FTC, FDA, and State Attorneys General Investigate COVID-19 Consumer Complaints | Practical Law

FTC, FDA, and State Attorneys General Investigate COVID-19 Consumer Complaints | Practical Law

As the 2019 novel coronavirus disease (COVID-19) upends life in the US, there has been a growing number of enforcement actions by state attorneys general, the Federal Trade Commission (FTC), and the Food and Drug Administration (FDA) against sellers who are preying on heightened public anxiety by price gouging high-demand products such as face masks, hand sanitizer, and disinfectant spray or falsely advertising certain products' ability to treat or prevent COVID-19.

FTC, FDA, and State Attorneys General Investigate COVID-19 Consumer Complaints

Practical Law Legal Update w-024-5001 (Approx. 5 pages)

FTC, FDA, and State Attorneys General Investigate COVID-19 Consumer Complaints

by Practical Law Commercial Transactions
Published on 18 Mar 2020 • USA (National/Federal)
As the 2019 novel coronavirus disease (COVID-19) upends life in the US, there has been a growing number of enforcement actions by state attorneys general, the Federal Trade Commission (FTC), and the Food and Drug Administration (FDA) against sellers who are preying on heightened public anxiety by price gouging high-demand products such as face masks, hand sanitizer, and disinfectant spray or falsely advertising certain products' ability to treat or prevent COVID-19.
As the 2019 novel coronavirus disease (COVID-19) upends life in the US, there has been a growing number of enforcement actions against sellers who are preying on heightened public anxiety by price gouging high-demand products such as face masks, hand sanitizer, and disinfectant spray or falsely advertising certain products' ability to treat, prevent, or cure COVID-19.

Price Gouging

Recent price gouging enforcement actions related to the COVID-19 outbreak include:
  • As of March 13, 2020, the New York Attorney General (AG) had sent six cease and desist letters for price gouging of hand sanitizer and disinfectant spray.
  • On March 4, 2020, the California AG issued a price gouging consumer alert following the state of emergency declaration.
  • On March 4, 2020, the Washington AG announced that his office is conducting formal investigations into price gouging in the wake of the COVID-19 pandemic.
Amazon has also blocked or removed tens of thousands of third party merchant listings charging exorbitant prices for items such as face masks and hand sanitizer.
Most states have laws prohibiting price gouging during declared emergencies, including Washington, New York, and California. State AGs primarily enforce these laws, but some also provide for criminal charges and private rights of action. These statutes define pricing gouging in several different ways, including when a merchant charges prices that are:
  • Unconscionably or excessively high.
  • A specific percentage above the price before the declared emergency (the most common being 10%).
To avoid liability and reputational issues, companies should avoid price gouging and comply with their state price gouging laws.

False Advertising

In addition to price gouging, some merchants have allegedly violated federal law by making false or unsubstantiated claims about their products' ability to treat, prevent, or cure COVID-19. As of March 9, 2020, the Federal Trade Commission (FTC) and Food and Drug Administration (FDA) together sent warning letters to seven companies making these types of claims. These are the first letters that the FTC and FDA have issued targeting companies that have allegedly made unapproved or unsupported claims that certain products can treat or cure COVID-19. According to the FDA, there are no approved drugs, vaccines, or products currently available to prevent or treat the virus.
In these letters, the Agencies:
  • State that one or more of the claims made by the marketers are unsubstantiated and therefore may violate the Federal Trade Commission Act (FTC Act).
  • Advise the recipients to immediately stop making all claims that their products can prevent, treat, or cure coronavirus.
  • Note that if the deceptive claims do not stop, the Agencies may seek a federal court injunction and an order requiring a refund to consumers.
  • Instruct the recipients to notify the FTC within 48 hours of the actions they have taken to address the Agencies' concerns.
In addition to pursuing companies that do not make sufficient corrections, the FDA and FTC will continue to monitor online marketplaces, social media, and consumer complaints to prevent fraudulent marketing practices and warning letter recipients from marketing their products under a different name or on a different website.
At the state level, the New York AG announced it ordered Alex Jones, operator of the InfoWars website, to immediately cease and desist selling and marketing products as treatment or cures for COVID-19. It also issued three other cease and desist letters to deceptive advertisers. One of these letters was sent to televangelist Jim Bakker, who hosted a person on his show touting a product that claimed to treat COVID-19. The state of Missouri also brought an enforcement action against Jim Bakker for the same incident.
For information on making and substantiating advertising claims, see Practice Notes, Advertising Claim Fundamentals and Substantiation of Advertising Claims. For more information on FDA labeling laws, see Practice Note, Product Labeling: Food, Drugs, Medical Devices, and Cosmetics.
For a collection of resources to assist counsel with managing the evolving COVID-19 pandemic, please see Practical Law's Global Coronavirus Toolkit. For a broad overview of consumer protection statutes and regulations, see Practice Note, Consumer Protection: Overview.