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March 26, 2020

COVID-19: DOJ and Other Regulators Warn of Hoarding, Price Gouging Amid Crisis

On Monday, President Trump signed Executive Order 13910 to prevent the hoarding and price gouging of health and medical resources that are necessary to respond to the spread of COVID-19 within the United States. Authorized under the Defense Production Act, this action is to help ensure that hospitals, first responders, doctors, and other providers receive sufficient and critical medical equipment.

Pursuant to the executive order, the US Department of Health and Human Services (HHS) secretary may designate certain resources as scarce or as threatened materials, which are materials that the supply of which would be threatened by excessive accumulation. The order prohibits any individual from accumulating designated materials in excess of the reasonable demands of business, personal, or home consumption or for the purpose of resale at prices in excess of prevailing market prices.

Some materials that have been determined by the HHS secretary to be needed to respond to COVID-19 and which are or are likely to be in short supply or would be considered threatened materials include:

  • Personal protective equipment (PPE), including facemasks, surgical masks, face shields, and gloves
  • Face piece respirators
  • Portable ventilators
  • Disinfecting devices
  • Medical gowns and apparel

A complete list of designated materials as of March 25 can be found here and is subject to periodic review by the secretary.

The Department of Justice (DOJ) announced it will work with the HHS to vigorously enforce the anti-hoarding provisions of the executive order in cases where hoarding may impede the supply of health and medical resources needed to combat COVID-19. The DOJ also intends to prioritize the detection, investigation, and prosecution of fraudulent activity and price gouging related to medical resources necessary to respond to the crisis.

In New York State, the national emergency declaration by the HHS on January 31 triggered the state’s price gouging laws that prohibit selling goods or services to consumers in an affected area for an unconscionably excessive price (NY General Business Law § 396-r). A price is likely to be found “unconscionably excessive” if the price being charged by the seller during the national emergency event is grossly greater than the price charged immediately prior to the onset of the national emergency event by that same seller or the price being charged during the national emergency event grossly exceeds the price for the same or similar goods and services readily obtainable in the affected area by other consumers.

New Yorkers are encouraged to report sudden price increases in consumer goods such as hand sanitizer, cleaning supplies, and other health- and sanitation-related products by calling the consumer hotline at 800.697.1220 or submitting a complaint form online.

Authorities in states like Florida are also on high alert about price gouging as the number of COVID-19 cases continues to increase among a predominantly elderly population. Florida law prohibits price gouging during a state of emergency, which applies to essential goods such as food, water, gasoline, masks, and cleaning supplies. Since last week, Florida’s Consumer Protection Division has received approximately 357 consumer contacts about essential commodities and is actively investigating whether price gouging occurred.

If you have any questions regarding the content of this alert, please contact Linda Clark, Health Care Controversies Team leader, at lclark@barclaydamon.com; Mary Connolly, associate, at mconnolly@barclaydamon.com or another member of the firm’s Health Care Controversies Team.

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