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Tainted Imports, Untainted Reputation

During the summer of 2007, a wave of tainted imported products prompted a

consumer safety scare. The United States Consumer Product and Safety

Commission issued a series of recalls affecting various Mattel toys, such as Batman

figurines and die cast cars, because of high levels of lead in the paint. This followed

a chain of recent revelations of toxic pet food and toothpaste imported from China.

The media followed the story aggressively since the affected consumer products,

such as pet food and toys, affected vulnerable, defenseless children and pets.

Headlines such as “China's toxic toymaker” appeared on the Economist (The

Economist). Mattel was prompted to recall millions of toys at a cost of over $30

million dollars, not counting the lost of projected profits from the damage of the

Mattel brand. The way Mattel handled the product recall is a lesson in how to deal

with the various stakeholders, such as government regulators and consumers, when

a product recall arises and how to maintain and protect the brand’s integrity.

Because Mattel dealt with the problems proactively and fully cooperated with the

regulators, it was able to manage the recall of millions of toys without tarnishing its

brand and image.

Mattel is the world’s biggest toymaker and holds the license to produce some

of the world’s most recognizable and iconic toys, such as Batman action figures and

Barbie dolls and play sets. Mattel, Inc has around 30,000 employees around the

world and had revenues of almost $6,000 million dollars (The New York Times). To

keep production costs low, Mattel’s sources all of its toy productions from China.

Mattel is not the only toymaker to manufacture its toys in China. Most of the

companies in the toy manufacturing industry do it. In fact, China produces more
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than three-quarters of total amount of toys produced in the world. Historically,

Mattel had the leading safety standards and manufacturing procedures in the

industry. Their safety testing and compliance model in China was the standard that

all other manufactures strived for. Mattel’s Asia manufacturing subsidiary, Mattel

Asia Pacific Sourcing (MAPS) had a reputation for strict safety standards and testing.

It had had the right to inspect and audit their vendors anytime and without notice. If

the vendors wanted to source material from other suppliers, such as paint, they

could only choose from a select list of subcontractors that had been certified by

Mattel’s safety inspection team. Each shipment of pigments had to be labeled and

record and were subject to random testing. Prior to the August recalls, Mattel

believed that their safety compliance system was the most rigorous in the industry.

According to Robert A. Eckert’s congressional testimony in front of the Commerce,

Trade, and Consumer Protection subcommittee, Mattel had strict tracking and

auditing measures placed in their supply chain (The House Committee on Energy

and Commerce: Hearing). For example, each container of paint had a tracking

barcode and corresponding testing certification. All shipments to the United States

therefore, had a traceable pedigree of the various suppliers, vendors, and

subcontractors.

In the United States, the Consumer Product Safety Commission is tasked with

conducting toy safety inspections. The CPSC was established as an executive

branch agency by the Consumer Product Safety Act of 1972 and had the authority

to set product safety standards and working with manufactures to issue product

recalls. Unfortunately, the CSPC is underfunded and understaffed to perform even

the most routine of product safety inspections. With only 400 employees, it is

expected to ensure the product safety of over 15,000 consumer items, such as
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toasters, toys, and playpens. And out of the 400 employees, 14 people are assigned

to monitor the quality of imports at the hundreds of ports of entry around the

country (Spencer). The relationship between the CPSC and the manufactures that it

monitors is mostly voluntary. Most of the testing and quality assurance is actually

left to the manufacture to perform. The CPSC does not actually do any safety

testing of products before they go on sale. They only perform tests on products that

receive complaints from customers.

On July 20th, 12 days after Mattel’s initial detection of lead paint, they

voluntarily alerted the CPSC to the situation and volunteered to issue a recall (The

Wall Street Journal). Initially, Mattel only issued a recall for suspected shipments

from Lee Der Industries, where the batch of tainted toys was traced back to. Then it

was discovered that another vendor also used lead contaminated paint. Mattel

subsequently froze all shipments of toys from MAPS vendors until each batch could

be sampled for contaminants. In addition, Mattel filed a report with CPSC to call for

fast rack recalls of a few toys such as Barbie accessory sets, Geo Trax vehicles, and

Fisher-Price 6-in-1 Big World Bongos Band sets (Story, Mattel Recalls 19 Million Toys

Sent From China).

Mattel says they and the CSPC worked closely to try to resolve the situation.

For example, CPSC required Mattel to staff their call centers with extra operators in

order to respond to the public and Mattel complied. Mattel designed a section of

their website with CPSC approved material in order to educate the public about the

recall. Thus, by working so closely with the CPSC, a Federal agency, they were

allying themselves with the regulatory stakeholders (CASEY). Mattel pointed out

that they followed every single procedure set forth by the CPSC and complied fully

and voluntarily. The result was that during the congressional hearing entitled
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“Protecting Children from Lead-Tainted Imports”, the congressmen placed some of

the blame on the CPSC as well (The House Committee on Energy and Commerce:

Hearing). In addition, a series of articles highlighting the inadequacies of the CPSC

took some of the media spotlight off of Mattel. For example, a New York Times front

page article had a picture of the CPSC safety testing lab. The only visible testing

implements were two pieces of paper taped to the wall indicating the height of the

drop.

Mattel also believed that they took further actions, exceeding CPSC

guidelines. Mattel spent millions of dollars on advertisements in major newspapers,

TV, and radio outlets in order to educate consumers about the recall. In addition,

the Chief Executive of Mattel Robert Eckert issued a video apology to parents of the

children that Mattel targets its products to. "I can't change what has happened in

the past, but I can change how we work in the future,” Mr. Eckert said in the video

apology, demonstrating Mattel’s commitment and seriousness to the issue (CASEY).

Recalled toys could be easily mailed back to Mattel using a prepaid mailer in

exchange for a voucher worth the full retail price plus tax. All in all, Mattel lost more

than $30 million dollars and faces increased costs as additional safety measures are

put in place.

It may seem like Mattel is truly apologetic and wants to change their way of

business to avoid this kind of problem in the future, but there are ulterior motives.

In some ways, Mattel shifted some of the blame for the recall onto the woefully

inadequate government agency. It was the CSPC’s fault for letting so many shoddy

consumer products slip by. Then, after Mattel discovered the lead tainted

shipments, they suddenly joined forces with the CSPC to issue the recall. They

leveraged some of the authority and credibility of the CSPC to make the recalls
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seem urgent, official, and sanctioned by the government. The truth is that the recall

was completely voluntary. In fact, Mattel could have just paid the 1.8 million

maximum fine and get away with it. It is up to the manufacture to take the initiative

and spread the word about recalls. Mattel’s efforts were mostly done to minimize

the damage to consumer’s trust and confidence in the Mattel brand (Silverstein).

The monetary value of lost faith in the company versus the $30 million cost of a

recall is an easy decision. If the consumers lose faith in Mattel products, Mattel

would lose significant revenue and would face a difficult future. Consumers like the

fact that Mattel is taking prompt and far reaching actions to reach out to them

regarding the recall. Consumers value action and results. With millions of toys off of

store shelves, Mattel’s CEO promise of stricter safety, and the blessings of the

CSPC, consumers are going to be lenient and still buy from Mattel (Story, After

Stumbling, Mattel Cracks Down in China).

Because Mattel aggressively spread word about the recall and the dangers of

lead tainted toys, there are likely to recover from this safety scare. Even the CEO

personally issued a video apology to the parents of the children affected by the

toys. “Mattel’s brand reputation should survive,” says Harvard Business School

professor John Quelch (CASEY). When a crisis arises, a company should spare no

expense, taking prompt action and working with federal regulators. It’s a small price

to pay to prevent consumer backlash and to preserve the company’s future.

Word count: 1460

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Works Cited
"August 2007 Recalls and Product Safety News." US Consumer Product Safety
Commission. 5 March 2008
<http://www.cpsc.gov/cpscpub/prerel/prerelaug07.html>.

CASEY, NICHOLAS. "Mattel Does Damage Control After New Recall." 15 August 2007.
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etplace>.

Silverstein, Barry. "A Brand's Worst Nightmare." 10 Sept 2007. Brandhome.com. 24

March 2008 <http://www.brandchannel.com/features_effect.asp?pf_id=385>.

Spencer, Jane. "Toy Recall Shows Challenge China Poses to Partners." 3 August
2007. The Wall Street Journal. 5 March 2008
<http://online.wsj.com/article/SB118607762324386327.html>.

Story, Louise. "After Stumbling, Mattel Cracks Down in China." 29 August 2007. The
New York Times. 5 March 2008
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—. "Mattel Recalls 19 Million Toys Sent From China." 15 August 2007. The New York
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<http://www.nytimes.com/2007/08/15/business/worldbusiness/15imports.html>.

The Economist. "China's toxic toymaker." 16 April 2007. The Economist. 16 March
2008 <http://www.economist.com/people/displaystory.cfm?story_id=9645770>.

The House Committee on Energy and Commerce: Hearing. 19 Sept 2007. 23 March
2008 <http://energycommerce.house.gov/cmte_mtgs/110-ctcp-hrg.091907.Eckert-
testimony.pdf>.

The New York Times. "Mattel, Inc." 5 March 2008. The New York Times. 5 March
2008 <http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp>.

The Wall Street Journal. "Key Dates in China Export Scares." 21 October 2007. The
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