Are You Going to be Out of Business on February 10th?

If you’re a manufacturer of consumer products for children, you might just be. And if you’re not worried, you should be. The penalties for failing to follow these new regulations include civil and criminal penalties.

On February 10, 2009, the Consumer Products Safety Improvement Act of 2008 (“CPSIA”) begins its ban on children’s products that have not been tested by an accredited third party testing facility for lead and phthalates.

All children’s products (which is defined as “a consumer product designed or intended primarily for children 12 years of age or younger”) must be certified to contain less than 600ppm of lead to comply (which will lower to 300ppm on August 14, 2009 and to 100ppm if feasible on August 14, 2011) and must have a compliance certificate showing that compliance available to governmental agencies, retailers and consumers. Any item covered in paint will have to drop to 90ppm of lead in that paint no later than August 14, 2009.

In addition, children’s products need to comply with the phthalates ban (which requires that your products contain less than 0.01% of each specific banned phthalate) which also goes into effect on February 10, 2009. Phthalates are chemicals that make plastics more pliable.

Congress permanently banned the phthlates DEHP, DBP, and BBP in “children’s toys” (which is defined as “a product intended for a child 12 years of age or younger for use when playing”) or “child care articles” (which is defined as “a product that a child 3 and younger would use for sleeping, feeding, sucking or teething”).

Three additional phthalates (DINP, DIDP, and DnOP) have been prohibited from “to child care articles or toys that can be placed in a child’s mouth or brought to the mouth and kept in the mouth so that it can be sucked or chewed that contains a concentration of more than 0.1% of the above phthalates” on an interim basis pending more testing.

Fab. So, how do you know if a toy can be placed in a child’s mouth within the meaning of the law?

The regulation states, “A toy can be placed in a child’s mouth if any part of the toy can actually be brought to the mouth and kept in the mouth by a child so that it can be sucked and chewed. If the toy can only be licked, it is not able to be placed in the mouth. By definition, if a toy or part of a toy in one dimension is smaller than 5 centimeters, it can be placed in the mouth.”

It also makes it illegal to sell products that do not meet the new lead limit (the phthalates ban only requires that products manufactured after February 10, 2009 complies with the CPSIA) after February 10, 2009, so any current inventory will either have to be tested or destroyed.

Also included in the CPSIA are permanent labeling requirements so that consumers will know if they have a product that has been recalled.

For a full text of the legislation, you can visit the Consumer Products Safety Commission’s website at http://www.cpsc.gov/about/cpsia/cpsia.html

So, what does this mean to you?

It means that as of February 10th, you need to have each item you manufacture tested to meet the requirements of the CPSIA. This includes each component part of each item that you make. For example, if you made stuffed animals, you would need to test the threads (individually if there’s more than one), the outer fabrics (individually if there are more than one), the batting or stuffing material and any other elements added such as eyes, rivets, etc. You have to test each color and type of item in your stock.

This can get very expensive, very fast. It’s going to be a terrible burden on small business owners and, sadly, it’s likely to knock a lot of them out of business.

What do you mean by all consumer products for children under the age of 12?

I mean ALL consumer products that are intended for children under the age of 12. From posters, CDs, books and pens to stuffed animals and video game systems to juvenile furniture and clothing, they’re all included in the ban.

Are there any exemptions?

- There is an exemption for “inaccessible component parts” which are parts that cannot be accessed by children (this exemption does not apply to phthalates) during the foreseeable use or misuse of the product.

- There is also an exemption for “natural products” like wood, undyed cotton, linen, silk, wool, etc.

- Packaging which is intended to be thrown away is exempted from testing.

- Used items, like those sold in thrift stores, are not subject to the new testing requirements. However, it is still illegal to sell products that don’t comply with the new regulations. How that’s going to shake out, I’m simply not sure....

It sounds like a lot of work. And it is. So if you haven’t started, now would be a good time. February 10th is coming very soon. Get ready....

As an aside, there are several petitions online aimed at trying to get the regulations repealed and/or modified to lessen the burden on small businesses. One can be at the President-Elect’s site www.change.org. If you’re opposed to the legislation, I’d suggest also writing to your Congressmen and women to let them know how you feel about the law and asking them to protect you and other small businesses.

Good luck and let me know if you have any questions. I’m happy to help if I can.

I'm going to run a contest on my site....That's ok, right?

To answer that question, I'm going to give you the most lawyerly answer I know… It depends.

Before you start screaming at me, understand that there are a lot of factors that affect whether or not you'll have legal hurdles to clear before you run your game. In order to understand them, you'll need to have both a clear idea of the game that you're planning to run and the law surrounding contest law.

I think that many people believe that you can just run a contest for whatever prizes you want, whenever you want, with no knowledge that failure to run a promotion properly can be, in a worst case scenario, a crime (granted, a misdemeanor, but a crime nonetheless).

All sweepstakes (or games of chance) are governed by both federal and state statutes prohibiting illegal lotteries. Lotteries are generally prohibited except when run by the government. A lottery is defined as a promotion that contains three elements: (1) Prize; (2) Chance; and (3) Consideration.

So, how do you avoid the problem. Well, you have to eliminate one of the elements. Let's assume that no one's going to eliminate the prize (because who's going to enter a promotion with no prize?), so you need eliminate one of the other two elements. Games of skill (which would eliminate the chance element) are possible, but they tend to be difficult to get as many entrants. Examples of games of skill include things like essay contests or spelling bees (some states even require that the judge making the selection is one that is specialized in the field).

There are many different tests and factors for determining whether a game is a game of chance or game of skill, but suffice it to say that most games will fall under the game of chance umbrella. If you're looking to give away a prize for an entry on your website, you're definitely running a game of chance.

So, your last option is to eliminate consideration (aka the entry fee). I can see your mind going right now. You're thinking, "Well, ok. I wasn't going to charge any money for entry anyway. Done!" Back the truck up, buddy.

The definition of consideration is very broad. It has been held that consideration was given where people had to fill out a complicated form or send a self addressed stamped envelope to enter a contest.

How can you eliminate the consideration element then? Well, the easiest way is to ask only for the barest information that you need in order to award prizes (i.e., name and email address). If you're planning on using the information you gain for marketing purposes, I would strongly recommend that you give registrants the option to opt in to receive information from you and to make sure that it is clear that the opt in is not necessary in order to enter or to win the prizes.

If you're doing a promotion through the mail, you will also have to offer an alternative method of entry that is free for the entrant, but I assume that this crowd is thinking mostly of online contests.

Piece of cake, right? Well, not exactly. There's a couple of other things that you have to worry about.

First, if your combined prize value totals $500 or more, you may have some registrations to do. Rhode Island requires registration for promotions that have prizes totaling over $500; Florida and New York require registration and bonding for promotions with prizes totaling over $5,000. These registrations and bonding can be quite expensive. I would advise avoiding these prize limits if at all possible.

Second, you need to make sure that you have contest rules that protect you from liability and comply with all applicable laws. A sampling of the items (but certainly not all of them) that should be in your contest rules include:

- Odds of winning;
- Methods of entry;
- Number of entries per household or per person;
- Eligibility requirements (cannot be open to persons under the age of 18, residency, etc.);
- Description of prizes;
- Duration of the contest; and
- Void where prohibited clause.

I hope that this answers some of your questions about online contests and helps you to keep yourself out of illegal lottery territory with your next contest...