WASHINGTON — The Federal Trade Commission (FTC) and other federal agencies are not doing enough to protect U.S. consumers from price gouging and con artists profiting from the pandemic, several senators said at a hearing Tuesday.
“There is a glaring lack of enforcement at the federal level,” said Sen. Richard Blumenthal (D-Conn.), chair of the Senate Commerce, Science and Transportation Subcommittee on Consumer Protection, Safety products and data security. “The federal government, including the Federal Trade Commission and the Department of Justice, has few legal tools to hold crooks accountable.”
Blumenthal told the story of one constituent, Julius Hull, who said that after waiting in vain to get a COVID test at two different walk-in clinics, he and his son “were told the only remaining tests were rapid tests available for purchase for $60”, an “inadmissible” result.
“I am deeply frustrated and disappointed that federal law enforcement has not done more,” he added. “And a big part of the problem is almost certainly the lack of sufficient authority and that’s why I will be proposing a measure that will fill that gap… We need to impose severe financial penalties and absolutely pursue criminal prosecution.”
Senator Marsha Blackburn (R-Tenn.), a ranking member of the committee, agreed, adding that “it is absolutely essential that the federal government work with our state partners to crack down on bad actors who threaten the livelihoods of some of the most vulnerable Americans Fraudsters have gotten quite creative with their schemes during the pandemic…Whether it’s taking advantage of the elderly or advertising and selling products with false medical claims, scammers have disrupted the lives of millions of Americans.These scams have cost Americans an estimated $700 million, which is “unacceptable”, she said.
Samuel Levine, director of the FTC’s Consumer Protection Bureau, said his agency is pursuing a “comprehensive” strategy to weed out fraudsters. “First, we carefully monitor fraudulent claims,” he said. “We work tirelessly to review thousands of complaints submitted to a sentinel database, and we monitor social media and other platforms which have become breeding grounds for fraud.” Additionally, “we’re using new congressional authorizations to target the worst forms of COVID abuse. Thanks in part to the COVID-19 Consumer Protection Act, we’ve been able to remove hundreds of claims.” fraud through “cease and desist”, and we have filed lawsuits to permanently arrest the worst offenders.”
However, Levine continued, “We recognize that removing claims from the marketplace quickly does not help those who have already been victims of these scams. And we will be bringing more cases to help ensure consumers can be cured. We are doing also unprecedented investments in consumer education, and we are reaching out to communities across the country to spread the word about how to avoid fraud.”
Despite his claims that the FTC was working hard, Levine was nevertheless strongly questioned by several senators, including Blumenthal. “You mentioned in your remarks that the FTC sent letters ordering over 425 companies to remove misleading claims,” Blumenthal said. “In what proportion of these cases have the claims been removed?”
“The overwhelming majority of recipients of these ‘cease and desist’ requests withdraw their claims,” Levine replied, “and often withdraw them within 48 hours –“
“And then bring new ones,” Blumenthal interjected.
“Well, senator, we’re watching this closely,” Levine replied. “If we see them bring new claims, we will not hesitate to take them to court. Blumenthal pointed out that the FTC has so far brought to court only three such cases.
“I totally agree, senator, that we need to carry more cases and we will carry more cases,” Levine said. “It is certainly important that we eliminate these claims quickly. But it is also essential that we do not allow scammers to profit from preying on American consumers, which means bringing them to justice. That is exactly what we will To do.”
Blackburn was more focused on states’ efforts to combat pandemic fraud, noting in her opening statement that Tennessee Attorney General Herbert Slatery (R) “[has] played a leading role in shutting down these scam artists…Tennessee shut down a price-gouging operation involving two brothers that left rural East Tennessee and East Kentucky without hand sanitizer. Fortunately, [Attorney General] Slatery was able to fix the problem quickly, and the brothers agreed to donate the supplies to a Tennessee nonprofit.”
Blackburn asked Todd Leatherman, program attorney for the National Association of Attorneys General’s Center for Consumer Protection, what hurdles or obstacles state attorneys general face in their fight against online scammers. Leatherman said attorneys general “have been very active in prosecuting not only price gouging cases, but counterfeit PPE as well. [personal protective equipment] case and fake [COVID] cure cases… Barriers or challenges are those related to the volume of activity taking place. Obviously, [attorney general] offices have limited resources, so being able to solve all these problems is a challenge.”
Sen. Amy Klobuchar (D-Minn.) said she and Sen. Chuck Grassley (R-Iowa) “have proposed legislation that would change the way merger fees are done, so we can also get more money for the FTC as to the Department of Justice to help them with their annual budgets.She asked Levine what the effect would be if Congress were to triple the FTC’s budget.
“The effect would be transformative,” Levine said. “A striking fact about FTC funding: We actually have a smaller workforce today than in 1980, when the economy was much smaller. With more resources, we could bring in more cases and render more money to more consumers In the previous 5 years the Supreme Court stripped us of our strongest authority, we returned over $11 billion to consumers, far more than we received in federal funding. Investing in the FTC is a good investment.