Enforcement Agencies’ Focus on COVID-19 Fraud and Disinformation Will Have Broad Impacts on Companies Throughout Economy

Enforcement agencies at the federal and state level are cracking down on deceptive claims, disinformation, and other conduct like price gouging to protect consumers during the COVID-19 pandemic.  The Federal Trade Commission (FTC), Department of Justice (DOJ), and state Attorneys General across the political spectrum have all announced this enforcement is a priority.  Given the magnitude of the issue, companies should expect scrutiny to move “up the chain” to push legitimate companies – online platforms, marketers, and e-commerce service providers – to assist in cracking down on fraud.  While strict legal obligations can be murky, companies need to be attuned to fraud and disinformation in the marketplace and implement policies that take account of greater government scrutiny in this area.

What kind of consumer disinformation is out there?  Government enforcers have focused significantly on products that claim can prevent or treat coronavirus, including bogus vaccine claims and treatment claims.  As the FTC and FDA have noted, there are currently no approved vaccines, drugs or investigational products available to treat or prevent COVID-19.  Also, there are currently no FDA-approved home testing kits.  The DOJ brought its first COVID-19 action last weekend against sellers of a bogus COVID-19 vaccine kit, and obtained a TRO shutting down the website.  The FTC, FDA, and state Attorneys General have sent warning letters to companies marketing products that claim to prevent or treat COVID-19 as well.

On the horizon, the FTC has warned about scammers setting up fake charitable causes, making deceptive claims around government payouts in connection with federal government relief, and offering in-demand products like cleaning product (often at high prices) but not delivering them.  As Wiley colleagues have noted, the FCC and FTC have taken action to warn consumers about COVID-19-related robocall scams.  Congress is likely to push for further oversight of suspected frauds as well.

How should businesses respond?  Businesses should be aware the government may look to them to take extra steps to stop COVID-19 fraud.  FTC Chairman Simons recently released a statement that the agency is “working closely with federal and state law enforcers, and with other stakeholders, including . . .  the business community, and are devoting significant resources to tackling scammers and unfair and deceptive business practices,” (emphasis added), noting that the agency “will not tolerate businesses seeking to take advantage of consumers’ concerns and fears regarding coronavirus disease, exigent circumstances, or financial distress.”  

Enforcers are already looking beyond product manufacturers.  On March 26, the New York Attorney General sent a cease-and-desist letter to a seller of air purifiers that was alleged to have passed on claims about products being used to help prevent COVID-19.  The FTC and states have challenged a broadcast program that promoted a product that claimed to help treat coronavirus.  And outside of COVID-19, agencies have shown a willingness to go after companies that they believe have assisted and facilitated fraud, such as certain “gateway providers” in the robocall context, and payment processors in a range of fraud cases.  In many cases, statutes limiting platform liability like Section 230 of the Communications Decency Act (CDA) may potentially apply, but notably, DOJ and others have sought to interpret those more narrowly in certain contexts.     

Given this level of scrutiny, companies should think carefully not only about any COVID-19 claims they make but also whether they are providing any services that could be swept up in government activity to attack to COVID-19 disinformation and fraud.  Whatever companies decide to do now can come under scrutiny in the weeks and months ahead.  Agencies like FTC, FDA, and EPA have put out information that can help evaluate acceptable claims about treating COVID-19 and potential scams, which can help provide a roadmap for action – for example, the FTC has indicated that it is scrutinizing metatags in evaluating company’s COVID-19 marketing claims.  Additionally, agencies have signaled that they may be more open to giving informal advice on how companies should act given the exigencies of COVID-19.  Companies should ensure they develop a plan of attack as the COVID-19 pandemic continues.

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Wiley attorneys have deep experience dealing with the FTC, DOJ, EPA, state Attorneys General and other regulators, and regularly advise on consumer protection issues.  More resources on important legal developments related to the COVID-19 pandemic can be found at Wiley’s COVID-19 resource center

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