Mattel and the Summer of Toy Recalls

The story

Mattel, the company behind Barbie, Hot Wheels and Fisher-Price, is one of the biggest toy makers in the world. Like most toy companies, it had many of its toys built by contract factories in China. That arrangement keeps costs low, but it also means the company does not control every step, every worker and every can of paint.

On August 2, 2007, the U.S. Consumer Product Safety Commission (CPSC), the government agency that watches over product safety, announced that Fisher-Price was recalling about 967,000 toys, including Sesame Street and Dora the Explorer figures. A recall means the company asks customers to stop using a product and return it. The problem was that surface paint on the toys could contain too much lead. Lead is poisonous, especially for young children who put toys in their mouths, and lead paint on toys had been banned in the United States since 1978. No injuries were reported. The toys had been made by a Chinese factory called Lee Der Industrial.

Two weeks later, on August 14, Mattel announced two more recalls. One was about 436,000 die-cast "Sarge" cars from the Cars movie line, again for lead paint. Mattel explained that a subcontractor that painted parts of the toy had used paint from an unapproved supplier instead of the paint it was supposed to use. The second recall was much larger: about 18.2 million toys worldwide, such as some Polly Pocket sets, that contained small, powerful magnets that could fall out. If a child swallows more than one magnet, they can stick together inside the body and cause serious harm. On September 4 came yet another lead-paint recall, about 675,000 Barbie accessory sets in the United States.

Mattel's chief executive, Robert Eckert, apologized publicly, saying the company was "deeply apologetic to everyone affected." Mattel announced tighter rules: only paint from certified suppliers, testing of every batch of paint, more surprise inspections at factories, and testing of every production run of finished toys before shipment.

Then the story took a turn. On September 21, 2007, a Mattel executive, Thomas Debrowski, met China's product safety chief and apologized to China. He acknowledged that the "vast majority" of the recalled toys were recalled because of a design flaw by Mattel itself, the magnet problem, not because of mistakes by Chinese factories. In other words, the lead paint came from the supply chain, but most recalled toys traced back to Mattel's own design.

The government also had the final word on the lead paint. In June 2009, Mattel and Fisher-Price agreed to pay a $2.3 million civil penalty, the largest the CPSC had ever imposed for that kind of violation. The agency said the two companies had brought in up to about 2 million toys that broke the lead-paint ban between 2006 and 2007. As is common in such settlements, the companies did not admit wrongdoing and denied knowingly breaking the law.

For families, the lesson is simple: a famous name on the box is only as good as the checking behind it. For business owners, it is a reminder that when you sell something with your name on it, customers hold you responsible for every part of it, no matter who actually made it.