Toy Execs: Safety Is Job One

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Greenberg said that companies have decided it makes more financial sense to violate safety laws and pay the fines, rather than comply with the standards. "Companies simply do not regard the CPSC's regulatory power as a deterrent to flouting the law," she said. She called for higher financial penalties, updated safety standards for lead in toys, and unannounced safety inspections by third parties at manufacturing sites.

Consumers Are Wary

A number of senators voiced support for more radical steps. Senator Sam Brownback (R-Kan.) called for tougher action against China, given the sharp increase in imported products from that country with safety issues. "I think we should do everything we can—whether it's banning whole categories of products from coming in—until we are sure there is no lead in these products," he said. "Hit ‘em where it hurts."

Charles Margulis, communications director of the Center for Environmental Health, a consumer group based in Oakland, Calif., said he didn't believe even government-mandated standards would be enough to keep dangerous products from hitting the market. Margulis said his organization sued over 90 companies that sold lead-based jewelry in California, suits which forced statewide standards on lead content. But he's had less luck in getting the federal safety commission to develop similar standards. "The CPSC has been saying for two years they're working on a legal standard," Margulis says. "They could just copy California's."

The big question for the toy industry now is not whether Santa will come but if he'll have any toys in his sleigh. Already some consumer safety advocates are urging shoppers to give clothes to kids instead of toys this holiday season. Marilyn Furer, a Chicago-area grandmother who used home-testing gear to find lead in her grandkids' lunch box and bib says she's hearing more and more from parents who are rejecting products made in China, where most of the defective items have come. "There is a definite reluctance to buy anything Chinese at this point," she says.

Linda Bolton Weiser, an Oppenheimer & Co. consumer-products analyst, issued a report on Sept. 12 suggesting the worst may be over for the toy industry, however. Although a second Congressional hearing on lead paint will occur on Sept. 19, Weiser said "additional recalls are now more unlikely." She added that government-mandated testing could even be a positive for Mattel, "if small players were driven out of the toy industry by increased regulation."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.