Tuesday, September 1, 2009

Why I hate government regulation

The Consumer Product Safety Improvement Act (CPSIA) was a law enacted in the wake of some tainted toy scandals and requires testing of toys for lead and other harmful chemicals.

The law was written so broadly that items like clothing and books would also have to be tested, not just toys for infants, who are most likely to put them in their mouths. This wide net of testing requirements has been a cause of particular concern among second-hand sellers and those that shop at such venues regularly.

Well who would be for such a regulation you ask. Surely not a toymaker, right? Wrong.

So while most small toymakers had no idea this law was coming down the pike until it was too late, Mattel spent $1 million lobbying for a little provision to be included in the CPSIA permitting companies to test their own toys in "firewalled" labs that have won Consumer Product Safety Commission approval.

The million bucks was well spent, as Mattel gained approval late last week to test its own toys in the sites listed above—just as the window for delayed enforcement closed.

Instead of winding up hurting, Mattel now has a cost advantage on mandatory testing, and a handy new government-sponsored barrier to entry for its competitors.

This is the definition of Regulatory Capture. It is the ability of the rich and connected to carve out advantages to themselves within a complex regulatory regime by manipulating a corrupt political system.

I like interstate highways, the Marine Corps, and non-tainted beef, but this kind of thing will never stop as long as we continue to implement unnecessarily complicated regulatory schemes.

An environment where the interests of The State align with those of The Corporation is the least conducive to freedom this side of Stalin's Russia.

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