like this because it wanted to avoid court fights," said Wallace. "This has been a sea change at the agency in recent months in which we've seen more public warnings.
