Stopping COVID–19 Fraud and Price Gouging
Summary
A hearing before the Subcommittee on Consumer Protection, Product Safety, and Data Security of the Committee on Commerce, Science, and Transportation, United States Senate, on February 1, 2022, titled Stopping COVID–19 Fraud and Price Gouging. Hon. Richard Blumenthal presided. The listed witnesses include Teresa Murray, Consumer Watchdog Director, U.S. Public Interest Research Group, and Todd Leatherman, Program Counsel for the National Attorneys General Training and Research Institute, along with the Director of the Bureau of Consumer Protection at the Federal Trade Commission. The appendix has responses to written questions submitted by Hon. Ben Ray Luján, including answers about price gouging statutes and what steps the Federal government can take to fight the practice.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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- Congressional materials
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- Chrg 117Shrg55075
Cite this document
“Stopping COVID–19 Fraud and Price Gouging.”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/chrg-117shrg55075/
, SHA-256 1bf29ea08247ffc6b0b105dc80435eb9b2c0e57c0bfbaac5ea7be2e50bf89d27.Full text
S. HRG. 117–15
STOPPING COVID–19 FRAUD AND PRICE GOUGING
HEARING
BEFORE THE
SUBCOMMITTEE ON CONSUMER PROTECTION,
PRODUCT SAFETY, AND DATA SECURITY
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
FEBRUARY 1, 2022
Printed for the use of the Committee on Commerce, Science, and Transportation
(
Available online: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
55–075 PDF WASHINGTON : 2024
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
MARIA CANTWELL, Washington, Chair
AMY KLOBUCHAR, Minnesota ROGER WICKER, Mississippi, Ranking
RICHARD BLUMENTHAL, Connecticut JOHN THUNE, South Dakota
BRIAN SCHATZ, Hawaii ROY BLUNT, Missouri
EDWARD MARKEY, Massachusetts TED CRUZ, Texas
GARY PETERS, Michigan DEB FISCHER, Nebraska
TAMMY BALDWIN, Wisconsin JERRY MORAN, Kansas
TAMMY DUCKWORTH, Illinois DAN SULLIVAN, Alaska
JON TESTER, Montana MARSHA BLACKBURN, Tennessee
KYRSTEN SINEMA, Arizona TODD YOUNG, Indiana
JACKY ROSEN, Nevada MIKE LEE, Utah
BEN RAY LUJÁN, New Mexico RON JOHNSON, Wisconsin
JOHN HICKENLOOPER, Colorado SHELLEY MOORE CAPITO, West Virginia
RAPHAEL WARNOCK, Georgia RICK SCOTT, Florida
CYNTHIA LUMMIS, Wyoming
LILA HELMS, Staff Director
MELISSA PORTER, Deputy Staff Director
GEORGE GREENWELL, Policy Coordinator and Security Manager
JOHN KEAST, Republican Staff Director
CRYSTAL TULLY, Republican Deputy Staff Director
STEVEN WALL, General Counsel
SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY,
AND DATA SECURITY
RICHARD BLUMENTHAL, Connecticut, MARSHA BLACKBURN, Tennessee, Ranking
Chair JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota ROY BLUNT, Missouri
BRIAN SCHATZ, Hawaii JERRY MORAN, Kansas
EDWARD MARKEY, Massachusetts MIKE LEE, Utah
TAMMY BALDWIN, Wisconsin TODD YOUNG, Indiana
BEN RAY LUJÁN, New Mexico
(II)
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CONTENTS
Page
Hearing held on February 1, 2022 ......................................................................... 1
Statement of Senator Blumenthal .......................................................................... 1
Statement of Senator Blackburn ............................................................................ 3
Statement of Senator Wicker .................................................................................. 4
Statement of Senator Cantwell .............................................................................. 5
Statement of Senator Klobuchar ............................................................................ 39
Statement of Senator Markey ................................................................................. 41
Statement of Senator Thune ................................................................................... 43
Statement of Senator Lee ....................................................................................... 45
WITNESSES
Samuel A.A. Levine, Director, Bureau of Consumer Protection, Federal Trade
Commission ........................................................................................................... 7
Prepared statement of the Federal Trade Commission ................................. 8
Teresa Murray, Consumer Watchdog Director, U.S. Public Interest Research
Group .................................................................................................................... 15
Prepared statement .......................................................................................... 17
Mary K. Engle, Executive Vice President, Policy, Better Business Bureau
National Programs ............................................................................................... 25
Prepared statement .......................................................................................... 26
Todd Leatherman, Program Counsel for the National Attorneys General
Training and Research Institute, Center for Consumer Protection, National
Association of Attorneys General ........................................................................ 30
Prepared statement .......................................................................................... 32
APPENDIX
Response to written questions submitted by Hon. Ben Ray Luján to:
Teresa Murray .................................................................................................. 53
Todd Leatherman ............................................................................................. 54
(III)
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STOPPING COVID–19 FRAUD
AND PRICE GOUGING
TUESDAY, FEBRUARY 1, 2022
U.S. SENATE,
SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT
SAFETY, AND DATA SECURITY,
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION,
Washington, DC.
The Committee met, pursuant to notice, at 3:05 p.m., in room
SR–253, Russell Senate Office Building, Hon. Richard Blumenthal,
presiding.
Present: Senators Blumenthal [presiding], Cantwell, Klobuchar,
Markey, Blackburn, Wicker, Thune, and Lee.
OPENING STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator BLUMENTHAL. The Subcommittee on Consumer Protec-
tion of the Commerce Committee will come to order.
I want to welcome our witnesses and thank the 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 meeting. She has played an
important role, and I want to thank our witnesses for being here
as well. Nothing could be more important right now than pro-
tecting 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, in-
cluding one from a constituent of mine in Shelton, Connecticut, Ju-
lius Hull, whose son tried to get a test. He needed a test because
he was potentially a danger to his older parents. He and his 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 are being told to wear masks, get vaccinated, keep so-
cial distances, and get tested if you have any symptoms. We have
done this and get hit with a $60 bill. I do not know who put the
price of these tests at $60 each, but I believe we are being taken
advantage of.’’ Yes, Mr. Hull, you are being taken advantage of,
you are being exploited, and what is happening to you is uncon-
scionable. And I would say the same thing to every one of those
800 people who have complained about similar practices.
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Sixty dollars per test is ridiculous. Taking advantage of people
by raising the cost 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 is a national challenge,
and I will be very blunt. There is a glaring lack of enforcement at
the Federal level. The Federal Government, including the 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 dis-
appointed that Federal enforcers have failed to do more, and a
large part of the problem is almost certainly lack of sufficient au-
thority.
And that is why I will be proposing a measure that will fill that
gap. It will enable Federal enforcers to do more and protect con-
sumers in Connecticut from these price gougers and scammers. We
need to impose steep financial penalties and absolutely bring crimi-
nal charges. I have said this in a variety of other 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 cre-
ated 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
face masks. Sophisticated counterfeits are still infiltrating our sup-
ply chain, putting unsuspecting consumers and healthcare workers
at risk. And social media platforms are still a mega mall for snake
oil salesmen hawking fake cures and prevention measures.
It is not small change theft. People are going unvaccinated be-
cause of the commercial misinformation from these snake oil sales-
men and then contracting COVID–19 and dying. So we have seen
a new trend, an entirely new paradigm of fake or deceptive testing
schemes during this recent surge. Bogus testing centers have prom-
ised quick results 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 the alarm, raise the red
flag, create awareness about the surge of scam, but it is also to en-
sure 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 deterrence through hefty fines and strict court
orders, and it must do more. In December 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 urge the Com-
mission to fight harder. We gave it more funding.
Last year, the Acting Director of the Bureau of Consumer Protec-
tion told us that it had ‘‘cases in the pipeline,’’ and yet the FTC
has brought two cases in the last 10 months since that hearing,
three in total, under the new law. However, the FTC continues to
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issue warning letters that are nothing more than a notice and not
even a slap on the wrist. They do not rise to that level. Again, this
fraud, this undermining of our pandemic response is happening be-
cause there are nearly no consequences. The burden is falling on
consumers. These bogus testing centers, counterfeit face masks,
and deceptive marketing schemes are crimes. I expect more en-
forcement 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 for-
ward to collaborating with colleagues on both sides of the aisle to
stop price gouging, hold online marketplace scammers accountable,
and ensure that our laws are enforced. Thank you again to the
Ranking Member, and I turn to her.
STATEMENT OF HON. MARSHA BLACKBURN,
U.S. SENATOR FROM TENNESSEE
Senator BLACKBURN. Thank you, Mr. Chairman, and I thank you
for the work and I thank your staff for the work. I appreciate that
our staffs are able to work together so well on not only this issue,
but other issues that our subcommittee is addressing, and it is im-
portant to bring some oversight to scams that consumers have
faced. It is absolutely essential that the Federal Government work
with our State partners to crack down on bad actors who threaten
the livelihood of some of the most vulnerable Americans.
Fraudsters have gotten quite creative with their schemes during
the pandemic. I think we have all been a little bit amazed with
some of what we have discovered that they are doing. Whether it
is through taking advantage of elderly citizens or advertising and
selling products with false medical claims, scammers have dis-
rupted the lives of millions of Americans. And you mentioned the
$700 million that is the cost that the FTC estimates has come to
consumers. Seven hundred million dollars. It is unacceptable. For-
tunately, our states have leaders, like my state of Tennessee, our
attorney general, Herbert Slatery, that have taken a leading role
in shutting down these scammers. In the first consumer action
brought by any State Attorney General Office in response to
COVID–19, Tennessee closed down a price gouging operation in-
volving two brothers that deprived rural East Tennessee and East-
ern Kentucky of hand sanitizer. Thankfully, AG Slatery was able
to resolve the matter quickly, and the brothers agreed to donate
the supplies to a nonprofit organization in Tennessee. State attor-
neys general know their consumers best, and that is why I believe
they are so well suited to lead this fight and to be there on the
front lines.
In 2020, another Tennessee company was making allegedly de-
ceptive and misleading claims related to its cleaning products and
services. The company claimed its products and services were FDA
and EPA approved and could eliminate COVID–19 and protect
against the virus on surfaces for up to 30 days. The company also
presented the logos of major companies on their website, even
though most of the companies confirmed they had never worked
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4
with the company or approved the use of their logo. Following a let-
ter from AG Slatery in May 2020, the company continued to imply
that its products and services could protect against COVID-19. In
November 2020, Attorney General Slatery announced a settlement
with the company and prevented them from making any further
deceptive or misleading claims that products or their services were
effective against COVID–19.
Individual consumers were not the only victims of fraudsters the
Federal Government has been defrauded in countless instances.
The Paycheck Protection Program and the Economic Injury Dis-
aster Loan Program have saved thousands of small businesses and
kept hundreds of thousands of people on the payroll. However,
scammers immediately took advantage of these programs when the
SBA was forced to screen applicants and approve loans quickly. Ac-
cording to an ABC News report dating back to last August, SBA’s
Inspector General Mike Ware, estimated that 5 percent of trans-
actions were fraudulent, a stunning rate that would suggest tens
of billions of dollars have been lost.
I would like to point out one last thing before the witnesses give
their opening remarks, and we do thank the witnesses for joining
us today and for their patience with our tardiness in beginning the
hearing. It is important to note that an unprecedented amount of
counterfeit PPE continues to come through our Nation’s ports. Not
surprisingly, countless amounts of these fake masks and test kits
come from China. Tomorrow, this committee is scheduled to vote
on the nomination of Mary Boyle to be a Commissioner of the Con-
sumer Product Safety Council, the CPSC.
Now, according to a USA Today report, in July 2021, Ms. Boyle
was a leader in last year’s decision to pull inspectors from the
ports. Ms. Boyle, who agreed to pull port inspectors during private
conversations in March 2020 told Commissioners, and I quote her,
that ‘‘The Agency could chase problem products later through re-
calls.’’ That is a very troubling statement, very troubling, because
by that time, the counterfeit products are there. People have had
tests that did not deliver accurate results. They have used PPE
that is counterfeit and not effective. So I highly recommend to the
White House that they pull the nomination of Ms. Boyle and that
they put forward a candidate with a more proven background.
Thank you, Mr. Chairman. I look forward to the hearing.
Senator BLUMENTHAL. Thanks, Senator Blackburn. Senator
Wicker, I do not know whether you have an opening statement.
Senator WICKER. I do have a brief opening statement, Mr. Chair-
man, and I do thank you.
Senator BLUMENTHAL. Please go ahead.
STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM MISSISSIPPI
Senator WICKER. And thanks to both of you for your leadership
on this issue and for convening this very important hearing on pro-
tecting the public from COVID–19 scams and price gouging.
As the COVID–19 virus continues to impact the United States,
fraudsters and cyber criminals have continued exploiting the pan-
demic to take advantage of consumers. These bad actors have em-
ployed myriad scams to steal money from Americans, including e-
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mail phishing schemes, government imposter scams, price gouging,
identity theft, and more. Last month, the FTC calculated that these
scams have cost Americans over $600 million, perhaps more. To
protect consumers from such illicit activities, Congress can and
should move to clarify the FTC’s authority to empower the Agency
to punish and enjoin fraudulent or improper behavior and quickly
see that victims are compensated for their losses. Congress should
also give the FTC clear authority to go after bad actors exploiting
the supply chain crisis and surging inflation to gouge consumers.
I think there is a real opportunity to craft legislation to clarify
the FTC’s authority to protect consumers from price gouging and
assist State attorneys general in combating this illegal practice.
However, this effort should not distract from addressing the reck-
less policies that have caused the price of goods to spike and
brought about the highest inflation numbers in 40 years. Finally,
these COVID-related scams further underscore the need for uni-
form national privacy legislation to protect consumers from identity
thieves and other misuse of their personal information. The sub-
committee addressed this topic about 10 months ago, as the Chair-
man has already stated. Today’s hearing presents an opportunity
to learn more about the efforts of the FTC, State and local govern-
ments, and the private sector to protect consumers from COVID–
19 scams.
So I thank the witnesses for their patience and for their testi-
monies, and I thank Senators Blumenthal and Blackburn for hold-
ing this important hearing. And I yield.
Senator BLUMENTHAL. I will turn to the Chair of the Commerce
Committee, Senator Cantwell, if she has any opening remarks.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
The Chairwoman: Thank you, Chair Blumenthal, and thank you
for holding this hearing, my colleague, the Ranking Member, Sen-
ator Wicker, and being here for this important hearing, and the
witnesses today.
Since the onset of the pandemic, consumers across the country
have been victimized by a range of scams related to COVID–19, in-
cluding fake COVID–19 tests, cures, price gouging, phishing scams,
and these are more than just an annoyance. They put the lives of
individuals really at risk. So I am sad to see in the Seattle Times
today a headline, ‘‘COVID Testing Company Faked Test Results,
Lied to Patients,’’ and that our attorney general in the State of
Washington is filing suit. The lawsuit, which was filed yesterday,
describes how an Illinois-based company with at least 13 COVID–
19 testing sites operating in Washington, took advantage of Wash-
ington residents and consumers, some in other parts of the country
as well, at a time when the Omicron infections were rising at a
skyrocketing rate. Consumers complained that they did not get test
results, that there were reports that companies stuffed tests into
trash bags. Reports also surfaced that employees did not wear pro-
tective gear, or masks, or gloves, and one resident particularly wor-
ried because he provided a copy of his driver’s license and insur-
ance card with obviously important personal information. Another
resident visited the site, was uneasy from the start when she en-
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tered a makeshift storefront to find an empty office except for two
folding chairs and was in—still waiting to hear about her test re-
sults.
So I hope that the witnesses will be able to answer important
questions for the record today. The alleged fraud has serious con-
sequences, and I want to make sure that consumers in Washington
have confidence to go get these tests and at these sites, so I hope
that the FTC will look into this matter. There are issues about
whether the FTC will—make sure the FTC has the proper author-
ity. The FTC reports that since 2020, there have been nearly
300,000 reported instances of fraud resulting in more than $669
million in total fraud losses. So I hope that the FTC—responding
by sending warning letters, but obviously we want and have sought
for much quicker action on that. The Commission needs to take
stronger tools to find companies who peddle fake treatment and
cures and who endanger the public. So I look forward, Mr. Chair-
man, to have comments from our witnesses on that.
We passed the Consumer Protection Act, and Senator Wicker and
I were sponsors of that, yet the FTC only has brought three civil
penalty cases with this authority. So we want a strong FTC pur-
suing these cases about misperceptions, fraudulent activity as it re-
lates to consumers in the time of a COVID crisis. So thank you,
Mr. Chairman.
Senator BLUMENTHAL. Thanks, Senator Cantwell, and thanks for
your support in the work of our subcommittee, and most especially
your work on the December 2020 law that strengthened the FTC
in giving them additional tools on this topic. And I want to join in
thanking the witnesses for their patience. We have ongoing votes
as you know, and we are going to be moving in and out, but we
were late starting because of those votes, and we appreciate your
staying with us.
Let me introduce the witnesses. Mr. Samuel Levine is the Direc-
tor of the Federal Trade Commission’s Bureau of Consumer Protec-
tion. Mr. Levine previously served as attorney advisor for Commis-
sioner Rohit Chopra and as a staff attorney in the FTC’s Chicago
office. Teresa Murray is the Director of the Consumer Watchdog
Office at the United States Public Interest Research Group, which
looks out for consumers’ health, safety, and financial security. Pre-
viously, Ms. Murray worked on—worked as a journalist and col-
umnist covering consumer issues and personal finance for 2 dec-
ades in Ohio. Ms. Mary Engle is the Executive Vice President of
Policy at the Better Business Bureau National Programs. Prior to
joining BBB, Ms. Engle directed the FTC’s Division of Advertising
Practices, enforcing truth in advertising principles for national ad-
vertising matters. And Mr. Todd Leatherman. Mr. Leatherman is
the Program Counsel of the National Attorneys General Training
and Research Institute for the National Association of Attorneys
General—NAAG. Before joining NAAG, Mr. Leatherman worked
for 23 years with the Kentucky Attorney General’s Office, Office of
Consumer Protection.
Mr. Levine, we will begin with your testimony. Thank you for
being here.
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STATEMENT OF SAMUEL A.A. LEVINE, DIRECTOR, BUREAU OF
CONSUMER PROTECTION, FEDERAL TRADE COMMISSION
Mr. LEVINE. Thank you, Senator, and good afternoon. My name
is Samuel Levine, and I am the Director of the FTC’s Bureau of
Consumer Protection. I am pleased to be speaking to you today
about the FTC’s comprehensive work to detect, deter, and halt
COVID-related fraud. My written statement represents the views
of the Commission, but this opening statement represents my
views alone.
The global pandemic has caused unimaginable suffering for mil-
lions of Americans, but it has created rich opportunities for
scammers. At the FTC, thanks to the new tools and resources Con-
gress gave us to fight COVID fraud, we are pursuing a comprehen-
sive strategy to combat this scourge. First, we are carefully moni-
toring fraudulent claims. We work tirelessly to review thousands of
complaints submitted to our Sentinel data base, and we monitor so-
cial media and other platforms which have become fertile ground
for fraud. In addition, we analyze the complaints we receive from
the public to spot emerging trends and guide our enforcement
strategy. Second, we are using new authorities granted by Con-
gress to target the worst forms of COVID abuse. Thanks in part
to the COVID–19 Consumer Protection Act, we have been able to
take down hundreds of fraudulent claims through cease and desist
demands, and we have brought lawsuits to permanently shut down
the worst offenders.
But there is more work to do. We recognize that removing claims
quickly from the marketplace does not help those who have already
been victimized by these scams, and we will bring more cases to
help ensure that consumers can be made whole. We are also mak-
ing unprecedented investment to consumer education, and we are
reaching out to communities across the country to spread the word
about avoiding fraud. Unfortunately, the impacts of the pandemic
on the marketplace have been so pervasive that case-by-case en-
forcement and education is simply not enough. That is why we are
also taking steps to deter fraud market-wide, particularly by trig-
gering civil penalty liability.
Over the last year, we initiated a rulemaking to combat govern-
ment and impersonation fraud, we revived our penalty offense au-
thority to crack down on false earnings and health claims, and we
worked with the CFBP to deter landlords from violating the CDC’s
eviction ban. We also protected consumers looking to buy products
made in America, formally outlawing the practice of slapping
‘‘Made in America’’ labels on imported goods. Finally, we issued a
statement on criminal referrals, reaffirming that we would not
hesitate to refer the most egregious frauds for criminal prosecution.
I am proud of the actions we are taking, but we do face signifi-
cant headwinds. First, scammers now have a lethal weapon to aim
at struggling Americans: social media. It is no longer the case that
scammers need to cold call consumers or blast out fraudulent mail-
ers to defraud the public. Now they can use powerful tools built on
secret surveillance of American consumers to target their prey with
precision. The result is that social media platforms have become
hotbeds for fraud. Last week we released data showing that 1 in
4 people who reported losing money to fraud in 2021 said that the
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con started on social media, and the number of consumers who re-
ported losing money to these scams has gone up 19-fold—19-fold—
since 2017. This surge is exactly why the Commission is pursuing
a strategy to effectuate deterrence market-wide, but this battle re-
mains uphill so long as digital platforms continue to wash their
hands of responsibility for the fraud they are facilitating.
Our second major challenge stems from the Supreme Court’s de-
cision in AMG, which stripped the FTC of its most powerful au-
thority, Section 13(b), to redress consumers and hold bad actors ac-
countable. During the 5 years before the decision was issued, FTC
law enforcement actions resulted in the return of more than $11
billion to injured consumers, but the AMG case means that many
lawbreakers are now able to pocket their profits with impunity. We
are grateful for everything Congress is doing to try to restore this
vital tool, and we stand ready to assist in any way we can.
I thank you for the opportunity to speak with you today, and I
look forward to taking your questions.
[The prepared statement of The Federal Trade Commission fol-
lows:]
PREPARED STATEMENT OF THE FEDERAL TRADE COMMISSION
I. INTRODUCTION
Chairman Blumenthal, Ranking Member Blackburn, and Members of the Sub-
committee, I am Samuel Levine, Director of the Bureau of Consumer Protection at
the Federal Trade Commission (Commission or FTC).1 I am pleased to appear before
you today.
During the course of this pandemic, we have encountered disturbing trends and
surging complaints as Americans are being targeted by predators large and small,
with schemes including get-rich-quick opportunities, bogus cures, false promises of
economic assistance, and counterfeit personal protective equipment (PPE). The Com-
mission is taking a comprehensive approach to identifying and addressing COVID-
related consumer frauds impacting American consumers and businesses. First, the
FTC is engaged in law enforcement to halt and deter COVID-related deceptive
claims. Second, we continue to collect and analyze data in our Consumer Sentinel
Network to identify consumer fraud trends. Third, the FTC has continued its out-
reach and consumer education and is proactively using social media, video stream-
ing conferences, and other methods to reach historically underserved communities
and people in economically and geographically diverse communities. The Commis-
sion appreciates funds provided in the American Rescue Plan, which we have used
to bolster our efforts to address the effects of the COVID–19 pandemic on American
consumers.
The Commission recognizes that challenges remain in protecting consumers from
fraud and abuse. Returning money to defrauded consumers has been a fundamental
part of the FTC’s consumer protection mission. However, the Supreme Court in
AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (Apr. 2021) held that the FTC
does not have the ability to obtain monetary relief pursuant to Section 13(b) of the
FTC Act. Amidst this devastating pandemic, restoring the FTC’s ability to provide
redress to wronged consumers is critical.
II. COMBATTING COVID–RELATED FRAUD
a. Detecting COVID–19 Scams
The FTC’s Consumer Sentinel Network collects millions of reports from the public
about fraud, identity theft, and other consumer problems, and makes them available
to thousands of law enforcement users across the country. In the weeks following
the first known cases of COVID–19 in the U.S., the FTC developed systems to track
and alert the public to shifts in Sentinel reporting. On ftc.gov/exploredata, the FTC
launched public dashboards showing aggregate Sentinel data on reports associated
1 This written statement presents the views of the Federal Trade Commission. The oral state-
ments and responses to questions reflect my own views and do not necessarily reflect the views
of the Commission or any Commissioner.
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with COVID–19 by age, type of fraud, and geographic location, with figures that are
updated daily. Since January 2020 and as of January 28, 2022, the FTC has re-
ceived more than 292,000 such fraud reports, reflecting $674 million in fraud
losses.2
Ensuring that the experiences of all consumers are represented in Consumer Sen-
tinel is critically important to the agency’s work. To expand accessibility, the FTC
launched a modernized reporting website, ReportFraud.ftc.gov, in October 2020. The
updated site includes a COVID–19 banner, providing an easy way for consumers to
report COVID-related issues. We are also grateful to more than 45 law enforcement
partners, including 25 state Attorneys General, for contributing data to the Sentinel
system. In 2021, the FTC increased the capacity of the Consumer Sentinel Network
to learn about individual instances of fraud by adding the Social Security Adminis-
tration as a data contributor. Sentinel received nearly 2.8 million reports of fraud
in 2021, with consumers reporting a total dollar loss of $5.9 billion and an indi-
vidual median dollar loss of $500.3
FTC staff monitors and analyzes Sentinel to identify every COVID-related fraud
complaint to find potential law enforcement targets and witnesses, and to coordinate
with federal, state, and local law enforcement partners. These reports have led to
numerous law enforcement actions.
b. COVID–19 Law Enforcement Actions
Thanks in part to new authority granted by Congress, bad actors face severe con-
sequences for committing COVID-related fraud. Deploying the Commission’s new
authority under the COVID–19 Consumer Protection Act of 2020 4 (CCPA) and its
other legal authorities, the Commission seeks emergency injunctions, asset freezes,
and civil penalties of up to $46,517 for each violation of the CCPA or other rules
enforced by the agency as necessary to ensure that the public is protected.
Most recently, the FTC filed a lawsuit under the CCPA alleging that a Utah-
based company claimed its nasal sprays provide four-hour protection against
coronavirus and are ‘‘an effective solution to the pandemic.’’ 5 A few months prior,
we filed the first case under the CCPA against a chiropractor and his company who
claimed their vitamin D and zinc supplements were scientifically proven to treat or
prevent COVID–19, and that they were equally or more effective than vaccines.6 We
pursued and obtained a stipulated preliminary injunction against these defendants.7
In addition, the agency is seeking civil penalties under the CCPA against an online
marketer that allegedly not only failed to deliver PPE within promised timeframes,
but also falsely claimed that consumers would receive N95 respirators certified by
the FDA or NIOSH while actually providing inferior cloth facemasks.8 In all three
of these cases, which are still ongoing, we are using authority granted by Congress
to pursue civil penalties and other relief. These actions are the latest in a long line
of enforcement efforts that began early in the pandemic. Even before the enactment
2 The figures reflect reports in Sentinel that specifically mention words related to the pan-
demic, such as COVID, stimulus, N95, and related terms. To provide the most relevant results,
some subcategories are excluded. For more information, visit https://public.tableau.com/pro-
file/federal.trade.commission#!/vizhome/COVID-19andStimulusReports/Map.
3 In 2020, Sentinel received nearly 2.3 million fraud reports and consumers reported a total
dollar loss of $3.4 billion. https://public.tableau.com/app/profile/federal.trade.commission/viz/
ConsumerSentinel/Infographic
4 Pub. L. No. 116–260, 134 Stat. 1182, Division FF, Title XIV, § 1401.
5 Complaint, US v. Xlear, Inc., Case No. 2:21-cv-00640–RJS (D. Utah), available at https://
www.ftc.gov/system/files/documents/cases/filed_complaint_xlear_v_jones_v.1.pdf.
6 Complaint, US v. Nepute, Case No. 4:21-cv-00437 (E.D. Mo.), available at https://www
.ftc.gov/system/files/documents/cases/2023188eneputecomplaint_0.pdf.
7 Preliminary Injunction, US v. Nepute, Case No. 4:21-cv-00437 (E.D. Mo.), available at
https://www.ftc.gov/system/files/documents/cases/consent_order.pdf.
8 Complaint, FTC v. Frank Romero dba Trend Deploy, Case No. 5:21-cv-00343 (M.D. Fla.),
available at https://www.ftc.gov/system/files/documents/cases/complaint_-_trend_deploy.pdf.
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of the CCPA, the FTC used Section 5 to challenge deceptive health claims 9 and ille-
gal practices relating to sales of PPE 10 and sanitizing products.11
The FTC also has challenged schemes that exploited consumers’ and small busi-
nesses’ financial distress. Most recently, the Commission ruled against a company
that deceived consumers with mailers that featured a likeness of the Great Seal of
the United States and a mock stimulus check and promised to get them Federal
COVID–19 stimulus benefits.12 Rather than assisting consumers to obtain stimulus
benefits, the mailers sought to lure consumers to auto sales events. The Commission
Order banned the company and its owner from participating in advertising, mar-
keting, promoting, distributing, or selling or leasing motor vehicles for 20 years.13
Early in the pandemic, the FTC alleged that a company falsely claimed to be an
approved lender to induce struggling small businesses to submit applications for the
Paycheck Protection Program, administered by the Small Business Administration
(SBA). The FTC obtained a court order permanently barring the company from mis-
representing its ability to make or process SBA loans, as well as its affiliation with
SBA.14 In addition, to protect consumers attempting to replace or supplement in-
come during the pandemic, the Commission—along with 19 federal, state, and local
partners—led a nationwide crackdown against scams making false promises of in-
come and financial independence.15 As part of the crackdown, the Commission sued
Moda Latina, which allegedly targeted Latina consumers with false earnings claims
in Spanish language ads.16 An order resolving that case bans the defendants from
selling or marketing opportunities to work from home and imposes a judgment of
over $7 million.17 In National Web Design, a work-from-home scam, the Commission
alleged that the defendants blasted out millions of illegal robocalls and adjusted call
messaging to capitalize on consumers who were concerned about the health risks
of working outside the home during the pandemic.18 The order resolving the case
9 For example, the Commission sued a company that, even after receiving a warning from the
FTC, allegedly deceptively advertised a $23,000 treatment plan as a scientifically proven way
to treat COVID–19, and recently settled with one defendant for over $100,000. FTC Press Re-
lease, FTC Sues California Marketer of $23,000 COVID–19 ‘‘Treatment’’ Plan (July 31, 2020),
https://www.ftc.gov/news-events/press-releases/2020/07/ftc-sues-california-marketer-23000-
covid-19-treatment-plan; Stipulated Order for Permanent Injunction and Monetary Judgment as
to Defendant Stephen Meis, FTC v. Golden Sunrise Nutraceutical, Inc., Case No. 1:20-cv-00540–
DAD–SKO (E.D. Cal.), available at https://www.ftc.gov/system/files/documents/cases/052-
_gs_stipulated_order_for_permanent_injunction_and_monetary_judgment_as_to_defendant_step
hen_meis.pdf.
10 See, e.g., Complaint, FTC v. SuperGoodDeals.com, Inc., Case No. 20-cv-3027 (E.D.N.Y.),
available at https://www.ftc.gov/system/files/documents/cases/202_3135_supergooddeals_-
_complaint.pdf; Complaint, FTC v. Am. Screening, LLC, Case No. 4:20-cv-1021 (E.D. Mo.), avail-
able at https://www.ftc.gov/system/files/documents/cases/202_3158_american_screening_-
_complaint.pdf; Complaint, FTC v. Zaappaaz LLC, Case No. 4:20-cv-02717 (S.D. Tex.), available
at https://www.ftc.gov/system/files/documents/cases/202_3136_zaappaaz_-_complaint.pdf.
11 See, e.g., Complaint, FTC v. QYK Brands LLC, Case No. 8:20-cv-01431–JLS–KES (C.D.
Cal.), available at https://www.ftc.gov/system/files/documents/cases/202_3147_qyk_brands_-
_complaint.pdf; Complaint, FTC v. One or More Unknown Parties Deceiving Consumers Into
Making Purchases Through: www.cleanyos.com et al., Case No. 5:20-cv-02494 (N.D. Ohio), avail-
able at https://www.ftc.gov/system/files/documents/cases/complaint_w-a_filed.pdf. The Com-
mission obtained a Federal court order that, while litigation proceeds, prohibits the defendants
from making deceptive claims, suspends their deceptive websites, and bars them from using
their websites to collect money from consumers. Preliminary Injunction, FTC v. One or More
Unknown Parties Deceiving Consumers Into Making Purchases Through: www.cleanyos.com et
al., Case No. 5:20-cv-02494 (N.D. Ohio), available at https://www.ftc.gov/system/files/docu-
ments/cases/ftc_v_unknown_preliminary_injunction_with_att_a.pdf.
12 Opinion of the Commission, In re Traffic Jam Events, LLC, Docket No. 9395 (FTC), avail-
able at https://www.ftc.gov/system/files/documents/cases/d09395_commission_opinion.pdf.
13 Final Order, In re Traffic Jam Events, LLC, Docket No. 9395 (FTC), available at https://
www.ftc.gov/system/files/documents/cases/d09395_commission_final_order.pdf.
14 Stipulated Final Order, FTC v. Ponte Investments, LLC, Case No. 1:20-cv-00177 (D.R.I.),
available at https://www.ftc.gov/system/files/documents/cases/x200042_ponte_inv_-_stipulated
_final_order.pdf.
15 FTC Press Release, As Scammers Leverage Pandemic Fears, FTC and Law Enforcement
Partners Crack Down on Deceptive Income Schemes Nationwide (Dec. 14, 2020), https://
www.ftc.gov/news-events/press-releases/2020/12/scammers-leverage-pandemic-fears-ftc-law-en-
forcement-partners.
16 Complaint, FTC v. Moda Latina BZ Inc., Case No. 2:20-cv-10832–FMO–SK (C.D. Cal),
available at https://www.ftc.gov/system/files/documents/cases/001_complaint.pdf.
17 Order on Stipulation Re: Permanent Injunction and Monetary Judgment, FTC v. Moda
Latina BZ Inc., Case No. 2:20-cv-10832–FMO–SK (C.D. Cal. March 21, 2021), available at
https://www.ftc.gov/system/files/documents/cases/056_order_on_stipulation_re_permanent_inj
_and_monetary_judgment.pdf
18 Complaint, FTC v. National Web Design, LLC, Case No. 2:20-cv-00846 (D. Utah), available
at https://www.ftc.gov/system/files/documents/cases/randon_morris_complaint.pdf.
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bans defendants from robocalling and selling or marketing work-from-home opportu-
nities and imposes a judgment of more than $2 million.19 In an ongoing lawsuit
against Raging Bull, the FTC has alleged that the defendants fraudulently mar-
keted investment-related services that they claimed would enable people to make
consistent profits and beat the market, and claimed that the pandemic was a great
time to learn their trading techniques to make profits.20 Instead, the FTC has al-
leged, consumers—including retirees, older adults, and immigrants—lost more than
$197 million to this scheme in only the last three years.
The Commission will remain vigilant in protecting the public from harms that
stem directly and indirectly from the COVID–19 pandemic. The FTC is committed
to tackling emerging threats, adjusting our strategies wherever necessary, and
working in close coordination with our law enforcement partners at the local, state,
and Federal level.
c. COVID–19 Consumer Education and Outreach
The Commission has continued to buttress its law enforcement actions with con-
sumer and business education. Aided by the American Rescue Plan funds, the FTC
has increased its outreach to ethnic and immigrant communities, which have been
targeted by COVID–19 scams. The FTC has actively engaged with ethnic and com-
munity media journalists nationwide to learn about issues affecting these commu-
nities. Later this month, the agency will place multilingual anti-fraud messaging
into targeted print and radio markets. This messaging will reach Asian-American,
Black, Latino, and Tribal communities on topics that include scams related to
COVID–19 and other topics. The FTC also has used new methods to reach people
in economically and geographically diverse communities. For example, the FTC con-
ducted national radio media tours with the National Association of Attorneys Gen-
eral (NAAG) focused on scams related to vaccine passports and certificates, travel,
vaccine lotteries and giveaways, and other topics. Segments of the recorded inter-
view were heard more than 7.6 million times over a seven-week period. Similarly,
in November 2021, the FTC and NAAG partnered on a national radio tour that fo-
cused on consumer finances and resiliency—segments of which were heard more
than 9 million times over five weeks. The FTC also mailed post cards to nearly a
quarter of a million people in communities with low broadband access and delivered
letters to community health professionals in 5,000 rural and urban clinics to help
people avoid COVID-related fraud.
We have also hosted and participated in national and local events with partners
to reach a variety of audiences, including older consumers, ethnic and community
media, housing organizations, re-entry groups, library patrons, and the military
community. For example, in June 2021, the FTC partnered with Connecticut’s De-
partment of Consumer Protection to brief the media and public about the FTC’s
newly-launched Community Advocate Center Program. This initiative provides a
new way for organizations that provide free and low-cost legal services to report
fraud and other illegal business practices directly to the FTC on behalf of their cli-
ents—a critical new resource in fighting COVID and other fraud. These kinds of ini-
tiatives and outreach events are the result of strong relationships built through reg-
ular collaboration and communication. FTC staff also participate on monthly con-
sumer fraud task forces or roundtables in Hawaii, Indiana, Kansas, Minnesota, Mis-
souri, South Dakota, and Wisconsin and hold additional quarterly calls with con-
sumer protection staff in Hawaii and Utah to remain abreast of consumer fraud
trends and developments in those states.
Finally, the Commission has been issuing timely alerts to warn consumers and
the business community about a wide range of evolving COVID-related frauds since
the beginning of the pandemic. To date, the FTC has issued more than 180 relevant
consumer and business alerts on topics including free testing kits and testing scams,
vaccine verification methods, economic impact payments, health claims, online shop-
ping, privacy in a virtual environment, contact tracing, government imposter scams,
and job scams. In addition to posting these materials on its public website, the FTC
proactively sends its alerts, in English and Spanish, to more than 500,000 e-mail
subscribers, which include consumers, businesses, partners, and the media. In turn,
many of these subscribers share the information with their communities, greatly ex-
19 Order Granting Stipulated Motion for Permanent Injunction and Monetary Judgment, FTC
v. National Web Design, LLC, Case No. 2:20-cv-00846 (D. Utah), available at https://www
.ftc.gov/system/files/documents/cases/38_-_permanent_injunction_and_monetary_judgment.pdf.
20 Amended Complaint, FTC v. RagingBull.com, LLC, Case No. 1:20-cv-03538–GLR (D. Md.),
available at https://www.ftc.gov/system/files/documents/cases/ragingbull.com_-_amended_com
plaint_for_permanent_injunction_and_other_equitable_relief.pdf.
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panding the reach of the agency’s message and resulting in media pick-up at the
national, regional, and local levels.
III. MARKET–WIDE INITIATIVES TO PROTECT CONSUMERS
In addition to pursuing enforcement and consumer education, the Commission is
deploying new tools and reviving old ones to try to address emerging trends that
threaten consumers. The consumer fraud problems reported to the FTC every year
help the agency not only identify specific law enforcement targets, but more broadly
understand emerging trends in the marketplace, particularly problems causing sub-
stantial consumer financial losses.
The pandemic required many work, school, recreation, and social activities to
transition from in-person to online. Reports in Sentinel show that scammers have
been quick to take advantage of these changes, resulting in record reports of finan-
cial losses. These broad shifts include soaring number of reports about business im-
posters,21 undelivered merchandise,22 and substantial losses stemming from online
shopping.23 Cryptocurrency investment scam reports have also risen sharply during
the pandemic,24 and in fact, reports about income scams of all sorts increased sharp-
ly during the pandemic.25 Work-from-home scams, fake check scams that start with
an e-mail, or deceptive online trading offers proliferated during the pandemic.26
Fraud reports about medical treatments more than doubled over the course of the
pandemic, and the fraction of these that related to COVID also increased substan-
tially in the last year.27
Scammers have reportedly increased their use of social media to target con-
sumers.28 More than one in four people who reported losing money to a scam in
2021 said that the scam started with a contact on social media. What’s more, these
reports have increased nineteen-fold since 2017.29 The Commission has been exam-
ining these issues. In December 2020, the Commission ordered social media and
video streaming companies to provide data on how they collect, use, and present
personal information, their advertising and user engagement practices, whether
they apply algorithms or data analytics to personal information, and how their prac-
tices affect children and teens.30 This study may provide critical information on the
business practices at issue.
a. Impersonator Fraud
For years, scammers have falsely claimed that they are calling from the IRS, the
Social Security Administration, or other offices or businesses to steal data and
money from hard-working Americans. Consumer financial losses to business im-
poster scams are substantial, topping $451 million in 2021 alone.31 In fact, business
imposter reports from consumers more than tripled between 2019 and 2021, and
21 The FTC received 106,727 business imposter reports in 2019, and 394,743 in 2021. FTC
Consumer Sentinel Data (on file with the FTC).
22 Emma Fletcher, Pandemic Purchases Lead to Record Reports of Unreceived Goods, FTC
Consumer Protection Data Spotlight (Jul 1, 2020), available at https://www.ftc.gov/news-
events/blogs/data-spotlight/archive/202007.
23 Emma Fletcher, Amazon tops list of impersonated businesses, FTC Consumer Protection
Data Spotlight (Oct. 20, 2021), available at https://www.ftc.gov/news-events/blogs/data-spot-
light/2021/10/amazon-tops-list-impersonated-businesses.
24 Emma Fletcher, Cryptocurrency Buzz Drives Record Investment Scam Losses, FTC Con-
sumer Protection Data Spotlight (May 17, 2021), available at https://www.ftc.gov/news-events/
blogs/data-spotlight/2021/05/cryptocurrency-buzz-drives-record-investment-scam-losses.
25 FTC Consumer Sentinel Data (current through Jan. 28, 2022) (on file with the FTC) .
26 Emma Fletcher, Income Scams: Big Promises, Big Losses, FTC Consumer Protection Data
Spotlight (Dec. 10, 2020), available at https://www.ftc.gov/news-events/blogs/data-spotlight/
2020/12/income-scams-big-promises-big-losses.
27 FTC Consumer Sentinel Data (on file with the FTC) (based on reports about health care
issues, such as medical treatments and cures, drug-OTC/prescription, and dietary supplements/
herbal remedies).
28 Emma Fletcher, Social Media A Gold Mine for Scammers in 2021, FTC Consumer Protec-
tion Data Spotlight (Jan. 25, 2022), available at https://www.ftc.gov/news-events/blogs/data-
spotlight/2022/01/social-media-gold-mine-scammers-2021.
29 Id.
30 FTC Press Release, FTC Issues Orders to Nine Social Media and Video Streaming Services
Seeking Data About How They Collect, Use, and Present Information (Dec. 14, 2020), available
at https://www.ftc.gov/news-events/press-releases/2020/12/ftc-issues-orders-nine-social-media-
video-streaming-services. Commissioner Phillips dissented, Dissenting Statement of Commis-
sioner Noah Joshua Phillips Social Media Service Providers Privacy 6(b) (Dec. 14, 2020), avail-
able at https://www.ftc.gov/system/files/documents/public_statements/1584154/dissenting
_statement_of_commissioner_noah_joshua_phillips_regarding_social_media_and_video_streaming
.pdf.
31 FTC Consumer Sentinel Data (on file with the FTC).
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were largely driven by scammers pretending to be an online retailer, like Amazon.32
Government imposter scams—a perennial top category of fraud—have similarly cap-
italized on the pandemic.33 Impersonators use all methods of communication to trick
their targets into trusting that they are the government or an established business
and then trade on this trust to steal their identity or money.
The Commission is considering deploying its rulemaking authority to prohibit
these impersonation frauds. In December, the agency launched an advanced notice
of proposed rulemaking to combat government and business impersonation fraud.34
If a rule is ultimately promulgated, it would enable the Commission to seek refunds
for consumers under its Section 19 authority, in addition to civil penalties. The FTC
will continue to use all of its tools, including any new tools granted by Congress,
to protect consumers and ensure a fair marketplace.
b. False Educational and Earnings Claims
As noted above, scams promising income have proliferated during the pandemic.35
The economic disruption caused by the pandemic led many consumers to pursue
new opportunities to earn a living, including through multilevel marketers, ‘‘gig’’
employers, and vocational schools. Unfortunately, bad actors are preying on Ameri-
cans’ economic insecurity by making false claims about the income they can earn
from jobs, and the training and opportunities they can receive from vocational
schools. Consumers who are lured into these schemes can be driven deeply into debt
and can be deprived of better opportunities.36
The Commission has long worked to protect consumers from deception in this
area, but this is becoming more challenging. For example, this past November, the
FTC returned nearly $60 million to more than 140,000 Amazon Flex drivers who
allegedly had their tips deceptively withheld.37 Achieving similar results in future
cases could be hindered by the Supreme Court’s decision in AMG.
The Commission has also launched an initiative to use its Penalty Offense Au-
thority to deter unfair and deceptive practices on a market-wide basis and to protect
consumers from scams that prey on economic precarity.38 This past October, the
Commission sent Notice of Penalty Offenses 39 to more than 1,100 businesses re-
32 FTC Consumer Sentinel Data (on file with the FTC). .
33 See Trade Regulation Rule on Impersonation of Government and Businesses, 86 Fed. Reg.
72901, 72902 (Dec. 23, 2021) (‘‘Since the pandemic began, COVID-specific scam reports have in-
cluded 12,491 complaints of government impersonation and 8,794 complaints of business imper-
sonation.’’), available at https://www.federalregister.gov/documents/2021/12/23/2021-27731/
trade-regulation-rule-on-impersonation-of-government-and-businesses.
34 FTC Press Release, FTC Launches Rulemaking to Combat Sharp Spike in Impersonation
Fraud (Dec. 16, 2021), available at https://www.ftc.gov/news-events/press-releases/2021/12/
ftc-launches-rulemaking-combat-sharp-spike-impersonation-fraud.
35 Emma Fletcher, Income Scams: Big Promises, Big Losses, FTC Consumer Protection Data
Spotlight (Dec. 10, 2020), available at https://www.ftc.gov/news-events/blogs/data-spotlight/
2020/12/income-scams-big-promises-big-losses.
36 See, e.g., Quarterly Report on Household Debt and Credit; Federal Reserve Bank of New
York (Nov. 2021) (showing that student loan debt accounted for approximately 10 percent of
total household debt in the third quarter of 2021), available at https://www.newyorkfed.org/
medialibrary/interactives/householdcredit/data/pdf/HHDC_2021Q3.pdf; see also COVID–19
Adds to Economic Hardship of Those Most Likely to Have Student Loans, U.S. Census Bureau
(Aug. 18, 2021) (stating that ‘‘student loans are among the largest contributors to household
debt’’), available at https://www.census.gov/library/stories/2021/08/student-debt-weighed-
heavily-on-millions-even-before-pandemic.html.
37 Decision and Order, FTC v. Amazon.com, Inc., Docket No.C–4746 (requiring Amazon to re-
turn all of the money it allegedly withheld from drivers deceptively), available at https://
www.ftc.gov/system/files/documents/cases/1923123c4746amazonflexorder1.pdf. See also Stipu-
lated Order, FTC v. University of Phoenix, Inc., Case No. 2:19-cv-05772 (D. AZ) (requiring the
University of Phoenix and its parent company to pay $191 million to resolve allegations that
they deceptively touted job opportunities), available at https://www.ftc.gov/system/files/docu-
ments/cases/de_15_stipulated_order_for_permanent_injunction_and_monetary_judgment.pdf;
Stipulated Order, FTC v. Career Education Corp., Case No. 1:19-cv-05739 (E.D. Ill) (providing
$30 million in redress to consumers deceived by post-secondary and vocational schools’ use of
alleged deceptive lead generators), available at https://www.ftc.gov/system/files/documents/
cases/de_11_-_stipulated_order_for_permanent_injunction.pdf.
38 The Penalty Offense Authority empowers the Commission to seek civil penalties of up to
$46,517 per violation from a company if it knowingly engages in acts or practices that the Com-
mission has determined to be unfair or deceptive in a prior administrative order, other than
a consent. 15 U.S.C. § 45(m)(1)(B). To trigger this authority, the FTC can send a company a No-
tice of Penalty Offenses outlining conduct that the Commission has determined is unlawful.
39 The agency also sent Notices of Penalty Offenses to more than 700 advertisers and con-
sumer product companies regarding fake reviews and other misleading endorsements. FTC
Press Release, FTC Puts Hundreds of Businesses on Notice about Fake Reviews and Other Mis-
Continued
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garding deceptive or misleading earnings claims and fake reviews and other mis-
leading endorsements,40 and to 70 for-profit colleges regarding deceptive or mis-
leading job and earning prospects.41 The goal of putting these industries on notice
is to deter wrongful conduct by triggering the possibility of civil penalties.
c. Deceptive Health Claims
Fraud reports about medical treatments more than doubled during the course of
the pandemic, and in the last year, those related to COVID increased persistently.42
Market-wide deterrence is especially important with respect to deceptive health
claims, which can lead consumers to turn to bogus cures and forgo legitimate treat-
ments. To achieve this deterrence, the Commission is placing market actors on no-
tice that they can face stiff civil penalties if they cheat consumers with false claims.
Starting in March 2020, the FTC launched a campaign to challenge companies’
deceptive COVID–19 claims—directing the companies to cure violations and pur-
suing enforcement actions if problematic claims were not quickly removed. To date,
the FTC has issued more than 425 cease and desist demands, many in conjunction
with the Food and Drug Administration (FDA), to sellers and marketers that
claimed that their products could treat or prevent COVID–19.43 Twenty of those
cease and desist demands were directed to multi-level marketing companies (MLMs)
regarding deceptive earnings claims and COVID–19 prevention or treatment claims
made by the MLM or its business opportunity participants.44 The agency also issued
cease and desist demands with the SBA regarding small business relief 45 and joint
demand letters with the Federal Communications Commission (FCC) to Voice Over
Internet Protocol service providers and others who may have been ‘‘assisting and fa-
cilitating’’ illegal telemarketing calls, including calls making fraudulent offers of
COVID–19 home testing kits.46 These cease and desist demands lay the groundwork
for ensuring that bad actors can face civil penalties of $46,517 and other relief
under the CCPA, the Commission’s Penalty Offense Authority, and other laws.47
These demands can be issued quickly, distributed broadly, and monitored closely.
leading Endorsements (Oct. 13, 2021), available at https://www.ftc.gov/news-events/press-re-
leases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other.
40 FTC Press Release, FTC Puts Businesses on Notice that False Money-Making Claims Could
Lead to Big Penalties (Oct. 26, 2021), available at https://www.ftc.gov/news-events/press-re-
leases/2021/10/ftc-puts-businesses-notice-false-money-making-claims-could-lead.
41 FTC Press Release, FTC Targets False Claims by For-Profit Colleges Oct. 6, 2021), available
at https://www.ftc.gov/news-events/press-releases/2021/10/ftc-targets-false-claims-profit-col-
leges.
42 See note 27.
43 Copies of all of the FTC’s COVID–19 related cease and desist demands are available here:
https://www.ftc.gov/coronavirus/enforcement/warning-letters.
44 See Press Release, FTC Sends Warning Letters to Multi-Level Marketers Regarding Health
and Earnings Claims They or Their Participants are Making Related to Coronavirus (Apr. 24,
2020), available at https://www.ftc.gov/news-events/press-releases/2020/04/ftc-sends-warning-
letters-multi-level-marketers-regarding-health; Press Release, FTC Sends Second Round of Warn-
ing Letters to Multi-Level Marketers Regarding Coronavirus Related Health and Earnings
Claims (June 5, 2020), available at https://www.ftc.gov/news-events/press-releases/2020/06/
second-round-warning-letters-to-mlms-regarding-coronavirus; Press Release, With Omicron Vari-
ant on the Rise, FTC Orders More Marketers to Stop Falsely Claiming Their Products Can Effec-
tively Prevent or Treat COVID–19 (Jan. 19, 2022), available at https://www.ftc.gov/news-events/
press-releases/2022/01/omicron-variant-rise-ftc-orders-more-marketers-stop-falsely.
45 FTC Press Release, FTC and SBA Warn Operator of SBA.com and Lead Generator Lendio
to Stop Potentially Misleading Coronavirus Relief Loan Marketing (May 18, 2020), available at
https://www.ftc.gov/news-events/press-releases/2020/05/ftc-sba-warn-operator-sbacom-lead-
generator-lendio-stop; Press Release, FTC and SBA Warn Six Companies to Stop Potentially Mis-
leading Marketing Aimed at Small Businesses Seeking Coronavirus Relief Loans (June 24, 2020),
available at https://www.ftc.gov/news-events/press-releases/2020/06/ftc-sba-warn-six-compa-
nies-stop-potentially-misleading-marketing.
46 FTC Press Release, FTC and FCC Send Joint Letters to VoIP Service Providers Warning
against ‘Routing and Transmitting’ Illegal Coronavirus-related Robocalls (Apr. 3, 2020), avail-
able at https://www.ftc.gov/news-events/press-releases/2020/04/ftc-fcc-send-joint-letters-voip-
service-providers-warning-against; FTC Press Release, FTC and FCC Send Joint Letters to Addi-
tional VoIP Providers Warning against ‘Routing and Transmitting’ Illegal Coronavirus-related
Robocalls (May 20, 2020), available at https://www.ftc.gov/news-events/press-releases/2020/
05/ftc-fcc-send-joint-letters-additional-voip-providers-warning. The FTC also independently sent
letters to nine VoIP service providers in March 2020 regarding illegal calls regarding COVID.
FTC Press Release, FTC Warns Nine VoIP Service Providers and Other Companies against ‘As-
sisting and Facilitating’ Illegal Coronavirus-related Telemarketing Calls (March 27, 2020), avail-
able at https://www.ftc.gov/news-events/press-releases/2020/03/ftc-warns-nine-voip-service-
providers-other-companies-against.
47 In coordination with FDA, the FTC has issued cease and desist demands pursuant to the
FTC’s Penalty Offense Authority on other health fraud such as diabetes and infertility. See, e.g.,
FTC Press Release, FTC Sends Cease and Desist Demands to 10 Companies Suspected of Mak-
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In response to these cease and desist demands, the vast majority of recipients
take down their claims. This allows the Commission to preserve its scarce law en-
forcement resources to pursue the most hardened scammers, and to seek every rem-
edy available to halt their wrongdoing, ban them from further abuses, and make
them pay.
IV. LEGAL CHALLENGES
Returning money to consumers harmed by scammers has been a cornerstone of
the FTC’s law enforcement actions. In Fiscal Year 2021, FTC law enforcement ac-
tions resulted in more than $403 million in redress to harmed consumers.48 These
payments help ensure that consumers can be compensated for their losses, and that
wrongdoers cannot pocket their illegal gains. And these payments are especially
critical during this pandemic. In AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341
(Apr. 2021), the Supreme Court held that the Commission cannot obtain monetary
relief pursuant to Section 13(b) of the FTC Act. The Commission requests legislation
to restore its ability to return money to consumers harmed by illegal conduct.
V. CONCLUSION
For nearly two years, the Commission has worked tirelessly to stop bad actors
from exploiting the pandemic. But the Commission’s work is far from over. COVID-
related scams are likely to persist as the country continues to grapple with this pan-
demic. Combatting these scams remain a top priority for the Commission, and we
will use every weapon in our arsenal to do so.
We look forward to continuing to work with the Subcommittee and Congress, and
I am happy to answer your questions.
Senator BLUMENTHAL. Thanks very much, Mr. Levine.
We will now hear from, in succession, Ms. Murray, then Ms.
Engle, and Todd Leatherman. I am going to be voting, but I have
read your testimony, so I will be back to ask questions by the time
you are done with your testimony. And in the meantime, Senator
Blackburn will preside. Thank you.
Ms. Murray, you can go ahead.
STATEMENT OF TERESA MURRAY, CONSUMER WATCHDOG
DIRECTOR, U.S. PUBLIC INTEREST RESEARCH GROUP
Ms. MURRAY. Good afternoon, Chairman Blumenthal, Ranking
Member Blackburn, and members of the Subcommittee. I am Te-
resa Murray, Director of the Consumer Watchdog Program with
U.S. Public Interest Public Research Group. We are an inde-
pendent nonpartisan group that works for consumers and for the
public interest. Thank you for the opportunity to talk about two big
challenges consumers have faced during the pandemic: counterfeit
products and price gouging.
Counterfeit or substandard products started infecting the mar-
ketplace in February 2020. We saw massive amounts of sub-
standard and even dangerous hand sanitizer filling store shelves
and retailers’ websites. People were terrified and desperate and
bought almost anything to protect themselves. Some hand sanitizer
actually contain methanol or other toxic substances. Since July
2020, the FDA has recalled 273 brands of hand sanitizer because
they were dangerous or ineffective, and a year ago, it issued an im-
ing Diabetes Treatment Claims without the Required Scientific Evidence (Sept. 9, 2021), avail-
able at https://www.ftc.gov/news-events/press-releases/2021/09/ftc-sends-cease-desist-demands
-10-companies-suspected-making; FTC Press Release, Federal Trade Commission, FDA Warn
Five Companies That May Be Illegally Selling Dietary Supplements Claiming to Treat Infertility
(May 26, 2021), available at https://www.ftc.gov/news-events/press-releases/2021/05/federal-
trade-commission-fda-warn-five-companies-may-be-illegally.
48 For more information visit https://public.tableau.com/app/profile/federal.trade.commis
sion/viz/Refunds_15797958402020/RefundsbyDate
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16
port alert on hand sanitizers from Mexico. And this is still a prob-
lem. The most recent recommended product recall was 2 weeks ago.
Many COVID-related products are counterfeit or do not do what
they claim. We appreciate the work the FTC has done to try and
keep us safe, but recently, we have seen a surge in counterfeit
masks. During 2020 and 2021, Customs and Border Protection
seized some 34 million counterfeit masks, half from China. We
know some counterfeits slip through. The CDC found that 60 per-
cent of KN95 masks sold in the U.S. during 2020 and 2021 did not
meet safety standards. Counterfeit masks have been a particular
problem the last couple of months as Omicron surged. The biggest
issue with substandard masks is consumers and healthcare work-
ers think they are protected, but they are not.
We are also seeing fake COVID test sites. The sites look real
with people in hazmat suits. You may get charged for a test that
is supposed to be free, or your information is used to steal your
identity, and, oh, you do not get test results. The FTC is also see-
ing a surge in unauthorized home COVID tests fueled by the test
shortage. Senators Blumenthal and Markey asked the FTC to in-
vestigate fraudulent tests and price gouging of home tests. This
cannot happen quickly enough.
Price gouging also started early in the pandemic. In spring 2020,
U.S. PIRG researched 90 types of face masks and hand sanitizers
on Amazon. We found price increases of at least 50 percent on more
than half the products compared with 3 months earlier. In January
2021, we researched 750 products, such as face masks and cough
syrup, and for each, we looked at the price in December 2019 and
in December 2020. And out of the 750 listings on Amazon, 409 saw
price increases of more than 20 percent, and 136 at least doubled
in price.
Recently, we have seen huge price spikes on home tests and N95
and KN95 masks. For example, 90 days ago, a 2-pack of On/Go
home tests was selling for an average of $29.07 on Amazon, but at
least one Amazon seller offered it for $39.99. Also, Saturday, I
pulled up the top three listings on Amazon for N95 masks. One
brand is Benehal. The 20-pack was selling for $16.78 2 months ago,
and then health officials recommended higher-quality masks. So 17
days ago, this same box of Benehal masks was selling for as much
as $69.98. How is this acceptable? In a 2020 letter to PIRG, Ama-
zon vowed to do more to get rid of exorbitant prices. It is not work-
ing, and it is not just Amazon.
In conclusion, our recommendations are: Customs and Border
Protection must do more to stop counterfeit products from entering
the U.S. Regulators should proactively investigate what is for sale
in stores and online, including products that falsely offer miracle
cures. State attorneys general should aggressively investigate price
gouging. Thirty-seven states have price gouging laws, but it is a
patchwork of confusion and inconsistency. We need meaningful
price gouging legislation in every state and at the Federal level.
Congress should pass the bipartisan INFORM Act to help squash
the sale of counterfeits. Businesses should not sell substandard
products. Social media platforms should not—they should eliminate
harmful content and advertising, including false promises of mir-
acle cures. Congress should give the FDA more authority to crack
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17
down on and punish mask counterfeiters. The bipartisan Protecting
Patients From Counterfeit Medical Devices Act could help. We all
need to do all need to do better. We all need to do more.
Thank you again for the opportunity to address this committee.
I look forward to your questions.
[The prepared statement of Ms. Murray follows:]
PREPARED STATEMENT OF TERESA MURRAY, CONSUMER WATCHDOG DIRECTOR,
U.S. PUBLIC INTEREST RESEARCH GROUP
Good afternoon Chairman Blumenthal, Ranking Member Blackburn and members
of the Consumer Protection Subcommittee. I’m Teresa Murray and I’m the director
of the Consumer Watchdog program with the U.S. Public Interest Research Group.
U.S. PIRG is an independent, non-partisan group that works for consumers and the
public interest. Thank you for the opportunity to talk today about challenges facing
consumers as they continue trying to keep themselves safe from COVID.
I’d like to talk today about two of the biggest consumer issues during this pan-
demic: First, counterfeit products and other scams. Second, price-gouging of legiti-
mate products.
Counterfeit or substandard products started infecting the marketplace in the ear-
liest days, in February 2020. We saw massive amounts of substandard and even
dangerous hand sanitizer filling store shelves and retailers’ websites. People were
terrified and desperate and they’d buy almost anything in hopes of protecting them-
selves and their families. Some of the items peddled as hand sanitizer actually con-
tained methanol and other dangerous substances. Since July of 2020, the Food and
Drug Administration has recalled 273 different brands of hand sanitizer because
they were dangerous or ineffective and a year ago issued an import alert on all alco-
hol-based hand sanitizers from Mexico1; the most recent recommended recall was
less than two weeks ago, on Jan. 20, 2022.2 All sorts of other COVID-related prod-
ucts have surfaced that are counterfeits or knockoffs or simply don’t do what they
say. Most recently, we’ve seen a surge in counterfeit masks.
The FDA is working with other government offices to squash the surge in counter-
feits. It has issued import alerts for fraudulent products.3 It also has been working
with customs officials to stop banned imports. During 2020 and 2021, agents with
Customs and Border Protection seized some 34 million counterfeit masks, half of
them from China, according to the New York Times.4 Those are just the ones that
got confiscated. Those are the ones we know about. We know that other counterfeit
and substandard products do slip through and are purchased by unsuspecting con-
sumers or provided to healthcare workers because they look genuine.5 For example,
last February, the Department of Homeland Security said it had confiscated 10 mil-
lion counterfeit 3M N95 masks, some of which were reportedly being shipped to hos-
pitals.6
Meanwhile, data from the Centers for Disease Control and Prevention shows that
60 percent of KN95 masks sold in the U.S. during 2020 and 2021 failed to meet
safety standards.7
Counterfeit masks have been a particular problem the last couple of months, as
omicron surged and people wanted better protection.
Of course the biggest issue with counterfeit masks is people have a false sense
of security. These substandard masks aren’t providing someone with the protection
they think they’re getting.
We’re also seeing fake COVID test sites, according to the Federal Trade Commis-
sion.8 The test sites look real with people in hazmat suits. But you get charged for
a free test. Sometimes your information is used to steal your identity. And you of
course don’t get any test results.
1 https://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-update-fda-
takes-action-place-all-alcohol-based-hand-sanitizers-mexico-import
2 https://www.fda.gov/drugs/drug-safety-and-availability/fda-updates-hand-sanitizers-consu-
mers-should-not-use#products
3 https://www.accessdata.fda.gov/ cms_ia/importalert_1165.html
4 https://www.nytimes.com/2021/11/30/ health/covid-masks-counterfeit-fake.html
5 See appendix 4 for a photo of a counterfeit mask that looks legitimate.
6 https://abcnews.go.com/Politics/senators-aim-fraudsters-flooding-market-fake-masks/story
?id=81778809
7 https://www.cdc.gov/niosh/npptl/respirators/testing/NonNIOSHresults.html
8 https://www.consumer.ftc.gov/blog/2022/01/dont-assume-every-covid-19-test-site-legit
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The FTC says we’re also seeing a surge in unauthorized home test kits, fueled
by the shortage of COVID test kits.9 10
Sen. Richard Blumenthal and Sen. Ed Markey have asked the FTC to investigate
fraudulent test kits and price gouging of home test kits. This can’t happen quickly
enough.11
On price gouging, like with counterfeit products, we saw this at the very begin-
ning of the pandemic. In spring of 2020, U.S PIRG researched more than 90 types
of face masks and hand sanitizers and used a price-tracking tool to compare current
prices with the three-month average leading up to the pandemic. We found price
increases of at least 50 percent on more than half of the products.
In January 2021, we did another report. We researched 750 products such as face
masks, disinfecting wipes, oral thermometers and cough syrup. For each product, we
looked at the price of the listing on Dec. 1, 2019—before the pandemic—and the
price again on Dec. 1, 2020. Out of the 750 listings, 409 saw price increases of more
than 20 percent, and 136 at least doubled in price.12
In the last couple of months, we’ve seen huge price spikes on home COVID tests
and on N95 and KN95 masks. For example, 90 days ago, ON/GO home COVID rapid
antigen tests were selling for an average of $29.07 on Amazon. But three months
ago, at least one merchant was selling the two-pack test kit for 38 percent more—
at a price of $39.99. As of last Saturday, Jan. 29, 2022, the price was down to $24.13
Also Saturday, I pulled up information for top 3 listings on Amazon for N95
masks. One is the Benehal NIOSH Approved N95 Mask particulate respirators,
pack of 20 individually wrapped, which is one of the masks recommended by Project
N95. The 20-pack was selling for as low as $16.78 two months ago. But then Federal
health officials recommended higher quality masks than simple cloth masks. And
17 days ago, this same box of Benehal masks was selling for as much as $69.98.14
How is this an acceptable business practice? For its part, Amazon vowed in an April
2020 letter to U.S. PIRG that it was committed to fair pricing and would work hard-
er to rid the site of exorbitant prices.15 It’s not working. And it’s certainly not just
Amazon.
In December, New York Attorney General Letitia James issued a consumer alert
regarding price gouging after consumers filed complaints about at-home tests being
sold at double or triple their normal prices. Some that you could buy in November
for maybe $20 were selling for as much as $70 per package at New York stores.16
This is outrageous.
My 103-year-old grandmother just died of COVID a few weeks ago. It’s personal
for me, as I suspect it is for many of you. She did not contract COVID because of
counterfeit masks or highly priced COVID tests. But it infuriates me to think the
pain of this pandemic could be prolonged by even one day or one more person might
get sick because of counterfeit masks or home COVID tests marked up three times
their normal price.
Recommendations:
1. Customs and Border Patrol needs to do as much as possible to stop counterfeit
and unauthorized products from entering this country. Regulators need to
proactively investigate what’s for sale at retailers and especially online, includ-
ing products that falsely offer miracle cures.
2. Authorities including state attorneys general need to investigate reports of
price gouging and prosecute any business that tries to take advantage of a pub-
lic emergency or natural disaster by dramatically increasing its prices.
9 https://www.cnbc.com/2022/01/06/fake-covid-testing-kits-are-everywhereheres-how-to-avoid
-them.html
10 https://www.consumer.ftc.gov/blog/2022/01/ how-avoid-buying-fake-covid-tests-online
11 U.S. PIRG has worked closely with the Federal Trade Commission on issues including
scams, data privacy, Big Tech oversight and the right to repair. We support, among other im-
provements to help the FTC, increased funding for this chronically under-funded agency, rein-
statement of its 13(b) authority to impose restitution orders and granting the FTC new author-
ity to impose civil penalties for first-time violations of the FTC Act. We also urge the Senate
to confirm President Biden’s well-qualified nominee to the commission, Alvaro Bedoya, as soon
as possible.
12 https://uspirg.org/sites/pirg/files/reports/1%20Year%20Later-%20Comparing%20Pre-Pan
demic%20Prices%20to%20Today%27s%20on%20Amazon%20%281%29.pdf
13 Per Keepa. See screenshots in appendix 2.
14 Per Keepa. See screenshots in appendix 3.
15 See appendix 1, Amazon Response—U.S. PIRG
16 https://ag.ny.gov/press-release/2021/consumer-alert-attorney-general-james-asks-consumers
-report-price-gouging-home
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3. The chronically under-funded FTC needs help, including increased funding, re-
instatement of its 13(b) authority to impose restitution orders 17 and new au-
thority to impose civil penalties for first-time violations of the FTC Act.18
4. In the United States, 37 states, three territories and Washington DC currently
have price gouging laws. But it’s a patchwork of confusion and inconsistency.
Many take effect when the state declares an emergency. Some only apply to
certain products such as gasoline or milk. While laws vary by state, increases
of 20 percent or more may be considered price gouging. We need meaningful
price gouging legislation in every state and we must also pass comprehensive
Federal price gouging legislation that would apply during pandemics, natural
disasters and other emergencies.
5. Congress needs to pass the INFORM act, which has bipartisan support.19 It
would help squash the sale of counterfeits by third-party sellers by requiring
online marketplaces to acquire the seller’s government ID, tax ID, bank ac-
count information, and contact information.
6. Businesses need to be more responsible and not sell products that could be sub-
standard.
7. Social media platforms need to eliminate harmful content and advertising, in-
cluding false promises of miracle cures.20
8. Congress needs to look at granting more authority to the FDA to crack down
on and punish mask counterfeiters. The new bi-partisan Protecting Patients
from Counterfeit Medical Devices Act 21 that was introduced six weeks ago
could be a good first step. It’s part of an effort to improve this country’s pan-
demic response and improve the supply chain.
We all need to do better. We all need to do more. Regulators. Lawmakers. Law
enforcement. Consumer advocates. As long as consumers are still getting ripped off,
we can’t stop trying to do more.
Thank you again for the opportunity to address this committee. I look forward to
answering your questions.
17 https://www.consumerfinancemonitor.com/2021/04/22/scotus-rules-ftc-act-section-13b-does
-not-authorize-ftc-to-seek-restitution-or-disgorgement/ #:∼:text=In%20a%20unanimous%20decision
%2C%20the,AMG%20Capital%20Management%2C%20LLC%20v.
18 https://castor.house.gov/news/documentsingle.aspx?DocumentID=403667
19 https://www.congress.gov/ bill/117th-congress/senate-bill/936
20 https://www.ftc.gov/news-events/blogs/business-blog/2021/11/ftc-analysis-shows-covid-
fraud-thriving-social-media
21 https://www.congress.gov/bill/117th-congress/senate-bill/3416?s=1&r=8
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Senator BLACKBURN [presiding]. Thank you, Ms. Murray.
Ms. Engle?
Ms. ENGLE. [Inaudible.] Sorry. You got it? Is it—OK? Thanks.
STATEMENT OF MARY K. ENGLE,
EXECUTIVE VICE PRESIDENT, POLICY,
BETTER BUSINESS BUREAU NATIONAL PROGRAMS
Ms. ENGLE. Ranking Member Blackburn, I am Mary Engle, Exec-
utive Vice President, Policy, at BBB National Programs, a non-
profit organization dedicated to increasing marketplace trust
through independent industry self-regulation programs. I pre-
viously worked at the Federal Trade Commission for 30 years with
the last 18 spent heading up the Division of Advertising Practices
in the Bureau of Consumer Protection. Thank you for this oppor-
tunity to testify on how independent industry self-regulation has
helped to combat COVID–19 fraud.
BBB National Programs was created in 2019 out of the reorga-
nization of the Council of Better Business Bureaus into two sepa-
rate entities: BBB National Programs and the International Asso-
ciation of Better Business Bureaus, which is the umbrella organiza-
tion for the local BBBs. BBB National Programs operates more
than a dozen national industry self-regulation and accountability
programs in the areas of advertising, child-directed marketing, pri-
vacy, and dispute resolution. Today I will focus on the work of two
of our programs, the Direct Selling Self-Regulatory Council, or
DSSRC, and the National Advertising Division, or NAD, which
both have addressed COVID–19 scams since the pandemic began.
Launched in 2019, the DSSRC monitors product and business op-
portunity claims made by direct-selling companies and their
salesforce members, and facilitates the voluntary removal of mis-
leading claims from the marketplace. The NAD has provided a vol-
untary self-regulatory forum for challenging misleading advertising
since 1971. NAD promotes fair competition and builds public trust
and advertising by reviewing misleading advertising claims based
on competitor challenges and through its own monitoring. When a
company does not participate or comply with a DSSRC or NAD rec-
ommendation, we refer the advertiser to the appropriate regulatory
authority, usually the FTC.
When COVID–19 shut down the world, some advertisers begin
touting untested cures, treatments, and preventives. The DSSRC
and NAD promptly took action against those claims. In April 2020,
the Direct Selling Association and DSSRC issued a joint press re-
lease cautioning direct selling companies and their salesforce mem-
bers from making claims referencing COVID–19 in the context of
product benefits and business opportunities. In addition, DSSRC
reminded all direct selling companies to educate their salesforce
members about best practices with respect to health-related claims.
Since the onset of the pandemic, DSSRC has commenced 139 in-
quiries involving claims pertaining to COVID. Those inquiries in-
cluded 309 product performance claims and 32 claims discussing
the pandemic as an earnings opportunity. In almost all the inquir-
ies, the parties took prompt action to remove references to the
coronavirus. In the seven cases where that did not happen, we re-
ferred the cases to the FTC or the appropriate State attorney gen-
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26
eral. DSSRC currently has five cases pending involving COVID–19
claims. Our National Advertising Division has also brought cases
challenging COVID claims. One of the benefits of NAD case deci-
sions is their ability to educate other marketers as they can expand
upon FTC guidance by showing specific examples of how adver-
tising can imply, without stating expressly, that a product is effec-
tive against COVID–19.
A good example is the NAD case involving advertising claims for
Your Superfoods U.S. Immunity Boosting Bundle of dietary supple-
ments. In that matter, the advertiser said things like, ‘‘With all
that is going on with the coronavirus, there is a piece we can con-
trol, and that is our own health and building our immune system
because it depends on what we eat. It is super important to have
a lot of micronutrients now, so Super Foods can help. We have this
amazing Immunity Bundle.’’ Following NAD’s inquiry, the adver-
tiser immediately agreed to remove the claims from the market-
place. A case concerning an elderberry supplement, advertised to
support the immune system, provides another example. NAD re-
viewed the claim, ‘‘As restrictions are gradually lifting, it is more
important than ever to keep your immune system strong. Our El-
derberry Immune Support keeps you protected with a powerful im-
mune boosting combo.’’ NAD found that this claim conveyed the im-
plied message that the product protects against COVID. The adver-
tiser voluntarily removed the misleading advertising from YouTube
and elsewhere. NAD’s COVID decisions have reached other indus-
tries as well, from cleaning products, to ultraviolet lights, to intra-
venous hydration therapy, and continuously self-cleaning surfaces.
Thank you for the opportunity to explain how independent indus-
try self-regulation has helped combat deceptive COVID claims. Al-
though some companies will respond only to government enforce-
ment, many other marketers respond voluntarily to remove mis-
leading advertising when given concrete guidance on appropriate
claims. Independent entity self-regulation thereby amplifies the im-
pact of government actions to reduce harm to consumers. Thank
you, and I look forward to your questions.
[The prepared statement of Ms. Engle follows:]
PREPARED STATEMENT OF MARY K. ENGLE, EXECUTIVE VICE PRESIDENT, POLICY,
BBB NATIONAL PROGRAMS
Introduction
Chairman Blumenthal, Ranking Member Blackburn, and members of the Sub-
committee, I am Mary Engle, Executive Vice President, Policy, at BBB National
Programs, a non-profit organization where businesses go to enhance consumer trust
and consumers are heard. I previously had the honor of working at the Federal
Trade Commission for 30 years, with the last 18 spent directing the Division of Ad-
vertising Practices in the Bureau of Consumer Protection. Thank you for this oppor-
tunity to testify today on how independent industry self-regulation has helped to
combat COVID–19 fraud.
After serving in government for three decades at the FTC, I was attracted to join
BBB National Programs because of its status as a mission-driven non-profit organi-
zation that creates a fairer playing field for businesses and a better experience for
consumers through the development and delivery of effective third-party account-
ability and dispute resolution programs. BBB National Programs was created in
2019 when the Council of Better Business Bureaus was re-organized into two sepa-
rate entities, BBB National Programs and the International Association of Better
Business Bureaus, or IABBB.
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BBB National Programs operates more than a dozen national industry self-regula-
tion programs, providing business guidance and fostering best practices in arenas
such as advertising, child-directed marketing, dispute resolution, and privacy.
IABBB is the umbrella organization for nearly 100 local Better Business Bureaus
in the U.S. and Canada, and among other things, rates businesses and resolves con-
sumer complaints about them. Although we share with IABBB a long history and
common mission of increasing marketplace trust, we serve businesses and con-
sumers differently and are no longer directly affiliated.
Before I explain how industry self-regulatory efforts have combatted COVID–19
fraud, I think it is important to distinguish between a company’s own self-regulation
and independent industry self-regulation, which is at the core of what we do at BBB
National Programs. Self-regulation, as some are discussing it, is when companies
monitor themselves without much guidance from regulators or the industry. By con-
trast, independent industry self-regulation, when done right, provides active collabo-
ration between industry and regulators necessary for credible accountability. It is
a system of three critical components: industry-wide accountability to agreed-upon
guidelines, independent monitoring, and coordinating enforcement mechanisms.
Today I will focus on the work of two of our independent industry self-regulation
programs, the Direct Selling Self-Regulatory Council, or DSSRC, and the National
Advertising Division, or NAD, which have addressed COVID–19 scams since the
pandemic began.
The Direct Selling Self-Regulatory Council was launched in 2019. Through exten-
sive monitoring of product and business opportunity claims made by direct selling
companies and their salesforce members, DSSRC’s oversight facilitates the vol-
untary removal of misleading claims from the marketplace. Advertisers who dis-
agree with a DSSRC decision can appeal to the DSSRC Appellate Board, consisting
of three members drawn from the advertising and direct-selling industry. Although
primarily funded by the Direct Selling Association (DSA), DSSRC operates as an
independent ‘‘watchdog’’ and provides accountability for DSA members and non-
members alike.
The National Advertising Division, also part of BBB National Programs, has a
much longer history, having provided a voluntary, self-regulatory forum for chal-
lenging misleading advertising since 1971. The flagship of the U.S. advertising in-
dustry’s system of self-regulation, NAD promotes fair competition and builds public
trust in advertising by reviewing misleading advertising claims, based on competitor
challenges and through its own monitoring program. Its decisions represent the sin-
gle largest body of advertising decisions in the U.S. Although participating in NAD’s
review is voluntary, over 95 percent of companies participate and comply with
NAD’s recommendations. If an advertiser disagrees with NAD’s recommendation to
discontinue or change its advertising, the advertiser can appeal to BBB National
Programs’ National Advertising Review Board, or NARB. The National Advertising
Review Board provides independent peer review for National Advertising Division
cases, with appeals heard by five-person panels drawn from an 85-person panel pool,
selected for their stature and experience, comprised of distinguished members rep-
resenting national advertisers, advertising agencies, and public members (usually
marketing academics). This layer of independent review further promotes credibility
and voluntary compliance with the self-regulatory system.
When a company does not participate or comply with DSSRC, NAD, or NARB rec-
ommendations, we refer the advertiser to the appropriate regulatory authority, usu-
ally the Federal Trade Commission, but often other regulatory agencies as well,
such as the Food and Drug Administration and state attorneys general. Recently,
BBB National Programs also began reporting misleading advertising claims directly
to platforms including Facebook and Instagram. Once received, the platforms will
remove the claims that violate their terms of service.
BBB National Programs values the longtime support of Federal and state regu-
latory agencies, particularly the FTC, that support its self-regulatory efforts to pro-
mote fair competition and truthful and accurate advertising to benefit consumers
and businesses. The FTC’s website keeps a record of response to referrals from BBB
National Programs, including DSSRC and NAD.1 The FTC’s responses demonstrate
a strong track record of following up on such referrals and getting the advertising
claims removed from the marketplace.
1 https://www.ftc.gov/enforcement/cases-proceedings/closing-letters-and-other-public-state-
ments/resolution-of-referrals-from-nad
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How Independent Industry Self-Regulation Has Addressed COVID–19
Fraud
When COVID–19 shut down the world and caused consumers to isolate fearing
dire health consequences, unscrupulous advertisers began touting cures, treatments,
and preventatives to the novel coronavirus. The FTC and FDA quickly issued letters
warning companies to stop making false and misleading claims that a product could
prevent, treat, or cure COVID–19. Similarly, as described below, the DSSRC and
NAD promptly took action as well.
The response of DSSRC and NAD to the misleading advertising that flooded the
marketplace demonstrates the value independent self-regulation can provide. Early
in the pandemic, DSSRC released a statement to the direct selling industry, urging
caution regarding misleading health-related product claims as well as misleading
earnings claims, and both DSSRC and NAD opened multiple cases, resulting in the
removal of advertising claims touting that products would prevent, treat, or cure
COVID–19. In all cases, our self-regulatory programs uphold standards set forth in
regulatory guidance issued by the FTC and FDA. Our case decisions, summaries of
which are publicly available, have impact beyond the advertising at issue. The deci-
sions educate companies on advertising law. To date the media has written more
than 25 articles and blogs highlighting the industry self-regulatory guidance pro-
vided through DSSRC and NAD decisions on COVID–19 claims.
DSSRC Actions Against Misleading COVID–19 Claims
Although the COVID–19 pandemic has significantly impacted all sectors of the
business community, direct selling companies face the added responsibility of ensur-
ing that their independent salesforce members are not seeking to boost sales by
making unauthorized health-related or business opportunity claims related to the
pandemic. DSSRC has focused its monitoring efforts on identifying false and mis-
leading claims about a product’s ability to treat or prevent COVID–19, and claims
related to how the pandemic has presented an opportunity for company salesforce
members to earn significant income.
In an action commended by FTC Commissioner Noah Phillips,2 in April 2020, the
Direct Selling Association and DSSRC issued a joint press release cautioning direct
selling companies and their independent salesforces from making claims referencing
COVID–19 in the context of product claims and business opportunity claims. More
specifically, the statement called attention to claims suggesting that products can:
• Cure, treat, or alleviate the symptoms of COVID–19
• Boost or improve immune function that can prevent COVID–19; or
• Eliminate or remove viruses.
In addition, because product claims made by salesforce members are attributable
to direct selling companies themselves, DSSRC reminded all direct selling compa-
nies to educate their salesforce members about best practices with respect to health-
related product claims.
Since the onset of the pandemic, DSSRC has commenced 139 inquiries that in-
volved claims pertaining to COVID–19. In those inquiries, DSSRC has reviewed 309
product performance claims that referenced COVID–19 and 33 claims that discussed
the pandemic as an earnings opportunity for direct selling company salesforce mem-
bers.
Of those 139 inquiries, 127 have been administratively closed while seven resulted
in referrals to the FTC and/or the appropriate state attorney general office for en-
forcement. DSSRC will administratively close an inquiry if a direct selling company
takes immediate action to remove an identified problematic claim or social media
post. DSSRC currently has five cases pending that involve COVID–19 claims. In al-
most all the inquiries in which DSSRC identified COVID–19 claims to direct selling
companies, the parties took prompt and immediate action to remove references to
the coronavirus.
Following warning letters issued by the FTC to several direct selling companies
regarding claims that they or their salesforce members were making about their
products’ ability to treat or prevent COVID–19 or about the earnings that salesforce
members can earn, DSSRC released a public statement applauding the actions
taken by the FTC and reiterated its call to direct selling companies to fulfill their
commitment to industry self-regulation. In its statement, DSSRC noted that the ac-
tions taken by the FTC were consistent with recent guidance issued by both DSSRC
2 Noah Joshua Phillips, Commissioner, Federal Trade Comm’n, Keynote Address at the DSA
Legal & Regulatory Summit (Oct. 15, 2020), in https://www.ftc.gov/system/files/documents/
public_statements/1581726/phillips_-_dsa_remarks_10-15-20.pdf
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and the DSA cautioning direct selling companies against expressly claiming or im-
plying that their products can prevent, treat, alleviate, or cure COVID–19 and its
symptoms.
With the FTC’s heightened scrutiny of the direct selling channel, direct sellers can
ill afford the reputational damage (and certain adverse regulatory enforcement ac-
tion) that would result if a company (or its independent salespeople) seeks to cap-
italize on the current pandemic by making unsubstantiated health claims. Accord-
ingly, through its case work and its direct engagement with the industry through
educational initiatives such as the DSSRC Direct Selling Summit and DSA’s Com-
pliance Certification Program, DSSRC will continue to provide guidance to the di-
rect selling industry with respect to earnings claims and representations pertaining
to health and safety.
DSSRC will continue to monitor direct selling advertising messages to make sure
they adhere to appropriate and ethical advertising standards throughout this pan-
demic and remains committed to helping ensure that inappropriate claims dissemi-
nated by direct selling companies and their salesforce members referencing COVID–
19 are expeditiously removed from the marketplace.
National Advertising Division Actions Against Misleading COVID–19 Cases
BBB National Programs’ National Advertising Division case decisions have often
expanded on the guidance provided by the FTC and FDA letters by providing spe-
cific examples of advertising that conveys implied messages that a product prevents,
treats, or cures COVID–19.
A good example is the NAD case involving advertising claims for Your Superfoods
Immunity Boosting Bundle dietary supplements. In that matter, following an NAD
inquiry, the advertiser immediately agreed to remove the following claim from the
marketplace:3
‘‘[W]ith all that’s going on, with the coronavirus . . . there is a piece that we
can control and that is our own health and building our immune system be-
cause it depends on what we eat. . .. It’s super important to have a lot of micro-
nutrients now, so Superfoods can help. We have this amazing immunity bun-
dle—Super Greens to up your green, Mellow Yellow which really reduces your
stress because [stress] actually reduces your immunity, and then we also have
immunity boosting mushrooms in our Magic Mushroom mix.’’
A case concerning an Elderberry supplement advertised to support the immune
system provides another example.4 NAD reviewed the claim: ‘‘[a]s restrictions are
gradually lifting, it’s more important than ever to keep your immune system strong.
Our Elderberry Immune Support keeps you protected with vitamin C, zinc,
elderberries, garlic and echinacea; a powerful immune-boosting combo.’’
NAD found that this claim conveyed the implied message that Vitamin Bounty
Elderberry Immune Support IV Drips protect users against the novel coronavirus
or COVID–19.
NAD initially referred the advertiser to the FTC for failing to respond to the in-
quiry but, after referral, the advertiser agreed to participate and voluntarily discon-
tinued the claim, removing the misleading advertising from YouTube and elsewhere.
NAD’s decision also alerted the dietary supplement industry that touting immune
support together with reminders of the ongoing pandemic misleads consumers that
the product could help prevent disease. A prominent publication that covers the die-
tary supplement industry, Nutritional Outlook, alerted the industry to the decision
with the headline, ‘‘Minor reference to pandemic constitutes implied COVID–19
claim according to recent NAD case,’’ in an article that cautioned dietary supple-
ment makers not to tie immune support to the pandemic. Other similar decisions
looked at social media posts and other advertising tying dietary supplements that
claim to support the immune system to the pandemic, generating guidance that
spread across the dietary supplement industry.
NAD decisions further expanded on FTC and FDA guidance to other kinds of
products that touted unsupported health benefits. In response to an NAD inquiry,
an advertiser modified its claims that its air purifier was effective on the
coronavirus:
‘‘Remove airborne coronavirus by 99.999%*’’.5
3 Your Superfoods, Inc. (Your Superfoods Immunity Bundle), Report #6371, NAD/CARU Case
Reports (May 2020).
4 Vitamin Bounty/Matherson Organics, LLC (Vitamin Bounty Elderberry Immune Support),
Report #6397, NAD/CARU Case Reports (Sept. 2020).
5 NuWave LLC’s OxyPure Air Purifier, Report #6432, NAD/CARU Case Reports (Mar. 2021).
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NAD recommended that the advertiser prominently disclose that it tested only
porcine respiratory coronavirus, a surrogate for SARS-CoV–2.
NAD decisions have reached a broad and disparate range of industries from clean-
ing products 6 to ultra-violet lights,7 intravenous hydration therapy,8 and even con-
tinuously self-cleaning surfaces,9 removing misleading claims. These industries have
been alerted that unsupported claims that a product prevents, treats, or cures
COVID–19 violate the law. The self-regulatory response to the pandemic is a power-
ful example of how independent industry self-regulation can prevent misleading ad-
vertising and reduce harm to consumers. Former FTC Chairwomen Edith Ramirez
praised the NAD program in 2016 as an example of ‘‘how impactful self-regulation
can be,’’ further noting that it is ‘‘a valuable complement to the FTC’s own enforce-
ment efforts to eliminate fraud.’’ 10
Conclusion
Thank you for the opportunity to appear before you today to explain how inde-
pendent industry self-regulation has helped combat deceptive COVID–19 advertising
claims in the marketplace. When regulatory guidance establishes standards or best
practices for advertising particular products or claims, independent industry self-
regulation is effective at spreading that guidance, holding companies accountable to
those standards, advising additional industries about the guidance, and applying
the standards in a wide array of settings. A broad range of industries, including the
dietary supplements, healthcare, and direct-selling industries look to DSSRC and
NAD for guidance. Although some companies will respond only to government en-
forcement, many other marketers respond quickly and voluntarily to remove mis-
leading advertising when given concrete guidance on appropriate claims. Inde-
pendent industry self-regulation thereby amplifies the impact of government ac-
tions.
With our Direct Selling Self-Regulatory Council and National Advertising Division
always on watch, BBB National Programs looks forward to working with this Sub-
committee to address the problem of misleading COVID–19 marketing claims.
Thank you again for this opportunity to testify, and I am happy to answer your
questions.
Senator BLACKBURN. Thank you, Ms. Engle.
Mr. Leatherman, you are recognized.
STATEMENT OF TODD LEATHERMAN,
PROGRAM COUNSEL FOR THE NATIONAL ATTORNEYS
GENERAL TRAINING AND RESEARCH INSTITUTE,
CENTER FOR CONSUMER PROTECTION,
NATIONAL ASSOCIATION OF ATTORNEYS GENERAL
Mr. LEATHERMAN. Thank you, Ranking Member Blackburn, and
thank you, Chairman Blumenthal and members of the Sub-
committee. My name is Todd Leatherman, and I want to thank you
for inviting me to participate in today’s hearing.
I currently serve as Program Counsel at the National Association
of Attorneys General, or NAAG, which is the nonpartisan national
forum for America’s 56 state and territory attorneys general.
NAAG provides training and resources to support attorneys general
in protecting the rule of law and the United States Constitution.
Prior to joining NAAG, I spent 23 years in the Kentucky AG’s Of-
fice of Consumer Protection, serving as consumer protection chief
6 One Home Brands, Inc. d/b/a Blueland (Blueland Cleaning Products), Report #6416, NAD/
CARU Case Reports (Sept. 2020).
7 Ontel Products Corp. (Safe & HealthyTM UV–C Disinfecting Light), Report #6426, NAD/
CARU Case Reports (Dec. 2020).
8 IV Drips, Customized IV Hydration & Wellness (IV Hydration Therapy), Report #6389, NAD/
CARU Case Reports (Oct. 2020).
9 NanoTouch Material, LLC (NanoSeptic Surfaces), Report #6390, NAD/CARU Case Reports
(July 2020).
10 Edith Ramirez, Chairwoman, Federal Trade Comm’n, Address at the CRN/ACI Fourth An-
nual Legal, Regulatory, and Compliance Forum on Dietary Supplements (June 2016), Press Re-
lease, https://www.crnusa.org/newsroom/crn-nad-reflect-programs-ten-years-self-regulatory-ex-
cellence.
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for 20 of those years, focusing on a wide range of consumer protec-
tion issues, including price gouging and disaster scams. In my cur-
rent role, I provide support and training for the consumer protec-
tion provisions of AG offices, who, along with Federal counterparts
at the FTC, CFBP, DOJ, Secret Service, and others, are on the
front lines fighting to protect U.S. consumers from deceptive busi-
ness practices and scams. I have submitted written testimony and
refer you to that for additional information that I am unable to ad-
dress in my time today.
Attorneys general are the primary enforcers of consumer laws
within their jurisdictions, and through a combination of enforce-
ment advocacy and education, they help protect consumers from a
wide variety of deceptive business practices and scams. From the
outset of the pandemic, consumers have been pitched phony cures,
treatments, and products supposed to prevent COVID. They have
been targeted by bogus testing sites, bombarded with scam tele-
marketing, phishing and smishing scams cloaked as contract—con-
tact tracing calls or testing companies, but which were, in fact,
identity theft efforts. They have been sold counterfeit or knockoff
N95 masks or other PPE that is not protective.
Like many of us, consumers have been spending more time on-
line and are being targeted by online scammers through online
marketplaces promising everything from PPE to puppies but hav-
ing no intention of actually delivering the goods. Attorneys general
on all sides of the political spectrum have taken on scams like
these as well as practices by legitimate businesses that have
harmed consumers, including recovering many millions of dollars
wrongfully retained by entertainment event ticket sellers and vaca-
tion travel companies following pandemic-related cancellations. In
addition, attorneys general have taken on price gouging, which is
when a merchant charges increased prices for essential consumer
goods and services during a declared state of emergency at such a
high level that it takes unfair advantage of consumers. While mer-
chants can pass on their own increased cost to consumers, they
may not increase prices simply to make a profit following a spike
in demand for an essential good or service, like bottled water or
gasoline after a major weather disaster or hand sanitizers or masks
during the pandemic. Thirty-nine States and several of the terri-
tories have price gouging statutes which are enforced by the AGs.
Attorneys general are vigilant when it comes to price gouging and
active in enforcing these laws.
On the consumer education front, the AGs have continued to pro-
vide vital consumer alerts to warn consumers about the latest
scams, as well as to put unscrupulous businesses on notice that ig-
noring the law will result in enforcement action. NAAG has been
coordinating with the FTC in providing timely public alerts and
educational materials and alerting consumers regarding emergent
scams and tips on how to avoid them.
Another consequence of the pandemic is that we are all spending
increasing amounts of time online, and as you would expect, so are
scammers. Impersonator scams are a huge problem. According to
the FTC, one type of impersonator scam, the romance scam, is one
of the fastest-growing scams in the U.S. and resulted in hundreds
of millions of dollars in losses over the last two years. NAAG is
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32
hosting a public webinar on Valentine’s Day with members of the
FBI, Commodity Futures Trading Commission, AARP, and the dat-
ing site company, the Match Group, to provide information about
this financially and often emotionally devastating crime.
In closing, I would like to voice my appreciation once again to
Chairman Blumenthal, Ranking Member Blackburn, and the entire
subcommittee for holding today’s hearing. Keeping consumers safe
is a team effort, and I applaud your effort on educating the public,
and urge you to continue using your platform to grow awareness
among your constituents and consumers across the Nation on how
to identify, avoid, and report scams and fraud. As you all have
said, there is much work to do, and the attorneys general are ready
to do the work and continue the work in protecting consumers.
I look forward to your questions today and working with the Sub-
committee on keeping consumers safe in the future.
[The prepared statement of Mr. Leatherman follows:]
PREPARED STATEMENT OF TODD LEATHERMAN, PROGRAM COUNSEL, NAGTRI CENTER
FOR CONSUMER PROTECTION, NATIONAL ASSOCIATION OF ATTORNEYS GENERAL
Chairman Blumenthal, Ranking Member Blackburn, and members of the Sub-
committee, thank you for inviting me to participate in today’s hearing. My name is
Todd Leatherman. I currently serve as Program Counsel at the National Association
of Attorneys General (NAAG). Founded in 1907, NAAG is the nonpartisan national
forum for America’s state and territory attorneys general. NAAG provides a commu-
nity for attorneys general and their staff to collaboratively address issues important
to their work, as well as training and resources to support attorneys general in pro-
tecting the rule of law and the United States Constitution.
Prior to joining the association, I spent 23 years in the Kentucky Attorney Gen-
eral’s Office of Consumer Protection. I served as the office’s executive director for
20 of those years focusing on a wide range of consumer protection issues. In my cur-
rent role, I am one of two attorneys within the National Attorney General Training
and Research Institute’s Center for Consumer Protection, the Nation’s only entity
dedicated to providing support to attorney general staff who are committed to pro-
tecting the public against consumer fraud and abuse.
The Center supports the work of the NAAG Consumer Protection Committee,
which currently has 19 members and is co-chaired by Illinois Attorney General
Kwame Raoul and Tennessee Attorney General Herbert H. Slatery III.
In my role, I support 2022 NAAG President and Iowa Attorney General Tom Mil-
ler’s Presidential Initiative, ‘‘Consumer Protection 2.0: Tech Threats and Tools’’. As
part of the initiative, Attorney General Miller welcomes the opportunity to collabo-
rate with the Federal government and Congress on our shared priorities. I encour-
age you to participate in the many events and meetings scheduled this year focused
on the initiative and protecting consumers.
ROLE OF STATE ATTORNEYS GENERAL
Attorneys general are the primary enforcers of consumer laws within their state
or territory. Their activities and enforcement actions are critically important for pro-
tecting consumers across the country. They deal with a full range of issues that con-
sumers encounter in the marketplace and at home, including health, safety, and pri-
vacy. Because consumer protection is uniquely ‘‘people law,’’ it is often the place
where individuals have the closest contact with not only the attorney general’s of-
fice, but with any governmental entity.
Attorneys general serve the public in a variety of ways in the sphere of consumer
protection. These include:
• Education: Making consumers aware of their consumer rights and potential
scams/frauds through speaking engagements, websites, press releases, public
service announcements, mobile offices, social media, and other communications.
• Mediation: Serving as an independent mediator regarding disputes that con-
sumers have with businesses.
• Enforcement: Investigation, settlement, and litigation of consumer protection
matters.
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COVID–19 SCAMS AND FRAUD
Whenever disaster strikes, unscrupulous individuals see an opportunity to profit
off their fellow citizens’ vulnerability. To individuals willing to profit off the misfor-
tune of others, the COVID–19 pandemic has presented the opportunity of a lifetime.
Phony cures, treatments, and products supposed to prevent infection; bogus testing
sites, telemarketing, phishing and smishing scams cloaked as contact tracing calls,
e-mails, or text messages; sales of counterfeit or knock-off N95 masks or other PPE;
puppy scams—requiring consumers to send money for a new pet that never arrives.
Schemes like these, as well as price gouging, have occurred during the pandemic
and been the subject of enforcement actions by attorneys general. In addition, attor-
neys general have helped recover millions of dollars in wrongfully retained cancella-
tion fees, obtained refunds for cancelled travel and entertainment events.
A few COVID-related cases to highlight:
• Missouri and Arkansas sued and won cases against James Bakker and his asso-
ciated television production company regarding false claims about a ‘‘silver solu-
tion’’ product that was marketed as a cure or treatment for COVID.1
• Nebraska settled with a testing company regarding deceptive and misleading
statements to consumers regarding the ability of their antibody tests to identify
the presence of a current or prior COVID–19 infection.2
• Oregon’s attorney general announced agreements with six companies and med-
ical practitioners selling products and services advertising a so-called Covid-19
‘‘cure,’’ or an ability to boost immunity and protect people from the disease.3
• New York’s attorney general sent cease and desist letters to multiple companies
allegedly selling fake COVID–19 treatments.4
• Arizona’s attorney general secured an agreement with Ticketmaster, returning
over $71 million in refunds for consumers who purchased tickets to live events
that were cancelled, postponed, or rescheduled due to the COVID–19 pan-
demic.5
• The Texas attorney general obtained a temporary restraining order against a
Texas clinic for misrepresenting the character of its COVID–19 testing and fail-
ing to secure patients’ sensitive personal information.6
PRICE GOUGING
Thirty-nine states and several of the territories have price gouging statutes, most
of which grant the jurisdiction’s attorney general civil enforcement authority for any
violations 7. Some states, such as Florida, Louisiana, and Mississippi, also give the
attorney general criminal enforcement authority in price gouging cases. States that
may lack a specific price gouging statute, may still combat price gouging under their
deceptive trade practices act, specifically as an unfair practice.
How price gouging is defined in specific statutes, varies by state. However, price
gouging laws generally prohibit a merchant from increasing prices for essential con-
sumer goods and services, during a declared state of emergency, to a level that takes
unfair advantage of consumers. The laws generally recognize that if a merchant’s
costs increase, they may pass on those cost increases to consumers. However, when
merchants’ costs have not increased, they may not increase prices simply to make
a windfall profit following a spike in demand for an essential good or service, wheth-
er it be a generator, motel room, bottled water, gasoline, hand sanitizer, or masks.
This type of market behavior is illegal, unfair to consumers, and harms communities
at their most vulnerable moments.
1 Arkansas: https://arkansasag.gov/media-center/news-releases/rutledge-sues-jim-bakker-for-
peddling-colloidal-silver-products-to-cure-covid-19/; Missouri: https://ago.mo.gov/home/news/
2020/03/10/ag-schmitt-files-suit-against-jim-bakker-for-selling-fake-coronavirus-cure.
2 https://ago.nebraska.gov/news/ag-peterson-reaches-settlement-omaha-companies-deceptive-
and-misleading-statements-regarding.
3 https://www.doj.state.or.us/media-home/news-media-releases/ag-rosenblum-settles-with-six
-companies-and-medical-clinics-selling-unproven-covid-19-treatments/.
4 https://ag.ny.gov/press-release/2020/attorney-general-james-orders-companies-stop-selling-
fake-treatments-coronavirus.
5 https://www.azag.gov/press-release/ag-brnovich-secures-71-million-ticket-refunds-arizona-
events-impacted-covid-19.
6 https://www.texasattorneygeneral.gov/news/releases/ag-paxton-files-lawsuit-against-clinica-
hispana-fraudulent-covid-testing-and-failing-secure-personal
7 https://www.ncsl.org/research/financial-services-and-commerce/price-gouging-state-statutes
.aspx
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Attorneys general have used their price gouging authority following multiple dis-
asters. For example:
• In 2017, the Texas attorney general took action against gasoline stations and
motels who raised their prices exorbitantly in the aftermath of Hurricane Har-
vey.8
• The New York and New Jersey attorneys general obtained settlements from ho-
tels, gas stations, and a hardware store for price increases following Hurricane
Sandy.9
• The North Carolina attorney general obtained settlements from an out of state
water damage restoration company for charging excessive prices following Hur-
ricane Florence.10
Price gouging restrictions may also be implemented following an unexpected sup-
ply disruption, a recent example being the 2021 Colonial Pipeline ransomware at-
tack that led to the shutdown of the pipeline supplying much of the gasoline to the
East Coast. Following that event, a number of attorneys general, including the those
from Kentucky,11 North Carolina,12 and Virginia,13 filed price gouging actions
against gasoline stations who raised their prices to unlawful levels.
PRICE GOUGING ENFORCEMENT DURING THE COVID PANDEMIC
As the committee is aware, consumers have reported gouging on a wide range of
products from hand sanitizer to masks, even on eggs during the COVID–19 pan-
demic.
One such incident made the national press in the early days of the pandemic. A
pair of brothers from Tennessee drove from store to store purchasing large quan-
tities of hand sanitizer in Tennessee and Kentucky. The brothers then jacked up the
prices and sold the bottles of hand sanitizer on Amazon for $8 to $70 each, many
times higher than their purchase price. The Tennessee and Kentucky attorneys gen-
eral quickly took action, obtaining a settlement in which the brothers gave up the
supplies and made them available for emergency responders and others serving the
public.
A few other cases to highlight:
• Colorado’s attorney general announced a settlement with a business for making
misleading claims about masks and respirators it sold and for charging unrea-
sonably excessive prices for those products.14
• Oregon’s attorney general settled with five Oregon companies for consumer pro-
tection violations related to the COVID–19 pandemic.15
• Pennsylvania’s attorney general has taken action against numerous retailers
who raised prices on sanitizer, wipes, masks, and bottled water;16
• The attorneys general of New York and Minnesota obtained settlements from
egg wholesalers alleged to have price gouged and obtained more than 1 million
eggs each for food pantries serving low-income communities in their states.
Attorneys general across the country have sent warning letters, activated price
gouging hotlines, and launched mobile apps for consumers to report exorbitant
prices.
The authority of attorneys general to pursue price gougers operating online was
recently affirmed by the U.S. Sixth Circuit Court of Appeals when it upheld Ken-
8 https://www.texasattorneygeneral.gov/news/releases/ag-paxton-files-more-lawsuits-against-
businesses-accused-price-gouging-during-hurricane-harvey
9 https://www.nj.com/mercer/2013/07/mercer_county_hotels_settle_with_state_over_alleged_
price_gouging_during_sandy.html; https://ag.ny.gov/press-release/2013/ag-schneiderman-anno
unces-40k-settlement-brooklyn-hotel-price-gouging-wake#:∼™text=Espa%C3%B1ol-,A.G.%20Schnei
derman%20Announces%20%2440k%20Settlement%20With%20Brooklyn%20Hotel%20For,In%20
Wake%20Of%20Hurricane%20Sandy&text=NEW%20YORK%20%2D%20As%20part%20of,Sandy
%2C%20Attorney%20General%20Eric%20T.
10 https://ncdoj.gov/attorney-general-josh-stein-reaches-100000-settlement-in-hurricane-florence
-price-gouging-investigation/.
11 https://www.kentuckytoday.com/state/price-gouging-settlement-with-fuel-retailer-reached/
article_ca5ed3f0-3b45-50c0-b69a-3de3cd1522fe.html.
12 https://ncdoj.gov/wp-content/uploads/2022/01/doc05140920220120142958.pdf.
13 https://www.oag.state.va.us/media-center/news-releases/2158-september-23-2021-herring-
holds-gas-station-accountable-for-price-gouging.
14 https://coag.gov/press-releases/1-25-21/.
15 https://www.doj.state.or.us/media-home/news-media-releases/attorney-general-announces-
settlements-in-covid-19-consumer-protection-cases/.
16 https://www.attorneygeneral.gov/avcs/.
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35
tucky’s authority to investigate third party sellers offering products on Amazon. The
court reversed a lower court ruling which had held that Kentucky’s statute violated
the dormant commerce clause of the U.S. Constitution by, in effect, regulating prices
in other states. A bipartisan coalition of 39 states filed an amicus brief in support
of Kentucky and the Sixth Circuit agreed with the states that the law was constitu-
tional.
Attorneys general are vigilant when it comes to price gouging and active in en-
forcing these laws.
RESPONDING TO DISASTERS
During times of disaster, attorneys general have an important role to play in
keeping their communities safe, whether it be from price gougers, scam artists sell-
ing bogus products, fake charities preying on the public’s sympathy to con them out
of donations, or fly-by-night storm chasers offering shoddy or expensive construction,
repair, or other damage-related services. Just recently, when my home state of Ken-
tucky suffered a devastating rash of tornados in early January, Attorney General
Cameron and his office reached out to local officials and created a contractor reg-
istration program, requiring contractors offering emergency-related services to reg-
ister with his office so they have identifying and contact information for all such
businesses operating in the area. The contractors are then required to place a con-
spicuous placard on their vehicles so residents know who has been approved to per-
form work in the area and can avoid those who are not. The program is a creative
initiative to help deter con men and unscrupulous businesses and, so far, has been
a huge success.
On the consumer education front, attorneys general have continued to provide
vital consumer alerts and public outreach to warn consumers about the latest
scams, as well as to put unscrupulous businesses on notice that ignoring the law
will result in enforcement action.
NAAG has been coordinating with Federal consumer agencies like the Federal
Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) in pro-
viding timely public alerts and educational materials, alerting consumers regarding
emergent scams and tips on how to avoid them. Among those efforts are campaigns
regarding free at-home test kits which we released last month, as well as efforts
warning of fake COVID clinical trials and vaccine scams at earlier stages of the
pandemic. We will soon be issuing tips to consider when visiting a testing site or
obtaining an at-home test kit. This new campaign comes amid a number of anec-
dotal reports of bogus pop-up testing sites, delayed test results, and questions about
at-home kits.
The materials related to these campaigns are available on our COVID–19 resource
page on NAAG’s consumer-facing website www.consumerresources.org. We encour-
age you and your staffs to make use of these materials along with other information
on the site. Of particular interest may be the page which lists every attorney gen-
eral’s consumer protection website and complaint intake portal, which many of your
colleagues and their staffs have told us has been very useful in referring consumers
to their attorney general.
ONLINE DANGERS GROW DURING COVID PANDEMIC
Apart from scams directly related to COVID, all of us are spending increasing
amounts of time online and so are scammers. This growing online presence has led
to other problematic issues—including impersonator scams like romance scams,
which according to the FTC is the fastest growing scam in the U.S. and one result-
ing in more than $300 million in consumer losses in 2020. As part of Attorney Gen-
eral Miller’s NAAG Presidential Initiative, we are hosting a public webinar regard-
ing romance scams on Valentine’s Day, with members of the Federal Bureau of In-
vestigations, Commodity Futures Trading Commission, AARP, and dating site com-
pany the Match Group, to provide information about this pernicious and financially
and emotionally devastating crime.
CONCLUSION
In closing, I’d like to voice my appreciation once again to Chairman Blumenthal,
Ranking Member Blackburn, and the entire Subcommittee for holding today’s hear-
ing. Keeping consumers safe is a team effort. I applaud your focus on educating the
public and urge you to continue using your platform to grow awareness among your
constituents and the consumers across the Nation on how to identify and report
scams and fraud.
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36
I look forward to your questions today and working with the Subcommittee on
keeping consumers safe in the future.
Senator BLUMENTHAL [presiding]. Thank you, Mr. Leatherman.
I am going to begin the questioning with you, Mr. Levine. You
mentioned in your remarks that the FTC has sent letters directing
more than 425 companies to remove deceptive claims. In what pro-
portion of those cases have the claims been removed?
Mr. LEVINE. Thank you, Senator. The overwhelming majority of
recipients of those cease and desist demands take down their
claims and often take them down within 48 hours.
Senator BLUMENTHAL. And then bring new ones.
Mr. LEVINE. Well, Senator, we monitor these closely. If we see
them bringing new claims, we will not hesitate to take them to
court.
Senator BLUMENTHAL. But you have brought only three cases
under COVID-related—the COVID-related Consumer Protection
Act.
Mr. LEVINE. I completely agree Senator that we need to bring
more cases, and we will be bringing more cases. It is certainly im-
portant that we get these claims taken down quickly, but it is also
critical that we not allow scammers to profit from preying on
American consumers. And if that means taking them to court, that
is exactly what we are going to do.
Senator BLUMENTHAL. You know, I have sat at this dais for years
now, and I have heard the same thing said as you have said, I am
sure in good faith, but we continue to have warning letters without
real apparent effect. Are you obligated to bring warning letters be-
fore you bring lawsuits?
Mr. LEVINE. We are not obligated, Senator. Particularly early on
in the pandemic, we wanted to make sure these claims got taken
down quickly to prevent further harm to consumers. But I think we
are now at the point where we do not only want to get these claims
taken down. We want to make sure scammers out there know that
they are going to pay a heavy price, not only pay back what they
stole, but pay a penalty to the government as punishment, and that
is why we are going to bring more cases.
Senator BLUMENTHAL. How many penalties have been paid as a
result of the three cases that you brought?
Mr. LEVINE. I could get that exact figure, Senator. I know some
of those cases remain in litigation.
Senator BLUMENTHAL. So, in effect, there have been few, if any,
penalties actually paid.
Mr. LEVINE. I think in addition to the three cases under the
CCPA, Senator, we brought about 15 other COVID-related cases
under other authorities, and there may be penalty liability there as
well.
Senator BLUMENTHAL. What changes have you made to deter
these criminals from price gouging, and scamming, and deceptive
and misleading practices that you have the authority to go to court
on without warning letters, but evidently continue issuing warning
letters?
Mr. LEVINE. I think the big change we are making is trying to
make sure that there is civil penalty liability across the market. So
those cease and desist demands and warning letters do give us the
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basis to seek civil penalties against COVID scammers, but we are
also sending notices of penalty offenses for other types of scams not
covered by the CCPA to make sure that those scammers pay a pen-
alty. Same with our Made in USA fraud rule. We want to make
sure those scammers pay a penalty. There are a lot of people using
this pandemic as a basis to prey on American consumers, and we
want to make sure everyone pays a price and know they are going
to pay a price if they persist in their wrongdoing.
Senator BLUMENTHAL. I appreciate your words, but what the con
artists and scammers understand is action.
Mr. LEVINE. I agree.
Senator BLUMENTHAL. Actions speak louder than words. So far
there has been no action. More important, there have been no pen-
alties. There is no deterrence if there are no penalties, and there
is no real deterrence unless there are penalties that have real bite.
And so far, there has been a complete dearth of action. We have
given you new authority, and I am at a loss to understand why the
FTC has not taken stronger action. I understand that some of your
testimony may be on your own or without the authority of the FTC,
but let me ask you as someone with a lot of experience in this area,
how do you go to work knowing that this Agency has apparently
no clear strategy, articulated by the Agency itself, for changing its
practice to bring more cases without warnings? Forget the warn-
ings.
Mr. LEVINE. I think our strategy, Senator, is going to be to bring
more cases. As I said, I think we are now at the stage in the pan-
demic where we are moving away from trying to get these claims
taken down as quickly as possible. Obviously we want them taken
down as quickly as possible, but we also need to make sure that
these scammers are paying a heavy penalty for preying on people.
And as I said, we are not just going to ask people to turn over what
they stole. We are going to ask them to pay a civil penalty to the
government and, when appropriate, we are going to make a crimi-
nal referral so that—because some of these people deserve jail
time.
Senator BLUMENTHAL. Are they under an obligation to take down
a deceptive misleading scam simply because you have issued a
warning letter?
Mr. LEVINE. If they do not, we are going to take them to court,
so yes.
Senator BLUMENTHAL. So why not just take them to court? They
will take it down anyway.
Mr. LEVINE. Some of them we are going to take to court. Part
of it is trying to get these claims taken down as quickly as possible,
but I hear what you are saying, Senator. It is not only that these
scammers pay a price. Consumers who lose money to these scams
should be made whole, and to do that we need to bring lawsuits,
and that is what we are going to do.
Senator BLUMENTHAL. To make them whole, you need to bring
lawsuits.
Mr. LEVINE. Mm-hmm.
Senator BLUMENTHAL. But also, to prevent them in the future,
you need to bring lawsuits with the remedy of penalties and injunc-
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tive relief so if they violate a court order, the court itself will exact
penalty.
Mr. LEVINE. We want to obtain permanent injunctions against
these scammers that put them under court order for the rest of
their lives. That is what most—that is what many of these
scammers deserve, and that is what we are going to be seeking in
court.
Senator BLUMENTHAL. Well, I am not from Missouri, but I am in
the show me state of mind. The Ranking Member is recognized.
Senator BLACKBURN. Thank you, Mr. Chairman. Mr. Levine, I do
appreciate that you mentioned that most of these things have
started online. Mr. Leatherman, I want to come to you first be-
cause in Tennessee we have seen a preponderance of these online
scams that have kicked up and the prevalence of that, and in my
opinion, the States’ attorneys general are in the best spot to deal
with this. And as you well know, Tennessee has been very active
and AG Slatery has been very active in pursuing these cases
against fraudsters in this space. And what I would like to know
from you, recognizing that the State is in a better position to go
after this than the Federal Government, are there any barriers or
hurdles that the State AGs are facing in this fight against these
online scammers? And we know that we want our State AGs to be
as well-equipped as possible, so any barriers or hurdles?
Mr. LEATHERMAN. I appreciate the question, Ranking Member
Blackburn. And as you know, Attorney General Slatery, but also
many other attorneys general, have been very active in pursuing
not only price gouging cases, but also counterfeit PPE cases and
also bogus cure cases. And you are correct that—and as has been
mentioned by others, there is a lot of activity that is going on on-
line. I would say that as a legal matter, the State AGs are replete
with authority under the UDAP cases as well as price gouging
cases in order to pursue these cases.
The barriers or the challenges are those related to the volume of
the activity that is going on. Obviously, AG offices have limited re-
sources, and so being able to address all these issues is a challenge.
We are not here with head in hand asking for additional resources,
but obviously, if the Federal Government is interested in pro-
viding——
Senator BLACKBURN. Let me—let me jump in there.
Mr. LEATHERMAN. Yep.
Senator BLACKBURN. So really, there are no legal barriers. The
attorneys general have the needed authority, correct?
Mr. LEATHERMAN. That is correct.
Senator BLACKBURN. OK. And just—it is always a resourcing
issue, so I appreciate that. Ms. Engle, let me come to you. I want
to be sure I understood. 2019, pre-pandemic, is when the Direct
Selling Association started their Self-Regulatory Council there at
the BBB National Program, correct?
Ms. ENGLE. That is correct.
Senator BLACKBURN. OK.
Ms. ENGLE. It was created in 2019.
Senator BLACKBURN. I think that that is significant, and we
know that you have used it to monitor the marketplace. So talk
with me just a touch about the program’s impact and what needs
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to happen to ensure that these self-regulatory bodies can be suc-
cessful?
Ms. ENGLE. Sure. So, you know, the impact of this program in
the area of COVID has been the removal of over 400 misleading
claims from the marketplace, from the direct selling marketplace
specifically. And it is true that most of these claims appear on so-
cial media, and so we actively monitor social media in order to find
those claims and contact the companies.
Senator BLACKBURN. How large is the staff that monitors this?
Ms. ENGLE. We have a handful of staff, but we have a—we have
a contract with a—like a web crawler type of company——
Senator BLACKBURN. Sure. Absolutely.
Ms. ENGLE.—that does the monitoring, yes.
Senator BLACKBURN. OK. That is helpful. Ms. Murray, I want to
come to you. CBP at the port in L.A. and Long Beach, intercepted
13,586 counterfeit products in 2021, and it was a 153-percent in-
crease from 2020. So you touched on it in your remarks, but a more
fulsome response on what we can do to fight these overseas entities
that are flooding our ports and flooding our country with fake and
counterfeit items. This is dangerous for our citizens, and we know
most of this is, of course, coming from China.
Ms. MURRAY. Yes, thank you for the question. As I mentioned in
my remarks, during 2020 and 2021, Customs and Border Protec-
tion actually seized 34 million counterfeit masks during that time.
And, of course, the ports in Los Angeles and Houston and on the
East Coast, I mean, all of them have seen this just monstrous in-
crease in fake PPE. I think what we need to see is more resources
as well as more cooperation. The things that scare me is we hear
about the cases where the FBI was involved in this case and Bor-
der Patrol seized this many masks or this many fake COVID tests.
But what about the ones we do not hear about? What about the
ones that are actually ending up on store shelves, or online, or in
hospitals, because there were a number of cases last year where
hospitals, including the Cleveland Clinic here in Ohio, as well as
hospitals in Minnesota and New Jersey, all across the country,
where hospitals actually had distributed what turned out to be
counterfeit 3M N95 masks. And how do we stop that? I mean, that
is just awful to think that we had our frontline workers running
around for hours or days or weeks with fake masks, and so we ab-
solutely need to have more resources to stop that.
Senator BLACKBURN. Thank you. Thank you, Mr. Chairman.
Senator BLUMENTHAL. I see that Senator Klobuchar has joined
us remotely, and she is recognized.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator KLOBUCHAR. All right. Well, thank you very much,
Chairman Blumenthal, and thank you also, Senator Blackburn, for
holding this important hearing. I appreciate it. I was listening in,
Ms. Murray, as you talked about the fake masks, and 3M is, of
course, a Minnesota company, so it even hits harder home that
someone was ripping off their masks and distributing them to our
frontline workers. Also, last week, our attorney general, Minnesota
Keith Ellison, filed a lawsuit in State court against two COVID
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testing companies for falsifying test results, and I think going after
these cases is really, really important.
One thing that I wanted to mention was just the work that we
can do federally. I have proposed legislation with Senator Grassley
that would change the way the merger fees are done so that we
could get more money into the FTC as well as to the Department
of Justice to help them with their annual budget. Mr. Levine, what
would the effect be of tripling actually the FTC’s budget, which is
part of another bill that I have introduced, have on the Agency’s
ability to better protect consumers? And by the way, there are
ways we can do this, as Senator Grassley and I pointed out from
our merger fee bill, without putting it on the back of taxpayers.
And I think there is also an argument that the cases, because there
is so much rampant scams going on, actually bring in money for
the government if done right, but not if they do not have the fund-
ing to start the cases to begin with. Mr. Levine, do you want to an-
swer that?
Mr. LEVINE. Certainly, Senator, and thank you for the question.
In short, the effect would be transformative. I mean, a striking fact
about FTC funding, we actually have a smaller headcount today
than we did in 1980 when the economy was far smaller. With more
resources, we could bring more cases and return more money to
more consumers. In the 5 years before the Supreme Court took
away our strongest authority—Section 13(b)—we returned more
than $11 billion to consumers, far more than we received in Fed-
eral funding. Investing in the FTC is a good investment.
Senator KLOBUCHAR. Exactly. You bring in money. And, Ms.
Murray, you also highlighted the chronically underfunded Agency.
How will more funding directly benefit customers from your per-
spective?
Ms. MURRAY. To the extent that the Federal agencies have more
resources, they can improve their technology. They can improve
their staffing. They can improve their training. All of those are
needed to help consumers because consumers cannot do it alone.
Senator KLOBUCHAR. Right. Another thing, social media plat-
forms, as you all know, are designed to amplify content, and, sadly,
if not monitored, it actually makes it easier for scammers to spread
content that is false. And, Mr. Levine, in your testimony, you note
how since 2017, reports of scams starting on social media have in-
creased 19-fold. Can you tell us about some of the most prevalent
scams, and then maybe, Ms. Engle, could you also touch on this,
what you think should happen? Mr. Levine.
Mr. LEVINE. Absolutely, Senator. The numbers are quite striking,
not only a 17-fold increase in the volume of losses on social media,
a 19-fold increase in the number of people reporting losses, 95,000
complaints last year, $770 million in losses reported last year, and
we know that is the tip of the iceberg. We are seeing particular rise
in investment scams, romance scams, online shopping, and other
frauds. And simply put, Senator, online platforms are not doing
enough to police this problem.
Senator KLOBUCHAR. Yep. Very good. Ms. Engle, would you like
to add what the platforms should be doing to make sure these
scams are not put forward in the first place?
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Ms. ENGLE. Absolutely. I think in addition to being vigilant, I
mean, one of the things that we would like them to do is to partner
with us so that when we see misleading ads on their platforms and
the advertiser does not comply with our decision, we could refer
them to the platforms. Facebook actually has already agreed to do
that, and so when we refer matters to them, that misleading ads
violate the terms of service, they promptly take them down. And
we would like to have that same partnership with the other plat-
forms as well.
Senator KLOBUCHAR. Mm-hmm. All right. Well, very good. I
think there are also some other proposals out there, I think, that
would be very helpful on everything from algorithms, to assessing
financial fees, taxes on this, to changes to immunity for misrepre-
sentation. It is one thing if someone puts a false comment on. It
is another when a platform actually amplifies the misinformation
and is making money off of it. To me, that is the distinguishing fac-
tor if you are going to look at immunity issues, or you are going
to look at taxation, or you are going to look at anything, to try to
get a handle on this because there has got to be more disincen-
tive—more incentives for good behavior than disincentives in place
that we see right now. So thank you very much.
Senator BLUMENTHAL. Senator Markey.
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator MARKEY. Thank you, Mr. Chairman, very much. Massa-
chusetts is seeing encouraging decreases in COVID–19, but we
know that reliable at-home test kits will continue to be an impor-
tant tool to keep our communities healthy. And at-home testing
kits are vital for identifying illnesses and stopping the spread of
COVID–19. Unfortunately, we know that during periods of in-
creased demand for tests, bad actors have engaged in predatory
and profiteering behavior, including selling fraudulent test kits and
charging exorbitant prices. Ms. Murray, can you briefly describe
the types of fraudulent activity related to COVID testing that
threaten consumers in this country?
Ms. MURRAY. Yes. Thank you, Senator, and I assume that by
testing, you are talking about, like, the test sites as well as the test
kits that people can buy in stores. And, you know, I mean, I have
focused on consumer issues for 30 years. I was a consumer finance
journalist in my past life, and just when you think you have heard
it all—predatory lending, phone calls, the grandkids are in jail and
they need iTunes gift cards for bail money—just when you think
you have heard it all, then all of a sudden you get COVID coming
along, and we have had so much of unauthorized test kits, counter-
feit masks, fake test sites, and these miracle cures that do not
work. So we——
Senator MARKEY. What should we do? What is the solution to
this? We know it is out there. We know it is rampant. What is the
plan we should put in place?
Ms. MURRAY. We need more resources, more enforcement. Frank-
ly, I would like to see some—well, I—we need more supply, OK?
And I would like to see more aggressive enforcement.
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Senator MARKEY. I am sorry. We need more—we need more sup-
ply of what? We need more supply of what?
Ms. MURRAY. Of test kits and of the test sites. I mean——
Senator MARKEY. How do we make sure that those that are there
are not fraudulent? We know the 60 percent of the masks coming
in from China are fraudulent, so what can we do in order to, you
know, police that?
Ms. MURRAY. Well, with the—with the test kits, there is a site
that you can go on with the FDA to make sure that the test kits
are valid. But really, I mean, are consumers going to be able to
look—they are at the grocery store. They finally found some test
kits for sale, and they are going to pull it up on their phone to see
whether it is legitimate or not? I think the retailers have more re-
sponsibility to make sure that the products that they are getting
in their stores are actually authorized. And with these test sites,
what I was starting to say is I would like to see a little bit more
of the mindset of see something, say something.
I mean, I wonder what some of these pop-up test sites that have
opened up in shopping center plazas, if somebody just was able to
call their local police department and say, hey, can you go out and
check out what this thing is because, you know, people can just
buy, like, orange cones and hazmat suits and go and pretend to be
a test site. We have heard just horrible, horrible cases with these
fake test sites, and people are getting their information stolen, in
some cases, being asked to pay money for free—for what should be
a free test. Everybody needs to——
Senator MARKEY. So, Mr. Levine, let me just say this to you, Mr.
Levine. We have got a big problem out here. Senator Blumenthal
and I have written for the—to the Federal Trade Commission ask-
ing for the toughest possible actions to be taken to deal with these
scams, and I applaud the FTC for everything that they have done
thus far. But we just want to make sure that we are working with
you so that you have all of the authority which you need in order
to—in order to police this area.
And I guess I would just move over to masks quickly because
they are an effective tool for reducing transmission, but the Cen-
ters for Disease Control and Prevention recently updated its mask-
ing guidance to acknowledge that higher-quality masks provide
better protection from COVID–19. Now more Americans are look-
ing for increased protection that comes from N95, KF94s, and
KN95s masks. Unfortunately, online marketplaces are rife with
counterfeit and fraudulent masks, and those platforms continue to
allow masks to be sold despite concerns that the information about
these products is misleading and unverified. Last year, the Depart-
ment of Justice established a COVID–19 Fraud Enforcement Task
Force. Today, Senator Blumenthal and Senator Warren join with
me in writing to the Department of Justice urging to take all steps
necessary to protect consumers from the threat of fraudulent
masks online in the marketplace.
Ms. Murray, do agree that this task force should prioritize efforts
to protect consumers and promote public health by cracking down
on fraudulent masks?
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Ms. MURRAY. Absolutely, and one of the stunning things is some
of these fake masks that have been tested by health officials. Their
filtration level is 7 percent.
Senator MARKEY. So exactly. So we need some kind—what we
need is this. We need a national ranking for masks so that people
know that a cloth mask, on a scale of 10, is a 1 or a 2, that a sur-
gical mask is only a 5 or a 6, and that you need those stronger
masks to get up to an 8 or a 9 or 10. So actually, the Federal Gov-
ernment has to do a better job in putting together a comprehensive
program. We actually—when people go and purchase their sun-
screen, they know that it is—what the SPF is, 36, 18. People know
what it is for their own skin. Right now it is incomprehensible to
people in terms of the rating system for masks. And the Federal
Government, following what NIOSH does for their masks, has an-
other counterpart, the FDA, some agency, of which is ranking all
of these masks, and that will help the consumer to know what to
buy. In the same way when they buy a car—it is 5 stars, 4, 3, 2,
and 1 for safety—we need some kind of system for masks because
we might see this pandemic subsiding, but it is going to come back,
and at that point, hopefully by then, we will have a ranking sys-
tem.
So I thank you, Mr. Chairman. This is just such an important
hearing. It gets right to what the Federal Government should be
taking as action to give more protections to consumers in our coun-
try. Thank you.
Senator BLUMENTHAL. Thank you, Senator Markey, and thanks
for mentioning the letter that we did today regarding fraudulent
and fake masks and other scams. Very important that the Depart-
ment of Justice takes responsibility here as well. Senator Thune.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator THUNE. Thank you, Mr. Chairman. Mr. Levine, I re-
cently introduced the bipartisan Robocall Trace Back Enhancement
Act with Senator Markey to help bolster privately led efforts to
trace back the origins of illegal robocalls. Can you speak to the
FTC’s efforts on engaging with industry initiatives, like the
Robocall Trace Back Group, and whether this public/private part-
nership has been successful in identifying illegal robocaller actions?
Mr. LEVINE. Absolutely, Senator, and, first of all, thank you for
your leadership on this issue and on the Trace Act as well. It has
been a successful partnership, but let us not kid ourselves. There
is a lot more work to be done. The FTC has brought 150 lawsuits.
We are moving upstream targeting VoIP providers who are blast-
ing billions of calls into Americans’ homes and pockets, but a lot
more needs to be done if we are going to take on this scourge.
Senator THUNE. Well, and I hope that you can continue to advise
us, too, on things that we can do to give you more tools, but we
do want to make sure that these partnerships that we have called
for are hopefully functioning and working in an effective way. And
I would follow up with Mr. Leatherman virtually, if you could
elaborate on the coordination between industry and enforcement of-
ficials to make the traceback efforts effective, and then perhaps
also address the question whether there are other tools Congress
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should consider providing attorneys general to meet the challenge
of tracking illegal robocallers?
[No response.]
Senator THUNE. Mr. Leatherman?
[No response.]
Senator BLUMENTHAL. I do not know whether we have Mr.
Leatherman still——
Senator THUNE. OK.
Senator BLUMENTHAL. Oh, there he is.
Senator BLUMENTHAL. Mr. Leatherman?
Mr. LEATHERMAN. Sorry about that.
Senator BLUMENTHAL. Did you hear the question?
Mr. LEATHERMAN. I did not hear the question. My Internet just
blinked out, so would you repeat it, please?
Senator THUNE. I do not know if you heard my first question of
Mr. Levine, but I wanted to ask if you could elaborate on the co-
ordination between industry and enforcement officials to make the
trace back efforts effective. This comes back to the issue of
robocalls. And as a followup, are there other tools Congress should
consider providing State attorneys general to meet the challenge of
tackling illegal robocallers?
Mr. LEATHERMAN. Thank you, Senator, for that question, and
thank you for your leadership on the issue involving robocalls. As
you are aware, I think, there has been a number of cases brought
recently by State attorneys general using tools that have been
made available through the Trace Back Act, and those efforts are
ongoing. There have been a number of cases brought recently tar-
geting illegal activity conducted on networks, and so the networks
themselves have been subject to law enforcement actions.
So in the past, it was difficult to obviously sift through all of the
scammers, and so the AGs have been very [inaudible] in targeting
the network [inaudible] that [inaudible].
Senator BLUMENTHAL. Mr. Leatherman, I think we have lost you
again. I think we have lost you.
Senator THUNE. Mr. Chairman, let me come back to Mr. Levine
here, and this is a separate issue, but it has to do with a concern
I have had for a long time about the big four meat packers’ domi-
nance and control over beef processing capacity and cattle supply
in this country. Packers are enjoying excessive profits while cattle
producers and family farm and ranch operations, like those in my
home state of South Dakota, struggle to stay in business. At the
same time, consumers are left paying record high prices for beef,
and most of the time they are not even sure where it is coming
from because the product of the USA labeling loophole, which is en-
tirely another issue. But I remain very concerned with potential
improper or anticompetitive activity in the beef sector, and I am
encouraged that this Administration has prioritized oversight of
this highly concentrated industry. And I am wondering what your
views are with respect to the FTC using its Section 6(b) authority
to investigate these meatpacking companies?
Mr. LEVINE. Well, Senator, I certainly share your interest in this
issue. I would want to raise that with my colleagues in the Bureau
of Competition who would have more knowledge on that particular
issue. But I just want to jump off on something you said about the
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‘‘Product of USA’’ beef. You know, one of the things we did at the
FTC last year is finalized a rule that prohibits mislabeling products
made in USA when they are from overseas. But as you referenced,
Senator, we know that when Americans are shopping for beef, it
might say ‘‘Product of USA’’ on the label, but that cattle could have
been born, raised, and slaughtered overseas. This is not only bad
for consumers. This is bad for the ranchers in your state and across
the country who are being cheated by misleading labels. We stand
ready to work with the USDA on this issue to protect all consumers
from misleading ‘‘Product of USA’’ of ‘‘Made in USA’’ labels.
Senator THUNE. Thank you, and I hope that you will take a look
at the other issue that I mentioned on the FTC with respect to the
concentration and dominance and control that a handful of
meatpackers have. But I appreciate you addressing the issue of la-
beling because it is misleading to consumers in this country when
a product that comes in from outside the U.S. attracts the USA
label, and it does not represent an animal that was born, raised,
and harvested here in the United States. And so this is an issue
that has been around for a long time. We have addressed it in a
couple of farm bills. It continually gets challenged at the World
Trade Organization, and we have not been willing to defend the
legislation that has passed previously here in the Congress that
would provide mandatory country of origin labeling.
I am glad that you all are moving forward to try and close that
loophole. I hope that you will use the powers that your Agency has
and the authorities that it has to continue to try and tighten up
so we can get to a point in this country where everything that we
put in the center of our plate has the same requirements as the
clothes we wear. Your tie, my tie will all say made in some other
country. We have got labeling on everything except the stuff that
we eat. It makes absolutely no sense. It is an issue that just flat
has to be addressed. I have got a bill with Senator Tester to do
that, but to the degree that you all have regulatory authority, I
would encourage you to continue to exercise it in a way that allows
American consumers to be able to differentiate when they go to the
supermarket or the grocery store the products that are born,
raised, and harvested here in the United States and those that are
not. I think it is an important distinction to be made and some-
thing that consumers around this country desperately want to see.
Thank you.
Thank you, Mr. Chairman.
Senator BLUMENTHAL. Thank you, Senator Thune, and I join
completely in the views you just expressed, and if you want to fol-
low up with letters or legislation, I would be very pleased to join
you. This is an issue of consumer protection that is supremely im-
portant to our whole country, not just to your State and the ranch-
ers and others there. I see we are joined by Senator Lee.
STATEMENT OF HON. MIKE LEE,
U.S. SENATOR FROM UTAH
Senator LEE. Thanks so much, Mr. Chairman. Mr. Levine, I
would like to talk about 13(b). You wrote in your testimony that
in the context of 13(b), ‘‘restoring the FTC’s ability to provide re-
dress to wronged consumers is critical.’’ But, of course, in the AMG
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case in which that ruling was issued, the Court specifically noted
that its decision did not prohibit the FTC from using its authority
under Section 5 and under Section 19 to obtain redress for wronged
consumers. Is the Supreme Court wrong? Under other existing au-
thorities, are you unable to provide any redress for wronged con-
sumers?
Mr. LEVINE. It is possible, Senator, but it is very difficult, and
I am happy to talk through why if that would be helpful.
Senator LEE. OK. Well, I mean, it is pretty significant. I mean,
there was a significant ruling. The ruling was significant on its
face. It also happened to be unanimous. And what the unanimous
Court found in that case was that over a period of over 40 years,
the FTC had been illegally obtaining money from companies, and
we are not talking about something trivial. Some were. We are
talking about billions of dollars.
Now, I certainly want to ensure, as I know you do, that con-
sumers who have been harmed can be made whole again, but I
think we cannot ignore what has happened. And I think it would
be legislative malpractice on my part if I were to decide to jump
on board with something that would grant the Commission the
very same authority that the Commission used for 40 years, not
only against bad actors, but also against lawful actors, against
legal, non-predatory business practices that were providing legiti-
mate goods and services. And so I think instead of just giving carte
blanche authority, Congress should ensure that this authority is
coupled with proper safeguards in order to block any future abuses
of this immense power.
Now, let me make sure I understand. Are you against any guard-
rails around 13(b)-like authority for the FTC?
Mr. LEVINE. I think the best guardrail for our 13(b) authority is
the fact that the FTC cannot order anybody to pay a nickel. We
need a Federal judge to order any payment. We needed that under
13(b), and we need it under some of the legislation the Senate has
considered.
Senator LEE. OK. So injunctive relief. You are saying that they
need to be able to have an injunctive relief, but they have an in-
junctive relief. What other types of reforms would you be willing
to support? What kinds of guardrails around the authority to do
what the unanimous Supreme Court said they were unlawfully
doing for 40 years in the AMG case?
Mr. LEVINE. The biggest reform we need is the ability to return
money to consumers, Senator, who have been scammed. You are
right. There are other ways to do it. It will take 5, 6 years—it could
take years, and by the time we actually get money back, by the
time we actually get a judgment and we are, you know, through
the appeals process, the defendant does not have any money any-
more. The best way to stop fraud and get money back to consumers
is restoring the authority we had.
Senator LEE. Look, ensuring that consumers can be protected
from scams and from unfair and deceptive business trap practices
is extremely important, and we need to get this right when we do
it. It is also important, not in spite of the fact that the aforemen-
tioned is important, but because it is important, it is also essential
that we ensure that consumers continue to have access to goods
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and services provided by legitimate businesses. These two goals do
not have to be at odds with one another. In fact, due process allows
for them to be pursued effectively and simultaneously. In fact, that
is what due process is. It is why we have it. It is why it is built
into the Constitution not just once, but twice.
I believe Congress can grant the expansion of 13(b) authority
while also providing appropriate safeguards, safeguards of the sort
outlined in my proposed legislation, S. 3410, which is called the
Consumer Protection and Due Process Act. And it would protect
consumers by, one, providing the FTC with the ability to pursue
monetary, equitable remedies as against bad actors, and, two, pro-
viding businesses due process—due process protections from im-
proper, unfounded, and frivolous claims, which leads to a concern
that I have had.
You know, under the COVID–19 Consumer Protection Act—the
CCPA—it is illegal to engage in deceptive marketing related to the
treatment, the cure, the prevention, the mitigation, or the diag-
nosis of COVID–19. And over the past two years roughly since that
has been in place, many hardworking Americans have stepped up
to the plate and have worked diligently to identify, or create, or de-
velop inexpensive therapies and treatments against COVID-19.
Lamentably, it seems that the Federal Government is keen on pro-
moting only some solutions while essentially blocking medical pro-
fessionals from delivering other FDA-approved medications for the
treatment of COVID, treatment options that are often far less ex-
pensive and far more available than the government-pushed ap-
proaches.
And I find it quite concerning that this combination of the FTC,
the FDA, and other entities seem to be trying to block the off-label
use of approved drugs when it comes to tackling the COVID–19
pandemic. In some cases, it is off-label use of previously approved
medication. In other cases, it is anything that looks like it might
help relieve the symptoms of COVID or otherwise address COVID.
And so, look, it is not illegal for healthcare providers in their best
judgment as medical professionals and with the health history and
the best interests of their patients in mind to just prescribe off-
label uses for approved drugs. Do you think this is a valid and im-
portant practice that is being hampered by the FTC and the FDA?
Mr. LEVINE. I think it depends on the circumstance, Senator. I
can say that we certainly do not regulate the practice of medicine,
and I think if you look at the cease and desist demands we have
sent, the cases we have brought, you know, frankly, Senator, these
are not close calls. These are hucksters. These are fraudsters who
are selling people snake oil. So I think some of the concerns you
raised, I am happy to——
Senator LEE. So you are saying that you go only after those who
are selling snake oil or the modern-day equivalent? Mr. Chairman,
I see my time has expired. I have got just one or two follow-up
questions. I will be fast.
Senator BLUMENTHAL. Go ahead.
Senator LEE. Thank you, Mr. Chairman.
Mr. LEVINE. We go after a wide range of COVID–19-related
fraud, Senator.
Senator LEE. You do.
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Mr. LEVINE. And they are not close calls.
Senator LEE. In your testimony, you mentioned that the first
case that you filed under the CCPA was against a chiropractor due
to claims about the use of vitamin D and zinc supplements to treat
or prevent COVID–19. And in the complaint filed by the Commis-
sion for that very case, you noted that you would seek to bar health
claims unless ‘‘true and can be substantiated by competent and re-
liable scientific evidence.’’ How do you determine what meets that
evidentiary standard, and by what process does the Commission
make these determinations? What process does it follow to protect
the rights of those who do not think they are selling snake oil?
Mr. LEVINE. The short answer, Senator, is that we have to per-
suade a Federal judge. It has been the position of the FTC for dec-
ades that if you are going to make a health claim, there needs to
be a reasonable basis for it or else it is deceptive, but we cannot
just announce that.
Senator LEE. And what guidance do you provide them about
what is deceptive?
Mr. LEVINE. We’ve provided extensive guidance both through our
casework and through our business guidance on FTC.gov around
the types of bases we look for for making medical claims. But,
again, if we are going into Federal court alleging that a claim is
unsubstantiated, we are only going to win if we can convince a Fed-
eral judge.
Senator LEE. Yes, and therein lies the tie to what I am describ-
ing about the need for due process. You have overwhelming power
at your disposal. You have presumptions in the eyes of an entity
that is staring down the barrel of your enforcement. It is not an
even playing field when they walk into that court. The immense
authority that you have got at your disposal within your discretion
is itself looming, and it could, can, and does shut businesses down
entirely. Now, I understand the difficult line-drawing problems in-
herent in the practice of government, but let us not pretend that
this happens in a vacuum, and let us not pretend that this does
not connect back to the need to protect due process and the need
for there to be guardrails around 13(b) authority.
So in light of that, I hope and expect—in fact, I demand that you
reconsider any opposition you might otherwise have to have to hav-
ing guardrails around 13(b) authority. We can protect consumers
and we must, but we have also got to provide American businesses,
American consumers with due process protection.
Thank you, Mr. Chairman.
Senator BLUMENTHAL. Thanks, Senator Lee. I have just a few
questions and then we will end. I have heard from a lot of con-
sumers who have been victims of these scams and a lot of them on
online marketplaces, as we have remarked throughout this hear-
ing. Consumers who research sellers and attempt to authenticate
these products, whether they are masks or supposed miracle cures,
did their homework and still got scammed, so the question is on
online retailers and marketplaces. Mr. Levine, in your testimony,
you mentioned enforcement action against online marketers who
claimed to provide, but failed to deliver, face masks and other prod-
ucts, and you remarked that the online marketplaces should be
more cooperative. I am not quoting you directly. Amazon, Facebook,
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eBay. Tell me whether they have been cooperative, and if not, why
not?
Mr. LEVINE. I think, Senator, that they will refer us cases and
we will let them know when we spot problems on their market-
places, but I think here’s the thing. If you are a consumer looking
to buy an authentic mask, and we have brought lawsuits against
sellers of—they claim it is an N95 mask and it is an absolute cloth
mask. It is crazy to me that 2 years into this pandemic, consumers
still cannot go on an e-commerce platform and have confidence that
the mask they buy is authentic. Nobody, not e-commerce platforms
and not the scammers, should be profiting from the sale of defec-
tive masks that are not only cheating consumers of money, but that
are putting public health at risk. But unfortunately, that is exactly
what is happening, and the platforms are not taking enough re-
sponsibility for the fraud they are facilitating.
Senator BLUMENTHAL. Are they doing anything?
Mr. LEVINE. I think they are doing things around the edges, but
at the end of the day, their business model does not give them an
incentive to sufficiently police this problem.
Senator BLUMENTHAL. They could scrutinize the sales of these
products, correct?
Mr. LEVINE. Certainly, Senator, just like we do. We have people
with the money Congress gave us monitoring these marketplaces
all the time, and it raises the question why these marketplaces are
not doing more on their own to protect their own customers and the
American public from the kinds of frauds that you and others on
this subcommittee have talked about.
Senator BLUMENTHAL. Tell me, why is the FTC not taking action
against the online marketplaces if they are failing to perform their
responsibilities? Is it lack of authority?
Mr. LEVINE. I think a big problem, Senator, is that these market-
places have disclaimed responsibility for any of the conduct on
their marketplaces, invoking Section 230 of the Communications
Decency Act.
Senator BLUMENTHAL. Well, they disclaim responsibility, but can
they not be held responsible?
Mr. LEVINE. It is certainly—you know, it is going to depend on
the facts of course, Senator, but if you look at how some Federal
courts have interpreted the CDA, it is, in fact, quite broad. And
what it means is that these platforms do not have a strong incen-
tive to actually police their marketplaces and we do not have
strong tools.
Senator BLUMENTHAL. Let me put it to you this way. I under-
stand there may be an issue under Section 230, but why has the
FTC not come to us and said we need to hold these online market-
places accountable because they are, in effect, complicit and we
cannot reach them?
Mr. LEVINE. I am here telling you just that, Senator.
Senator BLUMENTHAL. That you are asking for authority——
Mr. LEVINE. We would——
Senator BLUMENTHAL.—on behalf of the FTC?
Mr. LEVINE. We would be—well, I am speaking for myself, but
we would be very——
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Senator BLUMENTHAL. Well, that is not—you know, Mr. Levine,
I really respect your impressive accomplishments as an enforcer,
your personal career, but without meaning any disrespect, we want
you here speaking for the Agency. We did not invite you here as
a private citizen. We did not invite you, as a matter of fact. We in-
vited the FTC. I want you to tell me that you want authority on
behalf of your Agency to effectively enforce the law.
Mr. LEVINE. I cannot commit the Commission to a position, but
the Commission would be happy to work with you as we have——
Senator BLUMENTHAL. Well, I want you to work with me.
Mr. LEVINE. Happy to.
Senator BLUMENTHAL. I want you to do more than just work with
us. Request the authority so we can have you here and say the
FTC says it needs authority to go after these scammers and protect
the public because the online marketers, in effect, are enabling and
profiting from fraud. That is what is happening here.
Mr. LEVINE. I could not agree more, and like I said, we will cer-
tainly work with you on that, Senator.
Senator BLUMENTHAL. And I appreciate your agreement, believe
me.
Mr. LEVINE. Yes.
Senator BLUMENTHAL. Do not misunderstand me. I appreciate
your personal agreement, but we want the FTC to be on record as
well.
Mr. LEVINE. Totally understood, Senator.
Senator BLUMENTHAL. Thank you. I would like to ask you, Mr.
Levine, you mentioned in your testimony the work that the Com-
mission is doing to reach out to Latina consumers in Spanish lan-
guage ads, and you mentioned the FTC v. Moda Latina BZ, Inc.
case. Have there been others like it, and what was that case about?
Mr. LEVINE. I could get you a list of all the cases, Senator. Moda
Latina was an important case. It was COVID related. The company
was peddling money-making opportunities deceptively and cheating
people out of a lot of funds. We actually issued a report in the fall
called ‘‘Serving Communities of Color,’’ where we detailed our ex-
tensive enforcement work over the last 5 years to make sure that
we are being—we are responding to consumer protection problems
in every community, including for Latinos.
Senator BLUMENTHAL. And you mentioned also immigrant com-
munities. Does that report cover immigrant communities?
Mr. LEVINE. It does, Senator.
Senator BLUMENTHAL. I want to just finish by asking a couple of
questions. You noted in your testimony that the FTC requested
data from social media and video streaming companies in Decem-
ber 2020 about personal information collection and use practices,
stating, ‘‘This study may provide critical information on the busi-
ness practices at issue.’’ What is intended by the study and what
kind of progress has been made on it?
Mr. LEVINE. A lot of progress has been made, Senator. As you
can imagine, the document production has been quite voluminous.
I think the key to the study, and it really relates to what we are
talking about today. We know that scammers have a powerful new
tool in social media to target consumers where it is going to hurt
them the most. And what we want to do is we want to lift the hood,
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51
understand how these algorithms operate so that we can do the
best we—so that we can do the best job we can do to protect con-
sumers and also report to Congress on our findings so that you can
make a determination if legislation is needed.
Senator BLUMENTHAL. And finally, you mentioned in your testi-
mony that the U.S. Customs and Border Patrol needed to better act
to prevent counterfeit masks and other counterfeit products from
coming into the country. What more should they be doing?
Mr. LEVINE. I think the specific discussion of CBP might be else-
where. I will—what I will say, Senator, is that it could come into
the country. The way it is actually getting into consumers’ homes
is through e-commerce marketplaces that, as I said, are not doing
enough to police this problem. We can put all the people on at our
ports that we can, they are never going to catch everything. The
real question to me is why these for-profit marketplaces cannot do
what the FTC is doing, making sure that fraudulent masks, defec-
tive masks are not being sold and that they are not profiting from
it.
Senator BLUMENTHAL. That is a good way to end this hearing,
even though it is a discouraging act—answer about online market-
places. I think it should serve as a call to action, and I know that
this committee will be further interested in taking action. So I
want to really thank all of the witnesses for being here today. Your
testimony has been very, very helpful and enlightening.
This hearing record is going to remain open for two weeks. Any
Senators that want to submit questions for the record should do so
by February 15. We ask that responses be returned as quickly as
possible, in no case later than two weeks after you receive the
questions.
And, again, my thanks for your testimony. My thanks to every-
body who is online or virtual, and that will conclude this hearing.
Thank you very much.
[Whereupon, at 4:42 p.m., the hearing was concluded.]
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A P P E N D I X
RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. BEN RAY LUJÁN TO
TERESA MURRAY
Unlicensed COVID–19 Testing Site. I am deeply concerned by reports of unli-
censed COVID–19 test sites operating in New Mexico. These sites operated without
any connection to New Mexico’s medical providers or the Department of Health.
These sites threaten public health both by issuing unreliable results and by under-
mining confidence in legitimate testing sites.
Question 1. What do we know about unlicensed and scam COVID–19 testing sites
and the impact they are having on public health?
Answer. We know that unlicensed and scam COVID–19 testing sites started pop-
ping up in recent weeks 1 as opportunistic con artists tried to fill a void in the mar-
ketplace and seize on public fear of COVID and desperation to get tested, particu-
larly before holiday gatherings. These fake testing sites popped up in New Mexico
and other locations nationwide, including Chicago, Oregon, Los Angeles and Phila-
delphia, the latter which affected 4,000 people. The sites often would set up shop
in vacant lots at busy intersections, and in the parking lots of shopping plazas.
They’d put up a sign and some orange cones to mark off lanes and those ‘‘working’’
the sites were often dressed in hazmat suits or some other outfit to look legitimate.
In New Mexico, Attorney General Balderas put out a warning in January about
fake test sites where thieves were stealing personal or medical information.2
Specifics on other incidents:
Jan 4, 2022—Philadelphia officials are warning residents to avoid pop-up tents
offering COVID–19 testing in Center City that claim to be funded by the Fed-
eral government. The tents started operating around Center City in late Decem-
ber and city officials confirmed over the weekend that they had falsely claimed
they were backed by the Federal Emergency Management Agency.
Lab Elite, a Chicago-based company offering PCR tests, said it runs testing
sites in several cities and said it collected about 4,000 test samples in Philadel-
phia last month.3
Jan. 10—Illinois’ governor directed the Illinois Attorney General’s office to in-
vestigate fly by night testing sites.4 BBB was involved in getting warnings out
too.
Jan 13—The Oregon Department of Justice opened an investigation into a com-
pany accused of operating suspicious COVID–19 test sites.5
Mid-January—Los Angeles officials shut down a bunch of fake testing sites.
Some residents reported they paid up to $200 and never received their results,
and some sites even required people to give their Social Security number.6
Jan. 18—In Philadelphia, workers at a sidewalk COVID–19 testing tent falsely
claimed to be working with FEMA, said James Garrow, communications direc-
tor for the Philadelphia Department of Public Health. But FEMA told the de-
partment it wasn’t funding any testing centers in the city at the time.
The problems and public health threats of these fake testing sites include:
1 https://www.consumer.ftc.gov/blog/2022/01/dont-assume-every-covid-19-test-site-legit
2 https://www.krqe.com/health/coronavirus-new-mexico/new-mexico-attorney-general-warns-
residents-of-covid-19-test-scams/ https://www.cibolacitizen.com/news/attorney-general-balderas-
urges-citizens-beware-covid-19-test-scams
3 https://www.inquirer.com/news/covid-test-philadelphia-labelite-fema-20220103.html
4 https://abc7chicago.com/covid-testing-scam-fake-sites-pop-up-test-covid-19-warning/
11425543/
5 https://www.opb.org/article/2022/01/13/oregon-attorney-general-warns-against-covid-19-
test-scams/
6 https://www.latimes.com/california/story/2022–01–27/californias-attorney-general-warns-
of-fake-covid-testing-sites-heres-how-to-identify-one http://ph.lacounty.gov/hccp/covidscams/
(53)
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54
• Consumers would sometimes get charged for what was supposed to a free test.
• The con artists would steal people’s personal information and use it to commit
identity theft.
• Consumers would get fake test results, if any results at all. What happened
with people who actually had COVID and would have tested positive at a legiti-
mate testing site, but were told they tested negative? How many got infected
needlessly?
• As news of these fake testing sites spreads, there’s a risk of people becoming
leery of getting tested anywhere. This clearly threatens public health.
The FTC says we’re also seeing a surge in unauthorized home test kits, fueled
by the shortage of COVID test kits.7 8
Question 2. What measures do you recommend for public officials to restore con-
fidence in genuine testing sites and supplies?
Answer. Officials should do more to inform consumers how they can verify wheth-
er a test site is legitimate. In Ohio, where I live, you can look up whether a location
is legitimate with an easy-to-use website.9 But it’s not easy in every state to just
call your local health department or state health department and give them an ad-
dress and find out whether it’s legit. I’d like to see a phone number that consumers
could call, perhaps local health officials or the state AG or department of health that
could tell them quickly whether a particular location is legitimate. It needs to be
quick and easy. Some government officials in some cities agree it’s not easy.
Officials should also quickly investigate reports of unauthorized tests or fake test
sites and publicize it more when they shut something down. This will instill more
confidence that the public is being protected.
And more legitimate sites need to be established. In Cleveland and many other
cities, there were reports of two-hour waits before the holidays, if you could even
get an appointment to sit in line in your car. (Some members of my family couldn’t.)
The government should also do whatever it takes to make at-home tests widely
available. The inexcusable shortage drives people to scam testing sites and leads to
price-gouging for legitimate tests. As far as counterfeit supplies, we can try to edu-
cate consumers about warning signs of fake testing sites, at-home tests and other
products, but that only goes so far. For example, if hospitals can’t tell the difference
between genuine N95 masks and counterfeits, how are my parents or your neigh-
bors supposed to know?
I’m surprised there haven’t been any fake vaccination sites yet. Maybe there have
been. But God help us if that happens. Lots of people are already vaccine-hesitant.
In many cases, consumers can be their own first line of defense. But people rely
on government and public health officials to protect them.
RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. BEN RAY LUJÁN TO
TODD LEATHERMAN
Question 1. What challenges do States face when bringing cases against price
gouging?
Answer. States face a number of challenges. State price gouging legal authority
can vary in several respects and depending on the statute, there can be a number
of complications to state efforts to combat pricing behavior that harms consumers.
First, not all states have price gouging laws. 39 states do have such laws, but
states that don’t, may still have authority under other consumer protection laws
that prohibit ‘‘unfair’’ or ‘‘unconscionable’’ conduct. While those terms, may encom-
pass the types of conduct that raises concern, they lack specificity that could be
helpful in applying those laws to situations involving price gouging and there is lit-
tle precedent in the use of such statutes or guidance from the courts on how they
may apply to price gouging.
Second price gouging statutory definitions of what price increases are illegal can
be quite broad, as with many consumer protection laws, as what may be deemed
an ‘‘excessive’’ increase in one situation may not be inappropriate in others. This
flexibility is needed, but can lead to litigation in situations where there is no precise
standard.
Other issues that are commonly raised by defendants that can lead to protracted
litigation:
7 https://www.cnbc.com/2022/01/06/fake-covid-testing-kits-are-everywhereheres-how-to-avoid-
them.html
8 https://www.consumer.ftc.gov/blog/2022/01/how-avoid-buying-fake-covid-tests-online
9 https://coronavirus.ohio.gov/dashboards/other-resources/testing-ch-centers
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• What is the effective date of the price gouging law—does it apply to price in-
creases that occur prior to the declaration, such as when the market anticipates
a disaster and increases prices prior to the declaration?
• What is the benchmark price for purposes of comparing the allegedly unlawful
price?
• What is the duration of the emergency or applicability of the price gouging law?
• Does the statute apply to wholesalers as well as retailers?
• What are the allowable increased costs of the seller that may justify an increase
in the price? Are ‘‘opportunity costs’’ allowable costs?
• What types of events trigger the statute; must they be local to the jurisdiction
or do national events also trigger the statute. If so, what local effects must be
present?
• Statutes may only apply to natural disasters as opposed to market disruptions
such as occurred with the baby formula shortage.
Question 2. What steps can the Federal government take to help fight this prac-
tice?
Answer. First, whatever solution, if any, Congress should propose, Congress
should not preempt the states, who should have the authority to enforce their state
laws.
Second, the Federal government could articulate a clear standard and provide the
Federal Trade Commission clear authority to address price gouging. Much of the
price gouging activity that occurred during the pandemic occurred online and across
state and international borders. The Federal government is in a much better posi-
tion to address this type of activity than most state attorneys general, whose re-
sources are severely limited. Having an additional ‘‘cop on the beat’’ is needed to
address this activity. Also, providing the business community guidance on what ac-
tivity is considered unlawful would be very helpful to both businesses and enforcers.
The issues identified in the prior section merit serious consideration and there is
a growing body of case law interpreting state price gouging statutes that would in-
form the Congress on the issues confronting enforcers as well as the business com-
munity.
The issues are challenging but there will continue to be instances in which busi-
nesses seek to gain an economic advantage due to a disaster or supply disruption
and businesses should not be allowed to obtain a windfall at consumers’ expense.
Æ
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