Consumer Fraud Epidemic: Price Gouging and Exploitation Amidst the COVID-19 Health Crisis

Photo Credit:https://scammer419.files.wordpress.com/2013/02/scam_fraud.jpg (last visited May 3, 2020).

By: Dylan Martin
Member, American Journal of Trial Advocacy

          Growing concerns about the spread of the COVID-19 virus and the effort of the government and public health officials to “flatten the curve” has led to widespread lockdowns, resulting in shutdowns of businesses, layoffs for employees, and mandatory curfews.[i]  In addition to affecting the social and work lives of individual Americans, the novel COVID-19 is also causing a significantly strenuous impact on the U.S. healthcare system and economy.  As a country, we are experiencing unprecedented challenges including shortages of vital supplies and equipment for our healthcare system and everyday life.  Common, yet essential, items such as hand sanitizer, disinfectants, and disposable gloves are frequently absent from store shelves.  Healthcare workers across the country report that they are in desperate need for personal protective gear (“PPE”), ventilators, COVID-19 test kits and reagents, disinfectants, and various other medical supplies.  Some healthcare workers in COVID-19 epicenters such as California and New York, have even been advised or forced to use facemasks for three times the recommended length due to shortage concerns.[ii]  In an effort to combat these shortages, on March 17th, President Trump invoked the Defense Protection Act “which authorizes the President to compel American companies to prioritize federal government orders to produce equipment necessary to protect national security over other orders.”[iii]  Thankfully, numerous companies such as Tesla, Brooks  Brothers, and others have already answered the call for assistance in production and supply of PPE and medical equipment.[iv]

          However, even with major efforts to produce and distribute more PPE and other vital medical equipment, problems are still rising.  Another major problem is plaguing our economy, consumer fraud.  Sadly, it is not uncommon for American consumers to read, hear, or be the victim of a fraudulent scheme or price gouging.  And in the face of a global pandemic, fraudulent activity and price gouging is on the rise.  Unfortunately, the efforts of some companies and individuals to assist in resolving the shortages are accompanied by the predatory actions of individuals and businesses who intend to capitalize on the fear of consumers and the desperate need for certain supplies.

          Across the country, complaints are rolling into state attorneys general offices citing numerous violations for excessive price increases on essential and basic items ranging from hand sanitizer and gloves to rice and milk.[v]  This is typically called “price gouging,” which is the deliberate act of excessively pricing necessary consumer goods and services “during any abnormal disruption of the market.”[vi]  In recent weeks, reports of individuals and businesses engaging in price gouging, market allocation schemes, and bid-rigging of precious resources have been surfacing as the outbreak continues.  According to the New York Times, “In Florida, one seller was offering 15 N95 face masks on Amazon—for $3,799.  In Massachusetts, a convenience store was selling milk for $10 a gallon.  And in Minnesota, a smoke shop was charging $79.99 for 36 rolls of toilet paper.”[vii]  These unacceptable actions by individuals and businesses have sparked public outrage and state officials are not taking it lightly.

          The Times stated, “About 40 states have laws against price gouging, some of which were activated by emergency declaration . . . [s]ome of those laws define price-gouging as an increase above a certain amount—such as 20 percent.”[viii]  Prosecutors around the country are considering criminal prosecution for violators, in addition to cease and desist letters already sent.  In  Alabama, Attorney General Steve Marshall warned that businesses and individuals who seek to profit from the health crisis will be subject to Alabama’s Price Gouging Law.[ix]  Those found in violation of the law can be subject to $1,000 per violation, and further, continuing violators may be prohibited from doing business in the state.[x]  Moreover, thirty-three state attorneys generals have sent out letters to eBay, Amazon, Craigslist, Facebook, and Walmart requesting the companies put into place strict policies and procedures to curtail the amount of fraudulent activity taking place on their websites.[xi]  And further requested that they remove and inform the government on vendors and other third parties “who deviate in any significant way from price the product was sold at prior to the onset of the emergency.”[xii]

          Similarly, consumer fraud has become so pervasive in recent weeks that agencies such as Interpol released a statement warning consumers against COVID-19 fraudulent schemes including telephone fraud and phishing email scams, aimed at obtaining consumers’ sensitive information, operating under the guise of coming from national and global health authorities.[xiii]  Similar warnings have been issued by the U.S. Department of Health and Human Services Office of the Inspector General, the Food and Drug Administration, and the Federal Trade Commission.[xiv]

          The Department of Justice is working in tandem with states to combat the rampant issues of fraud and price gouging in the U.S.  On March 9th, Attorney General William P. Barr and the Department of Justice released a statement warning businesses against violating antitrust laws in the manufacturing, distribution, and sale of public health products.[xv]  Attorney General Barr stated, “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time.”[xvi]  According to the DOJ, price-fixing, bid-rigging, market allocation schemes, and anti-competitive conduct by individuals or companies could result in hefty fines and criminal prosecution.[xvii]  On March 22, the Department of Justice released a statement regarding the first federal enforcement action being filed in Austin, Texas against the operators of a fraudulent website.[xviii]  The operators of the website “coronavirusmedicalkit.com” were allegedly engaging in a wire fraud scheme that offered customers a World Health Organization COVID-19 vaccine in exchange for a $4.95 shipping fee, which would be paid by the consumers’ credit card.[xix]  To be clear, there are currently no vaccines for COVID-19, and consumers should be cautious when validating information from unknown and unverified sources.  In responding to the DOJ request, U.S. District Judge Robert Pitman issued a temporary restraining order requiring that the fraudulent website immediately be blocked to public access while an investigation continues.[xx]

          Certainly, more developments will follow concerning cases of fraud during this pandemic.  For now public officials encourage consumers who believe they might be victims of, or have information regarding, price gouging or fraudulent activity to help aid in combating criminal activity by reporting the individual(s) responsible to the National Center for Disaster Fraud.[xxi]  Additionally, tips for consumers to protect themselves from fraudulent schemes can be found on the Department of Justice website.[xxii]  In this public health crisis, we as citizens are responsible not only for practicing good hygiene and social distancing but also protecting the consumers.


[i] Rosie Perper et al., More Than Half of the US Population Is Now Under Orders to Stay Home — Here’s a List of Coronavirus Lockdowns in US States and Cities, Business Insider (March 31, 2020 11:57 PM), https://www.businessinsider.com/states-cities-shutting-down-bars-restaurants-concerts-curfew-2020-3.

[ii] Abby Vesoulis, ‘I’m Mentally and Physically Exhausted.’ Healthcare Workers Battling Coronavirus Are Running Out of Protective Gear, TIME, (March 24, 2020 2:30 PM), https://time.com/5808992/healthcare-workers-lack-ppe/.

[iii] Id.

[iv] Marguerite Ward, Tesla, Apple, and Ford Are Stepping Up to Address Global Shortages of Ventilators, Hand Sanitizer, Face Masks, and Gowns. Here’s a Running List of Companies Helping Out., Business Insider (April 6, 2020 9:39 AM), https://www.businessinsider.com/coronavirus-companies-helping-meet-shortages-of-ventilators-gowns-masks-hand-sanitizer-healthcare.

[v] Michael Levenson, Price Gouging Complaints Surge Amid Coronavirus Pandemic, N.Y. Times (March 27, 2020), https://www.nytimes.com/2020/03/27/us/coronavirus-price-gouging-hand-sanitizer-masks-wipes.html.

[vi] N.Y. Gen. Bus. Law § 396-r (McKinney 2008).

[vii] Levenson, supra note 5.

[viii] Id.

[ix] News Release, Attorney General Steve Marshall Warns Those Who Seek to Illegally Profit from State Public Health Emergency that Alabama’s Price Gouging Law Is in Effect, Ala. Off. of the Att’y Gen. (March 19, 2020), https://www.alabamaag.gov/newsviewer/8b5c94b6-91bd-4289-83ec-e09c5aa0c6f7.

[x] Id.

[xi] Letter from National Association of Attorneys General (March 25, 2020), https://www.naag.org/assets/redesign/files/Consumer%20Protection%20-%20Online%20Retail%20Price%20Gouging%20Letter.pdf.

[xii] Id.

[xiii] INTERPOL Warns of Financial Fraud Linked to COVID-19, INTERPOL (March 13, 2020), https://www.interpol.int/News-and-Events/News/2020/INTERPOL-warns-of-financial-fraud-linked-to-COVID-19.

[xiv] See Covid-19 Fraud Alert, U.S. Dep’t of Health and Hum. Serv., Off. of Inspector Gen. (March 23, 2020), https://oig.hhs.gov/coronavirus/fraud-alert-covid19.asp?utm_source=web&utm_medium=web&utm_campaign=covid19-fraud-alert (“alerting the public about fraud schemes related to the novel coronavirus”); Seven Coronavirus Scams Targeting Your Business, F.T.C. (March 25, 2020), https://www.ftc.gov/news-events/blogs/business-blog/2020/03/seven-coronavirus-scams-targeting-your-business?utm_source=govdelivery (warning both individuals and businesses from “Coronavirus-related scams”); Fraudulent Coronavirus Disease 2019 (COVID-19) Products, F.D.A. (last visited May 3, 2020), https://www.fda.gov/consumers/health-fraud-scams/fraudulent-coronavirus-disease-2019-covid-19-products (“issuing warning letters to firms for selling fraudulent products”).

[xv] Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Products, U.S. Dep’t of Just., Off. of Pub. Aff. (March 9, 2020), https://www.justice.gov/opa/pr/justice-department-cautions-business-community-against-violating-antitrust-laws-manufacturing.

[xvi] Id.

[xvii] Id.

[xviii] Justice Department Files Its First Enforcement Action Against COVID-19 Fraud, U.S. Dep’t of Just., Off. of Pub. Aff. (March 22, 2020), https://www.justice.gov/opa/pr/justice-department-files-its-first-enforcement-action-against-covid-19-fraud.

[xix] Id.

[xx] Id.

[xxi] Combatting COVID-19 Fraud, U.S. Dep’t of Just. (May 1, 2020), https://www.justice.gov/coronavirus/combattingfraud.

[xxii] Id.

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