Blumenthal Warns Consumers About Rising COVID Fraud & Calls for Strengthening FTC Authority to Hold Scammers Accountable

[WASHINGTON, D.C.] — In his first hearing as Chair of the Senate Commerce, Science, and Transportation Subcommittee on Consumer Protection, Product Safety, and Data Security, U.S. Senator Richard Blumenthal (D-CT) spotlighted the rising instances of frauds and scams related to the COVID-19 pandemic. To curb this rise, Blumenthal called for strengthening the Federal Trade Commission (FTC), including restoring its 13(b) authority to ensure consumers get their money back when they fall victim to a scam.

“This year of heartbreak for Americans has also been a break out year for the swindlers and con-artists. They have seen it as a bonanza and in fact, they have made it a bonanza,” said Blumenthal in his opening remarks.

“[R]eports show the results of a flooding of online marketplaces with fake personal protective equipment, sophisticated counterfeits, and other kinds of frauds. These sophisticated counterfeits have infiltrated the supply chain, often unchecked by big tech platforms, putting unsuspecting consumers and health care workers at risk. It truly has become a matter of life and death,” Blumenthal continued, later holding up two nearly-identical 3M face masks that have consumers have been able to buy online, one real and one counterfeit.

The FTC recorded 460,000 reports of consumer fraud in the past year related to COVID-19, with all reported fraud and scams costing consumers $3.3 billion. This represents a 45 percent increase year to year in the number of reports and an 83 percent rise in money consumers lost.

Blumenthal criticized the lagging speed at which online platforms identify and take down fake COVID cures, stating: “They’ve done too little too late, and then often only as a result of vigorous prodding, in fact very strong kicks by consumer advocates and members of Congress as well as state AGs, hucksters like Joseph Mercola have spread medical misinformation to millions denying the science of COVID-19 while reaping profit windfalls, selling expensive vitamins and supplements as cures.” Blumenthal held up a bottle of Joseph Mercola’s Vitamin C supplement that, despite FDA warnings, is still available for purchase online and advertised by Mercola as a recommended alternative to the COVID-19 vaccine.

Blumenthal emphasized that the FTC must exercise its full authority, including new penalties recently provided by Congress through the COVID-19 Consumer Protection Act, to curb this rise in scams, by creating “deterrents through hefty legal penalties and strict court orders and it needs to refer for criminal action, more often and more effectively these kinds of cases.”

Blumenthal stated that Congress should look toward legislative reform to “bolster and support the FTC, providing more legal tools and resources where necessary to defend consumers.” He added the first step in bolstering FTC’s authority is restoring its 13(b) authority, saying: “[A] first step to ensure that the FTC can get consumers’ money back when they are scammed, we need to restore 13(b) authority which was taken away by the Supreme Court when it caved to a shadowy campaign to disarm the FTC. Unless Congress acts, the FTC will have in effect both hands tied behind its back.”

Blumenthal also stressed the importance of reforming Section 230 immunity that social media platforms enjoy in the context of consumer protection: “[w]e need to reexamine and revise Section 230 to enable victims to go against the platforms as well.”

The transcript of Blumenthal’s opening remarks is available below.

Blumenthal: Thank you so much for joining us, all who are watching and who are witnesses, particularly thank you for being here today whether in person or remotely and I want to say a special thanks to the Ranking Member Senator Blackburn.

This subcommittee has been traditionally very, very bipartisan and we are beginning our hearings today in a very bipartisan way. The witnesses that we have before us are the result of a bipartisan consensus and there is nothing partisan about consumer protection. We all want to protect against the abuses and deception and lies that all too often we see in the marketplace.

We are completing a year of unimaginable heartbreak and hardship for all Americans. A year of pandemic crisis, health care crisis, and consumer crisis. This year of heartbreak for Americans has also been a break out year for the swindlers and con-artists. They have seen it as a bonanza and in fact, they have made it a bonanza. There have been 460,000 reports of consumer fraud [as a result of COVID-19 related fraud] according to the FTC at a cost of more than $411 million, which represents a 45 percent increase in the numbers of reports, 83 percent rise in the dollars lost.

So these reports show the results of a flooding of online marketplaces with fake personal protective equipment, sophisticated counterfeits, and other kinds of frauds. These sophisticated counterfeits have infiltrated the supply chain, often unchecked by big tech platforms, putting unsuspecting consumers and health care workers at risk. It truly has become a matter of life and death.

As consumers have grown more fearful for their safety, social media platforms have become a megamall for snake oil peddlers hawking fake cures and prevention. These platforms have been way too slow to respond. They’ve done too little too late, and then often only as a result of vigorous prodding, in fact very strong kicks by consumer advocates and members of Congress as well as state AGs, hucksters like Joseph Mercola have spread medical misinformation to millions denying the science of COVID-19 while reaping profit windfalls, selling expensive vitamins and supplements as cures. One of them, he has advertised is his Vitamin C liposomal with his name which he has said will successfully fight COVID and advise people to take it rather than take the vaccine.

To this day, despite FDA warnings, he tells consumers you likely don’t need a vaccine, in fact he creates false fears about the vaccine, and then he offers these supplements such as Vitamin C, as prevention strategies, and treatments readily available. They’ve been shown, he says, to be effective. Of course, he’s not only playing fast and loose, he’s lying.

In protective equipment, we’ve seen similar kinds of scams. Real and fake protective equipment, which endangers lives. It literally puts lives at risk because the fake 3M devices are no substitute for the real ones. Not only have the social media platforms been enablers, knowing and recklessly enabling these kinds of frauds to occur, but they’ve also been laggard and lacking in taking action when they had fair notice that many of these frauds were exploiting their platforms. The Federal Trade Commission has been a line of defense but all too often, what we’ve seen is warnings rather than court action.

The time for warnings is over. The FTC must go to court against wrongdoings. It needs to create deterrents through hefty legal penalties and strict court orders and it needs to refer for criminal action, more often and more effectively these kinds of cases.

The perpetrators of these frauds don’t like to pay money. They don’t like to pay penalties, they don’t like to pay restitution, but most important they don’t like to be behind bars, and that’s what the FTC has to see. More than baring its teeth, this agency has to use those teeth through the penalties that have been provided, new penalties provided most recently by Congress.

So we need to bolster and support the FTC, providing more legal tools and resources where necessary to defend consumers and as a first step to ensure that the FTC can get consumers’ money back when they are scammed, we need to restore 13(b) authority which was taken away by the Supreme Court when it caved to a shadowy campaign to disarm the FTC. Unless Congress acts, the FTC will have in effect both hands tied behind its back. Over the last four years, the FTC has secured over $11 billion in refunds for consumers, there is approximately $1.8 billion of American money at stake right now and I hope that Congress will act promptly and effectively to restore that authority.

Let me just say in summary, the path forward seems clear, the FTC must act more swiftly to stop scams, perhaps going to court without Department of Justice authority, it has to seek financial penalties against wrongdoing more vigorously, it has to hold the platforms accountable for aiding scams and in that regard we need to reexamine and revise Section 230 to enable victims to go against the platforms as well. And the FTC needs to work with law enforcement to bring criminal penalties as a deterrent.

There’s a lot of work ahead and I look forward to tackling it in combination with the ranking member Senator Blackburn. Again my thanks for your leadership over the years, Senator, and I turn to you.

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