COVID-19 Consumer Protection Act Shows Alternative Path to Monetary Remedies

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A recent Federal Trade Commission (FTC) action demonstrates how the FTC has pivoted toward enforcement actions based on specific acts of Congress and rules in light of the Supreme Court’s ruling in AMG Capital. Congress passed the COVID-19 Consumer Protection Act in December 2020, which made deceptive acts or practices involving the treatment, cure, prevention, mitigation, or diagnosis of COVID-19 unlawful. Since the pandemic began, the FTC has sent hundreds of warning letters to companies allegedly making deceptive or scientifically unsupported claims regarding their products’ ability to treat or prevent COVID-19.

Despite the hundreds of warning letters, the FTC did not file its first complaint under the COVID-19 Consumer Protection Act until April 15, 2021. In United States v. Nepute et al., the FTC and Department of Justice alleged that Quickwork and its chiropractor CEO, Eric Nepute, deceptively advertised that its vitamin D and zinc products are scientifically proven to treat or prevent COVID-19. Notably, the FTC had previously sent Nepute a warning letter in May 2020 regarding the same practices. After receiving the warning letter, however, the advertiser continued to make claims such as “COVID-19 Patients who get enough Vitamin D are 52% less likely to die.”

The FTC’s complaint argued that such a claim was unsubstantiated and requested that the court grant injunctive and monetary relief. A few days after this action was filed, the Supreme Court ruled in AMG Capital Management, LLC v. Federal Trade Commission that the FTC will no longer be able to seek or obtain equitable monetary relief under Section 13(b) of the Federal Trade Commission Act. The FTC, like most other observers, clearly anticipated this result because while it did include Section 13(b) in its request for relief, it also included Section 19, which allows for administrative relief, and, most significantly, a request for relief under the COVID-19 Consumer Protection Act.

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, which the FTC cites to in its Nepute complaint. There are not many of these rules – which include, for example, the Restore Online Shoppers’ Confidence Act and the Mail Order Rule – but it seems likely that enforcement of them will pick up significantly. In the wake of AMG Capital, these rules still provide a clear path to monetary relief under Section 18 that is not subject to a lengthy administrative process.

In its April report “Protecting Consumers During the COVID-19 Pandemic: A Year in Review,” the FTC recounts many of the successes it has had in responding to issues arising from COVID-19. In the report, the FTC vowed to “continue its vigilance to protect the public from harms that stem directly and indirectly from the COVID-19 pandemic, the economic fallout and the technological shift in how we live, learn and work.” Though the pandemic may be winding down, the FTC’s crackdown of specious advertising claims associated with COVID-19 may be ramping up. The resolution of the Quickwork case may show just how potent FTC action can be under the COVID-19 Consumer Protection Act despite the Supreme Court’s ruling in AMG Capital.

While there may not currently be many rules providing a similar path to enforcement action, that could change. The FTC had previously indicated that it would look to engage in more rulemaking, and just recently in a partisan 3-2 vote acted to streamline its procedures for promulgating such rules. For many years the FTC provided clarity around what constitutes misleading or deceptive advertising primarily through the use of guides, such as the Green and Endorsement guides. The AMG Capital decision has clearly pushed the Commission majority to now favor rules. However, aggressive rulemaking may precipitate yet more legal challenges to the basis for such rules and the methods by which they were promulgated.

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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