Forbes Small Business magazine of Feb. 2006 describes the fate of Boston Billows, the makers of a praised nursing pillow. Their product, filled with plastic beads, was making dents in the sales of larger, established producers. So, in 2004, an anonymous competitor "tipped" the Consumer Products Safety Commission to the danger (to their profits?) of Boston Billows' product. Although it had never been involved in any injuries or deaths, it bore enough similarity to some mattress that had been banned years before that the CPSC ordered a recall. Today, the company is on the verge of closing.
The article also mentioned that how the CPSC, "understaffed" and lacking knowledge, often relies on the large producers in a market to draw up the safety rules. The small players can't afford to pay an employee to sit around devising regulations, and -- surprise! -- the regulations get drawn up to favor the big guys.