Tuesday, June 2, 2020

Immunity Supplement Marketers Face Heightened Regulatory Scrutiny

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Richard B. Newmanhttp://www.hinchnewman.com
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

           The Federal Trade Commission and state attorneys general are devoting significant resources to combat false and deceptive advertising content related to the coronavirus, including the dissemination of express or implied immunity-based claims that lack competent and reliable scientific evidence.

            From a recent press release pertaining to various coronavirus scams to joint warnings with the Food and Drug Administration, digital marketers that fail to properly examine claims and substantiation are in for a world of hurt, potentially even criminal liability. In fact, The U.S. Department of Justice has issued a number of press releases directing all U.S. Attorneys to appoint coronavirus fraud coordinators, and prioritize the investigation and prosecution of coronavirus-related schemes, including, but not limited to, individuals and businesses selling fake cures for COVID-19 online.  The DoJ has also expressed its intention to pursue individuals that purposefully expose and infect others with COVID-19 under federal terrorism-related statutes.

            Immunity supplements and express or implied COVID-19 prevention, treatment, cure or diagnosis-related representations are squarely within the crosshairs. Without limitation, a lack of competent and reliable scientific evidence with respect to the final product formulation – not just a single/handful of ingredient(s) – could prove disastrous for those hurriedly seeking to bring products to market without first ensuring that lawfully adequate substantiation is possessed prior to dissemination of claims.

             FTC attorney and Chairman Joe Simons has released a statement outlining current enforcement efforts, which include working with both federal and state law enforcement, in order to protect consumers from unfair and deceptive commercial practices. The FTC “will not tolerate businesses seeking to take advantage of consumers’ concerns and fears regarding coronavirus disease, exigent circumstances, or financial distress,” according to Simons.

           On the state side, state attorneys general are not only confronting unsubstantiated efficacy claims, but are also actively policing price gouging on disinfectant products and masks. The Michigan Attorney General recently announced that it forwarded cease and desist letters to two businesses for marketing to consumers the “Coronavirus Defender Patch,” which the companies allegedly falsely claim will help protect people from contracting the coronavirus disease. Price gouging complaints related to COVID-19 filed with the Michigan Attorney General’s office exceed 1,500.

            A bipartisan group of 32 state attorneys general have recently forwarded correspondence to large online retailers requesting their assistance with price gouging.

            The New York Attorney General has sent letters to domain registrars requesting that GoDaddy, Namecheap, HostGator and others stop and de-list domain names used for coronavirus-related scams and bogus remedies.

             “In this time of uncertainty, it’s more important than ever that we remain cautious when it comes to companies and individuals selling coronavirus-related products and services over the internet,” said New York Attorney General James. “These scam sites are not only stoking fear in the hearts and minds of Americans, but are profiting off their appalling deception. We need all consumers to remain vigilant, as my office continues to work diligently to take down these websites and ensure scammers, cons, and cheats are held responsible for their unlawful actions.”

             The NY OAG has also sent a letter to Craigslist.com, calling on the company to immediately remove posts that attempt to price gouge users, or otherwise purport to sell items that provide “immunity” to the coronavirus or allow individuals to test for the disease.

             Multiple business in New York have recently received cease and desist notifications from the NY OAG for allegedly charging excessive prices for hand sanitizers, disinfectant sprays and rubbing alcohol. New York’s price gouging statute prohibits the sale of goods and services necessary for the health, safety, and welfare of consumers at unconscionably excessive prices during any abnormal disruption of the market.

             The FTC, the U.S. DoJ and state attorneys general will continue to surveil and monitor businesses across the country for potential scams and price gouging schemes designed to exploit public concern related to the spread of the coronavirus. Advertising claims touting such benefits that are not supported by competent and reliable scientific evidence, including implied immunity-based claims related thereto, are a very dangerous proposition.

            Consult with an experienced FTC defense attorney prior to disseminating health claims. In addition to potentially violating federal and state advertising law, those making unsubstantiated health claims could be deemed to be a “public threat.”             

             The DoJ has already filed four federal criminal actions to combat fraud and other offenses related to the coronavirus pandemic. 

             The first in Los Angeles, California involving allegations that an individual solicited investments in a company he claimed would be used to market pills that would prevent coronavirus infections, as well as market an injectable cure for those who had already contracted the virus.  The individual is charged with wire fraud.

             The second in Newark, New Jersey involving allegations that an individual conspired to receive kickbacks and commit health care fraud by agreeing to refer patients for COVID-19 testing in exchange for payment as long as that testing was also bundled with more expensive Respiratory Pathogen Panel Testing.  The individual is charged with violating the federal Anti-Kickback Statute and conspiracy to commit health care fraud.

             The third also in Newark, New Jersey involving allegations of assault resulting from an individual who represented to have tested positive for COVID-19 coughed on FBI agents and lied to them about his accumulation and sale of surgical masks, medical gowns and other medical supplies.  The individual allegedly sold certain designated materials to doctors and nurses at inflated prices.

             The fourth in Los Angeles California involving allegations that an individual mislabeled drugs that were purported to be a treatment for COVID-19 into the U.S. According to DoJ, the individual claimed to have created a “miracle cure” not approved by the FDA.            

             The mandate from all levels of regulatory agencies are quite broad.  It is all too simple to inadvertently cross the line when making immunity-based product efficacy representations.  The stakes at present for missteps are higher than ever.

Richard B. Newman is an FTC defense attorney at Hinch Newman LLP. You can find him on Twitter @FTC defense attorney.

Informational purposes only. Not legal advice. May be considered advertising material.

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