Federal and State Governments Work to Limit Price Gouging and Hoarding of Products Related to COVID-19 | Practical Law

Federal and State Governments Work to Limit Price Gouging and Hoarding of Products Related to COVID-19 | Practical Law

President Trump signed an executive order to prevent the hoarding of health and medical resources in need due to the COVID-19 pandemic. Thirty-two state attorneys general sent a letter to online retailers and marketplaces urging them to enact measures to prevent price gouging. The House Energy & Commerce Committee also urged the Federal Trade Commission (FTC) to take further action to combat price gouging and protect consumers.

Federal and State Governments Work to Limit Price Gouging and Hoarding of Products Related to COVID-19

by Practical Law Commercial Transactions
Published on 30 Mar 2020 • USA (National/Federal)
President Trump signed an executive order to prevent the hoarding of health and medical resources in need due to the COVID-19 pandemic. Thirty-two state attorneys general sent a letter to online retailers and marketplaces urging them to enact measures to prevent price gouging. The House Energy & Commerce Committee also urged the Federal Trade Commission (FTC) to take further action to combat price gouging and protect consumers.
Retailers and marketplaces that advertise and sell health products and medical equipment, valuable in the fight against COVID-19, should pay close attention to the efforts being put in place to limit the hoarding and price gouging of these resources. Price gouging involves the practice of charging excessively high prices for products and services during an emergency situation or other unusual market condition. There is no federal law that prohibits price gouging, but most states prohibit the practice either through:
  • Specific anti-price gouging laws.
  • Their consumer protection laws as an unfair or deceptive trade practice.
These state laws apply to both brick and mortar stores and online stores and marketplaces.

President Trump Signs Anti-Hoarding Executive Order

On March 23, 2020, President Trump signed Executive Order 13910, to prevent the hoarding of medical resources that are needed to limit the spread of COVID-19 in the US (85 Fed. Reg. 17001). The President's actions are authorized under the Defense Production Act of 1950 (DPA), which gives the president the authority to shape national defense preparedness programs and take appropriate steps to maintain and enhance the domestic industrial base (50 U.S.C.A. § 4502).
Executive Order 13910 delegates the president's authority to the US Department of Health and Human Services (HHS) Secretary to designate health and medical products as scarce materials, or as a material in the supply of which would be threatened by persons accumulating the material either:
  • In excess of:
    • The reasonable demands of business; or
    • Personal or home consumption.
  • For the purpose of resale at prices in excess of prevailing market prices.
Following the announcement of the executive order, Alex Azar, the HHS Secretary, designated a set of medical products subject to the order as of March 25, 2020, including:
  • N-95 Filtering Facepiece Respirators.
  • Other filtering Facepiece Respirators (those designated as N99, N100, R95, R100, or P95, P99, P100).
  • Personal protective equipment (PPE) coveralls (Tyvek suits), facemasks, surgical masks, face shields, gloves or surgical gloves.
  • Elastomeric, air purifying respirators and appropriate particulate filters and cartridges.
  • Powered Air Purifying Respirators (PARP).
  • Portable Ventilators.
  • Chloroquine phosphate or hydroxychloroquine HCI.
  • Sterilization services for certain medical devices and certain sterilizers.
  • Disinfecting devices and other sanitizing and disinfecting products suitable for us in a clinical setting.
  • Medical Gowns or apparel (surgical gowns or isolation gowns).
  • Ventilators, anesthesia gas machines modified for use as ventilators, and positive breathing devices modified for use as ventilators, ventilator tubing connectors, and ventilator accessories.
Penalties for violating the DPA and Executive Order 13910 include up to a $10,000 fine or imprisonment for up to 1 year, or both (50 U.S.C.A. § 4513). The Office of the President also published a fact sheet on the executive order, available here.

State Attorneys General Send Letter to Online Retailers Asking for Price Gouging Crack Down

Thirty-two State Attorneys General sent a letter to Amazon, eBay, Craigslist, Facebook and Walmart asking them to crack down harder on price gouging occurring on their marketplaces. The letter specifically lists several examples of price gouging, including:
  • More than half of hand sanitizers and facemasks available on Amazon spiked by at least 50% compared to the average price.
  • A seller on Craigslist selling a two-liter bottle of Purell Advanced hand sanitizer for $250, ten times the normal price.
  • An eight-ounce bottle of Purell being sold on Facebook Marketplace for $40.
The State AGs, acting as the top law enforcement officials in their states, urge the companies to do more to combat price gouging, including by the following measures:
  • Set policies and enforce restrictions on unconscionable price gouging during emergencies.
  • Trigger price gouging protections independent of or prior to an emergency declaration.
  • Create and maintain a "Fair Pricing" page or portal where consumers can report price gouging directly to the company.

House Committee Urges FTC to Protect Consumers from Price Gouging

On March 17, 2020, the House Energy and Commerce Committee sent a letter to the Federal Trade Commission (FTC) urging the agency to do more to protect consumers from supply shortages and price gouging, including for hand sanitizer and cleaning supplies. The letter urges the FTC to take immediate action to protect consumers from price gouging during the declared public health emergency. The letter also mentions that the Committee would pursue legislation to assist the FTC in protecting consumers.
For more information on the regulation of price gouging, see Practice Note, State Price Gouging Laws: Overview.
For a collection of resources to assist counsel with managing the evolving COVID-19 pandemic, please see Practical Law's Global Coronavirus Toolkit.