It hard to see how the Consumer Product Safety Commission’s actions against entrepreneur Craig Zucker amount to anything less than an abuse of power by the government and a possible personal vendetta by the head of the agency. Zucker faces a fine of up to $57 million from the CPSC for having sold a magnetic novelty toy, “Buckyballs,” that the federal agency deemed unsafe.
The agency's conclusion was based on 22 cases between 2009 and 2011— about one out of every 100,000 sets sold — in which somebody swallowed one or more of the magnets.
That can be dangerous – if multiple magnets are swallowed, they can tear holes in your intestines. But the toys were marketed to adults, not children, and had copious warnings not to ingest them. Besides, does anyone really need to be told not to swallow a magnet?
Zucker’s company, Maxfield & Oberton Holdings, LLC, tried to work with the CPSC on creating a stronger safety warning or some other remedy, to no avail. CPSC got six major retailers to pull the product in 2012 and the company went out of business.
The entrepreneur went down swinging, though, publicizing his story to any media outlet that would listen. He even circulated a poster of CPSC Chairman Inez Tenenbaum that portrayed her as a TV psychic (spoofing the CPSC’s product harm predictions).
In an ill-advised move, however, the poster included Tenenbaum’s office number and urged people to call her to get “your free psychic reading.” In February 2013, the CPSC took the unprecedented step of adding Zucker as a defendant to its complaint, making him personally liable for the cost of recalling Buckyballs, which it estimated at $57 million.
There’s no direct evidence that the move was in reaction to Zucker’s mockery of Tenenbaum, but the timing makes it highly suspicious. How else to explain the fact that Zucker is the first executive CPSC has personally held responsible? This runs contrary to the whole point of business incorporation, which is supposed to provide liability protection to entrepreneurs. Without that protection, why would anybody go into a business risker than a Five and Dime?
CPSC is acting under an obscure 1975 Supreme Court precedent that corporate officers can be held liable for their company’s criminal activity. But even CPSC concedes nothing criminal happened regarding Buckyballs.
“What you have here at a minimum is a shocking example of regulatory overreach and abuse of statutory power. At its most sinister, this is an example of government power being used to punish people who object to it,” said Reed Rubinstein, a lawyer at the free market group Cause of Action, which is representing Zucker in a suit filed last week against the CPSC.
Zucker says his net worth comes nowhere close to $57 million. So he’ll likely be ruined if he loses the case. Folks who believe in free enterprise, or who just want to see economic confidence and growth return, should be rooting for him.