The importation of toys with lead paint from China two years ago prompted Congress to pass the Consumer Product Safety Improvement Act (CPSIA), requiring extensive independent testing of all products sold — or resold — for children.  The new regulations threatened to put small manufacturers and thrift shops out of business, thanks to the onerous burden of test costs.  But what about the big manufacturer that actually put 2 million contaminated products on shelves?  Mattel gets a waiver from testing requirements — again:

The nation’s biggest toy maker, Mattel Inc., is getting another exemption on federal safety rules even as smaller companies struggle with testing costs imposed after a rash of Mattel toy recalls in 2007.

Under the law passed after the recalls, the makers of children’s products must perform independent third-party tests for lead, lead paint and other potential dangers.

On Friday, however, the Consumer Product Safety Commission voted unanimously to approve Mattel’s request to use two more of its own company laboratories for the third-party checks on its toys. …

The third-party testing required under the 2008 law followed a slew of recalls of Chinese-made toys contaminated by lead, including six Mattel-related recalls.

But the legislation also has a provision that allows CPSC to consider requests — for so-called “firewalled laboratories” — from manufacturers who want to use their own testing facilities for the third-party checks. The firewalled labs are supposed to have safeguards in place to prevent any undue company pressure on an employee to clear a dangerous product.

So let’s get this straight. Mattel buys millions of items from China that violate American product-safety laws and standards. Congress reacts by punishing the entire industry, especially those small businesses that can’t afford independent testing, especially on products that don’t really need it. Thrift stores can’t resell merchandise without testing, making their business model impossible and threatening the charities that rely on those sales. Meanwhile, the economy of scale means that this law gives Mattel a competitive advantage from their own malfeasance — and they get the waiver on independent testing?

Yesterday, we discussed crony capitalism. This is exactly what is meant. This is a perfect example of government picking winners and losers in the marketplace through legislation written to be sympathetic to big businesses, and an enforcement mechanism that favors the big players even beyond the legislation Congress passed. Mattel can push its smaller competitors out of business, or force them into buyouts, because they broke the law in the first place.