The COVID-19 Consumer Protection Act Is Nothing to Sneeze AtNovember 10, 2021
Just 30 pages from the end of the 2,124 page Consolidated Appropriations Act of 2021, you will find the COVID-19 Consumer Protection Act. For the duration of the COVID-19 public health emergency, this Act signed into law on December 27, 2020 makes it unlawful under Section 5 of the Federal Trade Commission Act for any person, partnership, or corporation to engage in a deceptive act or practice in or affecting commerce associated with the treatment, cure, prevention, mitigation, or diagnosis of COVID–19 or a government benefit related to COVID–19. The Act provides that such a violation shall be treated as a violation of a rule defining an unfair or deceptive act or practice prescribed under Sec. 18(a)(1)(B) of the FTC Act. As we have discussed previously, the AMG Capital decision removed the FTC’s authority to collect monetary relief under Section 13(b), but the FTC can still do so under Section 18 of the FTC Act, which addresses violations of rules defining an unfair or deceptive act or practice. When Congress passed the COVID-19 Consumer Protection Act, it provided means for relief under this section.
And the Federal Trade Commission (FTC) and Department of Justice (DOJ) are using the authority granted them. The latest action under the law was just filed, seeking civil penalties from the marketers of Xlear, a nasal spray the complaint alleges has been deceptively advertised to offer “up to four hours” of protection from COVID-19 and as “part of a layered defense to prevent getting COVID-19.” FTC and DOJ allege that Xlear doesn’t have the proper substantiation to back up their claims that the nasal spray – made from purified water, xylitol, saline and grapefruit seed extract – protects from COVID-19, despite two studies the company cites to support their claims. In the complaint, the FTC and DOJ are asking for – among other things – refunds for consumers, civil penalties, and a permanent injunction to prevent future violations. Unfortunately for Xlear, this is not the first time the FTC has taken notice of the company, as it sent a warning letter to them in July 2020 telling them to stop their unsubstantiated claims. They didn’t stop.
This is also not the first time the FTC and DOJ has used the authority of the COVID-19 Consumer Protection Act. That dubious honor goes to a chiropractor and his company Quickwork LLC which deceptively marketed products containing Vitamin D and zinc as scientifically proven to treat or prevent COVID-19. Among other things, the company baselessly claimed that “COVID-19 Patients who get enough vitamin D are 52% less likely to die.” The FTC filed a complaint in that case in April 2021. And, like Xlear, Quickwork LLC also received a warning letter telling them to stop their unsubstantiated COVID-19 claims. They didn’t stop.
Enforcement of the COVID-19 Consumer Protection Act isn’t limited to supplement-type products and health claims, but extends to other deceptive activities related to COVID-19. For example, the FTC filed a complaint on June 30, 2021 against a marketer of PPE for falsely advertising an ability to quickly deliver N95 facemasks to consumers. The company on multiple occasions failed to deliver any PPE at all, failed to deliver PPE in a timely manner, failed to issue any refunds, and at times even delivered cloth masks despite promising delivery of N95 masks. The complaint seeks civil penalties under the COVID-19 Consumer Protection Act, among other things.
These cases provide some cautionary insights:
- The FTC (and DOJ) have been and continue to be very serious about prosecuting claims that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence, including, when appropriate, well-controlled clinical studies substantiating that the claims are true.
- This goes doubly for COVID-19 related claims.
- As the PPE case shows, the authority under the COVID-19 Consumer Protection Act isn’t limited to health claims, but goes generally to deceptive acts or practices in connection to COVID-19.
- The FTC and DOJ will seek monetary penalties – including both refunds for consumers as well as civil penalties.
- If the FTC tells you to stop making unsubstantiated claims, stop. Ignore the FTC’s warning letters at your own peril.