Covid Consumer Protection Act

Many healthcare companies and individuals are trying to advantage of the fears Americans have about the deadly COVID-19 pandemic. These companies and people are claiming that their drugs and products provide cures and treatments when they do not. In general, all drugs and remedies that claim to prevent, treat, mitigate or diagnose the virus must first be approved by the US Federal Drug Administration (FDA).

Now, these claims are subject to review by the US Department of Justice and the FTC for being deceptive. The Covid Consumer Protection Act is part of the 2021 Consolidated Appropriations Act. According to the Federal Trade Commission (FTC), the Act provides that during the COVID-19 health crisis (and pursuant to the Public Health Service Act), the Covid Consumer Protection Act makes it unlawful

“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.”

Any violation of the Covid Consumer Protection Act will “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.”

The COVID-19 Consumer Protect Act became law in December 2020. Anyone who violates the Act may be subject to civil penalties, injunctive relief, and other applicable FTC remedies.

The first Covid-19 Consumer Protection Act enforcement action

The US Department of Justice, Office of Public Affairs, followed up the passage of the Covid Consumer Protection Act with an announcement on April 15, 2021, that the DOJ and the FTC would be working together to stop deceptive marketing of treatments that purport to be effective for managing COVID-19. The US DOJ and FTC announced on April 15, 2020, that they had filed their first complaint against two defendants – Eric Anthony Nepute and Quickwork LLC, doing business as Wellness Warrior for violation of the Covid-19 Consumer Protection Act.

The complaint was filed in the US District Court for the Eastern District of Missouri. The complaint alleges that the defendants claimed their nutritional supplements – of zinc and vitamin D – could prevent or treat COVID-19 even though there is no reliable scientific evidence to support their claims. The US DOJ and FTC also claim that the defendants “allegedly advertised without scientific support that their supplements were equally or more effective therapies for COVID-19 than the currently available vaccines.”

The FTC enforcement action seeks to impose civil penalties and requests injunctive relief to force the defendants to cease making these deceptive advertising claims. The joint DOJ/FTC complaint also claims the defendants violated the FTC Act, which makes unfair and deceptive conduct, and false advertising illegal.

Acting Assistant Attorney General Brian M. Boynton of the DOJ’s Civil Division said that “the Justice Department is committed to preventing the unlawful marketing of unproven COVID-19 treatments. “The Justice Department is committed to preventing the unlawful marketing of unproven COVID-19 treatments.”

Rebecca Kelly Slaughter, the acting chairwoman of the FTC said that the claims by the defendants that their products can be used instead of the approved COVID-19 vaccines are especially troubling. She added, “With this case, the Commission has quickly put to use its new authority to stop false marketing claims related to the pandemic.”

The Consumer Protection Branch of the DOJ enforces laws that protect Americans’ health, safety, economic security, and identity integrity. The Branch has the authority to file civil and criminal cases. The Branch works with the U.S. Attorneys’ Offices and investigative agencies. The areas of enforcement by the Consumer Protection Branch include:

• Pharmaceuticals and Medical Devices
• Complex Consumer Fraud
• Food and Dietary Supplements
• Deceptive Practices, Telemarketing, and Data Privacy
• Consumer Product Safety and Tampering
• U.S. Service members and Veterans Fraud
• Class Action Fairness Act
• Tobacco Products

Subsequent DOJ/FTC actions based on the Covid Consumer Protection Act

The Covid Consumer Protection Act applies to all deceptive products – including, but not limited to, supplements and health claims. In one case, the FTC filed a claim because a defendant improperly claimed it could deliver N95 facemasks quickly.

In another case, the FTC filed a lawsuit against a company based in Utah for false claims that its nasal spray prevented and treated COVID-19. The FTC filed the lawsuit against Xlear, Inc. claiming that the company violated the COVID-19 Consumer Protection Act. The FTC claimed that the company falsely claimed that its saline nasal spray was an effective way to prevent and treat the deadly disease.

The FTC filed the lawsuit against Xlear, Inc. and the owner of Xlear, Inc. The FTC, pursuant to its Section 18 authority, is requesting that the federal court order the defendants to pay civil penalties. The FTC is also seeking an injunction against the defendants from “continuing to make such false and unsupported claims.” As with the first COVID-19 Consumer Protection complaint, the US DOJ filed the complaint on behalf of the FTC.

The Director of the FTC’s Bureau of Consumer Protection said, “Companies can’t make unsupported health claims, no matter what form a product takes or what it supposedly prevents or treats.” He added that the lawsuit hopes to convince people that they should rely on qualified medical professionals and not on advertising.

“Xlear, Inc. sells products including nasal sprays, dental care products, and sweeteners. The company’s nasal sprays marketed under the Xlear Sinus Care brand contain, among other things, xylitol and grapefruit seed extract. Xlear sells these sprays on Amazon.com and through retailers like Rite-Aid, CVS, Walgreens, and Target.”

The FTC asserts that Xlear, Inc. and the founder and president, Nathan Jones, claimed that the nasal sprays provide several hours’ worth of protection from coronavirus infection. The company and founder assert the sprays are “a simple, safe, and cheap option that could be an effective solution to the pandemic.”

Xlear, Inc. and Mr. Jones made these claims on websites and several major social media accounts, on local TV stations, and on podcasts.

There is no scientific support for these claims. No clinical trials were conducted on the nasal sprays. The lawsuit by the FTC also claims that the defendants misrepresented the relevance of a few scientific studies. The FTC sent an original warning letter in July 2010. When the defendants failed to remove the claims even though they agreed to do so, the FTC decided to file the civil lawsuit in the US District Court for the District of Utah. The case will now be heard in federal court.

According to the FTC, the agency “works to promote competition, stop deceptive and unfair business practices and scams, and educate consumers.”

States are also filing claims based on the Consumer Protection Act

Washington State filed a lawsuit against a Seattle company, in July 2020, that claimed the company and its owner sold a Covid-19 vaccine. The state attorney general filed a lawsuit against the company, North Coast Biologics, and its owner after the defendants failed to respond to a cease-and-desist letter. The lawsuit claims the owner violated the Consumer Protection Act when he made unsupported claims and when he administered the supposed “vaccine” to dozens of Washingtonians (about 30 people) for $400 each – without evaluating the “vaccine’s safety or effectiveness. The owner promoted the vaccine on his Facebook account.

The attorney general’s lawsuit asserts that the company and the owner violated the Consumer Protection Act by:

• “Misrepresenting the health benefits of the purported “vaccine” they developed and marketed,
• Claiming that the product they developed could vaccinate consumers against COVID-19 without adequate scientific evidence to support these claims,
• Offering a so-called “vaccine” without adequately testing the product’s effectiveness or safety,
• Claiming that Stine [the owner] himself was immune from COVID-19 without adequate scientific evidence, and
• Offering to cure a human disease, ailment, or condition without a medical license.”

The lawsuit seeks civil penalties, restitution, legal costs and fees.  The lawsuit also seeks injunctive relief. There is a $2,000 per individual penalty for each violation of the Consumer Protection Act.

The FTC Act – section 18

The authority of the FTC to obtain a monetary recovery is based on Section 18 of the FTC Act. That Act provides as follows:

“Under Section 18 of the FTC Act, 15 U.S.C. Sec. 57a, the Commission is authorized to prescribe “rules which define with specificity acts or practices which are unfair or deceptive acts or practices in or affecting commerce” within the meaning of Section 5(a)(1) of the Act. Among other things, the statute requires that Commission rulemaking proceedings provide an opportunity for informal hearings at which interested parties are accorded limited rights of cross-examination. Before commencing a rulemaking proceeding, the Commission must have reason to believe that the practices to be addressed by the rulemaking are “prevalent.” 15 U.S.C. Sec. 57a(b)(3).”

Once a regulation pursuant to Section 18 is promulgated, violators “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule” are liable for civil penalties. The FTC enforces these penalties by filing a lawsuit in federal district court. Anyone who violates a rule (regardless of their state of knowledge) “is liable for injury caused to consumers by the rule violation.”

General guidelines for healthcare companies and health providers – regarding the Covid Consumer Protection Act

Medical companies and physicians always need to be concerned when they make any claims that indicate their products are essentially – drugs. Any claims that drugs can diagnose, prevent, cure, treat, or mitigate any disease – without reliable scientific evidence – may result in warning letters of complaints from the FDA, the FTC, and the DOJ.

• Claims regarding healthcare for COVID-19 illnesses or complications are especially suspect.
• Claims that can lead to compliance warning letters or complaints include healthcare claims and any type of deceptive practice.
• The monetary penalties may include reimbursement of any money received from consumers along with civil fines.
• Any medical company or health provider who receives an FDA or FTC complaint should speak with an experienced healthcare lawyer as soon as possible. FDA and FTC both normally give defendants a very short time to respond.

Medical companies and doctors should contact Cohen Healthcare Law Group, PC to discuss the COVID-19 Consumer Protection Act, the FTC Act, and other laws that affect COVID-19 vaccinations and medical treatments. Our experienced healthcare attorneys explain the relevant COVID compliance laws.