Will the Lead Toy Industry Get Bailed Out?

Who cares about moral hazard anymore! AEI, Cato, where are you when we need you?

It goes something like this: A group of companies that chose to put lead in children’s toys, or to offshore their operations to countries with poor manufacturing controls in order to save money, are now upset that their schemes are going to cost them money. The government has the audacity to do something about this crisis, and guess what, it costs the industry money! Maybe they should have incorporated the costs of lead when they decided to offshore!

Joseph Pereira of the Journal reports:

Makers of children’s products and charities that run second-hand shops are stuck with more than $1 billion of inventory they can’t sell because of a new federal product-safety law, according to surveys by trade groups and the charities.

They’re stuck with this inventory because of a new federal product safety law? What a way to shift the blame! If the industry as a whole maintained quality controls, we wouldn’t be in a toxic toy crisis, and then the federal safety law would not have been passed. Consumer protection laws do not just pass out of the blue; they are motivated by serious, overwhelmingly problematic situations. Trust me on this, there are 100 lobbyists against any consumer protection matter for each advocate in favor of it. They only pass when agencies and Congress have no option but to side with the single advocate.

The Toy Industry Association estimates that more than $600 million in toys made illegal by the law are sitting in manufacturers’ warehouses or have already been shipped to retailers. A trade group for small apparel makers in New York called the Coalition for Safe and Affordable Childrenswear says its members have a $500 million problem. And the California Fashion Association, which represents many Western clothes makers, puts their troubled inventories at $200 million.

The trade groups were reluctant to disclose the names of the companies affected or provide documentation in support of their estimates.

Yep. Sounds like they’ll be next in line for a bailout.


  1. Well, it’s complicated. Some of the complaints you mention are coming from places like the salvation army, or second-hand thrift shops. They are in trouble not because they offshored their manufacturing, or lack of quality control. They are (worried about, possibly unjustifiably) being screwed because they bought items from consumers that now can’t be sold back to other consumers.

    I have also heard rumors and grumbling that this law seems almost designed to especially hurt small-scale industry to the benefit of large-scale industry. The scenario I have heard (again — I know little about this law, just pointing out some worries I have heard from various places) is this: A woman has a small home sewing business making children’s clothes. She uses a few dozen varieties each of cloth, trim, thread, buttons, etc., each in dozens of different colors. i.e. many hundreds of materials. The law says she has to have each one tested. Doesn’t matter that she buys the materials from a big-name company, and does nothing but sew them together. Doesn’t matter that every other small company using the same materials has to do the same testing. The fact that she she uses many materials for a handful of low-margin low-volume items means she can’t possibly afford to have them tested. Meanwhile, the cost of testing for the big-scale manufacturer using the same materials, from the same suppliers, negligible because of the high volume.

  2. “I have also heard rumors and grumbling that this law seems almost designed to especially hurt small-scale industry to the benefit of large-scale industry.”

    Of course, its about anything but child safety. NOT.

    Sorry, not a snark at Kevin but at the industry. The thing about large-scale is that they’re perfectly happy to use small-scale as an example of suffering, when the suffering is a result of their own lobbying.

  3. Except in this case it really is the small US producers being screwed in this not the big companies who manufacture in China. Mattel can afford to do the testing, or not and take the fines (though I doubt they would do that) however a small producer even those working with certified organic materials have to do the testing and have certification which is incredibly expensive.

    A toy safety crisis? Where the hell did your skepticism go? Have you seen the data on how many kids get lead poisoning and from where? Most are still getting it from lead paint in houses a miniscule amount are getting poisoned from a few cheaply manufactured products from China. I’m not saying it’s not a problem when kids get lead poisoning but the problem is cheap imported toys not library books (yes libraries have had to decide whether to follow the law or not and pull all children’s books printed prior to 1985), school lab equipment, clothing, ANY toys produced in the US, Canada, or EU, and yet all of this is covered by CPSIA. This law is also retroactive which is why thrift stores are screwed, nothing that’s been donated has been tested so all of it isn’t supposed to be sold regardless of it’s actual lead content. To make it all worse the CPSC who is supposed to be enforcing this law doesn’t seem to know what they’re doing and giving conflicting information to businesses if they are able to answer the questions at all.

    I’m not saying that the people who wrote and voted for this law didn’t have good intentions, they just massively overreached and overreacted sweeping up all children’s products into this instead of going after where the problem is.

  4. llewelly

    mmm … chewy lead toys … mmm

  5. George

    Can’t the government do something like buy out the inventory of small companies that have the tainted toys and then dispose of them in an appropriate manner? I mean they’re already bailing out fraudsters and crooked bankers, i’m sure they can spend taxpayers money for something good.

    Or maybe provide some sort of financial incentive to those companies that show they will suffer a certain percentage of loss due to the bill. After all it is for the safety of children and they can’t argue with that.. at least I hope they can’t 😛

  6. V J Webb

    This new law requires testing of all products for children under 12. That includes things like leather shoes, used Teddy Bears, clothing, handmade items, etc. If you have an 11 year old child chewing on his leather shoes you have a bigger problem than potential lead poisoning. As usual, the government cobbled together a bill without considering the consequences. Several large U.S. toy makers were responsible for the problem not the Chinese. Mattel tried to blame it on the Chinese and then had to apologize and admit it was poor quality control on their part in their own factories. According to the AMA, lead levels in children is down to the lowest it has been in history. You get lead poisoning by ingesting lead. As usual, the big guy causes the problem and the little guy gets punished.

    Children die everyday in automobile accidents, yet I don’t see a law preventing them from riding in cars. I agree that lead testing is a good idea. However, it should only apply forward not backward and only to items that have the potential of containing lead. If a parent is concerned that a stuffed toy or book they just purchased contains lead they can purchase a lead testing kit. Other parents can just teach their children to not chew on books and bears and shoes. We grew up with lead in everything and we were taught that books were for reading not for eating. However, that was back in the day when parents actually parented and didn’t expect the government to do it for them.

    To say that the lawmakers were good intentioned is no excuse. They were just looking for a quick fix to satisfy all the voters complaining that the government should do something. And, everyone else signed off on it because they didn’t want to look like they didn’t care about the children. Well they did and now you will be paying twice as much for a toy that was lead tested when it didn’t even have the potential of containing lead. And all those bears that the police carry to give to kids in emergency situations to comfort them will have to go into the landfill which is already full. Until we get over the idea that the government is supposed to fix everything, we will continue to have these kind of ridiculous regulations. If anyone really wanted to punish the toy makers that were responsible all they had to do was quit buying their products.

  7. Physicalist

    OT, but this Onion story’s a must read for this blog:
    “San Francisco Historians Condemn 1906 Earthquake Deniers.”

  8. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.



  9. I live up in Vancouver, WA, a few minutes outside of Portland, OR. There’s a huge indie-type scene up there that my parents are actively involved in– they make plush toys (http://dollsforfriends.com/).

    They and a number of their friends in the community have been worried sick over this law. It’s common discussion in our household.

    Anyhow… yeah.

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