Peloton Interactive, Inc., 1193-1196 [2023-00146]

Agencies

• Consumer Product Safety Commission

[Federal Register Volume 88, Number 5 (Monday, January 9, 2023)]
[Notices]
[Pages 1193-1196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00146]


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CONSUMER PRODUCT SAFETY COMMISSION

[CPSC Docket No. 23-C0001]


Peloton Interactive, Inc.

AGENCY: Consumer Product Safety Commission.

ACTION: Notice.

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SUMMARY: The Commission publishes in the Federal Register any 
settlement that it provisionally accepts under the Consumer Product 
Safety Act. Published below is a provisionally accepted Settlement 
Agreement with Peloton Interactive, Inc. containing a civil penalty in 
the amount of $19,065,000, subject to the terms and conditions of the 
Settlement Agreement. The Commission voted unanimously (4-0) to 
provisionally accept the proposed Settlement Agreement and Order 
pertaining to Peloton Interactive, Inc.

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 January 24, 2023.

ADDRESSES: Persons wishing to comment on this Settlement Agreement 
should send written comments to Comment 23-C0001, Office of the 
Secretary, Consumer Product Safety Commission, 4330 East West Highway, 
Bethesda, MD 20814; telephone: (240) 863-8938 (mobile), (301) 504-7479 
(office); email: [email protected].

FOR FURTHER INFORMATION CONTACT: Michael J. Rogal, Trial Attorney, 
Division of Enforcement and Litigation, Office of Compliance and Field 
Operations, Consumer Product Safety Commission, 4330 East West Highway, 
Bethesda, Maryland 20814-4408; [email protected], 301-504-7528 (office).

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

    Dated: January 4, 2023.
Alberta E. Mills,
Secretary.

United States of America Consumer Product Safety Commission

    In the Matter of: PELOTON INTERACTIVE, INC.

CPSC Docket No.: 23-C0001

Settlement Agreement

    1. In accordance with the Consumer Product Safety Act, 15 U.S.C. 
2051-2089 (``CPSA''), and 16 CFR 1118.20, Peloton Interactive, Inc. 
(``Peloton''), and the United States Consumer Product Safety Commission 
(``Commission''), through its staff, hereby enter into this Settlement 
Agreement (``Agreement''). The Agreement and the incorporated attached 
Order resolve staff's charges set forth below.

The Parties

    2. The Commission is an independent federal regulatory agency, 
established pursuant to, and responsible for, the enforcement of the 
CPSA, 15 U.S.C. 2051-2089. By executing the Agreement, staff is acting 
on behalf of the Commission, pursuant to 16 CFR 1118.20(b). The 
Commission issues the Order under the provisions of the CPSA.
    3. Peloton is a corporation, organized and existing under the laws 
of the state of Delaware, with its principal place of business in New 
York, New York.

Staff Charges

    4. Between September 2018 and April 2021, Peloton imported to the 
United States, distributed and offered for sale approximately 125,000 
Peloton Tread+ treadmills (Model No. TR01) (``Tread+ treadmills'' or 
``Subject Products'').
    5. The Subject Products are ``consumer products'' that were 
``import[ed]'' and ``distribut[ed] in commerce,'' as those terms are 
defined or used in sections 3(a)(5), (7), and (9) of the CPSA, 15 
U.S.C. 2052(a)(5), (7), and (9). Peloton is a ``distributor'' of the 
Subject Products, as such term is defined in section 3(a)(8) of the 
CPSA, 15 U.S.C. 2052(a)(8).

Violation of CPSA Section 19(a)(4)

    6. The Tread+ treadmills contain a defect which could create a 
substantial product hazard or create an unreasonable risk of serious 
injury or death because adult users, children, pets and objects can be 
pulled under the rear of the treadmill, posing an entrapment hazard.
    7. Beginning in December 2018 and continuing into 2019, Peloton 
received reports of incidents associated with pull

[[Page 1194]]

under and entrapment in the rear of the Subject Products, including 
reports of injuries.
    8. During that time the Firm also began the process of relocating a 
warning label to the rear of the treadmill where the entrapment 
incidents were occurring, and evaluated the feasibility of a design 
change to add a rear guard to prevent entrapments.
    9. Despite possessing information that reasonably supported the 
conclusion that the Subject Products contained a defect that could 
create a substantial product hazard or created an unreasonable risk of 
serious injury or death, Peloton did not immediately report to the 
Commission.
    10. On March 3, 2021, Peloton received notice that a six-year-old 
child had died after being entrapped under the rear of the Tread+ 
treadmill.
    11. On March 4, 2021, Peloton filed a report with the Commission 
under 15 U.S.C. 2064(b) concerning the Tread+ treadmills. By that time, 
there were more than 150 reports of persons, pets and/or objects being 
pulled under the rear of the Tread+ treadmill, including the death of a 
child and 13 injuries, including broken bones, lacerations, abrasions 
and friction burns.
    12. Because Peloton's report failed to provide certain consumer 
contact information, the Commission was forced to issue a subpoena for 
this information.
    13. On April 17, 2021, prior to the Firm's agreement to conduct a 
voluntary recall, the Commission issued a unilateral Health and Safety 
Notice warning consumers to stop using the Tread+.
    14. The Commission and Peloton jointly announced the recall of the 
Tread+ treadmill on May 5, 2021.

Failure to Timely Report

    15. Despite having information reasonably supporting the conclusion 
that the Subject Products contained a defect or created an unreasonable 
risk of serious injury or death, Peloton did not notify the Commission 
immediately of such defect or risk, as required by sections 15(b)(3) 
and (4) of the CPSA, 15 U.S.C. 2064(b)(3), (4), in violation of section 
19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4).
    16. Because the information in Peloton's possession about the 
Subject Products constituted actual and presumed knowledge, Peloton 
knowingly violated section 19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4), 
as the term ``knowingly'' is defined in section 20(d) of the CPSA, 15 
U.S.C. 2069(d).
    17. Pursuant to section 20 of the CPSA, 15 U.S.C. 2069, Peloton is 
subject to civil penalties for its knowing violation of section 
19(a)(4) of the CPSA, 15 U.S.C. 2068(a)(4).

Violation of CPSA Section 19(a)(2)

    18. Between May 5, 2021, after Peloton received notice that the 
voluntary corrective action was approved by the Commission, through 
August 2021, Peloton knowingly distributed into commerce 38 Tread+ 
treadmills (``Recalled Products'') that were subject to the recall by 
Peloton personnel and through third-party delivery firms to consumers.
    19. The Recalled Products were subject to voluntary corrective 
action taken by Peloton in consultation with the Commission. Peloton 
knew of the voluntary corrective action taken for the Recalled 
Products.
    20. The Recalled Products are ``consumer products,'' that were 
``import[ed]'' and ``distribut[ed] in commerce,'' as those terms are 
defined or used in sections 3(a)(5), (7), and (9) of the CPSA, 15 
U.S.C. 2052(a)(5), (7), and (9). Peloton is a ``distributor'' of the 
Subject Products, as such terms are defined in section 3(a)(8) of the 
CPSA, 15 U.S.C. 2052(a)(8).
    21. Under CPSA section 19(a)(2)(B), 15 U.S.C. 2068(a)(2)(B), it is 
unlawful for any person to sell, offer for sale, manufacture for sale, 
distribute in commerce, or import into the United States, any consumer 
product that is subject to a voluntary corrective action taken by the 
manufacturer, in consultation with the Commission, of which the 
Commission has notified the public, or if the seller, distributor, or 
manufacturer knew, or should have known, of such voluntary corrective 
action.
    22. Pursuant to section 20(a)(1) of the CPSA, 15 U.S.C. 2069(a)(1), 
any person who ``knowingly'' violates CPSA section 19 is subject to 
civil penalties. Under section 20(d) of the CPSA, 15 U.S.C. 2069(d), 
the term ``knowingly'' means: ``(1) the having of actual knowledge, or 
(2) the presumed having of knowledge deemed to be possessed by a 
reasonable man who acts in the circumstances, including knowledge 
obtainable upon the exercise of due care to ascertain the truth of 
representations.''

Response of Peloton

    23. This agreement does not constitute an admission by Peloton to 
the staff's charges as set forth in paragraphs 4 through 22 above, 
including without limitation that the Subject Product contained a 
defect that could create a substantial product hazard or created an 
unreasonable risk of serious injury or death; that Peloton failed to 
notify the Commission in a timely matter in accordance with section 
15(b) of the CPSA, 15 U.S.C. 2064(b); that Peloton distributed any 
Recalled Products in violation of section 19(a)(2)(B) of the CPSA; and 
that Peloton knowingly violated section 19(a)(4) of the CPSA, 15 U.S.C. 
2068(a)(4), or section 19(a)(2)(B) of the CPSA, 15 U.S.C. 
2068(a)(2)(B), as the term ``knowingly'' is defined in section 20(d) of 
the CPSA, 15 U.S.C. 2069(d).
    24. Peloton enters into this Agreement to settle this matter and to 
avoid the cost, distraction, delay, uncertainty, and inconvenience of 
protracted litigation or other proceedings. Peloton does not admit that 
it violated the CPSA or any other law, and Peloton's willingness to 
enter into this Agreement and Order does not constitute, nor is it 
evidence of, an admission by Peloton of liability or violation of any 
law.
    25. At all relevant times, Peloton had a product safety compliance 
program, which among other things, prohibited the distribution of 
recalled products. Peloton requested its third-party distribution 
partners pause deliveries prior to the recall announcement. Peloton 
notified the Commission in connection with the Subject Products on 
March 4, 2021 and voluntarily notified the Commission of the post-
recall distribution of Tread+ units that Peloton identified through an 
internal review.

Agreement of the Parties

    26. Under the CPSA, the Commission has jurisdiction over the matter 
involving the Subject Products and over Peloton.
    27. The parties enter into the Agreement for settlement purposes 
only. The Agreement does not constitute an admission by Peloton or a 
determination by the Commission that Peloton violated the CPSA.
    28. In settlement of staff's charges, Peloton shall pay a civil 
penalty in the amount of nineteen million, sixty-five thousand dollars 
($19,065,000) (``Total Civil Penalty Amount''). This includes a civil 
penalty of $16,025,000 for the CPSA section 19(a)(4) timeliness 
violation and a $3,040,000 civil penalty for the CPSA section 19(a)(2) 
distribution of recalled goods violation. The $19,065,000 Payment shall 
be paid within thirty (30) calendar days after receiving service of the 
Commission's final Order accepting the Agreement. All payments to be 
made under the Agreement shall constitute debts owing to the United 
States and shall be made by electronic wire transfer to the United 
States via https://www.pay.gov, for allocation to, and credit against, 
the payment obligations of Peloton under this Agreement. Failure to 
make such

[[Page 1195]]

payment by the date specified in the Commission's final Order shall 
constitute Default.
    29. The Commission or the United States may seek enforcement for 
any breach of, or any failure to comply with, any provision of this 
Agreement and Order in United States District Court, to seek relief 
including, but not limited to, collecting amounts due.
    30. All unpaid amounts, if any, due and owing under the Agreement, 
shall constitute a debt due and immediately owing by Peloton to the 
United States, and interest shall accrue and be paid by Peloton at the 
federal legal rate of interest set forth at 28 U.S.C. 1961(a) and (b) 
from the date of Default, until all amounts due have been paid in full 
(hereinafter ``Default Payment Amount'' and ``Default Interest 
Balance''). Peloton shall consent to a Consent Judgment in the amount 
of the Default Payment Amount and Default Interest Balance, and the 
United States, at its sole option, may collect the entire Default 
Payment Amount and Default Interest Balance, or exercise any other 
rights granted by law or in equity, including, but not limited to, 
referring such matters for private collection, and Peloton agrees not 
to contest, and hereby waives and discharges any defenses to, any 
collection action undertaken by the United States, or its agents or 
contractors, pursuant to this paragraph. Peloton shall pay the United 
States all reasonable costs of collection and enforcement under this 
paragraph, respectively, including reasonable attorney's fees and 
expenses.
    31. After staff receives this Agreement executed on behalf of 
Peloton, 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 CFR 1118.20(e). If the Commission 
does not receive any written request not to accept the Agreement within 
fifteen (15) calendar days, the Agreement shall be deemed finally 
accepted on the 16th calendar day after the date the Agreement is 
published in the Federal Register, in accordance with 16 CFR 
1118.20(f).
    32. This Agreement is conditioned upon, and subject to, the 
Commission's final acceptance, as set forth above, and it is subject to 
the provisions of 16 CFR 1118.20(h). Upon the later of: (i) 
Commission's final acceptance of this Agreement and service of the 
accepted Agreement upon Peloton, 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.
    33. Effective upon the later of: (1) the Commission's final 
acceptance of the Agreement and service of the accepted Agreement upon 
Peloton and (2) and the date of issuance of the final Order, for good 
and valuable consideration, Peloton 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:
    (i) an administrative or judicial hearing;
    (ii) judicial review or other challenge or contest of the 
Commission's actions;
    (iii) a determination by the Commission of whether Peloton failed 
to comply with the CPSA and the underlying regulations;
    (iv) a statement of findings of fact and conclusions of law; and
    (v) any claims under the Equal Access to Justice Act.
    34. Peloton shall maintain an enhanced compliance program designed 
to ensure compliance with the CPSA with respect to any consumer product 
imported, manufactured, distributed or sold by Peloton, which shall 
contain the following elements:
    (i) written standards, policies and procedures, including those 
designed to ensure that information that may relate to or impact CPSA 
compliance is conveyed effectively to personnel responsible for CPSA 
compliance, whether or not an injury has been reported;
    (ii) procedures for reviewing claims and reports for safety 
concerns and for implementing corrective and preventive actions when 
compliance deficiencies or violations are identified;
    (iii) procedures requiring that information required to be 
disclosed by Peloton to the Commission is recorded, processed, and 
reported in accordance with applicable law;
    (iv) procedures requiring that all reporting made to the Commission 
is timely, truthful, complete, accurate, and in accordance with 
applicable law;
    (v) procedures requiring that prompt disclosure is made to 
Peloton's management of any significant deficiencies or material 
weaknesses in the design or operation of such internal controls that 
are reasonably likely to affect adversely, in any material respect, 
Peloton's ability to record, process and report to the Commission in 
accordance with applicable law;
    (vi) procedures for the prompt identification, quarantine and 
disposition of recalled goods; including, but not limited to:
    i. implementation and maintenance of stock keeping unit (SKU) 
blocks at points of sale, reinforced informational technology (IT) 
coverage for SKU blocks, and maintenance of SKU blocks of recalled 
products without a time limit;
    ii. a product master database that consolidates all Peloton 
products;
    iii. dissemination to stores and third-party delivery firms recall-
related communications and a catalog of recalled product information; 
and
    iv. labeling and quarantine of recalled products prior to 
disposition.
    (vii) mechanisms to effectively communicate to all applicable 
Peloton employees, through training programs or other means, 
compliance-related company policies and procedures to prevent 
violations of the CPSA;
    (viii) 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;
    (ix) Peloton's senior management responsibility for, and general 
board oversight of, CPSA compliance; and
    (x) retention of all CPSA compliance-related records for at least 
five (5) years, and availability of such records to CPSC staff upon 
request.
    35. Peloton shall submit a report under CPSA Section 16(b), sworn 
to under penalty of perjury:
    (i) describing in detail its compliance program and internal 
controls and the actions Peloton has taken to comply with each 
subparagraph of paragraph 34;
    (ii) affirming that during the reporting period Peloton has 
reviewed its compliance program and internal controls, including the 
actions referenced in subparagraph (i) of this paragraph, for 
effectiveness, and that it complies with each subparagraph of paragraph 
34, or describing in detail any non-compliance with any such 
subparagraph; and
    (iii) identifying any changes or modifications made during the 
reporting period to Peloton's compliance program or internal controls 
to ensure compliance with the terms of the CPSA and, in particular, the 
requirements of CPSA Section 15 related to timely reporting.
    Such reports shall be submitted annually to the Director, Office of 
Compliance, Division of Enforcement and Litigation, for a period of 
five (5) years beginning 12 months after the Commission's Final Order 
of Acceptance of the Agreement. The first report shall be submitted 30 
days after the close of the first 12-month reporting

[[Page 1196]]

period, and successive reports shall be due annually on the same date 
thereafter. Without limitation, Peloton acknowledges and agrees that 
failure to make such timely and accurate reports as required by this 
Agreement and Order may constitute a violation of Section 19(a)(3) of 
the CPSA and may subject the Firm to enforcement under section 22 of 
the CPSA.
    36. Notwithstanding and in addition to the above, Peloton shall 
promptly provide written documentation of any changes or modifications 
to its compliance program or internal controls and procedures, 
including the effective dates of the changes or modifications thereto. 
Peloton shall cooperate fully and truthfully with staff and shall make 
available all non-privileged information and materials and personnel 
deemed necessary by staff to evaluate Peloton's compliance with the 
terms of the Agreement.
    37. The parties acknowledge and agree that the Commission may 
publicize the terms of the Agreement and the Order.
    38. Peloton represents that the Agreement:
    (i) is entered into freely and voluntarily, without any degree of 
duress or compulsion whatsoever;
    (ii) has been duly authorized; and
    (iii) constitutes the valid and binding obligation of Peloton, 
enforceable against Peloton in accordance with its terms. The 
individuals signing the Agreement on behalf of Peloton represent and 
warrant that they are duly authorized by Peloton to execute the 
Agreement.
    39. The signatories represent that they are authorized to execute 
this Agreement.
    40. The Agreement is governed by the laws of the United States.
    41. The Agreement and the Order shall apply to, and be binding 
upon, Peloton and each of its parents, successors, transferees, and 
assigns; and a violation of the Agreement or Order may subject Peloton, 
and each of its parents, successors, transferees, and assigns, to 
appropriate legal action.
    42. The Agreement, any attachments, and the Order constitute the 
complete agreement between the parties on the subject matter contained 
therein.
    43. 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.
    44. The Agreement may not be waived, amended, modified, or 
otherwise altered, except as in accordance with the provisions of 16 
CFR 1118.20(h). The Agreement may be executed in counterparts.
    45. 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 Peloton agree in writing that severing the provision materially 
affects the purpose of the Agreement and the Order.

(Signatures on next page)

PELOTON INTERACTIVE, INC.
Dated: 12/8/22
By: /s/Barry McCarthy
Barry McCarthy, Peloton Interactive, Inc., CEO & President

Dated: 12/9/2022
By: /s/Erin M. Bosman
Erin M. Bosman, Morrison Foerster LLP, Counsel to Peloton 
Interactive, Inc.

U.S. CONSUMER PRODUCT SAFETY COMMISSION
Mary B. Murphy, Director
Leah Ippolito, Supervisory Attorney
Michael J. Rogal, Trial Attorney

Dated: 12/14/22
By: /s/Michael J. Rogal
Michael J. Rogal, Trial Attorney, Division of Enforcement and 
Litigation, Office of Compliance and Field Operations

United States of America Consumer Product Safety Commission

    In the Matter of: PELOTON INTERACTIVE, INC.

CPSC Docket No.: 23-C0001

Order

    Upon consideration of the Settlement Agreement entered into between 
Peloton Interactive, Inc. (``Peloton''), and the U.S. Consumer Product 
Safety Commission (``Commission'' or ``CPSC''), and the Commission 
having jurisdiction over the subject matter and over Peloton, and it 
appearing that the Settlement Agreement and the Order are in the public 
interest, the Settlement Agreement is incorporated by reference and it 
is:

    Provisionally accepted and provisional Order issued on the 28th 
day of December, 2022.

    By Order of the Commission.

/s/Alberta Mills
Alberta E. Mills,
Secretary, U.S. Consumer Product Safety Commission.

[FR Doc. 2023-00146 Filed 1-6-23; 8:45 am]
BILLING CODE 6355-01-P