Ross Stores, Inc. et al., Provisional Acceptance of a Settlement Agreement and Order, 38298-38302 [2013-15258]

Agencies

• Consumer Product Safety Commission

[Federal Register Volume 78, Number 123 (Wednesday, June 26, 2013)]
[Notices]
[Pages 38298-38302]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15258]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 13-C0006]


Ross Stores, Inc. et al., 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 16 CFR 1118.20(e). 
Published below is a provisionally-accepted Settlement Agreement with 
Ross Stores, Inc. et al., containing a civil penalty of $3,900,000.00, 
within twenty (20) 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 July 11, 2013.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to the Comment 13-C0006, Office of the 
Secretary, Consumer Product Safety Commission, 4330 East West Highway, 
Room 820, Bethesda, Maryland 20814-4408.

FOR FURTHER INFORMATION CONTACT: Mary B. Murphy, Assistant General 
Counsel, Office of the General Counsel, Consumer Product Safety 
Commission,

[[Page 38299]]

4330 East West Highway, Bethesda, Maryland 20814-4408; telephone (301) 
504-7809.

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

    Dated: June 21, 2013.
Todd A. Stevenson,
Secretary.

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of CPSC Docket No. 13-C0006,
Ross Stores, Inc., et al.

SETTLEMENT AGREEMENT

    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, Ross Stores, 
Inc., Ross Procurement, Inc., Ross Merchandising, Inc., and Ross Dress 
for Less (Ross), and the U.S. Consumer Product Safety Commission 
(Commission), through its staff (Staff), hereby enter into this 
Settlement Agreement (Agreement). The Agreement and the incorporated 
attached Order (Order) resolve staff's charges set forth below.

PARTIES

    The Commission is an independent federal regulatory agency, 
established pursuant to, and responsible for, the enforcement of the 
Consumer Product Safety Act, (CPSA), 15 U.S.C. Sec. Sec.  2051-2089. By 
executing this 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.
    Ross is a corporation, organized and existing under the laws of 
Delaware, with its principal place of business at 4440 Rosewood Drive, 
Pleasanton, CA 94588.

STAFF CHARGES

    On multiple occasions, and during various periods from January 2009 
to February 2012, Ross sold and/or held for sale, 12 series of various 
styles, models, and quantities of children's upper outerwear products 
with drawstrings at the neck and/or waist, for a total of approximately 
23,000 garments, including, but not limited to, the following: 
Children's Apparel Network, Ltd. (Children's Apparel) Young Hearts 
hooded sweater; Byer California (Byer) Girls cargo pocket jacket with 
neck and waist drawstring; Puma North America Inc. (Puma) USA V-Kon 
training jacket with waist drawstrings; LA Fashion Hub, Inc., jacket 
with neck drawstring; LA Fashion jacket with neck drawstrings; Umbro 
International, Ltd., jacket with waist drawstrings; Hot Chocolate 
Athletic set jacket with waist drawstrings; Bonded Apparel hooded 
fleece jacket with neck drawstrings; Me Jane/Louise Paris Ltd., fur 
hood fleece with waist drawstring; MeJane Louise Paris, Ltd., fur hood 
bubble jacket with waist drawstrings; LANY Group LLC terry hooded 
sweatshirt with neck drawstring; and YMI Jeanswear hooded sweatshirt 
with neck drawstrings. The products identified in this paragraph are 
collectively referred to as ``Garments.''
    Ross sold the Garments to consumers, and/or held the Garments for 
sale with the intent to ultimately sell to consumers.
    The Garments are ``consumer product[s],'' and at all relevant 
times, Ross was a ``retailer'' of those consumer products, which were 
``distributed in commerce,'' as those terms are defined in CPSA 
sections 3(a)(5), (8), and (13), 15 U.S.C. Sec.  2052(a)(5), (8), and 
(13).
    In February 1996, staff issued the Guidelines for Drawstrings on 
Children's Upper Outerwear (Guidelines) to help prevent children from 
strangling or entangling on neck and waist drawstrings. The Guidelines 
state that drawstrings can cause, and have caused, injuries and deaths 
when they catch on items, such as playground equipment, bus doors, or 
cribs. In the Guidelines, staff recommends that no children's upper 
outerwear in sizes 2T to 12 be manufactured or sold to consumers with 
hood and neck drawstrings.
    In June 1997, ASTM adopted a voluntary standard (ASTM F1816-97) 
incorporating the Guidelines. The Guidelines state that firms should be 
aware of the hazards associated with drawstrings and should ensure that 
garments they sell conform to the voluntary standard.
    On May 19, 2006, the Commission posted on its Web site a letter 
from the Commission's Director of the Office of Compliance to 
manufacturers, importers, and retailers of children's upper outerwear. 
The letter urges them to make certain that all children's upper 
outerwear sold in the United States complies with ASTM F1816-97. The 
letter also states that staff considers children's upper outerwear with 
drawstrings at the hood or neck area to be defective and to present a 
substantial risk of injury to young children under Federal Hazardous 
Substances Act (FHSA), section 15(c), 15 U.S.C. Sec.  1274(c). The 
letter also references the CPSA's section 15(b) (15 U.S.C. Sec.  
2064(b)) reporting requirements.
    In September 2009, Ross paid a civil penalty in the amount of 
$500,000 to settle staff charges that the Firm failed to report four 
children's upper outerwear products that it distributed in commerce 
during various periods in 2006, 2007, and 2008. Throughout the course 
of that civil penalty matter, Ross received repeated reminders about 
the drawstring hazards and applicable law.
    On July 19, 2011, the Commission published in the Federal Register 
a Final Rule that designates the hazards presented by drawstrings in 
children's upper outerwear as substantial product hazards. The Final 
Rule, which became effective on August 18, 2011, provides that 
``[c]hildren's upper outerwear in sizes 2T to 16 or the equivalent, and 
having one or more drawstrings, that is subject to, but not in 
conformance with, the requirements of'' the ASTM Standard, shall be 
deemed to be a substantial product hazard under CPSA section 15(a)(2). 
16 C.F.R. Sec.  1120.3(b)(1).
    Staff provided Ross with multiple direct notifications of the 
hazards associated with drawstrings on children's upper outerwear.
    Ross's distribution in commerce of the Garments did not comply with 
the 1996 staff Guidelines, ASTM F1816-97, staff's May 2006 defect 
notice, or the Final Rule, and posed strangulation hazards to children.
    Ross's distribution of two series of the Garments (Children's 
Apparel and Byer) occurred in part, during the same period of time as 
the investigation and negotiation of Ross's 2009 civil penalty matter. 
Ross's distribution of four of the remaining 10 series of violations 
occurred partially after the effective date of the Final Rule; the 
other six series were distributed entirely after the effective date of 
the Final Rule.
    Ross has informed the Commission that there have been no reported 
incidents or injuries associated with the Garments.
    The Commission, in cooperation with Ross and/or other firms that 
manufactured, imported, or distributed the Garments announced recalls 
of the Garments.
    Based in part on information available through the sources set 
forth in paragraphs 7 through 11, Ross had presumed and actual 
knowledge that the Garments distributed in commerce posed strangulation 
hazards and presented substantial risks of injury to children under 
FHSA section 15(c)(1), 15 U.S.C. Sec.  1274(c)(1). Ross obtained 
information that reasonably supported the conclusion that the Garments 
contained defects that could create substantial product hazards or that 
the Garments created unreasonable risks of

[[Page 38300]]

serious injury or death. Pursuant to CPSA sections 15(b)(3) and (4), 15 
U.S.C. Sec.  2064(b)(3) and (4), Ross was required to inform the 
Commission immediately of these defects and risks.
    Ross knowingly and repeatedly failed to immediately inform the 
Commission about the Garments, as required by CPSA sections 15(b)(3) 
and (4), 15 U.S.C. Sec.  2064(b)(3) and (4), and as the term 
``knowingly'' is defined in CPSA section 20(d), 15 U.S.C. Sec.  
2069(d). These knowing failures violated CPSA section 19(a)(4), 15 
U.S.C. Sec.  2068(a)(4). Pursuant to CPSA section 20, 15 U.S.C. Sec.  
2069, these knowing failures subjected Ross to civil penalties.

ROSS'S RESPONSE

    Ross denies Staff's charges above, including but not limited to any 
claim that Ross failed to timely report to the Commission the sale or 
distribution of any children's upper outwear products with drawstrings 
pursuant to Sec.  15(b) of the CPSA.
    Ross enters into this Agreement to settle this matter without the 
expense of litigation. Ross enters into this Agreement and agrees to 
pay the amount referenced below in compromise of staff's charges. 
Ross's entering into this Agreement is not an admission of liability of 
any kind, whether legal or factual.
    Ross does not manufacture the products it offers for sale in its 
stores. It purchases a wide variety of products, including children's 
apparel, from thousands of vendors and other suppliers. Ross 
distribution centers and warehouses processed approximately 57 million 
units of children's apparel in 2011, and approximately 1.4 million of 
those units were children's outerwear. Consistent with practice in the 
retail industry, Ross contractually requires its vendors to supply 
products that comply with all federal, state, and local laws, 
regulations, and standards, and relies on its suppliers to provide 
compliant products. Notwithstanding this reliance, Ross has implemented 
policies and practices to preclude such garments being purchased by 
Ross, held in inventory, or sold in interstate commerce. Since the 
Commission first issued the Guidelines in 1996, Ross's children's 
apparel purchasing policy has prohibited Ross's apparel buyers from 
purchasing children's upper outerwear with drawstrings. Prior to 2009, 
Ross's management had procedures in place that it reasonably believed 
prevented Ross's purchase of children's upper outwear products with 
drawstrings.
    Ross first learned that it had sold the Children's Apparel and Byer 
Garments upon receiving notice of the fact that they were being 
recalled by the vendors in March and April 2010. Prior to that time, 
Ross's compliance and safety personnel and children's apparel buyers 
had no knowledge, whether actual or constructive, that the Garments 
actually supplied by Children's Apparel and Byer contained drawstrings. 
Ross did not file a report pursuant to Sec.  15(b) of the CPSA because 
it believed that the Commission was adequately informed of the alleged 
defect, due to the Commission's involvement in the recall of these 
Garments.
    Subsequent to the Children's Apparel and Byer recalls, and in 
response to staff's investigation regarding those Garments, Ross 
undertook an extensive, and voluntary, manual audit of all children's 
upper outerwear in all of its stores and distribution centers in the 
fall and winter of 2011, to determine whether it had unintentionally 
purchased other products subject to the Final Rule. This voluntary 
audit required Ross's personnel in all of its approximately 1,125 
stores, as well as its warehouses, to visually inspect all items of 
children's apparel then in inventory, to determine whether certain 
items failed to comply. The audit identified 10 of the 12 series of 
Garments, accounting for more than 19,000 of the approximately 23,000 
Garments, which Ross reported to the CPSC.
    Prior to the audit, Ross's product compliance and safety personnel 
and children's apparel buyers had no knowledge, whether actual or 
constructive, that the Garments discovered in the audit actually 
supplied by Ross's suppliers contained drawstrings. Ross promptly 
notified the Commission pursuant to Sec.  15(b) of the CPSA upon 
discovering as a result of the audit that it had purchased and sold 
many of the Garments, as well as a number of other children's upper 
outerwear products that appeared to contain drawstrings, but which 
Staff determined were not subject to the Guidelines.
    Upon learning in 2009 that, despite the procedures it had in place, 
the Children's Apparel and Byer Garments had been discovered in Ross's 
stores, Ross began developing new compliance measures to augment its 
existing policies, including a product recall inventory and sales 
tracking system, the creation of a dedicated product safety personnel 
position to address product safety compliance, training, and policy 
issues, increased training of personnel who order children's apparel 
for sale in Ross's stores and process children's apparel in its 
distribution centers, an enhanced distribution center review process, 
in which children's outerwear is audited for compliance with the Final 
Rule prior to distribution to stores, and a point-of-sale register lock 
system that prohibits the sale of recalled products. These compliance 
measures were implemented and refined through 2012 and will continue to 
be evaluated and modified, as appropriate.
    Ross is unaware of any incidents or injuries associated with the 
Garments.

AGREEMENT OF THE PARTIES

    Under the CPSA, the Commission has jurisdiction over the matter 
involving the Garments and over Ross.
    The parties enter into the Agreement for settlement purposes only. 
The Agreement does not constitute an admission by Ross, or a 
determination by the Commission, that Ross knowingly violated the CPSA.
    In settlement of staff's charges, and to avoid the cost, 
distraction, delay, uncertainty, and inconvenience of protracted 
litigation or other proceedings, Ross shall pay a civil penalty in the 
amount of three million nine hundred thousand dollars ($3,900,000.00). 
The civil penalty shall be paid within twenty (20) calendar days of 
service of the Commission's final Order accepting the Agreement. The 
payment shall be made by electronic wire transfer via www.pay.gov.
    Following staff's receipt of this Agreement executed on behalf of 
Ross, 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 within 
fifteen (15) calendar days the Commission does not receive any written 
request not to accept the Agreement, the Agreement shall be deemed 
finally accepted on the sixteenth (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).
    This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and 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 Ross; and (ii) the date of issuance of the 
final Order, this Agreement shall be in full force and effect and shall 
be binding upon the parties.

[[Page 38301]]

    Effective upon the later of: (i) the Commission's final acceptance 
of the Agreement and service of the accepted Agreement upon Ross; and 
(ii) the date of issuance of the final Order, for good and valuable 
consideration, Ross 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: (1) an 
administrative or judicial hearing; (2) judicial review or other 
challenge or contest of the validity of the Order or of the 
Commission's actions; (3) a determination by the Commission of whether 
Ross failed to comply with the CPSA and its underlying regulations; (4) 
a statement of findings of fact and conclusions of law; and (5) any 
claims under the Equal Access to Justice Act.
    Ross represents and agrees that it has implemented and will 
maintain a compliance program designed to assure compliance with the 
Final Rule and CPSA Sec.  15(b). In addition to the program components 
set out in paragraph 25 of this Agreement, Ross represents that the 
ongoing compliance program contains (i) written standards and policies; 
(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) 
appropriate communication of company compliance-related policies and 
procedures regarding the Final Rule and CPSA Sec.  15(b) to all 
applicable employees through training programs, or otherwise; (iv) 
management oversight of compliance and appropriate personnel 
responsibility for implementing compliance; and (v) a policy to retain 
all compliance-related records for at least five (5) years and 
availability of such records to Commission staff, upon reasonable 
request.
    Ross represents and agrees that it has designed and implemented 
internal controls and procedures that are designed to assure that (i) 
all reporting made to the Commission is timely, truthful, complete, 
accurate and in accordance with applicable law; and (ii) prompt 
disclosure is made to Ross's management of any significant deficiencies 
or material weaknesses in the design or operation of such internal 
controls that are reasonably likely to adversely affect in any material 
respect Ross's ability to record, process and report to the Commission 
in accordance with applicable law.
    Upon reasonable request of staff, Ross shall provide written 
documentation of its procedures, including, but not limited to, the 
effective dates of its procedures and improvements thereto, and shall 
cooperate fully and truthfully with staff and shall, upon reasonable 
notice, make available all non-privileged information and materials, 
and personnel with direct involvement in such procedures, if reasonably 
requested by staff in relation to an investigation of noncompliance by 
Ross with the Final Rule and/or CPSA Sec.  15(b).
    The parties acknowledge and agree that the Commission may publicize 
the terms of the Agreement and the Order in a press release or other 
public notice (including but not limited to social media, such as 
Twitter and Facebook), the content of which shall substantially conform 
to the terms of this Settlement Agreement and any CPSC press releases 
previously issued in connection with the recalls of the Garments.
    Ross represents that the Agreement: (i) is freely and voluntarily 
entered into, without any degree of duress or compulsions whatsoever; 
(ii) has been duly authorized, and (iii) constitutes the valid and 
binding obligation of Ross, enforceable against Ross in accordance with 
its terms. The individuals signing the Agreement on behalf of Ross 
represent and warrant that they are duly authorized by Ross, including 
Ross Stores, Inc., Ross Procurement, Inc., Ross Merchandising, Inc., 
and Ross Dress for Less, to execute the Agreement.
    The Commission signatories represent that they are signing the 
Agreement in their official capacities and that they are authorized to 
execute this Agreement.
    The Agreement is governed by the laws of the United States.
    The Agreement and the Order shall apply to, and be binding upon, 
Ross and each of its officers, agents, servants, employees, and 
attorneys; successors, transferees, and assigns, and a violation of the 
Agreement or Order may subject Ross, and each of its officers, agents, 
servants, employees, and attorneys; successors, transferees, and 
assigns to appropriate legal action.
    The Agreement and 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.
    The Agreement shall 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.
    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 the 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 Ross agree in writing that severing the provision materially 
affects the purpose of the Agreement and the Order.

Ross Stores, Inc.

Dated: 6/7/13
By:--------------------------------------------------------------------
Michael O'Sullivan
President and Chief Operating Officer
Ross Stores, Inc.

Dated: 6/10/13
By:--------------------------------------------------------------------
Jeffrey B. Margulies, Esq.
William L. Troutman, Esq.
Fulbright & Jaworski L.L.P.
555 South Flower Street, 41st Floor
Los Angeles, CA 90071
Counsel--Ross Stores, Inc.
U.S. CONSUMER PRODUCT SAFETY COMMISSION STAFF
Stephanie Tsacoumis
General Counsel

Dated: 6/12/13
By:--------------------------------------------------------------------
Mary B. Murphy
Assistant General Counsel
Office of the General Counsel

UNITED STATES OF AMERICA CONSUMER PRODUCT SAFETY COMMISSION

In the Matter of
Ross Stores, Inc., et al.)
CPSC Docket No. 13-C0006

ORDER

    Upon consideration of the Settlement Agreement entered into among 
Ross Stores, Inc., Ross Procurement, Inc., Ross Merchandising, Inc. and 
Ross Dress for Less (Ross), and the U.S. Consumer Product Safety 
Commission (Commission), and the Commission having jurisdiction over 
the subject matter and over Ross, and it appearing that the Settlement 
Agreement and the Order are in the public interest, it is:
    ORDERED, that the Settlement Agreement be, and hereby is, accepted; 
and it is
    FURTHER ORDERED, that Ross shall comply with the terms of the 
Settlement Agreement and shall pay a civil penalty in the amount of 
three million nine

[[Page 38302]]

hundred thousand dollars ($3,900,000.00) within twenty (20) calendar 
days of service of the Commission's final Order accepting the 
Agreement. The payment shall be made by electronic wire transfer to the 
Commission via: www.pay.gov. Upon the failure of Ross to make the 
foregoing payment when due, interest on the unpaid amount shall accrue 
and be paid by Ross at the federal legal rate of interest set forth at 
28 U.S.C. Sec.  1961(a) and (b). If Ross fails to make such payment, or 
to comply in full with any other provision as set forth in the 
Settlement Agreement, such conduct will be considered a violation of 
the Settlement Agreement and Order.

    Provisionally accepted and provisional Order issued on the 21st day 
of June, 2013.

    BY ORDER OF THE COMMISSION:

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Todd A. Stevenson, Secretary
U.S. Consumer Product Safety Commission.
[FR Doc. 2013-15258 Filed 6-25-13; 8:45 am]
BILLING CODE 6355-01-P