After nearly two years of investigation, the U.S. Consumer Product Safety Commission has levied a $500,000 civil penalty on Horizon Fitness and its parent, Johnson Health Tech, for allegedly not reporting a potential hazard in earlier models that caused rapid and unexpected belt acceleration.
"Our job here is to protect the consumer first," Scott Wolfson, spokesman for the Consumer Product Safety Commission (CPSC), told SNEWSÂ®. "If a company knowingly and intentionally withholds safety information from us, we're pulling all our resources into" the investigation.
The announcement of the penalty on Oct. 29 said Johnson, of Taiwan, and Horizon, of DeForest, Wis., received 180 reports of "runaway" treadmill belts and failures in safety stop-key operation between January 2001 and January 2002. Of those, 15 resulted in injuries, including minor sprains, strains and bruises, to a torn rotator cuff and serious friction burns. Despite requirements that companies report the possibility of defects that may cause injury, the CPSC said Johnson and Horizon never reported the incidents, but rather attempted to correct these defects by redesigning the product on three occasions.
"In retrospect, while we didn't report the problem to the CPSC as early as the CPSC believes we should have, we were working proactively to quickly understand and address the problem in the field to the best of our ability," said Jason Lo, Johnson Health Tech CEO, in a prepared statement issued by Horizon.
The penalty stems from a CPSC recall announced on April 23, 2002, but began in January 2002 (see SNEWSÂ® story, April 24, 2002). At that time, SNEWSÂ® was told the recall affected about 5,900 early production models of the 2000/2001 Paragon, Quantum and Omega treadmills. According to last week's information, 10,000 models with the defective electronic console were imported; they had been made by a subcontractor for Johnson between August 2000 and June 2001. The models were sold by sporting goods stores between November 2000 and June 2001 for between $700 and $1,100.
The defective panels caused the motor and walking belt to "rapidly and unexpectedly accelerate." In some cases, the CPSC stated, the belts also failed to stop when the safety key was activated.
"We accept it and we're ready to move on," a Horizon spokesman told SNEWSÂ®, adding that the company has stopped subcontracting work and is now "fully vertically integrated."
Product safety enforcement
Wolfson of the CPSC said civil penalties for violations in reporting standards happen with "some degree of frequency," and can strike everyone from GE to tiny toy manufacturers. It is based on whether the agency determines a manufacturer, distributor or retailer did not work quickly enough to report a possible hazard (within 24 hours) after receiving information that reasonably supports the possibility of a defect -- an obligation laid out by federal laws enforced and administered by the CPSC. Â
"Everybody knows their obligation to report," Wolfson said.
In fact, on Oct. 28, the U.S. Court of Appeals for the Ninth Circuit in Southern California issued a ruling on a case that re-affirmed the obligation for early reporting of possible defects that could create consumer hazards or injury. In that case, Mirama Enterprises had been fined for not reporting hazards in juicers. Although the company did not contest liability, it did challenge the $300,000 civil penalty it received. The appellate court affirmed a ruling by the U.S. District Court, Southern District of California, from early 2004 that upheld a company's duty to report a possible hazard even before any defect is verified and affirmed the $300,000 penalty.
The amount of the penalty is determined among other things by the number of incidents, the size of the company, the number of products involved, the company's ability to pay and the severity of any injuries, Wolfson said.
Other exercise cases
In the exercise equipment industry, the most recent penalty issued by the CPSC was $750,000 against Wal-Mart in April 2003, which resolved a lawsuit from two years earlier that charged the store failed to report multiple safety hazards associated with exercise gliders it sold made by Icon with the brand names, Weslo and Weider (see SNEWSÂ® story, April, 25, 2003; "Wal-Mart pays fine for unreported Icon glider hazards"). In that case, consumers were injured while trying gliders at the store and included fractured vertebrae, herniated discs, and a compression injury to a woman's spine.
Most recently, recalls without penalties included ones by Sportcraft for its Tredex treadmills sold by Dick's in what was called a "voluntary corrective action" in June 2004 for unexpected accelerations where five injuries were reported, by Life Fitness in October 2003 announced after inquiries to the CPSC by SNEWSÂ® for three high-end retail and entry-level commercial treadmills that also unexpectedly accelerated (no injuries reported), and by Cybex also in October 2003 for more than 33,000 treadmills sold mostly in the late '90s that created possible fire hazards due to accumulated dust where no injuries were reported.
CPSC investigation into Horizon
The CPSC said it contacted Horizon in early January 2002 to schedule an inspection of company documents after receiving consumer complaints. Three days later, Horizon made a full report, which the Horizon spokesman said had been in the works for weeks. The CPSC determined the report should have been filed earlier for compliance.
Horizon, which in settling this case said that it denies the treadmills were defective and that the company violated reporting requirements, also said it used its warranty registration database to contact purchasers, posted a notice of the recall on its website, set up a 24-hour consumer hotline to handle consumer inquiries, and worked with its dealers to contact as many consumers as possible. Â
To view this release on CPSC's website, including any pictures, click here.