Taking State AGs’ Temperature on Covid Tests

Kelley Drye & Warren LLP
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Consumers across the country have been scrambling to get their hands on convenient and quick at-home Covid tests for weeks as the Omicron variant surge has gripped the country. With President Biden’s recent announcement that insurance plans will cover the costs of certain at-home Covid that started January 15 and the rollout of hundreds of millions of free tests, this trend is unlikely to wane any time soon. State AGs have taken notice, and we have seen many issue consumer alerts warning consumers about fake tests, illegitimate “popup” Covid test sites, and price gouging.

But what can the AGs do about the Covid test shortage? It depends on what test issues they are seeing.

If the AGs are seeing price gouging complaints regarding Covid testing at a clinic, pharmacy, online (including on social media), or at retail locations, they will likely make inquiries or send Civil Investigative Demands. These inquiries could be directed at the business itself or used to obtain information about a third party. Businesses should keep track of complaints they receive internally and/or from AGs because any trends, or in the case of price gouging even a “one-off” situation, could result in an investigation.

State authority to investigate price gouging differs, but many times it can be triggered by an emergency or disaster declaration by the governor or by the President. Emergency orders are still in place for about half the country’s states (and maybe not the ones you would expect), as well as the nation. Some price gouging statutes reference specific type of goods or services eligible for enforcement, and others are vague. How much is too much of a price increase? An undefined term of “exorbitant” price is one typical description, but some states have specific price thresholds. In some states, anywhere in the supply chain can be liable for price gouging. Soon after the initial disaster declarations, several states took action against sellers of masks, hand sanitizer, and even eggs. So it would be unsurprising if states took further action now that at-home tests are in short supply.

Traditional Unfair and Deceptive Acts and Practices violations may apply, too. We have seen New York already take action against testing companies misrepresenting their results time or their prices. Businesses should keep in mind that statements they and their employees make about the efficacy, target age group, and price of these Covid tests could have meaningful consequences as states are on alert for misrepresentations. Online platforms representing they monitor seller activities or ban sales of certain items could be under scrutiny if AGs think their terms and conditions are not being effectively enforced. Perhaps most obviously, selling or facilitating sale of unapproved or fake tests would result in even more exposure, from both state and federal enforcers.

Of course, the top consumer issue of today may be displaced next week as another scam dominates complaints. Keep a finger on the pulse of the State AGs as we enter the new year.

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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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