When the COVID-19 pandemic began, and consumers swarmed the stores for disinfectant sprays, masks, and household items, state price-gouging laws grew increasingly relevant as sellers sought to cash in on the heightened demand.

In May 2020, New York Attorney General Letitia James took action against Quality King Distributors, Inc., a wholesaler that, according to James, illegally increased its prices to sell Lysol disinfectant products to neighborhood grocery and discount stores in New York. A New York state court tossed the case a few months later, finding that Quality King did not “uniformly raise their prices on Lysol products to these customers.” This week, a New York appellate court disagreed.Continue Reading The Pandemic May Be Over, but Price-Gouging Laws Live On

At the height of the pandemic, the Federal Trade Commission took swift action to stamp out scammers and other actors looking to take advantage of—or simply make a buck off—the crisis. One of the early moves it made was to file separate lawsuits against a pair of companies that sold sanitizer, face masks, and other protective equipment gear (PPE), but failed to ship the products as promised.

As of this week, the FTC has won summary judgment in both cases, FTC v. QYK Brands LLC d/b/a Glowwy and FTC v. American Screening, LLC. The cases highlight the two following points.Continue Reading When a Mail Order Rule Case Is Not Just About the Mail Order Rule

The FTC has sued a seller of personal protective equipment (PPE), bringing its first PPE-related case under the COVID-19 Consumer Protection Act (CCPA). The lawsuit demonstrates the FTC’s continued focus on COVID-19-related advertising practices. Although this is not the first time the FTC has brought an action for a failure to deliver PPE on time,

On April 20, 2021, Acting Chairwoman Rebecca Kelly Slaughter and Commissioners Rohit Chopra, Noah Phillips, and Christine Wilson testified before the Senate Committee on Commerce, Science, and Transportation and provided an overview of the FTC’s consumer protection priorities. In addition, the hearing addressed the Commission’s imperiled consumer redress authority under Section 13(b) of the FTC Act and the agency’s continuous efforts to combat COVID-19-related scams.

As we have previously written, the Supreme Court is set to decide the scope of FTC’s Section 13(b) authority to obtain a permanent injunction and equitable monetary relief. At the hearing, the Commission emphasized that Section 13(b) authority is the FTC’s “bread and butter” and requested that Congress clarify that authority. Chair Maria Cantwell (D-WA) and Ranking Member Roger Wicker (R-MS) showed an interest to move quickly with a legislative fix if the Supreme Court decides against the FTC. Specifically, Senator Cantwell gave two examples of how the FTC has used its Section 13(b) power to get consumer redress. In 2019, the FTC returned more than $34 million to consumers who were allegedly tricked into buying computer repair products and services, and the FTC sent settlement payments of nearly $50 million to students allegedly lured by a university’s deceptive advertisements that it worked with reputable companies to create job opportunities.Continue Reading The Uncertainty Continues: Compromised Section 13(b) Authority, COVID-19 Scams, and the FTC’s Plans for Consumer Protection

The FTC has filed its first lawsuit under the COVID-19 Consumer Protection Act, charging St. Louis-based chiropractor Eric Anthony Nepute and his company, Quickwork LLC, with violating the Act by deceptively marketing nutritional supplements as scientifically proven to treat or prevent COVID-19.

According to the FTC, despite its May 2020 warning letter to Nepute regarding unsubstantiated COVID-19 efficacy claims he made in connection with other products, the defendants continued marketing their vitamin and mineral products—namely, their “Wellness Warrior” vitamin D and zinc supplements—as proven immunity boosters that effectively treat or prevent COVID-19. The FTC also accuses the defendants of routinely dismissing public health guidance and falsely representing that their products provide protection against the disease that is equal to or better than that provided by available vaccines. The FTC’s complaint seeks both monetary penalties and broad injunctive relief.Continue Reading FTC Files First Action Under COVID-19 Consumer Protection Act

The COVID-19 crisis has spawned a new wave of predatory behavior toward consumers, with the marketing of coronavirus-related products and untested cures. Regulators have responded to these behaviors swiftly and in a variety of ways. Richard Cleland, assistant director – division of advertising practices at the Federal Trade Commission (FTC), and Venable attorneys Melissa Steinman and Kristen Klesh addressed the advertising enforcement trends stemming from the COVID-19 pandemic and offered their reflections on best practices for consumer protection.

How has the FTC addressed consumer complaints?

The FTC’s response to COVID-19-related violations has been a combination of education and enforcement. The agency recorded more than 130,000 complaints in approximately the first half of 2020; unsubstantiated health claims and health fraud are the main areas of concern. The FTC has issued more than 300 warning letters and has seen a high compliance rate (around 95%) with this course of action. These letters address claims that businesses are promoting the cure or treatment of COVID-19 through:

  • dietary supplements or treatment in medical or wellness clinics in the form of herbal teas, essential oils, vitamins, zinc, immunity boost IVs, chiropractic, homeopathic, other therapies, virus-killing “zappers,” and colloidal silver
  • anti-vaccine messaging

The FTC has also filed three federal court actions related to COVID-19 consumer fraud and the agency is conducting extensive consumer education campaigns related to health fraud and coronavirus scams. The FTC website examines various types of health and economic fraud related to the epidemic.Continue Reading Ad Law in the Age of COVID-19 and Regulatory Reactions

Given all the tumult with natural disasters, COVID-19, and other goings on in Washington, a memorandum directing government agencies to reform how they operate may have gone unnoticed. It’s worth considering. On August 31, 2020, the Office of Information and Regulatory Affairs (OIRA), a subagency within the Office of Management and Budget (OMB), issued Memorandum M-20-31 (the “Memo”), which elaborates on and implements directives from a prior executive order to consider and adopt certain best practices and procedures to promote fairness in administrative enforcement and adjudication. The Memo directs federal agencies to adopt measures aimed at according greater due process to individual and company targets for investigations and enforcement actions, and to promote transparency and accountability in the initiation and pursuit of administrative actions. The Memo’s directives usher in the potential for long-overdue substantive and procedural revisions to the rules of practice for independent agencies.

By way of background, the President signed Executive Order 13924, “Executive Order on Regulatory Relief to Support Economic Recovery,” on May 19, 2020, in response to economic impacts due to the COVID-19 pandemic. EO 13924 directs federal agencies to “address this economic emergency by rescinding, modifying, and waiving or providing exemptions from regulations and other requirements that may inhibit economic recovery” as enumerated in Section 6. The OIRA Memo sets forth specific best practices for implementing changes for the ten principles in Section 6 and sets a deadline of November 26, 2020 for agencies to engage in any necessary rulemaking to implement them.

The guidance will apply to all federal government departments and agencies, such as the Federal Trade Commission, the U.S. Securities and Exchange Commission, the Federal Reserve Board, the Consumer Financial Protection Bureau, and many others.Continue Reading The New Normal? Executive Guidance Asks Agencies to Reform Enforcement Policy

Although the coronavirus pandemic has impacted every business over the past few weeks, companies offering negative option and subscription programs face a unique set of issues. On the one hand, the subscription model offers consumers benefits that are difficult to provide outside of this context (such as streaming services, online learning programs, and uninterrupted access). On the other hand, business interruptions — in addition to consumers tightening their budgets — have presented significant hurdles to the subscription model during the current pandemic.

For example, the current shutdown has prevented many companies that offer membership programs from continuing to provide these services to consumers, such as gyms, access passes, and in-person events. As a result, customers have increasingly begun to cancel their memberships to avoid paying for services that companies simply cannot fulfill. Online services are not immune to the fallout, as consumers who are tightening their belts and looking for ways to reduce spending have started cancelling recurring billing services, which they may view as unnecessary in the present circumstances.Continue Reading Automatic Renewal Programs: Reducing Risks During the COVID-19 Pandemic

Last week, the FTC filed its first lawsuit involving COVID-19 disease claims, but the Commission took an approach it had largely abandoned in consumer protection cases, by filing for a temporary restraining order and preliminary injunction in federal court and simultaneously filing an administrative action. Although COVID-19 claims are new, the procedural approach taken by the FTC is one that it has not used in years.

On April 24, the FTC filed a Complaint for a Temporary Restraining Order and Preliminary Injunction in the United States District Court for the Central District of California, in FTC v. Marc Ching. The Complaint alleged that the defendant, Marc Ching doing business as Whole Leaf Organics, disseminated false or unsubstantiated advertisements that its product, Thrive, treated, prevented, or reduced the risk of COVID-19. In addition, the defendant marketed a cannabidiol (CBD) product that it claimed could treat cancer.

The defendant had been the recipient of a warning letter from the federal Food and Drug Administration in November 2019, which warned the defendant that it was making unapproved new drug claims in violation of the Federal Food, Drug, and Cosmetic Act by claiming that its CBD products are intended for use in the mitigation, treatment, or prevention of diseases. According to the complaint, the defendant did not remove the unapproved drug claims from its website.Continue Reading FTC Files Lawsuit Against Company Selling CBD Products, Claiming to Prevent or Treat COVID-19 and Cancer

The FTC continues to devote substantial time and attention to its enforcement battle against companies seeking to take unfair advantage of consumers amid the COVID-19 pandemic. This week, the FTC announced its latest round of warning letters to ten companies making unsubstantiated claims that their products can treat or prevent the disease.

As we have