Legal Alert

Task Force Enacted to Combat Industrial-Scale Hoarding and Price Gouging

March 26, 2020

In response to the COVID-19 pandemic and the shortage of necessary medical supplies, U.S. Attorney General William P. Barr, in a memo released on March 24, 2020, announced the creation of a special, nationwide task force to address industrial-scale hoarding, market manipulation, and price gouging. 

Spearheaded by the U.S. Attorney for the District of New Jersey, Craig Carpenito, the task force will develop enforcement measures and coordinate nationwide investigations and prosecutions of illegal hoarding and price gouging. Mr. Carpenito, a veteran federal prosecutor and former attorney with the SEC, will lead a team comprising experienced attorneys from each of the 93 U.S. Attorney’s Offices and various components of the Department of Justice.

AG Barr’s memo follows President Trump’s Executive Order dated March 23, 2020, granting his authority under 3 U.S.C. Code § 301 and the Defense Production Act of 1950 (50 U.S.C. § 4501 et seq.) to the Secretary of Health and Human Services, Alex Azar, to “prevent hoarding of health and medical resources necessary to respond to the spread of COVID-19.” Secretary Azar also is charged with implementing restrictions and gathering information on how essential materials are distributed.

As stated in the Executive Order, the effort to combat hoarding and price gouging arises under the Defense Production Act of 1950 (the Act), which was originally approved by Congress during the Korean War to help the government stock up and maintain wartime materials. Since 1950, the Act has been reenacted several times.

Specifically related to the goals of the newly established task force, § 4512 of the Act allows the President—and now Secretary Azar—to designate materials as “scarce,” and it prohibits individuals from accumulating “in excess of the reasonable demands of business, personal, or home consumption.” It also prohibits individuals from accumulating scarce resources “for the purpose of resale at prices in excess of prevailing market prices.” The penalties for violating § 4512 include a fine of not more than $10,000 and imprisonment for not more than one year.

Importantly, the task force will not target individuals who stock up on scarce materials required for daily necessities or businesses who need these materials for regular operations. Instead, the task force is directed at individuals—like the brothers in Tennessee who bought 18,000 bottles of hand sanitizer—and businesses who deliberately and willfully hoard scarce materials for the purpose of profiting off the spreading pandemic. 

Although Secretary Azar has not to date designated materials as critical, the creation of the task force signals DOJ’s continuing dedication of resources to combat those attempting to profit illegally from the crisis. It also is likely that the task force will coordinate efforts with various state attorneys general who have already been proactive in ordering individuals to cease and desist in price gouging and profiteering.

Thirty-two state attorneys general have issued a joint letter to online marketplaces such as Amazon, Facebook, eBay, Walmart, and Craigslist, urging them to rigorously monitor price gouging practices by online sellers. It is therefore imperative that businesses and individuals avoid stockpiling of medical supplies and related materials beyond what is needed for regular operations.

Attorneys in our White Collar Defense/Internal Investigations Group counsel companies and individuals in complying with the law, including the Defense Production Act and related Executive Orders. Our preventive counseling guides clients to prevent situations that trigger government investigations and mitigate consequences if one occurs.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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