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Health Canada Announces First Penalty Under CCPSA

April 4, 2016

Health Canada recently announced its first administrative monetary penalty under the Canadian Consumer Product Safety Act (CCPSA). The $75,000 CAD penalty was levied against Orange TKO Industries (International) Inc., manufacturer of Orange TKO Super Concentrated All Purpose Cleaner, for violations of a 2015 recall order.

Alleged Violations

On September 14, 2015, Health Canada announced that it had ordered Orange TKO to recall and stop sale of its all-purpose cleaner for failing to meet Canadian labeling and child resistant packaging requirements for hazardous substances. Health Canada had issued earlier warnings for the same product on August 10, 2011. Orange TKO’s alleged violations occurred between September 16 and September 20, 2015, when it failed to submit information by deadlines mandated by the order, including failing to provide a list of relevant products, a copy of the distribution list, and a completed Recall Notice. The recall was announced on September 29, 2015, apparently with Orange TKO’s participation. In March 2016, Health Canada then announced the $75,000 administrative monetary penalty based on Orange TKO’s failure to act in accordance with the September 2015 order.

CCPSA & Penalties

The CCPSA was enacted in 2010 and came into force in 2011. It authorizes the Canadian Minister of Health to, among other things, assess an administrative monetary penalty against a firm for failing to comply with an order to recall a product or take other measures. Penalty amounts are provided by regulation and range from $10,000 to $25,0001, depending on the type of violation and the cumulative number of violations in the preceding five years. Violations under the CCPSA are continuing; each day constitutes a new violation punishable by the applicable penalty amount. Orange TKO’s five days of non-compliance were assessed at $15,000 per day, for a total penalty of $75,000.

In Canada, firms are informed of administrative monetary penalties by a written Notice of Violation. The amount of a penalty may be reduced if a firm pays within 15 days of receiving the notice. A penalized firm may instead elect to reduce penalty amounts by requesting to enter into a compliance agreement, subject to negotiations with Health Canada.

Penalties in the U.S. & Canada

There are differences between monetary penalties in Canada and the U.S. that may affect firms that sell products in both places.

There is no administrative penalty available in the U.S. for product safety violations. Unlike Health Canada, the U.S. Consumer Product Safety Commission (CPSC) does not have the power to assess a fine, can only compromise civil penalty matters. The CPSC must go to court, represented by the U.S. Department of Justice, to force a firm to pay a civil penalty. In practice, the Commission settles most of its penalty matters privately, through individual negotiations with firms, which reveals little about how the Commission evaluates a penalty in a given case. Concerns about the opacity of penalty matters at the CPSC were recently raised again in connection with its $5.45 million settlement with Gree. By contrast, Health Canada’s authority is more like a ticketing scheme, with defined criteria and corresponding penalty amounts. On one hand, Canada’s transparency about when penalties are sought and for how much can mean more predictability for industry and a better understanding about regulators’ expectations. On the other hand, the CPSC’s regime requires firms to engage with the regulator as a necessary step in the civil penalty process, which may affect the penalty amount and determine whether enforcement is ultimately pursued.

Another significant difference between Canada and the U.S. is the time limit for penalties. In Canada, a penalty must be issued within six months of a violation of an order. In the U.S., the CPSC must bring a penalty enforcement matter within five years. The additional time afforded to the U.S. government means that it has much more time to consider and investigate facts before deciding whether a penalty is appropriate, which may result in a longer period of uncertainty for a firm that may be subject to enforcement.

Health Canada’s penalty assessment follows an enforcement tradition that, in the U.S., dates back to the formation of the CPSC. The penalty may signal Health Canada’s intent to use its own penalty power as a compliance tool. The approach to penalties is very different, however, and companies doing business in both the United States and Canada face the risk that prosecution may turn on different facts and proceed at different paces.

1 Non-commercial and non-profit organizations are subject to lesser fines.

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