FTC Chairman Discusses Coronavirus Scams, Privacy Concerns in Teleconference with Lawmakers

On May 11, 2020, Federal Trade Commission (FTC) Chairman Joseph Simons participated in an hour-long teleconference with lawmakers from the House Committee on Energy & Commerce. Chairman Simons took questions from members of the Consumer Protection and Commerce Subcommittee, which held the teleconference forum to discuss consumer protection issues related to the COVID-19 pandemic. Speaking in his individual capacity, Chairman Simons described efforts the FTC has taken to address covid-related consumer scams. 

Focus on Fraud

Subcommittee Chair Jan Schakowsky (D., Ill.) emphasized the committee’s general concern for disaster-specific unfair or deceptive acts, such as selling fake COVID-19 cures. Chairman Simons identified three basic categories of consumer protection issues relating to the pandemic; (1) bogus cures/prevention methods for the coronavirus; (2) scams involving confusion over government programs; and (3) imposter robo-call scams. 

Regarding bogus cures, Simons noted that the Commission recently sent over 100 warning letters for covid-related product scams, and in all but one case, the problem was cured within 24 hours of the letter’s receipt without any further agency action needed.

On scams involving government program confusion, Simons referenced the FTC’s recent successful preliminary injunction obtained against a company which posed as the Small Business Administration and accepted loan applications for the CARES Act. The Commission is actively searching for similar cases and expects scams of this type to continue as financial-hardship programs are rolled out. 

As for imposter scams, Simons spoke of companies, usually based outside the U.S., engaged in robo-call campaigns designed to trick callers into disclosing sensitive personal information. Simons broadly described a subset of robo-call campaigns perpetuating pandemic-related scams which prey on consumers’ coronavirus fears. According to Simons, the FTC succeeded recently in ending such robo-call campaigns with more than a dozen warning letters sent in conjunction with the Federal Communications Commission. 

Privacy Concerns

Several committee members asked about the FTC’s protection of consumers’ online privacy. Rep. Cathy McMorris Rodger (R., Wash.) and Rep. Jerry McEnerny (D., Calif.) specifically referenced Zoom, a popular video conference service, and media reports of Zoom’s privacy vulnerabilities. Chairman Simons did not confirm an official investigation, but said that “If you’re reading about [complaints] in the media, you can be assured that we’re either working on it already or we will be as result of that media attention.”

Additionally, Rep. Rodgers and Rep. Lisa Blunt Rochester (D., Delaware) both asked about the FTC’s role addressing COVID-19 contact tracing technology, citing general privacy concerns. Chairman Simons said that the FTC is actively communicating with multiple tech companies regarding contact tracing apps and other pandemic-related pilot programs. Simons specifically mentioned Google in this regard, noting the company remains subject to a FTC consent order related to privacy practices. 

Chairman Simons explained a few general privacy precautions consumers should employ when online. He recommended consumers create password-protected video conferences and further utilize features that “lock” a meeting once it has started. He warned against clicking on unsolicited meeting links, which could be phishing attacks. 

Chairman Simons also noted the Commission continues to vigorously enforce privacy compliance with the Children’s Online Privacy Protection Act (COPPA) and the Fair Credit Reporting Act (FCRA). 

Price Gouging

Chairman Simons answered multiple questions aimed at the FTC’s response to price-gouging. Rep. Schakowsky noted that she has proposed federal price-gouging legislation because not all states have price-gouging statutes. 

Simons stated he did not believe the FTC has the authority to prosecute price-gouging under the FTC Act. He encouraged Congress to pass a law giving the FTC specific authority on the matter, noting that a standalone federal price-gouging law would be consistent with the approach taken by many states which have “baby FTC Acts” along with a separate statute for price-gouging. 

Nonetheless, Simons explained the FTC is using agency resources to identify and recommend cases to the Department of Justice, which prosecutes price-gouging pursuant to its authority under the Defense Production Act. “If we get our own authority, we will obviously enforce that as well.”

Other Concerns 

Rep. Bobby Rush (D., Ill.) asked if a disproportionate share of scams target seniors or minorities, which Chairman Simons said was not the case. “Scammers are equal opportunity con-artists,” Simons explained, referencing data showing that younger people get scammed at a higher frequency, but older people generally get scammed for larger amounts of money. 

Rep. Tony Cardenas (D., Calif.) asked for an estimate of the monetary damage suffered by consumers from coronavirus scams. Although Simons was unable to offer an estimate, the Chairman highlighted that the Commission’s ability to obtain monetary relief under Section 13(b) of the FTC Act has been hampered by recent federal appellate court decisions. “With respect to 13(b), we really need congress to clarify our authority,” Simons said, explaining that the agency faces the common arguments that it either doesn’t have the authority to obtain monetary redress at all under Section 13(b), or that a particular challenge is not timely because the threat of harm is not imminent. 

Rep. Doris Matsui (D., Calif.) asked what the FTC is doing to monitor the labor market, especially given the drastic increase in unemployment. In response, Chairman Simons pointed to an April 13th joint-statement with the DOJ explaining that competitors colluding to deprive workers from competitive compensation will be aggressively prosecuted. Simons emphasized both agencies are on the lookout for this type of collusive activity, which would garner criminal prosecution. Simons further noted that due to a “lull” in merger notification filings, the Commission is able to redirect some staff to investigate covid-related competition issues, including labor market issues.  

Conclusion

Monday’s teleconference reiterated the FTC “is the main cop on the beat” when it comes to protecting consumers from unfair and deceptive business acts, including COVID-19-related scams. The Commission has been active in issuing warning letters against coronavirus fraudsters and bringing court cases when necessary. The agency is also engaged with privacy concerns; communicating with tech companies and promising that high profile media-reported privacy complaints are being investigated. 

The audio recording of the teleconference is published here. For more resources, visit the FTC’s main coronavirus response webpage, https://www.ftc.gov/coronavirus/enforcement. Should you have any questions about this, or any other antitrust or competition law question, please feel free to contact any of the attorneys listed above.

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