Blumenthal Chairs Hearing on COVID-19 Fraud & Price Gouging

[WASHINGTON, D.C.] – Today, U.S. Senator Richard Blumenthal (D-CT), Chair of the Senate Commerce, Science, and Transportation Subcommittee on Consumer Protection, Product Safety, and Data Security, convened a hearing titled, “Stopping COVID-19 Fraud and Price Gouging,” During the hearing, senators and witnesses examined the ongoing scams and price gouging related to the COVID-19 pandemic, highlighted education efforts to ensure consumers are aware of such scams, and explored proposals to strengthen FTC enforcement against unfair and deceptive practices.

In his opening remarks, Blumenthal shared the story of a Shelton, Connecticut resident whose son paid $60 for a rapid COVID test after waiting for hours at multiple locations and was told all tests were out of stock.

“He needed a test because he was potentially a danger to his older parents. He and the son went to a walk in test facility, waited in line for 45 minutes before they were told no more tests. They went to another facility, waited for 50 minutes, no more tests. And they were told the only tests left were rapid tests available to purchase for $60,” said Blumenthal.

“You are being taken advantage of, you’re being exploited, and what’s happening to you is unconscionable,” Blumenthal said of the Shelton family and other consumers who have faced difficulties. “Taking advantage of people by raising the costs of these lifesaving products is not only immoral, in most states it is a crime.” 

With consumers inundated with sophisticated scams, online marketplaces rife with counterfeit PPE and treatments, and companies charging exorbitant prices for tests, Blumenthal highlighted stronger efforts needed to bring scammers and price gougers to justice.

“We need to impose steep financial penalties and absolutely bring criminal charges,” said Blumenthal. “I’ve said this in a variety of others contexts – the one thing that these companies understand is prison time and criminal charges. Profiteering during a pandemic is reprehensible, it costs lives, it must end…For these criminals, only prison time will act as a deterrent.” 

Blumenthal also discussed the lack of enforcement at the federal level and the limited legal tools the Federal Trade Commission (FTC) and Department of Justice (DOJ) have to hold wrongdoers accountable. While the FTC has received more than 700,000 complaints and it’s estimated consumers have lost upwards of $700 million since the start of the pandemic, the FTC has only brought three cases against scammers since Congress passed a law in December 2020 giving the agency more tools to levy stiffer financial penalties.

“I am deeply frustrated and disappointed that federal enforcers have failed to do more and a large part of the problem is almost certainly lack of sufficient authority. And that’s why I will be proposing a measure that will fill that gap, that will enable federal enforcers to do more, and protect consumers in Connecticut from these price gougers and scammers,” said Blumenthal. “Our consumer protection laws are dead letter if they are unenforced, and the Federal Trade Commission has to do more, has to do better, has to be more vigorous and assertive.”

“This fraud, this undermining of our pandemic response, is happening because there are nearly no consequences. The burden is falling on consumers. These bogus testing centers, counterfeit facemasks, and deceptive marketing schemes are crimes. I expect more enforcement and so does the American people.”

Video of Blumenthal’s opening remarks can be found here and the transcript is copied below.

U.S. Senator Richard Blumenthal (D-CT): The Subcommittee on Consumer Protection of the Commerce Committee will come to order. I want to welcome our witnesses and thank Chair Maria Cantwell and Ranking Member Roger Wicker who is with us and especially my partner in this effort, Senator Blackburn whose leadership has been very important throughout our subcommittee process today, no less than in our past meetings. She’s played an important role and I want to thank our witnesses for being here as well.

Nothing could be more important right now than protecting consumers against the spreading scourge of price gouging and scamming on the internet and elsewhere relating to COVID prevention and treatment products. Connecticut alone has received more than 800 complaints, including one from a constituent of mine in Shelton, Connecticut, Julius Hull, whose son tried to get a test. He needed a test because he was potentially a danger to his older parents. He and the son went to a walk in test facility, waited in line for 45 minutes before they were told no more tests. They went to another facility, waited for 50 minutes, no more tests. And they were told the only tests left were rapid tests available to purchase for $60.

As Mr. Hull put it to me, “We’re being told to wear masks, get vaccinated, keep social distances and get tested if you have any symptoms. We’ve done this and get hit with a $60 bill. I don’t know who put the price of these tests at $60 each, but I believe we’re being taken advantage of.”

Yes, Mr. Hull, you are being taken advantage of, you’re being exploited, and what’s happening to you is unconscionable and I would say the same thing to every one of those 800 people who have complained about similar practices. $60 per test is ridiculous. Taking advantage of people by raising the costs of these lifesaving products is not only immoral, in most states it is a crime.

State attorneys general are stepping up bringing cases where they can, but it’s a national challenge and I will be very blunt, there is a glaring lack of enforcement at the federal level. The federal government, including Federal Trade Commission and the Department of Justice have few legal tools to hold price gougers accountable. That is a glaring gap in the law that needs to be corrected. I am deeply frustrated and disappointed that federal enforcers have failed to do more and a large part of the problem is almost certainly lack of sufficient authority.

And that’s why I will be proposing a measure that will fill that gap, that will enable federal enforcers to do more, and protect consumers in Connecticut from these price gougers and scammers. We need to impose steep financial penalties and absolutely bring criminal charges. I’ve said this in a variety of others contexts. The one thing that these companies understand is prison time and criminal charges. Profiteering during a pandemic is reprehensible, it costs lives, it must end.

Last year, the subcommittee held a hearing on scams and fraud exploiting the pandemic. We heard then that the pandemic has created a bonanza for swindlers and con artists. The theft continues. The FTC has received nearly 700,000 reports of fraud since the start of the pandemic, approaching $700 million lost. At each new phase of the pandemic, consumers have been inundated with more sophisticated scams. Online marketplaces are still rife with fake facemasks, sophisticated counterfeits are still infiltrating our supply chain, putting unsuspecting consumers and health care workers at risk and social media platforms are still a megamall for snake oil salesmen hawking fake cures and prevention measures. It’s not a small change theft. People are going unvaccinated because of the commercial misinformation from these snake oil salesmen and then contracting COVID-19 and dying.

So we’ve seen a new trend. An entirely new paradigm of fake or deceptive testing schemes during this recent surge. Bogus testing centers that promise quick result and left consumers waiting for days. In some cases the results are not even real, again, these scams cost lives.

The purpose of this hearing is to sound alarm, raise a fed flag, create awareness about the surge of scams. But it’s also to ensure that those who steal from consumers and put them at risk are brought to justice. Our consumer protection laws are dead letter if they are unenforced, and the Federal Trade Commission has to do more, has to do better, has to be more vigorous and assertive, it has failed to create deterrents through hefty fines and strict court orders. And it must do more.

In December of 2020, Congress gave the FTC new legal tools to help bring stiff financial penalties against fraud. I want to recognize Chair Cantwell’s substantial leadership on that law which I was pleased to help lead. We urged the commission to fight harder, we gave it more funding. Last year the acting director of the Bureau of Consumer Protection told us that it had, “cases in the pipeline,” and yet the FTC has brought two cases in the last ten months since that hearing. Three in total under the new law.

However, the FTC continues to issue warning letters that are nothing more than a notice and not even a slap on the wrist. They don’t rise to that level. Again, this fraud, this undermining of our pandemic response is happening because there are nearly no consequences. The burden is falling on consumers. These bogus testing venters, counterfeit facemasks, and deceptive marketing schemes are crimes. I expect more enforcement and so does the American people.

I expect the FTC to refer cases to the Department of Justice and collaborate with states for criminal prosecution. For these criminals, only prison time will act as a deterrent. I look forward to hearing from the witnesses about what else can be done and should be done to protect consumers and I look forward to collaborating with colleagues on both sides of the aisle to stop price gouging, hold online market place scammers accountable, and ensure that our laws are enforced.

-30-