The Consumer Product Safety Improvement Act (CPSIA) took effect on February 11th. The Act requires that any new product made primarily for children under the age of 12 undergo third-party lead and phthalate testing by a government-approved testing firm before sale.  Sellers of used products are not required to pay for testing, but they are included in the law’s new rules on lead content and can be prosecuted for selling noncompliant products.

That may sound like a good thing.  Even if it doesn’t turn up any dangerous products- and most of the products that must undergo testing are overwhelmingly unlikely to contain dangerous levels of lead- it may seem harmless. Of course, the firms that do third-party safety testing don’t work for free.

The new costs added to the production of products such as toys, books, and children’s clothes means that some firms that were economically viable no longer are.  This has already produced casualties.

Like many forms of economic regulation, this cost falls disproportionately hard on smaller businesses, many of whom have already eliminated some of their products or scaled back their operations because of the new costs.

For a small firm that might produce only a few thousand or hundred of an item in a production run, or makers of unique handmade items, the testing process for the product is a much higher percentage of the total cost- and takes a proportionately bigger bite out of their revenue.  This can make a product- or a company- that used to be economically viable cease to be so.  Also, some foreign companies are no longer exporting products to the United States.  The result? Less choice for the consumer and less incentive for new entrepreneurs.

Consumers in the lowest socio-economic classes are harmed the most directly. In this case the Act has caused a number of thrift stores to stop selling children’s products in order to avoid the risk of being prosecuted for unwittingly selling something noncompliant.  This also takes away revenue from charity groups such as Goodwill.

Used bookstores are also throwing out children’s inventory rather than play Russian roulette with the legal system.  The Consumer Product Safety commission has announced that books printed prior to 1985 are especially likely to be in violation, causing many stores to throw away or destroy countless books that have been out of print for years and will never be replaced.

Meanwhile large corporations, such as toymaker Mattel, actually stand to benefit from this law.  They have to bear the cost of additional testing, but in return some of their smaller competitors are driven out of the market.  People often talk as if government intervention in the economy is hostile to entrenched wealthy interests, and think of supporters of regulation as champions of the common man.  Nothing could be further from the truth.  Government regulations often destroy small businesses while leaving big ones still standing.    The richest and most powerful businesses get richer, while small entrepreneurs and the consumer are made poorer.

The average supporter of the CPSIA is unlikely to have considered the full effects of the law.  Sadly, unintended consequences are very real and very common.  Just as sadly, these results aren’t necessarily unintended for everyone involved- companies big enough to have influential lobbyists are often quite happy to take advantage of the well-intentioned.

For more on the CPSIA, Overlawyered is a valuable resource (and the source of many of the links above.)  Look into the Bureaucrash Intel  sections Enjoy Capitalism and Stop Rent-Seeking for more on economic freedom and the destructive interplay between politically connected private interests and government power.  For more on the way misguided attempts to do good often go hand-in-hand with government privilege for established business interests, you can listen to this episode of economist Russ Roberts’ “Econtalk” podcast where he talks with economist Bruce Yandle.