Publications

Consumer Protection in the Age of COVID-19

June 11, 2020
Overview

For all Americans, the beginning of June brings with it the lifting of stay-at-home orders and the reopening of the economies of every state. Yet, many experts warn that it could be months or even years before everyday life returns to normal. While the “new” American way of life is uncertain at best, recent trends in litigation provide some insight into the types of claims that are likely to arise out of the COVID-19 pandemic. One trend highlights an emergence in litigation involving consumer protection statutes and COVID-19.

Unfair and Deceptive Acts and Practices (UDAP) statues exist in all fifty states and the District of Columbia to protect consumers from unfair, deceptive, predatory and unscrupulous business practices.[1]  However, there exists little uniformity among UDAP statues. Some states such as Massachusetts provide for liberal coverage, extensive damages, and attorneys’ fees. Other states, such as Rhode Island, exempt most lenders and creditors from UDAP coverage.[2] By way of example, Massachusetts’ UDAP statute, known as “Chapter 93A” broadly prohibits “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”[3] Chapter 93A Section 9 provides for a private right of action for a claimant who is a consumer and Chapter 93A Section 11 provides for a private cause of action for an entity engaged in trade or commerce.[4] The Massachusetts UDAP statute provides for actual damages, multiple damages for knowing or willful violations, and attorneys’ fees to a prevailing claimant.[5]

In comparison, California has two UDAP statutes. First, California’s Unfair Competition Law, prohibits any unlawful, unfair or fraudulent business practice, as well as depictive or misleading advertising.[6] Though the Unfair Competition Law does not exempt particular businesses, consumers may not seek damages or multiple damages and are limited to restitution.[7] Private causes of action under California’s Unfair Competition Law are also limited to consumers who have “lost money or property.”[8] California’s other UDAP statute is the Consumers Legal Remedies Act, California Code sections 1750-1784.[9] The Consumer Legal Remedies Act applies to consumer transactions involving the “sale or lease of goods or services.”[10]

In addition to general provisions that prohibit unfair or deceptive acts, many UDAP statues give the attorney general or a state agency authority to adopt rules and regulations to enforce the act. For example, Massachusetts’ Chapter 93A provides that “[t]he attorney general may make rules and regulations interpreting the provisions of subsection 2(a) of this chapter.”[11] As such, on March 20, 2020, Massachusetts Attorney General Maura Healey announced an emergency regulation banning price gouging of essential products and services in light of the COVID-19 pandemic.[12] Attorney General Healey’s amendment sought to supplement Massachusetts’s Chapter 93A statute, which previously regulated only the sale of gasoline and petroleum.[13] The amendment now prohibits price gouging of all essential goods necessary to prevent the spread of the pandemic (e.g., masks, soap and hand sanitizer). By contrast, California’s Unfair Competition Law does not provide a state agency with authority to adopt rules prohibiting emerging scams.[14]

In recent months, consumers filed numerous complaints across the country alleging COVID-19 related consumer protection violations and price gouging. These COVID-19 lawsuits illustrate how claimants rely upon consumer protection laws and regulations to contend that businesses have engaged in unfair acts. First, in DelVecchio v. Town Sports International, LLC et al., the plaintiffs filed a class action lawsuit alleging violations of Massachusetts’ Consumer Protection Statute.[15] The Amended Complaint alleges “unfair and deceptive acts and practices against Massachusetts consumers” by the defendant, Town Sports International, LLC (d/b/a Boston Sports Clubs), “in willfully and knowingly charging consumers monthly membership fees for services that Town Sports knew it would not be providing pursuant to the terms of its membership agreements.”[16] More specifically, plaintiff’s Amended Complaint details that while Boston Sports Clubs closed its doors in mid-March 2020, it continued to charge consumers monthly membership fees, despite requests to cancel memberships, freeze accounts or refund charges and knowing that it would not provide the services for which it charged.[17] The Amended Complaint avers that Town Sports violated the Massachusetts Consumer Protection Statute, M.G.L. c. 93A, when it “willfully and knowingly charg[ed] consumers for services it knew it would not provide” and “then, knowing the financial strain felt by many of its members during the Massachusetts State of Emergency, made it virtually impossible for consumers to cancel their memberships or avoid further charges for services Town Sports knew it would not render.[18]

Two recent California District Court cases illustrate a growing trend in consumer protection actions related to price gouging. On April 20, 2020, a group of California plaintiffs sued multiple grocery sellers including Whole Foods Market Group, Inc., Costco Wholesale Corp., Amazon.com, Inc., and Trader Joe’s Co. alleging violations of California’s Unfair Competition Law for “unjustifiably raising the price of eggs by more than ten percent during the declared state of emergency.” [19] Plaintiffs rely upon California Penal Code Section 396(a) which prohibits price gouging of more than ten percent during a declared state of emergency and provides that a violation of Section 396 “shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code.”[20] The Complaint alleges that because the defendants violated California Penal Code Section 396 and California’s Unfair Competition Law, plaintiffs are entitled to both injunctive relief pursuant to Section 18203 of the Business and Professions Code and restitution.[21]

Likewise, on April 21, 2020, a plaintiff filed a consumer protection class action lawsuit in California District Court against Amazon.com, Inc. (“Amazon”).[22] Plaintiff McQueen, on behalf of a class of similarly situated plaintiffs, sought “to hold Amazon accountable for its unlawful price increases during the COVID-19 pandemic” under California’s Unfair Competition Law, in addition to claims for negligence, negligence per se, and unjust enrichment.[23] The Complaint alleges that after California officials declared a public health emergency, face masks increased in price over 500%, pain relievers rose from $18.75 to $62.40, flour increased over 400% in price and disinfectants rose from $14.99 to $29.99.[24] Similar to the Fraser Complaint, the McQueen plaintiffs also claimed violations of California Penal Code Section 396, and thus violations of California’s Unfair Competition Law.[25]

In Florida, a plaintiff recently accused Amazon of price gouging in spite of a worldwide pandemic by allegedly charging the named plaintiff $99.00 for a 36-pack of toilet paper and $199.00 for a two-pack of one liter hand sanitizer bottles, prices that are several times the normal prices for those products.[26] In Alaska, a resident faces a lawsuit alleging numerous consumer protection violations for stockpiling thousands of N95 facemasks and selling those masks “on the internet for unconscionable prices during a time of increased necessity and high demand for such respirators [which] offends public policy, violates fundamental concepts of fairness, and is unethical, immoral, and unscrupulous.”[27]

Other COVID-19 consumer protection actions concern deceptive advertising practices. For example, in another California District Court matter, a plaintiff filed a class action lawsuit seeking to enjoin Target “from engaging in deceptive advertising and business practices concerning false and misleading promotion of its hand sanitizer product that purports to eliminate 99.99% of germs.”[28] The Complaint states that despite a lack of any studies demonstrating that Target’s hand sanitizer is effective in killing germs, Target represented that the Hand Sanitizer “kills 99.99% of germs,” and thus “misleads consumers into believing its Hand Sanitizer is as effective as Purell’s and can therefore prevent disease or infection from, for example, Coronavirus and flu, along with other claims that go beyond the general intended use of a topical alcohol-based hand sanitizer.”[29] Plaintiffs sought damages in the form of restitution and injunctive relief under California’s Unfair Competition Law and California’s Consumer Legal Remedies Act, and for negligent misrepresentation and intentional misrepresentation.[30]

Businesses must brace for a flurry of inevitable consumer protection lawsuits. Not only must businesses anticipate how state specific UDAP statutes may give rise to COVID-19 specific claims, but businesses must also pay careful attention to any rules and regulations imposed by state agencies as related to COVID-19 and consumer protections. Though many businesses may be well intentioned in ensuring that consumer goods are available to their customers in the wake of worldwide shortages, businesses must also consider the optics associated with the provision of consumer goods in view of UDAP statutes and COVID-19-specific rules and regulations imposed by the states.

[1] Carolyn Carter, Consumer Protection in the States: A 50-State Evaluation of Unfair and Deceptive Practices Laws, National Consumer Law Center, Inc. (Mar. 2018), https://www.nclc.org/images/pdf/udap/udap-report.pdf (hereinafter, the “50-State Report on UDAP”).

[2] See Carter, supra note 1, 50-State Report on UDAP, at 1-8.

[3] M.G.L. c. 93A, § 2.

[4] Id., §§ 9, 11.

[5] M.G.L. c. 93A.

[6] Cal. Bus. & Prof. Code §§ 17200-17209.

[7] Id.

[8] Id.

[9] Cal. Civ. Code §§1750, et seq.

[10] See Carter, supra note 1, 50-State Report on UDAP (explaining that California has a second UDAP statute which allows for compensatory damages and punitive damages). California also has a False Advertising Act, codified in the Business and Professions Code Section 17500, which prohibits “untrue or misleading” advertising. See Cal. Bus. & Prof. Code § 17500.

[11] M.G.L. c. 93A, § 2(c).

[12] Office of Attorney General Maura Healey, Press Release: AG Healey Issues Emergency Regulation Prohibiting Price Gouging of Critical Goods and Services During COVID-19 Emergency (Mar. 20, 2020), https://www.mass.gov/news/ag-healey-issues-emergency-regulation-prohibiting-price-gouging-of-critical-goods-and-services (last visited June 9, 2020) (hereinafter, “Attorney General Healey’s March 20, 2020 Price Gouging Regulation”).

[13] See supra note 12, Attorney General Healey’s March 20, 2020 Price Gouging Regulation.

[14] See Carter, supra note 1, 50-State Report on UDAP at 54; but see California Attorney General Xavier Becerra, Press Release: Attorney General Becerra Calls on Online Marketplaces to Up Their Game to Combat COVID-19 Price Gouging on Their Platforms (Mar. 20, 2020), https://www.nclc.org/images/pdf/udap/udap-report.pdf; California Attorney General Xavier Becerra, Press Release: Attorney General Becerra Reminds Wholesalers and Manufacturers They are Subject to California’s Price Gouging Law (Mar. 27, 2020), https://oag.ca.gov/news/press-releases/attorney-general-becerra-reminds-wholesalers-and-manufacturers-they-are-subject. California Penal Code Section 396 prohibits “excessive and unjustified increases in the prices of essential consumer goods and services” during a state of emergency. Cal. Penal Code § 396. Furthermore, a violation of Section 396 “shall constitute an unlawful business practice and an act of unfair competition within the meaning of Section 17200 of the Business and Professions Code.” Cal. Penal Code § 396(i).

[15] See DelVecchio v. Town Sports International, LLC et al., Civil Action No. 1:20-10666, ECF. No. 1. Plaintiffs subsequently filed an Amended Complaint and a request for a Preliminary Injunction and declaratory relief against Town Sports International. Id., ECF. No. 7-8. While the plaintiffs/members eventually withdrew the motion for a preliminary injunction, the defendant both moved to dismiss the Amended Complaint and moved for sanctions against the plaintiffs. Id., ECF. No. 13, 25-27.

[16] DelVecchio v. Town Sports International, LLC et al., Civil Action No. 1:20-10666, ECF. No. 21, at 1.

[17] Id., at 1-2.

[18] Id. at 2.

[19] Fraser et al. v. Cal-Maine Foods, Inc. et al., No. 20-cv-02733 (N.D. Cal. Apr. 20, 2020), ECF No. 1.

[20] Id.; Cal. Penal Code § 396.

[21] Id.

[22] McQueen et al. v. Amazon.com, Inc., No. 4:20-cv-02782-JSW (N.D. Cal. Apr. 21, 2020), ECF No. 1.

[23] Id.

[24] Id.

[25] Id.

[26] Armas v. Amazon.com Inc., Case No. 104631782 (Cir. Ct. Fla. Mar. 10, 2020), at 3.

[27] State of Alaska v. Juan Lyle Aune, Case No. 3AN-20-05758 (Apr. 1, 2020), Complaint at ¶ 14 (alleging violations of the Unfair Trade Practices Act, AS 45.50.471-.561).

[28] Taslakian v. Target Corp., et al, 2:20-cv-02667 (C.D. Cal. Mar. 20, 2020), ECF. No. 1. On May 4, 2020, the Plaintiff filed a notice of voluntary dismissal without prejudice.

[29] Id. at 3.

[30] See generally, id.

Team
Associate
Boston
617 670 8303
Marissa L.
Morte
mmorte@mgmlaw.com