Senators scrutinize FTC powers to curb COVID-19 price gouging

DOJ has thus far taken lead on price gouging cases

Led by Chairman Joseph Simons, the FTC may not have the authority to crack down on price gouging.  (Tom Williams/CQ Roll Call)
Led by Chairman Joseph Simons, the FTC may not have the authority to crack down on price gouging. (Tom Williams/CQ Roll Call)
Posted April 15, 2020 at 7:15pm

A bipartisan pair of senators is pressing the Federal Trade Commission to clarify its authority to combat price gouging amid the COVID-19 pandemic.

Members of Congress are alarmed over reports of huge price hikes on some consumer products that are in high demand because of the crisis. The Financial Times reported last month that prices for some items listed on Amazon.com that were sought by consumers to fight the coronavirus represented a 2,000 percent markup from previous listings.

The FTC has been largely silent on the matter, and the Justice Department has taken a lead role under an executive order signed by President Donald Trump. Sens. Jerry Moran, R-Kan., and Richard Blumenthal, D-Conn., who lead the Senate Commerce Manufacturing, Trade and Consumer Protection Subcommittee, say that’s insufficient.

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“The FTC should be just as vigilant as ever during the COVID-19 pandemic,” the lawmakers said in a letter Tuesday to FTC Chairman Joseph Simons.

The commission considered price gouging in the context of competition laws in the aftermath of Hurricane Katrina in 2005, but there’s less publicly available information from the agency on how consumer protection rules might apply, the letter said.

FTC spokeswoman Betsy Lordan declined to comment beyond confirming the agency’s receipt of the letter.

The senators asked the commission to provide details, such as under which circumstances price gouging might give rise to an enforcement action from the agency. The senators also requested input on ways the FTC’s authority in this area might be beefed up if existing statutes are inadequate.

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Blumenthal was among more than a dozen Senate Democrats who urged the FTC in a March 27 letter to use “the full extent” of its authority to address recent reports of abusive price gouging on items such as hand sanitizer, face masks, soap and household disinfectants. House Democrats penned a similar letter last month.

The commission hasn’t brought a single price gouging case throughout its history, possibly because of a lack of clear authority, legal analysts said. Besides urging the FTC to do what it can under existing laws, Democrats have also introduced bills to provide the agency with explicit authority to act. So far, no Republicans have signed on.

Despite the partisanship and gridlock normally associated with Congress, particularly in an election year, the current pandemic could provide enough momentum to get an anti-price gouging bill across the finish line in a short time, according to Bill Kovacic, a George Washington University Law School professor and former FTC chairman.

“You get interesting, broad coalitions to act when you have a crisis,” Kovacic told CQ Roll Call in an interview. He noted that Congress acted “pretty fast” last month to pass a $2 trillion economic relief package after COVID-19 forced much of the U.S. business community into a temporary shutdown. Lawmakers are now discussing the possibility of another COVID-19 response measure.

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That could become a vehicle for related provisions such as price gouging language, according to Chicago attorney Nikhil Mehta. Republicans are focused on providing immediate financial assistance to small businesses, while Democrats are pushing to get other concerns addressed as well.

“The environment might be ripe now” for moving a price gouging bill, said Mehta, who works in the corporate practice group at SmithAmundsen LLC. Currently, there’s a patchwork of state laws on price gouging but no federal statute that explicitly addresses the issue.

On March 23, Trump signed an executive order under a 1950 law known as the Defense Production Act to prevent hoarding and price gouging during the current crisis. The Justice Department was directed to investigate and prosecute price gouging related to medical supplies. The department is also authorized under antitrust laws to pursue criminal cases in which individuals have colluded to fix prices.

The FTC has broad consumer protection and competition enforcement powers that could come into play, but they’ve never been used to bring a price gouging case, according to legal analysts.

“The agency has no express mandate to challenge excessive pricing,” Kovacic said. “If lawmakers want the FTC to get involved with this, it probably makes sense for them to pass a law.”

Sen. Amy Klobuchar, D-Minn., introduced a bill that would give the FTC explicit authority to crack down on price gouging, with the power to impose civil penalties of up to $10,000 per violation, as well as injunctions. It would apply to “essential” goods and services needed to protect the public from potential harm resulting from a natural disaster or pandemic.

Blumenthal is one of the bill’s three Democratic co-sponsors. Similar legislation was introduced by House Democrats, led by Rep. Jan Schakowsky, D-Ill. House Judiciary Chairman Jerrold Nadler, D-N.Y., and Energy and Commerce Chairman Frank Pallone Jr., D-N.J., are among the co-sponsors.

The House lawmakers plan to push to get such price gouging language included in a COVID-19 response package, assuming that one moves forward, a Schakowsky aide said.