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We need to call for test cost regulation and oversight
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Maura Townsend
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PostPosted: Tue Jan 20, 2009 2:57 pm    Post subject: We need to call for test cost regulation and oversight Reply with quote

I'm putting this here, because, honestly, I've seen it addressed nowhere else.

Why is there NO regulation of the lab test costs? The accredited labs are able, currently, to charge whatever they please for the required tests. Misinformation is rampant. Even the CPSC seems to think that the lead tests are 5 dollars per test, while estimates show wildly varying costs.

A provision for sliding scales based on size of run/size of company/profit margin/SOMETHING needs to be made, somehow.

There needs to be some kind of oversight for fee structure in the accreditation procedure for labs, and provision to have that accreditation yanked if they practice cost-gouging.
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J C Sprowls



Joined: 25 Mar 2006
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PostPosted: Tue Jan 20, 2009 3:53 pm    Post subject: Reply with quote

Hang on a second.

How is it that a free-market economy has failed to serve you as a consumer or businessperson?

Every business knows that their pricing needs to remain competitive in order to stay in business. That said, the fear that testing labs might engage in price gouging is not completely irrational. But, it hasn't happened, yet. So, there is no problem, yet.

Labs - as in their processes, procedures and equipment calibration - are regulated by local enforcement agencies. That does not necessarily mean there aren't going to be fringe companies that will crop up in an attempt to garner revenue without appropriate governance. But, you - the manufacturer - will be accountable for using certified labs in order to obtain your test results. If you fail to ask for the lab's certificate, you are remiss, no-one else.

As far as regulating/dictating that labs provide sliding fee schedules, it is my opinion that this is beyond wrong. No one - not even the government - should ever have authority to dictate what the market will bear. This defeats the purpose of a free-market economy, eliminates competition, an results in a practice of rewarding mediocrity.

Full-time regulation of market costs is a completely different government structure. I've lived under socialism. And, while there were a number of things I liked about it. Some things I did not like. Mostly, price governance increases the barrier for entry for a new business and it also prevents citizens from changing industries or being, otherwise, mobile.

I will concede that some regulation is reasonable. An example of what I mean would be price regulation in disaster areas during a state of emergency. When hurricanes are blowing through Florida, a state regulation exists to prevent price gouging when the Governor declares a state of emergency in a particular region. The legislation provides a maximum percent of increase a business can charge for emergency/necessary products, like: gasoline, water, etc. This legislation is only in effect when an emergency state is declared.

While CPSIA might have disastrous results on businesses that cannot afford the cost of entry, it is not an emergency or act of divinity that cannot be managed. The business impact is that one must regroup, ensure adequate capitalization, and re-launch.
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Alison Cummins
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PostPosted: Tue Jan 20, 2009 4:22 pm    Post subject: Cost Regulation Reply with quote

There are various scenarios where governments set prices: for instance, in Canada we have the CRTC that sets limits on what telephone monopolies can charge for service. (Note that in a competitive situation — where several different telephone companies offer the same service to the same customers — there is no regulation.) This has been felt to be necessary and reasonable for several reasons, including the fact that basic telephone service is an essential service. It doesn’t all go against the Telco’s favour, either. A monopoly Telco is required to provide telephone service even to remote areas, if at all feasible. In exchange, the Telco is protected against competitors who might undercut them by cherry-picking urban customers who are cheap to service. In one sense this denies choice to the urban customer who doesn’t have a cheap alternative, but in another sense ensures a broad choice of people to talk to because very few people are excluded from phone service by cost.

A testing lab is different from a Telco in several respects. For one thing, it doesn’t require billions of dollars of infrastructure to start a new one. There are no monopolies because access to the market is relatively easy.

If DEs were to benefit from government-set prices, there would probably be tradeoffs:
- Government would turn around and set limits on the prices of DE products: since DEs benefit from government restriction of prices, they should be required to pass these cost savings on to the consumer, right? It’s a hassle to put together a business case to ask a government arbitrator to set a price for you. I rather doubt DEs want to have to go through this exercise for each product that requires testing, on *top* of having to test the product.
- Testing labs might be offered monopolies in exchange for accepting government-set prices. While in the example of Telcos consumers might see benefits to protecting monopolies, I don’t see an obvious case to make for protecting monopolies of testing labs.

In the long run, because it’s fairly easy to become a testing lab, more testing labs will enter the market. Competition will drive the prices down. In the short run, high prices are what will attract the competitors to enter the market.

Right now there aren’t enough testing labs. Even if the government sets prices, in the short term there will still be a shortage of labs. And in the long term, the shortage would be likely to persist under government-set prices because low prices will mean that competitors will be less attracted to enter the market.

Note that I’m a socialised-medicine loving Canadian. I live in a province riddled with populist legislation that protects the working class against the depradations of capitalist exploiters. As a landlord, every year I have to ask an arbitrator permission to raise rents. I grouse and whine and complain that the terms are unreasonable (18 years to recover an investment before interest) and point to the deteriorating housing stock all around me that results. But I choose to live here in Québec because overall I think the tradeoffs work; I choose to live in Canada even though I have dual US citizenship because I actually like the way we do things here.

And even poor deluded, brainwashed, nanny-state me thinks that asking government to set test lab prices is asking for more trouble than it’s worth.
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Maura Townsend
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PostPosted: Tue Jan 20, 2009 5:07 pm    Post subject: Reply with quote

I'm not suggesting asking the government to set prices - just suggesting that we put some kind of accountability for price gouging in the accreditation procedure.

I'm trying to make suggestions that might make it possible for micro companies to comply at all. As it stands, very small operations cannot feasibly do so.
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J C Sprowls



Joined: 25 Mar 2006
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PostPosted: Tue Jan 20, 2009 5:59 pm    Post subject: Reply with quote

Quote:
As it stands, very small operations cannot feasibly do so.

Suggestions are good. And, we should talk these through. In terms of being a business, your suggestion underscores the fact that a lot of companies are under-funded and cannot maintain their position in the market.

That's a business problem. Either the owners rushed too quickly to market and skipped a lot of protocols - including safety - or they are extracting too much wealth from the company. In any event, it's a manageable business problem that has solutions.

Whatever the results of CPSIA compliance happens to be, it's a cost of entering the market. For the most part, we are combining forces to ask for clarification of the requirements and to suggest more meaningful (and, cost-effective) ways of achieving the goal.
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Alison Cummins
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PostPosted: Tue Jan 20, 2009 6:53 pm    Post subject: Reply with quote

Maura,

Most of the people on this forum, like you, support safety standards and agree that manufacturers need to take some form of responsibility for ensuring their products are safe.

The problem is, as you have noted, that Congress drafted this particular piece of legislation in such a way that small runs — whether dictated by small overall production by a micro-manufacturer or lean production practices of a small to medium manufacturer — become prohibitively expensive.

Most manufacturers will be able to conduct a “reasonable testing program” until August 10th, but the requirements of the legislation are such that whatever testing labs do, producing small runs of goods that will be compliant after August 10th will simply cost too much. The problem isn’t evil money-grubbing labs. It’s the legislation.

Back to the question of relief: In practical terms, any relief for small producers is more likely to take the form of a tax break than price controls.
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Eric H
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PostPosted: Tue Jan 20, 2009 7:16 pm    Post subject: Reply with quote

Maura Townsend wrote:
I'm not suggesting asking the government to set prices - just suggesting that we put some kind of accountability for price gouging in the accreditation procedure.


Can you define "gouging" in some objective, non-arbitrary way?

Your analysis on the blog showed a considerable amount of diligence, but this sounds like venting and "I don't care if we have to throw out the baby with the bathwater, as long as *I* get what *I* want." I don't think anyone could effectively define "reasonable price", nor do I think they could enforce it (especially if we're talking about the same bunch that passed CPSIA). And I think that what we would get is the same thing that happened when Telcos and electric utilities asked to be regulated (that's a not well known bit of history): they end up controlling the regulatory bodies (it's well known enough to get its own name: "regulatory capture").

Seems to me that when demand is suddenly and dramatically increased, a price rise is the natural outcome. It not only forces economizing on the scarce resource, but signals potential competitors to enter that market. As you may have read or experienced, wait times have gone up dramatically, too, and as Kathleen is preparing to show, the timing issues may be more devastating than the cost issues.
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Maura Townsend
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PostPosted: Tue Jan 20, 2009 8:08 pm    Post subject: Reply with quote

Quote:
Can you define "gouging" in some objective, non-arbitrary way?


The range seems to be differences of hundreds of dollars per test. For the same type of test. If some labs can do it for a low price, why? What is different? Why are some CPSC accredited labs able to provide testing for lower prices and some are charging more than double other labs?

I'm only suggesting that as a part of the CPSC lab selection/certification criteria, that there should be some kind of monitoring (if not any sort of regulation) of going test rates. If even the regulatory body in question has no idea what the typical costs are for the required tests, there's something wrong there.

It's currently akin to a school district making uniforms mandatory and some of the local uniform suppliers charging hundreds of dollars per uniform, while telling the district that they are actually giving discounts.
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J C Sprowls



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PostPosted: Tue Jan 20, 2009 8:37 pm    Post subject: Reply with quote

Quote:
It's currently akin to a school district making uniforms mandatory and some of the local uniform suppliers charging hundreds of dollars per uniform, while telling the district that they are actually giving discounts.

This only goes on until a competitor enters the market and makes their presence known.
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Maura Townsend
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PostPosted: Tue Jan 20, 2009 8:39 pm    Post subject: Reply with quote

Quote:
Your analysis on the blog showed a considerable amount of diligence, but this sounds like venting and "I don't care if we have to throw out the baby with the bathwater, as long as *I* get what *I* want."


Far from it. I will simply not make children's products for any children but my own, until such time as component testing can be amended into the law. It saddens me to do so, but as I'm a one-woman show, I'll just have to suck it up and shelve any plans I had* to make kids products. I might be able to sell patterns for my designs. If that's not going to work, I'll just give them away. I've done that before with my design work.

I'm really just a little worried that there wasn't any clear communication regarding the test costs, and that there is little or not mention of that in most places I've been following the issue. In a discussion -here?- I read elsewhere, someone quoted a person at the CPSC claiming that usable test costs from a certain lab were as low as five dollars, and when the cited lab was called, the cost was more in line with quotes seen elsewhere (between 50 and 95 dollars per surface lead test).

*my business, as such, does not even exist yet. It's planned to be a one-woman "boutique" type internet craft business, planned to be a mix of some apparel, some accessories, some collectible-type items, some kids things ... I had planned to make some soft sewn toys and some cloth diapering items, and was trying to budget for use testing for those when this hit the fan.

I'm lucky - since I'm still in the prototype/planning stage, I can change the focus of my business plan. Maybe I'm luckier than I think - I won't have to try to get funds together to use test kids items if I'm not making them, will I?
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J C Sprowls



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PostPosted: Tue Jan 20, 2009 9:35 pm    Post subject: Reply with quote

One person commented (Textile Savvy?) that adult wearing apparel will require flammability testing. I haven't had time to validate that, yet. I need to, though.
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Maura Townsend
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PostPosted: Tue Jan 20, 2009 9:56 pm    Post subject: Reply with quote

It looks like adult apparel will not require third party flammability testing at this time. It still requires a GCC, though.
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Alison Cummins
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PostPosted: Wed Jan 21, 2009 5:32 am    Post subject: Reply with quote

I like the way Maura is taking hold of the other end of the stick.

Would we love CPSIA if third-party testing were very cheap?
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PostPosted: Wed Jan 21, 2009 8:02 am    Post subject: Reply with quote

Alison Cummins wrote:
I like the way Maura is taking hold of the other end of the stick.

Would we love CPSIA if third-party testing were very cheap?


We need affordable testing AND a reasonable turn around time. If those two things happen then I might try harder to embrace CPSIA.
I'm certainly not loving it very much right now :}
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Kathleen F.
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PostPosted: Wed Jan 21, 2009 8:37 am    Post subject: Reply with quote

Alison Cummins wrote:
Would we love CPSIA if third-party testing were very cheap?

We all know we wouldn't love CPSIA anyway and I think lashing out at various parties (China, "big companies", large vs small, handmade vs "commercial") etc is splintering the effort when we should be focusing on the problem of cpsia itself. Because people are angry, they're lashing out at anyone or anything they can -including me- to reduced effect.

Summary: Testing costs are onerous. We can't do anything about it. We will be more effective focusing on targeting CPSIA rather than China, "big businesses", testing costs -or me.


Last edited by Kathleen F. on Thu Jan 22, 2009 9:04 am; edited 1 time in total
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