Federal Crackdown on Hoarding and Gouging During COVID-19 Crisis

Or imagine this slightly different scenario: You own a trucking company and learn that your drivers are delivering pallets of hand sanitizer and disinfectants to a residential address. Perhaps they have delivered several pallets in a single delivery, or they are repeatedly bringing goods to the same place.

What, if any, obligations might you have in these scenarios? And importantly, what, if any, liability might you have if it turns out a customer is hoarding PPE?

Today's Legal Landscape

The possibility of these types of scenarios is all too real, and so are the potential criminal and civil penalties that could flow forth from them. The Defense Production Act of 1950 (50 U.S.C. §4512) generally prohibits individuals and entities from hoarding materials that have been deemed to be scarce, or which would be made scarce by hoarding. Specifically, it prohibits accumulation of such materials "in excess of the reasonable demands of business, personal, or home consumption" or if such accumulation is "for the purpose of resale at prices in excess of prevailing market prices." 50 U.S.C. §4512. Recently, an Executive Order (Executive Order 13910) was issued under which several categories of goods have been designated as "scarce" or "threatened." They include, among other things:

• N-95 respirators, other respirators, and component parts;
• Portable ventilators, stationary ventilators, and other positive pressure breathing devices modified for use as ventilators;
• Drug products in which the active ingredient is either chloroquine phosphate or hydroxychloroquine HCl;
• Sterilizers;
• Disinfectant products;
• Medical gowns and apparel;
• PPE coveralls, face masks, face shields, and gloves; and
• Surgical gloves.

Items designated as "scarce" have been determined to be critical so that the government and society are equipped "to respond to the spread of COVID-19." (Department of Health and Human Services, Notice of Designation of Scarce Materials or Threatened Materials Subject to COVID-19 Hoarding Prevention Measures Under Executive Order 13910 and Section 102 of the Defense Production Act of 1950.) And they have been determined to be in short supply, to likely be in short supply, or to otherwise be the types of goods for which supply "would be threatened by hoarding." Id.