Washington toy story shows why regulation helps the big guys
By: Timothy P. Carney
Examiner Columnist
January 30, 2009
Thousands of self-employed businessmen, artists, and boutique owners who make or deal in hand-crafted children’s toys, clothes, or furniture could be out of work next month. A 2008 federal law, with the salutary-sounding name “Consumer Products Safety Improvement Act,” could drive these craftsmen out of business.
Big toymakers, who helped write the bill, are ready for the regulations that will go into effect Feb. 10, while smaller toymakers look likely to suffer. It’s another example of how Washington, when it regulates an industry, often helps the biggest businesses in that industry while crushing the smaller guys.
This toy story begins in the summer of 2007 when toy-making goliath Mattel was thrice forced to recall products made in China after discovering dangerous levels of lead. That fall, as Congress took up the bill reauthorizing the Consumer Products Safety Commission, consumer groups pushed for stricter safety standards on toys and other children’s products.
In September 2007, Sen. Mark Pryor, D-Ark., introduced a bill in response to the lead-in-toys scare. The bill became law in August 2008, making it illegal to sell children’s products—toys, furniture, clothes, et cetera—that have not undergone third-party testing for hazardous materials.
The bill also declared that any children’s product was a “banned hazardous substance” if any portion of it had a lead content greater than 600 parts per million. Also all manufacturers of children’s products—big or small—are required by the law to create registries of every product they sell and put unique tracking numbers or marks on each product.
This third-party testing portion of the bill goes into effect Feb. 10, which has small toymakers up in arms. The Handmade Toy Alliance is one of many groups mobilizing to keep the CPSC from destroying artisan toymaking.
Large manufacturers who mass produce toys or children’s furniture will face some added costs from the bill, but these are costs they can bear—especially because the costs will be industry wide thus passed onto consumers.
Indeed, many of the bigger manufacturers have already implemented testing procedures to comply with the federal requirements. Their smaller competitors, however, will suffer under the burden.
A stay-at-home mom who sews children’s dolls on the side or a small woodworker who sells a few child-sized chairs each year will find these regulations much more burdensome if not impossible.
The CPSC staff has proposed a rule that would exempt from the testing requirement products made solely of “unadulterated,” unpainted, unfinished, and untreated wood, “natural fibers,” gemstones, or other “natural materials.” This rule, if approved, will not be finalized for months, while the testing requirement becomes effective in two weeks.
Is this disproportionate impact on the smaller businesses an “unintended consequence,” as many now say? When you look at the lobbying records, it doesn’t look so.
Mattel—whose leaded toys kicked off this whole scare—beefed up its lobbying effort when the legislation appeared. The company’s lobbying budget, which had been steady at $120,000 per year from 2002 through 2006 ballooned to $540,000 in 2007 and $650,000 in 2008—a 442% increase from two years earlier.
In late August 2007, Mattel, the largest toymaker in the world, hired a new lobbying firm, Johnson, Madigan, Peck, Boland & Stewart, to lobby on the bill. One of their lobbyists on this issue was Sheila Murphy, recently the legislative director for Sen. Amy Klobuchar, a Democratic member of the Commerce Committee’s Consumer Affairs subcommittee. Klobuchar became a cosponsor of the bill in late September 2007.
Hasbro, the world’s No. 2 toymaker, had never had a Washington lobbyist, according to federal lobbying filings, before October 2007, when the company hired the Duberstein Group, headed by Ken Dubertstein, the former White House Chief of Staff under Ronald Reagan. Since then, Hasbro has spent $500,000 on lobbying.
But these industry giants weren’t resisting regulation—they were embracing it. Carter Keithley, president of the Toy Industry Association—of whom Mattel is the biggest member—told this columnist “we were early proponents of adopting mandatory laws to require toy testing.”
The regulations give the big toymakers a federal stamp of approval, and they make it harder for upstarts to challenge the big guys—or even survive. Without the regulation, parents might put more trust in a local, independent toymaker they know. After the regulation goes into effect, that toymaker is out of work.
Regulation proponents usually say anti-regulation types are shills for big business. Washington’s toy story makes that claim look even more like make-believe.
Examiner staff columnist Timothy P. Carney is author of “The Big Ripoff: How Big Business and Big Government Steal Your Money.”
