One answer is, when, for example, it is armed with powers it never uses. Another is, when it lacks powers to use in the first place.

Today, we will look at the U.S. Consumer Product Safety Commission. It’s an example of a regulatory agency that has powers it doesn’t much use, that doesn’t have all the powers one might expect, and, according to Congress and other critics, has lost its way, protecting businesses instead of consumers.

Certainly, a regulatory agency that overdoes the power trip, or has too much power, is its own kind of problem, bad for business and bad for America. And sometimes it might be best not to have any regulatory agency at all. But those are subjects for another day.

Trying to describe the CPSC lately gives you the opportunity to haul out the valuable Scrabble words, like ‘moribund’, or ‘listless.’ The commission came under intense fire last year when it appeared not to act quickly and effectively in a series of toy recalls (remember all the reports about lead found in toys, for example?), and some in Congress called for acting chair Nancy Nord to resign.

Well, reasonably quickly, Congress and the President have taken remedial steps. In August, Congress passed and President Bush signed a new law aimed at strengthening the sleepy commission. The Consumer Product Safety Improvement Act of 2008 does a bunch of different things. It gives CPSC some additional money; sets new standards and testing and certification requirements for children’s toys (to get the lead out, phthalates too); adds a whole range of new requirements for all-terrain vehicles; sets up a database for consumer complaints; and increases civil penalties against violators.

To understand how this changes CPSC, you have to first know who they are and how they are supposed to do what they do.

CPSC, created in 1972, is an independent federal agency that is intended to reduce the number of deaths and injuries caused by consumer products. It has power over more than 15,000 consumer products, though it doesn’t deal with items regulated by other agencies, such as foods, drugs, medical devices and cosmetics, which FDA and USDA handle primarily, or pesticides, which EPA regulates. CPSC also does not deal with automobiles, tires, boats, alcohol, or tobacco.

The names of some of the laws that the commission administers give a hint as to what they cover: the Federal Hazardous Substances Act; the Poison Prevention Packaging Act (the source of child-resistant special packaging requirements); the Flammable Fabrics Act; and the Refrigerator Safety Act.

The commission acts by setting safety standards for specific products, by occasionally banning products, and by exercising its power to order product recalls or corrections when it thinks the product presents a substantial hazard. It can also seize products, get injunctions against future violations, and criminally prosecute corporations and individuals who violate the laws it administers.

It also can impose civil money penalties for violations, and the new change in the law piled on the possible dough. What the new act does is increase the dollar amounts that CPSC can impose as civil penalties for violations of each of the acts it administers. So for example, the maximum for some violations of the Consumer Product Safety Act, Federal Hazardous Substances Act, and Flammable Fabrics Act, is now $15 million, up from $1.25 million. CPSC sets packaging-related standards for child-resistant packaging for specified products. It also publishes and enforces labeling requirements for potentially hazardous substances under the Federal Hazardous Substances Act.

That Federal Hazardous Substances Act is an interesting one, since it leads to labeling requirements of wide applicability. The FHSA requires that certain household products be labeled with cautionary labeling that warns consumers of the potential hazards that those products present. Such label statements include the signal words “WARNING” or “CAUTION” and a statement of the principal hazard such as “Flammable,” “Combustible” or “Causes Burns,” etc. The labeling must also inform consumers of measures they may need to take to protect themselves from those hazards.

A hazardous substance or product is defined as one that is toxic, corrosive, flammable or combustible, or an irritant, a strong sensitizer, or one that generates pressure through decomposition, heat, or other means. Labeling is required if the product may cause substantial personal injury or substantial illness during, or as a proximate result of, any customary or reasonably foreseeable handling or use, including reasonably foreseeable ingestion by children.

Under the FHSA, the CPSC has the authority to ban a hazardous substance if the product is so hazardous that even cautionary labeling is not enough to protect the public. Toys or articles intended for use by children and that contain a hazardous substance are banned under the FHSA if a child can gain access to the substance. Also, the CPSC has the authority to ban toys or articles intended for use by children when the toy/article presents a mechanical, electrical or thermal hazard.

The new act’s enhancements of the commission’s powers was hailed as a victory for consumer protection by consumer advocates and others. CPSC acting chair Nancy Nord said “The new product safety legislation signed into law today is a victory for parents and consumers. New regulatory authorities and enforcement tools, many of which I asked of Congress last year, will make it easier for CPSC to find and recall unsafe products made around the world. CPSC is ready to implement the law fully, fairly and in a way that bolsters the safety of children’s products and increases consumer confidence.”

So if the CPSC is truly a regulatory agency, with powers and abilities beyond those it had in the past, how does one judge if they are doing their job well? There are at least three ways to do so. First, of course, performance can be measured by looking at statistics for the numbers and types of agency enforcement actions.

Second, though, would be to track the numbers of consumers hurt and killed by consumer products. Reductions in those numbers might well be attributed to a more active CPSC. And after all, that’s the CPSC’s mission, and such reductions might be credited to all its efforts, including enforcement, yes, but also standards-setting, public education, and so on.

Third, you could look for the indirect, voluntary steps taken by industry as a result of simply raising the profile of product safety in the pubic consciousness. After all, publicity about product recalls and other problems, as well as the revitalization of CPSC, has a tendency to make businesses more careful and more demanding toward their suppliers, asking for quality and safety assurances even if they are not required by law.

It will be interesting to see whether this new effort at revitalization of the CPSC awakens future measurements of any of these types.

• Eric can be reached at greenberg@efg-law.com, and visit his firm’s Web site at www.ericfgreenbergpc.com.