Today may have been ignominious for toymaker Mattel (NYSE: MAT) as its Fisher Price unit paid $12 million in a settlement to make up for its role in allowing toys containing lead to be delivered to retailers and consumers across the U.S. However, Mattel and its big competitors, like Hasbro (NYSE: HAS), may be enjoying the fruits of the scandals next year as new laws meant to protect consumers from the toxins in lead paint and the plastic toxin known as phthalates effectively remove its small competition from the marketplace.


Because in order to comply with the new Consumer Product Safety Improvement Act (CPSIA), effective February 10, 2009, all toymakers must pay a testing fee of $4,000 per type of toy they make, as well as permanently labeling them with a batch number and date (requiring them to create new molds in many cases). While this $4,000 fee will be barely felt by huge toymakers such as Mattel and Hasbro, it will annhilate the growing handmade toy industry in the U.S. and, for many importers, end their relationships with U.S. consumers. German wood toy maker Selecta Spielzeug has already announced its intention to pull its toys from the U.S. market, effective December 31. In a statement, the company said its retail prices would have to increase "by at least 50 percent, which would price these products out of the market." Small toymakers, such as the little company which sells wooden shields at a wholesale price of $7, would be out of business, as would nearly every other small American, Canadian and European toy company, according to the Handmade Toy Alliance. What's more, it could decimate Etsy, a marketplace for handmade goods.

The potential results of this act are so frightening and amazingly efficient I am left to wonder if it was drafted by the big toy manufacturers themselves. "We'll pay $12 million," I can imagine executives telling each other, "and we'll appear mollified by the government. Chastened and ready to return to the hallowed work of making toys for good little girls and boys."