Consumer Fraud Increases in the Wake of COVID-19 and Enforcement Activities Quickly Follow

Seyfarth Shaw LLP

Last week, the Federal Trade Commission (“FTC”) and Food & Drug Administration (“FDA”) ramped up their enforcement letters since they first issued COVID-19 related warning letters a month ago. The FTC and FDA sent letters to nine different companies selling a variety of products, including supplements, oils, “preventative medicine,” oral mint strips, saline products, “herbal medicines,” and nasal spray. The products had a common underlying theme of purportedly helping consumers prevent and treat symptoms of COVID-19.

The warning letters addressed promotional activities undertaken through product labels, websites, and social media platforms. Across these varying mediums, the product manufacturers made express claims that their products were designed to help tackle the coronavirus. These include general claims that the products will help in “protecting yourself from coronavirus,” and specific claims that the products will treat “coronavirus symptoms of cough, fever and breathing issues.” These even include other unsubstantiated claims that with use of this product, there is a “slim chance you will catch this disease.” All of these claims were construed as “misleadingly” representing the products as safe and effective for the treatment or prevention of COVID-19. The FDA therefore determined that the products were misbranded under Section 502 of the Food Drug & Cosmetic Act (the “FD&C Act”).

Furthermore, by marketing these products as “intended to mitigate, prevent, treat, diagnose or cure COVID-19 in people,” the products were deemed “drugs” as defined under the FD&C Act. See 21 USC § 321(g)(1). Absent advance review and approval by the FDA, these products are “unapproved new drugs” sold in violation of Section 505(a) of the FD&C Act. The introduction of these unapproved and misbranded drugs into interstate commerce is prohibited under sections 301(a) and (d) of the FD&C Act.

The letters also advise that under the Federal Trade Commission Act (the “FTC Act”), 15 U.S.C. 41 et seq., it is unlawful “to advertise that a product can prevent, treat, or cure human disease unless you possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.” Accordingly, “[t]o make or exaggerate such claims, whether directly or indirectly, through the use of a product name, website name, metatags, or other means, without rigorous scientific evidence sufficient to substantiate the claims, violates the FTC Act.” Because there are “no vaccines, pills, potions, lotions, lozenges or over-the-counter products available to treat or cure COVID-19,” the manufacturers’ claims are unsupported by competent and reliable scientific evidence, and therefore unsubstantiated.

The letter recipients were directed to immediately cease making their prohibited claims and contact the FTC within 48 hours providing the actions taken to comply with the FTC and FDA’s regulations.

The FTC and FDA are not the only government actors seeking to protect consumers from scams and misleading product sales related to COVID-19. Joining their efforts are the Department of Justice (“DOJ”), state attorneys generals and local officials who have dedicated resources to COVID-19 and have taken enforcement actions just the same. For example, on April 6th, the Los Angeles City Attorney announced that his office filed an enforcement action and obtained an immediate settlement with a company for advertising and selling an at-home test kit for coronavirus. The company agreed to end its alleged widespread marketing and sales campaign of test kits and provide restitution in the form of full refunds to consumers who purchased them. Similarly, the New York Attorney General’s Office issued a cease-and-desist letter last month to an entity that falsely marketed a product as a proven treatment for coronavirus. Additionally, in a memorandum, the DOJ recently outlined COVID-19 related scams, a number of which relate to product sales, including “robocalls making fraudulent offers to sell respirator masks with no intent of delivery” and “sales of fake testing kits, cures, “immunity” pills, and protective equipment.”

While government regulators are certainly demonstrating flexibility by making adjustments to traditional requirements (e.g., hand sanitizer manufacturing), there is no short-cut for following established regulations, especially as they relate to making claims about the safety and efficacy of products. Federal, state and local authorities are on heightened alert of the potential for fraud because of the critical health implications. Manufacturers and advertisers should continue to be cognizant of applicable legal requirements for new products, which remain unchanged even in the face of a pandemic.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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