Gree Ordered to Pay $15.45 million Civil Penalty for Failure to Report Defective Dehumidifiers

In what is so far the highest penalty for a single offense that the Consumer Product Safety Commission (CPSC) has ever imposed, Gree Electric Appliances Inc. has agreed to pay a $15.45 civil penalty to the government. The CPSC has charged Gree with the following:

• Knowingly failing to report a defect and the reasonable risk of serious injury to CPSC within 24 hours
• Knowingly making false representations to CPSC during an investigation; and
• Selling de-humidifiers bearing the “UL Safety” certification mark while knowing that the dehumidifiers did not meet UL flammability standards

Gree dehumidifiers had a defect that caused the machines to overheat and catch fire. Consumers submitted multiple reports of these types of incidents to the company, and Gree made some design changes in an attempt to fix the problem, but they did not report the product defects to CPSC within 24 hours as required. These incidents began occurring in 2012 and have caused nearly $4.5 million in property damage from the fires started by the dehumidifiers.

In 2013, Gree Electric Appliances announced a recall of about 2.5 million dehumidifiers in the U.S. and about 55,000 in Canada because the machines can overheat, create smoke and catch fire causing fire and burn hazards. In the original recall there were about 119 reported incidents of dehumidifiers catching fire, and by January 2014 there were more than 471 reported incidents. Gree manufactured dehumidifiers that were sold in most major appliance retailers such as AAFES, HH Gregg, Home Depot, Kmart, Lowe’s, Menards, Mills Fleet Farm, Sam’s Club, Sears, Walmart and other stores nationwide and in Canada, and online at Amazon.com and Ebay.com. Consumers were advised to turn the units off immediately, unplug them from the wall and request a refund from Gree.

As part of the settlement agreement, Gree has agreed to implement a program that would ensure that they are in compliance with the Consumer Product Safety Act (CPSA). The compliance program that Gree agreed to requires written procedures that address the following issues:

• Creation of a process for the confidential reporting of compliance concerns to a senior manager
• Effective training and communication of compliance policies
• A senior management team responsible for compliance
• Meeting the requirements for the retention of company records

According to a CPSC statement, Gree did not admit to any of the CPSC staff’s charges.

With this significant penalty, the CPSC was looking to make an example out of this case. CPSC Chairman Elliot Kaye said in a statement, that they wanted to “send a message” with these penalties from Gree:

“I have repeatedly called for much higher civil penalties when the facts line up. In this case, here is what CPSC staff concluded: The Company misled and endangered the public. The company delayed reporting to us and made material misrepresentations during our investigation. And now they will be paying the highest civil penalty possible under law. To remove any doubt as to whether we are sending a message that this kind of conduct will not be tolerated, we absolutely are sending that message. Companies behaving similarly should be prepared to pay similarly.”

Manufacturers have a duty to comply with safety regulations such as the Consumer Product Safety Act in order to provide protections for consumers. When companies fail to comply with safety regulations and their products cause harm to consumers, then those consumers have the recourse of filing a products liability lawsuit against the manufacturer and down the chain of commerce in order to recover compensation for their losses.