We noted a couple news items this week that help add context to the pervasiveness of and risks related to price gouging enforcement. In this story, the New York Times reported on a merchant who was selling hand sanitizer and related protective gear on Amazon, at profit levels that corresponded with the growing public concern. Amazon removed his listing along with hundreds of thousands of others and suspended thousands of sellers’ accounts for price gouging. He’s now left with 17,700 bottles of hand sanitizer.

The California, Washington, and New York attorneys general offices are investigating price gouging complaints. The New York AG issued multiple cease and desist letters last week relating to exorbitant prices on hand sanitizer and disinfectant spray. The California AG issued a consumer alert regarding price gouging following announcement of a state of emergency. The Washington AG issued a similar alert calling on consumers to report price gouging and scam products.

On the advertising claims front, the New York AG announced enforcement against Alex Jones, who operates the InfoWars website. The AG alleged that Jones was marketing and selling toothpaste, dietary supplements, and creams as treatments to prevent and cure the coronavirus. The NY AG also issued cease and desist letters to Dr. Sherill Sellman, who was selling colloidal silver as a coronavirus cure, and to disgraced televangelist, Jim Bakker, for featuring claims that Sellman’s colloidal silver product could “eliminate [coronavirus] within 12 hours.” The State of Missouri has also brought enforcement action against Mr. Bakker.

In addition to retail platforms, advertising and social media platforms may want to take note. CDA Section 230 is alive and well but does any platform want to go to bat for advertising allegedly scam products? The Washington AGs office stated that they will use their consumer protection laws to sue platforms or sellers even if they aren’t in Washington, as long as they were trying to sell to Washington residents. Every other state AG undoubtedly agrees with this approach.

And finally for some comic relief…for some insightful advice from John Oliver, check out this link at the 17-minute mark.

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Not anymore.

The public is rightly concerned about coronavirus and how to avoid catching it. And where the public has questions, marketers will have answers. Here are a couple things to think about before rushing that next campaign out the door.

State and Local Laws Prohibit Price Gouging

As hand sanitizer has become scarce, some who have it have sought to capitalize on consumer demand and no small amount of fear. We noticed this story about Amazon cracking down on third-party merchants selling coronavirus products at inflated prices.

Many states have laws governing price gouging. New York’s law prohibits merchants from taking unfair advantage of consumers by selling goods or services that are “vital to the health, safety or welfare of consumers” for an "unconscionably excessive price" during an abnormal disruption of the market place or state of emergency.

New York's price gouging law does not specifically define what constitutes an "unconscionably excessive price." However, per the NY AG, the statute provides that a price may be "unconscionably excessive" if: the amount charged represents a “gross disparity” from the price such goods or services were sold or offered for sale immediately prior to the onset of the abnormal disruption of the market. Merchants may provide evidence that justifies their higher prices were justified by increased costs beyond their control.

California’s law is more prescriptive. California’s anti-price gouging statute, Penal Code Section 396, prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared. There may also be local laws that prohibit price gouging.

State attorneys general and CA district attorneys have reported receiving price gouging complaints. Companies that fail to comply will risk being enforcement targets.

Be Careful Not To Oversell

The FTC and FDA issued warning letters to seven companies allegedly selling unapproved products that may violate federal law by making deceptive or scientifically unsupported claims about their ability to treat coronavirus. Both agencies issued statements indicating that they are prepared to take further enforcement action to prevent the public from being misled.

An equally concerning scenario is the marketer who sees an opportunity to market around coronavirus with a product that has value but not to the degree that it would be an effective prevention tool. For example, dust masks are not the same as N95 face masks. Hand wipes without alcohol will not kill the same germs as those with alcohol. Tito’s Handmade Vodka is not hand sanitizer. It would be potentially misleading and deceptive to market dust masks, hand wipes without an effective sanitizer, or even Tito’s Handmade Vodka hand sanitizer as effective coronavirus prevention tools. It’s also a waste of good vodka. But, we digress.

The lesson is this: The rush to meet consumer demand should not overcome the legal clearance process or common sense. Rules still apply even in – and maybe especially in – times of public health emergency.

Stay tuned. We’ll update this post as the situation evolves.

This webinar series will commence January 25 and continue the last Wednesday of each month, as outlined below.

January 25, 2017, February 22, 2017, March 29, 2017, April 26, 2017, June 28, 2017, July 26, 2017, September 27, 2017, October 25, 2017, and November 29, 2017

Kicking off the series will be a one-hour webinar on “Marketing in a Multi-Device World: Update on Cross Device Tracking” on January 25, 2017 at 12 PM ET.

CLE credit will be offered for this program.

The FTC’s complaint alleges that Engineered Plastics Systems, LLC (“EPS”) marketed its plastic lumber products – including picnic tables and benches – as made of “recycled plastic,” made “entirely of recycled plastic lumber,” or having an “all recycled plastic design.” The FTC alleges that while consumers would likely interpret the claims to mean that the products are made from all, or virtually all, recycled plastic, the products contained, on average, only about 72 percent recycled plastic. The products also contained some non-recycled plastic and a mineral component.

The proposed consent order with EPS prohibits the company from misrepresenting the recycled content or environmental benefit of any product or package. For any recycled-content claims, the company must substantiate the claims by demonstrating that the content of its product or package is composed of materials that have been recovered or otherwise diverted from the waste stream. The FTC’s consent order will remain effective for 20 years.

The ADA generally prohibits discrimination on the basis of disability and ensures equal opportunity for persons with disabilities. This applies to private sales or rental establishments under Title III of the ADA, such as clothing stores, shopping centers, hardware stores, and grocery stores.

Traditionally, the ADA was thought to apply only to “brick-and-mortar” stores. In more recent years, however, a handful of courts have applied the ADA to online websites, when finding that a “nexus” exists between the e-commerce website and the physical store. This has led to some high-profile settlements. But because courts are split on this issue, there isn’t clear guidance for online retailers.

In light of the uncertainty in this area, the DOJ will issue a Notice of Proposed Rulemaking (NPRM) in November 2013 to provide guidance on this issue to State and local governments under Title II. Although not directly applicable to private entities, this will likely provide insight on how the DOJ will implement the technical standards necessary to comply with the ADA. The DOJ will then issue a NPRM in March 2014 setting forth the scope and standards for private parties covered under Title III.

If you operate a retail website, you should pay close attention to these developments and ensure that your site is in compliance.