Financially-strapped Peloton is facing a plethora of investigations, litigation and now potential penalties from the feds related to its treadmill recall last year, the company said in a securities filing on Wednesday.
The Consumer Product Safety Commission told Peloton in August that it may impose civil monetary penalties because its “staff believes we failed to meet our statutory obligations under the Consumer Product Safety Act,” Peloton said in the filing.
Last year, a Peloton treadmill caused the death of a six-year-old child who was pulled under the machine. Dozens of other customers reported that they and or their children were injured by the machines.
The agency is continuing its investigation into the exercise equipment and Peloton’s handling of the matter, according to the filing. The amount of a possible fine was not disclosed.
The struggling exercise company, which is running low on cash and has had to lay off 2,800 employees this year as it faces a steep decline in sales, can hardly afford to shell out extra funds.
Once a pandemic darling that benefited from housebound consumers, Peloton expanded too quickly, investing in new equipment and manufacturing plants just as the pandemic was waning and demand for its pricey bikes dissipated.
Former chief executive and founder John Foley was ousted in February as the company launched a turnaround strategy, bringing in a new CEO Barry McCarthy.
At the time of the treadmill crisis, the agency warned consumers not to use the Peloton machines, citing some 70 incidents of the Tread + pulling people, pets and objects beneath the machine.
Foley disclosed the death of the child on the company’s website in March 2021 and urged customers to keep children and pets away from the equipment at all times.
“Before you start a workout, double check to make sure that the space around your Peloton exercise equipment is clear,” he wrote at the time.
But Foley initially disputed the agency’s characterization of the machines as being dangerous – and was later forced to back pedal his statements when the company finally recalled the equipment in May 2021.
“I want to be clear, Peloton made a mistake in our initial response to the Consumer Product Safety Commission’s request that we recall the Tread+. We should have engaged more productively with them from the outset,” Foley said in a statement at the time. “For that, I apologize.”
In the filing, Peloton also said “we are presently subject to class-action litigation, private personal injury claims and other regulatory proceedings related to the Tread+ recall and other matters that, regardless of their merits, could harm our reputation, divert management’s attention from our operations, and result in substantial legal fees, judgments, fines, penalties, and other costs.”
Peloton said it disagrees with the CPSC’s staff, adding “we are engaged in ongoing confidential discussions with the CPSC.”