At the end of December, Dimmeys, a large Australian discount department store, was fined approximately $3 million dollars by an Australian court for violating Australia’s federal product safety laws for the fifth time. The retailer’s supplier, Starite Distributors, was fined $600,000, and the owner of Dimmeys has been banned from managing the company (or any other corporation) for six years. Australian regulators within the state of Victoria alleged that Dimmeys breached product safety laws by selling children’s swimwear, bath toy sets, cosmetic sets, and basketball rings that had improper warning labels or were otherwise non-compliant and potentially hazardous. This is the latest example of a high-profile foreign product safety enforcement action ending in significant penalties paid by a large retailer. The CPSC, along with its international counterparts in Australia, Canada, and the EU continue to scrutinize the safety of children’s products.

Brief Background

In November 2012, Consumer Affairs Victoria launched an enforcement action that led to the penalties against Dimmeys and Starite Distributers in Australian federal court. The state regulator alleged the retailer (and its supplier) breached the country’s product safety laws by selling children’s products that posed choking and other hazards, were mislabeled, and otherwise did not conform to Australia’s product safety laws. Consumer Affairs Victoria, a unit within that state’s Department of Justice, is Victoria’s consumer affairs regulator and has the power to enforce and ensure compliance with Australia’s federal consumer product safety laws (complementary to the Australian Competition and Consumer Commission).

Dimmeys has had a history of run-ins with Australian federal and state consumer product safety regulators, which likely contributed to this latest enforcement action and sizeable penalty. For example, in 2011 and 2001, it was ordered to pay hundreds of thousands of dollars in penalties for selling children’s sleepwear that did not conform to flammability standards or have proper fire hazard warnings.

The Court Imposed Penalty

In addition to the $3 million court-imposed fine levied against Dimmeys last month, Dimmeys is (1) banned from selling any goods which were subject to safety standards not complied with for six years; (2) the owner of Dimmeys cannot manage the Company, or any other corporation, for six years; and (3) the non-compliant goods were ordered to be destroyed at the expense of Dimmeys. The Court noted that the stiff penalty was appropriate given the need for general deterrence when dealing with the safety of children’s toys and other kid products.

What This Means For Retailers

This latest enforcement action continues to underscore the point that all retailers must be aware of their independent product safety compliance obligations within the countries in which they sell, domestic or foreign.

For American retailers, manufacturers, importers, this case should also serve as a reminder that our own State Attorneys General have been empowered under the Consumer Product Safety Improvement Act of 2008 (“CPSIA”) to enforce certain provisions of the federal product safety laws typically administered by the Consumer Product Safety Commission. Like the Consumer Affairs Victoria agency in Australia, U.S. State Attorneys General have the authority to proceed in federal court to enjoin companies selling consumer products from certain activities such as selling products that violate a CPSC safety regulation or pose a “substantial product hazard” to consumers. Although there have not been many actions to enforce federal product safety laws initiated by the states to date, the Attorney General of California, Illinois and Vermont have shown a particular interest in product safety laws and a willingness to do so.