Combatting Covid Through . . . Consumer Protection? a Multi-jurisdictional Approach to Protecting Public Health Through Enforcement of Consumer Fraud Laws

• Jurisdiction: United States,Federal
• Author: Written by Christina Tusan, William Pletcher, and Alex Bergjans
• Publication year: 2022
• Citation: Vol. 32 No. 1

COMBATTING COVID THROUGH . . . CONSUMER PROTECTION? A MULTI-JURISDICTIONAL APPROACH TO PROTECTING PUBLIC HEALTH THROUGH ENFORCEMENT OF CONSUMER FRAUD LAWS

Written by Christina Tusan, William Pletcher, and Alex Bergjans¹

I. INTRODUCTION

We have been impressed, unfortunately, with the ability of the SARS-CoV-2 virus, as well as associated scams, to mutate into succeeding waves of variants over the ongoing course of the pandemic. Courts also have long recognized the ability of frauds to evolve to ever-changing conditions.² The novel, global, and multiyear nature of the COVID-19 crisis—along with the evolving scientific consensus and shifting regulatory environment regarding COVID-19 testing and treatment—allowed enterprising scammers to engage in deceptive and unlawful business practices that existing legal authority and tools were not specifically designed to address.

Fortunately, the adaptability of consumer protection laws—often described as sweeping in scope³—made them an effective tool for addressing new consumer frauds that rapidly developed in the face of the COVID-19 pandemic. This emergency demanded that consumer protection prosecutors and regulators creatively use this existing, adaptable authority to find ways to protect the public from deceptive and, at times, dangerous business practices. It also created the opportunity for prosecutors, regulators, and policymakers to reevaluate and rethink ways that consumer protection laws should be adjusted to more effectively protect the public during the long-term and global environmental and public health emergencies we will face in the future.

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This article will discuss: (1) the unfair and deceptive business practices that arose in the COVID-19 pandemic, (2) the consumer protection tools and authorities available to combat those practices, (3) how federal, state, and local regulators and prosecutors used existing consumer protection authority—such as California's Unfair Competition and False Advertising Law, the Federal Trade Commission Act, and other states' Unfair & Deceptive Acts and Practices laws—to halt and deter COVID-19-related unlawful business activities, and (4) how consumer protection tools can be improved to better respond to future crises.

II. THE NOVEL CORONAVIRUS ARRIVES IN THE UNITED STATES; COVID-19 RELATED UNLAWFUL AND DECEPTIVE BUSINESS PRACTICES FOLLOW

In December 2019, health officials identified an outbreak of a deadly respiratory illness caused by SARS-CoV-2, a novel coronavirus, in Wuhan City, China.⁴ In late January 2020, the Centers for Disease Control and Prevention ("CDC") confirmed the first case of COVID-19 in the United States.⁵ On January 31, 2020, the U.S. Secretary of Health and Human Services declared the SARS-CoV-2 virus a public health emergency, and the White House 2019 Novel Coronavirus Task Force announced new travel policies to be effective on February 2, 2020.⁶ In early March 2020, after more than 1,600 Americans were diagnosed with the disease,⁷ the World Health Organization declared COVID-19 a pandemic.⁸ The federal government declared a national state of emergency⁹ and state and local governments quickly followed with their own emergency declarations.¹⁰

Policymakers at all levels of government issued orders and implemented guidelines aimed at "flattening the curve" and slowing the spread of COVID-19 to keep hospitals and healthcare facilities from being overwhelmed by patients infected with this highly contagious disease.¹¹ New York State, which suffered the largest outbreak in the early pandemic, shut down schools on March 16, 2020 and bars and restaurants the following day.¹² On March 19, 2020, the Governor of California and the Los Angeles County Board of Supervisors issued emergency "Safer at Home" orders mandating that residents shelter in place except to engage in "essential activities" like buying food or medicine.¹³ New York followed suit one day later when it ordered that all non-essential workers stay home.¹⁴

A vital element of all COVID-19 mitigation and suppression strategies was testing for the disease and isolating those who contracted it or were in close contact with an infected person. However, tests were not readily available in California or nationwide during the first several months of the pandemic. For example, as of March 11, 2020—a whole week after California declared a public health emergency—the Los Angeles Times reported that only 1,138 people in California had received a COVID-19 test in a public health lab and the state only had an additional 7,675 tests available for its approximately 40 million residents.¹⁵ The media reported on national testing shortages well into the summer of 2020, months after the federal government first declared a state of emergency.¹⁶

Mass public fear, confusion, and uncertainty accompanied the arrival of COVID-19 in the United States. Early in the pandemic, doctors, public health officials, and the pharmaceutical industry had not yet developed therapeutics effective against COVID-19.¹⁷ In turn, many members of the fearful public bulk-purchased various purported "treatments" of dubious efficacy in an effort to protect and treat themselves and their families. The public fear was exacerbated by the fact that at the beginning of the state of emergency scientists and public health officials did not know precisely how the novel coronavirus spread.¹⁸ One of the popular early theories was that the virus spread through infection by "fomites"—inanimate objects such as packages, doorknobs, and surfaces helping to spread infection, indirectly, from person-to-person.¹⁹ The fear of fomite transmission led to a nationwide run on and subsequent shortage of

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disinfectant products, along with related price gouging of those products.²⁰

COVID-19 illustrated that public health emergencies can quickly transform into consumer protection emergencies. Deceptive business practices thrive in atmospheres of confusion and fear. Scarcity, real or perceived, promotes price gouging. And desperate consumers are more likely to buy products and services advertised with promises and representations that are too good to be true than they would in calmer situations where they can exercise more scrutiny. The pandemic produced significant opportunities for enterprising scammers and unscrupulous businesses to advertise and sell unauthorized COVID-19 test kits and fake COVID-19 cures and treatments, as well as to price-gouge essential products and services.²¹

A. UNLAWFUL SALES OF UNAPPROVED COVID-19 TEST KITS

Some of the earliest and most prominent consumer-facing scams that arose from the COVID-19 pandemic were the advertising and selling of unauthorized "home" COVID-19 test kits.

At the beginning of the pandemic, the Department of Health and Human Services ("HHS") and the Food and Drug Administration ("FDA") took steps to increase the supply and availability of COVID-19 tests. HHS declared a state of emergency and invoked Section 564 of the Food, Drug, and Cosmetic Act, which allowed the FDA to issue Emergency Use Authorizations EUAs allowing for the development, distribution, and use of medical products, including COVID-19 tests, that the FDA had not formally approved under its normal procedures.²² Because of the novelty of the virus and the need to make available hundreds of millions of tests for it, the FDA was required to engage in a delicate balancing act of simultaneously promoting the creation of a new industry while ensuring that the testing products met standards of scientific accuracy and reliability.

To do so, the FDA issued its Policy for Diagnostic Tests for Coronavirus Disease-2019 ("Interim Guidelines") governing the manufacture and distribution of COVID-19 tests developed under the EUA process, including tests that applied for but had not yet obtained EUA approval. The Interim Guidelines announced the FDA's policies regarding the development and use of COVID-19 tests in four sections:

• Section IV.A: clinical labs developing tests and the process for received Emergency Use Authorization;
• Section IV.B: states setting their own validation standards;
• Section IV.C: commercial manufacturers of diagnostic tests that are provided to laboratories or healthcare providers prior to EUA submission; and
• Section IV.D: commercial manufacturer development and distribution, and lab development and use of serology tests prior to or without an EUA.²³

Reflecting the need for testing capacity, the policies permitted manufacturers of COVID-19 tests to sell, use, and distribute them even before the FDA granted an EUA application, provided that an application for the device was filed with appropriate validation paperwork.²⁴

Although it generally exercised regulatory flexibility, the FDA's policy drew certain bright lines, most notably the requirement that the use of tests under the policy be limited to laboratories or at the "point-of-care,"²⁵ and not at home unless expressly authorized by the FDA. Due to the FDA's concerns about the sensitivity of the tests, the difficulty and potential danger of having individuals self-collect saliva and/or nasal tissue, and (in the case of serology or blood tests) the reliability of the tests themselves,²⁶ the FDA had "not authorized any COVID-19 test to be completely used and processed at home" even months after the state of emergency was declared.

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Despite the best efforts of the FDA and other public health authorities, "tests of 'frankly dubious quality'" flooded into the stream of commerce, leading to false positives and false negatives.²⁷ The purveyors of these unreliable and unauthorized test kits relied on the FDA's regulatory flexibility (and the accompanying uncertainty) to dupe consumers into believing that their tests were approved or otherwise permitted by the FDA. They also filled an unmet demand for "home" test kits that would allow customers to diagnose the disease while socially distancing and self-isolating.

The early pandemic saw a wave of unauthorized...