Dive Brief:
- Lumber Liquidators Inc. has paid the California Air Resources Board (CARB) $2.5 million to settle claims that the company sold, supplied, or offered for sale in California composite wood products that exceeded state formaldehyde limits, and that it failed to take reasonable precautions to ensure the products met those limits, according to press releases from the company and CARB released Tuesday.
-
Lumber Liquidators said the agreement with CARB fully resolves the inquiry and that CARB concluded its review with no formal finding of wrongdoing on the part of Lumber Liquidators. The company also noted that it hasn’t sold the products in question since May last year.
-
The company’s shares spiked some 16% on the news Tuesday, recovering some of the damage the stock has suffered throughout the past year.
Dive Insight:
While no admission of violation or wrong-doing was attached to this agreement, CARB made it clear that it had acquired its pound of flesh.
“The California Air Resources Board adopted the [Airborne Toxic Control Measure] to protect the public from toxic exposures to formaldehyde from composite wood products, and we are enforcing this regulation,” CARB enforcement division chief Todd Sax said in a statement. “Companies need to understand we expect compliance with our Rules, and we will hold those accountable who do not comply.”
Still, the ruling closes one chapter in what has been a year of bad news for Lumber Liquidators. 60 Minutes aired a report in March 2015 revealing that certain laminate flooring products sold by the retailer emit too much formaldehyde, a known carcinogen and a chemical that can exacerbate respiratory issues. And just last month the Centers for Disease Control and Prevention updated its report to say that the health risks are worse than they first measured.
Lumber Liquidators says it has boosted its quality-control measures, suspended sales of Chinese laminates and offered free air tests to customers. However, the company took more than two months to halt sales of suspect products last year, and pled guilty to charges of making false declarations on import documents, paying millions in a settlement.
At this point, with shares at historic lows and little trust left, Lumber Liquidators needs more than public relations help. But in a way, as the company slowly but surely puts these regulatory cases and lawsuits behind it, it has an opportunity to turn itself around—perhaps even make sustainable and guaranteed healthy flooring a part of its emerging new brand. Whether that’s possible is unclear, but there’s still a window to achieve it.