Regulation Aids the Large & Established

I have written many times about how regulation tends to help the large and well established competitors against smaller companies and potential future market entrants.  Larger companies have the size to pay compliance costs and the political muscle to sway regulation in their direction and co-opt regulatory bodies.  The tobacco settlement, ostensibly aimed at "big tobacco" has done nothing but cement the market leadership of the top brands.  This is why you see some large companies jumping on board cap and trade or health care reform -- for example, Waxman-Markey contains rules that give a particular advantage to certain GE lighting technologies on which it holds patents.

The CPSIA is another such law, and Overlawyered has been all over the story.  Here is what a craft fabricator of handmade dolls (even say your grandma selling at a craft fair) will have to comply with:

"¦Each batch needs a unique identifying number.

However, if in the course of making the products, you have to break into a separate box of buttons that has a separate batch or lot number itself, even if the product is otherwise identical, this is a separate batch and you need a separate new label for it with its own batch number that you assign. "¦ It is conceivable [if you incorporate variations into the product] every item you produce is its own batch and each needs its own number and label. "¦

You will need to do "batch control". You need to create a separate BOM [Bill of Materials] for each batch. You can keep this electronically in a database or spreadsheet. It is my understanding you need to keep these records for three years.

Though it was originally Mattel's problem with lead from China in toys that caused the CPSIA to get passed (Congress always has to "do something" when a story makes the news) do you think it is Mattel or grandma who will be driven out of the business?  In the future, when leftish hippies wail that there are no small manufacturer crafts or locally grown food at their weekend fair, you will know why.

Much more coverage on CPSIA here.


  1. Bob Smith:

    It seems to me that laws this intrusive encourage lying. The BOM is just going to say "Button, Blue" without identifying the batch or lot number (if any) from the button's manufacturer.

    At heart, a serial number and a batch number are the same thing. The latter reduces to the former under degenerate conditions.

    The real problem is that a batch number anywhere on (for example) a handmade doll is rather tacky.

  2. Sarah Natividad:

    Tacky? Try impractical. These batch numbers have to be on everything, down to the little toys you get in a vending machine. Can you imagine putting a tracking label with batch number on a child's post earring? We're hoping CPSC will put some common sense guidance out there (e.g. allowing for tracking labels to be on packaging for tiny items) or even stay enforcement like they did with some of the other provisions of CPSIA. But the August 14 deadline is fast approaching, so at this point it's a choice between complying the way you see fit and hoping it's good enough, or going out of business.

  3. tomw:

    But, it is for the Children!! You know, those hundreds of thousands of children in the local ER's with their lead poisoning!!! Oh, wait. There aren't hundreds of thousands with Pb poisoning.

    Can't they do a little cost-benefit analysis? For heavens sake. Mattel should have been doing quality control, but didn't. So, the rest of the industry, and a whole slew of home-made toy makers must now comply with this abomination.

    I guess Congress is proof of the statement that stupidity is still not illegal...


  4. Fred Z:

    Seeing this post just after your July 4 post where you wrote of the 'Rule of law' depressed me. The Rule of law is dead in the west, destroyed in part by crap laws like this, in part by the sheer volume of the laws, in part by the shocking immorality and dishonesty of many, probably most, lawyers.

    Anyway on your main point, I once watched it happen. At one time I was a lawyer and a real estate developer. As a developer I tried and failed to initiate a chain of small wilderness hotels on the German 'Gasthaus' model in one of our local wilderness areas. I realized I did not have the time, energy or money to risk in persuading the regulators to approve.

    As a lawyer I watched one of our firm clients succeed. Just so your readers know it's a beautiful mix of legal bribery and pressure.

    'Conferences', 'Educational' sessions, 'Seminars' and 'Consultations' all held at resorts, golf courses or the best eateries in town, with 'souvenirs' such as free sets of golf clubs, entire wardrobes, lashings of caviar and champagne, all paid for by the developer with the regulators in gleeful, greedy attendance.

    The pressure comes from politicians and people of influence who call the regulators and exert the pressure. Why? Because they too have received the legal bribes and pressure or expect a return favor from the developer or are re-paying an already given favor.

    The laws being thwarted were stupid, the regulators were political appointees without an ounce of honesty or brains amongst them and thwarting the laws was a positive good. The resort was approved and built and has been successful.

    But a smaller footprint development, which the rules were supposedly designed to promote, had no chance.

  5. cmmjaime:

    Good points. As a citizen and small businesswoman who tries to abide by the laws of our Country, and agrees that the Rule of Law is supposed to mean something, all this drama with CPSIA is just disheartening.

    It is incredible to me that Congress can pass these kinds of laws, make these types of messes, and then refuse to fix them! If it has done nothing else, it has turned me into a much more serious Citizen Activist!

  6. Craig:

    I saw a story today about how Walmart is signing on with Obamacare in order to squash Target. Walmart reasons that it already provides health care for employees, so if the government makes Target do it too, it will give Walmart an advantage.

  7. Ian Random:

    Wait, I thought liberals hate stuff that would be sold by large retailers. Yet these large manufacturers are the only ones that can comply with the new laws. And to lower the cost of compliance they need to make everything in China to pay for the testing. So I'm confused.

  8. Joseph Hertzlinger:

    Future leftists will cite this as a reason big business cannot be trusted ... which will then be used as an argument for further regulations of big business.