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    The Lawletter Blog

    CORONAVIRUS: Hoarding During the Pandemic

    Posted by James P. Witt on Fri, Dec 18, 2020 @ 11:12 AM

    The Lawletter Vol 45 No 6

    Jim Witt—Senior Attorney, National Legal Research Group

                While the as yet unexplained hoarding of toilet paper may be thought of as the light side of the coronavirus pandemic, on the not-so-light side is the hoarding of medical supplies, notably drugs and medical equipment such as masks and ventilators. The federal government has taken two steps in this regard—first, an Executive Order from the President, and, second, a warning from the Department of Justice.

                Executive Order No. 13910, 85 FR 17001, "Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19" (Mar. 23, 2020), was announced under the authority of the Constitution and the Defense Production Act of 1950 (the "Act"), as amended (50 U.S.C. §§ 4501 et seq.).

                The Order referred to Proclamation 9994 of March 13, 2020, "Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak," in which the President declared a national emergency recognizing the threat that the novel coronavirus known as SARS-CoV-2 poses to the Nation's health-care systems. The President also noted that on March 11, 2020, the World Health Organization announced that the outbreak of COVID-19 (the disease caused by SARS-CoV-2) can be characterized as a pandemic and that the federal government, along with state and local governments, has taken preventive and proactive measures to slow the spread of the virus.

                The President further noted that on March 18, 2020, he issued Executive Order 13909 in which he delegated to the Secretary of Health and Human Services (Secretary) the prioritization and allocation authority under § 101 of the Act with respect to health and medical resources needed to respond to the spread of COVID-19.

                The President further stated that the purpose of the latest Executive Order, Order 13910, was "[t]o ensure that our Nation's healthcare systems are able to surge capacity and capability to respond to the spread of COVID-19, it is the policy of the United States that health and medical resources needed to respond to the spread of COVID-19, such as personal protective equipment and sanitizing and disinfecting products, are not hoarded."

                Accordingly, the President delegated to the Secretary his authority to prevent hoarding of health and medical resources necessary to respond to the spread of COVID-19, to implement any restrictions on hoarding, and to gather information concerning how supplies of such resources are distributed throughout the Nation.

                More specifically, § 2 of the Order, "Delegation of Authority to Prevent Hoarding," authorized the Secretary "to prescribe conditions with respect to the accumulation of such resources, and to designate any material as a scarce material, or as a material the supply of which would be threatened by persons accumulating the material either in excess of reasonable demands of business, personal, or home consumption, or for the purpose of resale at prices in excess of prevailing market prices."

                In informal language, Attorney General William Barr and the President followed up on the Executive Order. The Attorney General stated that "[i]f you have a warehouse of surgical masks, you will hear a knock on your door," and he vowed to prosecute hoarders or scam artists who seek "to exploit the suffering of American citizens for their own profit." The Attorney General also stated that he was working to protect the health and safety of his personnel while ensuring the law was enforced "at full throttle." To that end, he said, "we have started to see some evidence of potential hoarding and price gouging." Focusing on criminal violations, the Attorney General stated that once materials are designated, the law prevents hoarding and price gouging "in excess of reasonable personal or business needs or for the purpose of selling them in excess of prevailing market prices. . . . It is a crime to engage in the prohibited activity."

                Turning to specific subjects of potential hoarding, the President named "hand sanitizers, face masks, and personal protective equipment" as among the items he was considering for action. The President continued that "[w]e have a lot of face masks, a lot of equipment just coming in, and we have some people hoarding; . . . we want to prevent price gouging. . . . Critical health and medical resources are going to be protected in every form," that the problem was of a "relatively small degree," but that he could not allow it to go on.

                The international law firm, Covington & Burling LLP, issued a newsletter, "Defense Production Act Anti-Hoarding Provisions Invoked for Coronavirus," on March 30, 2020, summarizing a posting by the Department of Health and Human Services that designated certain COVID-19-related personal protective equipment ("PPE") and materials as "scarce" or "threatened." As a result of this notice, the Act now prohibits the accumulation of these materials in excess of reasonable demands of business, personal, or home consumption. The notice also results in a prohibition of the accumulation of these materials for the purpose of resale at prices in excess of the prevailing market rate.

                The notice specifically applies to the following types of materials:

    o       N-95 Filtering Facepiece Respirators and other types of respirators;

    o       Portable ventilators;

    o       Drug products with active ingredient chloroquine phosphate or hydroxychloroquine HCI;

    o       Certain sterilization services;

    o       Certain disinfecting devices;

    o       Medical gowns or apparel and PPE coveralls; and

    o       PPE face masks, surgical masks, face shields, and gloves.

                Violating the Act in this manner could result in a fine up to $10,000 or up to one-year imprisonment. See 50 U.S.C. § 4513.

    Topics: James P. Witt, COVID-19, presidential orders, hoarding, Defense Production Act

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