My last post was a response to a recent article in Consumers Digest magazine that suggested that waterpark injuries were on a sharp rise and that the best solution to solving that problem was implementing new federal regulation that would require reporting of waterpark injuries to federal authorities. My initial response took on the factual underpinnings of this article, showing that even the very injury-data Consumers Digest relied upon failed to support the central thesis that waterparks were dangerous and becoming more so. Now it’s time for the second issue raised both in the Consumers Digest piece and, more generally, in the media every time an unfortunate incident occurs: Is federal regulation the answer?
When I wrote my last piece, the intention was to get this one out the door post-haste. Unfortunately, the needs of my clients intervened and it has now been a bit longer than I had originally anticipated. Consequently, I gave some thought to whether I should even write this second part or not. After all, the last piece I did, while garnering some nice feedback, has not exactly lit up the blogosphere nor has the Consumers Digest piece caused much hub-bub around the industry. But this is an important issue – even if Consumers Digest had never uttered a word about it. Whenever an accident occurs or an article is written about industry safety, you can be assured that someone will point out the “patchwork” of state regulation that governs the amusement and waterpark industries and make the case that only the federal government, usually through the Consumer Products Safety Commission, has the ability to bring order from supposed chaos. Since I don’t see this issue going away, I thought it worth spending some time on … even if it’s a bit late.
Considering the usual suggestions that shows up in these kinds of articles, the Consumers Digest piece takes a relatively unique approach. The author, Sara Bongiorni, essentially focuses on one aspect of federal regulation: mandatory injury reporting. The central tenant of the article is that if the federal government required waterparks to report injuries (as many states do), the industry would be safer and consumers would have the ability to compare one facility to another to determine which is safer. On the surface, there is some appeal to this argument. If a waterpark knows, for example, that all injuries are going to be reported and made publicly available, the facility would seem to have an incentive to maximize its safety efforts to avoid unwanted publicity. But this superficial appeal hinges on two entirely unproven assumptions: that waterparks don’t already have a powerful incentive to maximize safety and that only federal regulation can properly incentivize the industry to act. Neither of these are true.
The media and some advocacy groups often take a very melodramatic, sensationalized view of the amusement industry. The portrait of an industry that frequently cuts corners in the name of making a few extra bucks is one frequently painted, but that rarely exists in reality. While it may make for a great Hollywood movie to have an “evil corporation” that makes all its decisions based on the nothing but the balance sheet thereby endangering the very people that pay its bills, the reality is nothing at all like that. Are decisions made in the interest of maximizing profit? Of course. But the Hollywood version of events assumes a simple mathematical formula: the cost of making safety improvements vs. the cost of paying damages from an injured person’s lawsuit. In the world of big budget pictures, the greedy corporate president (often having slicked back hair and / or a goatee) simply compares the two and almost always decides that it is cheaper to pay damages than to “do the right thing.” There are groups that would have people believe that this is the way it works in real life. It isn’t.
The incentives to “do the right thing” go well beyond the scripted math in a Hollywood movie. First, and perhaps most importantly, operators are not faceless corporations – they are people who have to face their guests every day and live with the decisions they make. In more than 20 years in the industry, I have never met a single person who did not have a PERSONAL, not just a financial, stake in their guests’ safety. When things go wrong occasionally, these people spend huge amounts of time trying to figure out what happened and how to correct it so it does not happen again. This is not solely a financial issue – it is a personal mission. It is a task undertaken out of genuine concern for guests. It is an almost instinctual incentive to “do the right thing” that is far more powerful than any law or regulation.
But let’s put that aside since I can already hear some of you out there saying, “That’s great, Erik. Next time I’m at the park, I’ll build a campfire with management and we can all sing Kumbaya together.” I know, you want something more concrete than warm and fuzzy feelings. Well, ok. There’s plenty of that too. There are a lot of “costs” associated with a poor safety record beyond the costs of a lawsuit. Public perception is one of them and it is exceptionally powerful. We live in a society where guests do not need the government to shine a light on safety issues at a facility to expose safety problems. Today, a business has virtually no control over whether an incident becomes public knowledge because of the proliferation of consumer-driven reporting. Virtually any guest has the ability to record an incident occurring in real time with a cell-phone and upload it to Facebook, Twitter, or You Tube within seconds. Visitor review websites have never been more popular – and those reviewers rarely pull punches if they have a problem. The media loves nothing more than to report on a carnival, amusement park, or waterpark accident "caught on tape." Operators know all of this and are keenly aware of the cost to their business from a safety issue that goes viral or lands on the 6:00 news. The notion that a federal reporting requirement provides an incentive, currently lacking, to maximize safety just ignores the very world we live in. Want to know what parks are having incidents or what kinds of incidents occur? Google it. Go to TripAdvisor or Yelp. Check Facebook or YouTube. There is absolutely no shortage of information out there being self-reported by guests already. A federal reporting requirement would provide no greater incentive to maximize safety than the world we live in already does.
And let’s not also forget about a very powerful force in the amusement industry: insurance companies. Every operator is insured whether through commercial insurance companies or through self-insurance with excess liability coverage. Many states require minimum coverage and insurance inspections of rides annually (if not more frequently) and insurance companies frequently require such inspections even absent state law requirements. While Consumers Digest casts doubt as to the effectiveness of these inspections with respect to safety – stating that insurance “inspectors are more interested in limiting a park’s liability than in trying to protect consumers” – such a position ignores the simple reality that a park’s liability is inextricably tied to protecting consumers. Insurance companies are some of the most risk-averse businesses in existence. Their whole profit model is built around minimizing risk so that premiums paid are not paid out again as benefits. Thus, to suggest that an insurance company somehow has an incentive to overlook or ignore safety issues at a waterpark borders on the absurd. It is simply not in the insurance companies’ interest to ignore problems that could directly hit their bottom line.
Finally, I would be remiss if I did not address one last issue that crops up time and again, and has reared its head again in the Consumers Digest piece: the notion that the amusement industry is flexing its considerable political muscle to ensure that federal oversight never occurs. There are at least two fallacies in this argument.
First, the notion that the amusement industry is a political giant, with the clout to bend legislators to its every whim, is simply not in accordance with reality. Our country has substantial problems: health care, huge annual budget deficits and a gargantuan national debt, immigration reform and gun safety. The notion that the amusement industry rises to the level of any of these is almost laughable. Does the industry communicate its concerns and take positions on issues that are of concern to it? Absolutely – just as any other industry or citizen is entitled to do. But the idea that Congressmen and Senators shiver with trepidation when industry representatives sit down to talk due to their overwhelming political power is ridiculous. I have no doubt that the industry wishes it had such power (who wouldn't?), but it just does not.
Second, the industry does not oppose regulation. It merely opposes ineffective regulation. The amusement industry works closely with state level regulators, often serving on state-wide amusement safety advisory councils, in an effort to strengthen safety across the board. The industry works closely with legislators on proposed bills both to craft regulation that is practical and effective and to point out where regulation is unnecessary or misguided. While the relationship between the state and local government and the industry is not exclusively harmonious, it is, by and large, an effective collaboration that has been proven to work. The reason that the industry opposes federal regulation, therefore, is not because it is afraid of more oversight, but because no one can demonstrate how the federal government could do it better than the states already are. No one can come up with the funding that it would take to implement national oversight. No one can offer a reason why a state like Montana, with no fixed site amusement parks at all, should be forced to shoulder a portion of the cost to regulate these facilities in other states. Absent compelling answers to questions like these, the industry will continue to oppose federal regulation as a waste of taxpayer money with no marginal benefit to the public beyond the programs already in place at the state level. The problem isn’t federal oversight per se. The problem is that federal oversight just won’t work.
So there it is. Again, my apologies for the tardiness of this piece. I had to make the justice, and just couldn’t get to it any earlier. Nonetheless, I think the point on federal regulation continues to be relevant and one that will come up again as we head into a busy summer operating season.