We recently blogged about regulatory warning letters and a consumer class action stemming from consumer-facing advertising related to the coronavirus. Today, we write to provide updates on state and federal efforts to protect consumers and a Federal Trade Commission (FTC) press release sounding the alarm on B2B coronavirus scams.
State regulators are confronting many of the same issues the FTC identified in its joint warning letters with the Food and Drug Administration. Specifically, many products continue to be advertised as curing, treating or preventing COVID-19, the disease caused by the coronavirus, despite the fact that there is no known cure or vaccine as of yet. Additionally, states have been confronting price gouging on disinfectant products such as hand sanitizer, wipes and cleaning solutions. And with stimulus checks being a frequently discussed news topic while federal lawmakers negotiated the package, states have seen an uptick in scams targeting the elderly that solicit bank account information and Social Security numbers to facilitate receipt of stimulus checks.
State attorneys general are working closely with state lawmakers, congressional representatives and each other to confront these issues head-on and protect consumers. For example, Michigan Attorney General Dana Nessel enlisted state lawmakers to field price gouging complaints and recently filed a cease and desist letter against two businesses marketing a “Coronavirus Defender Patch.” A bipartisan group of 32 state attorneys general sent letters to executives at some of the biggest online retailers, urging them to help prevent price gouging. Arizona Attorney General Mark Brnovich has partnered with Sen. Kyrsten Sinema, D-Ariz., to increase awareness among seniors of the stimulus check scams. And New York Attorney General Letitia James sent letters to website domain name registrars requesting that they halt new registrations of – and de-list current – domain names associated with coronavirus and COVID-19, alleging many of these sites perpetuate scams.
The FTC, which has recently increased its focus on B2B advertising, issued a press release warning that not only are consumers vulnerable to coronavirus scams, but so too are other businesses. Specifically, the FTC identified seven types of scams that have targeted business employees, leaving both employees and employers at risk: public health scams, government check scams, business email scams, IT scams, supply scams, robocall scams and data scams. While many of these scams are nothing new, they take advantage of new circumstances – with many (if not most) employees working remotely, it no longer seems out of the ordinary to get an email from “the IT department” asking for certain password or account information.
Lastly, FTC Chairman Joe Simons released a statement outlining current enforcement efforts. Per the chairman’s statement, the FTC is working with both federal and state law enforcement, as well as business and community stakeholders, to protect consumers from unfair and deceptive commercial practices and to educate the public about such practices. In short, the FTC “will not tolerate businesses seeking to take advantage of consumers’ concerns and fears regarding coronavirus disease, exigent circumstances, or financial distress.” The chairman added that “the FTC will remain flexible and reasonable in enforcing compliance requirements that may hinder the provision of important goods and services to consumers.” While this does not give businesses carte blanche in how they advertise or market important goods and services, Chairman Simons noted that “good faith efforts undertaken to provide needed goods and services to consumers will be taken into account in making enforcement decisions.”
Takeaways: The circumstances surrounding COVID-19, including widespread misinformation and the transition of entire companies to remote work operations, have resulted in a time of heightened regulatory scrutiny at both the state and federal levels. As such, companies would do well to (re)examine their claims and substantiation, as well as their pricing, to evaluate whether any changes should be implemented. While it is often difficult to control the price at which some third-party sellers offer products, to the extent the company has control, it should exercise it to avoid price gouging. Lastly, now would be a great time to (re)educate employees on information security policies to protect not only their personal information, but also that of the company.