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Law360 (September 29, 2020, 2:49 PM EDT) -- The COVID-19 pandemic has brought new compliance risks and considerations for companies and individuals. In this Expert Analysis series, state attorneys general share their enforcement priorities.
Gurbir Grewal
In New Jersey, the attorney general serves not only as the state's chief legal and law enforcement officer, but also as the chief regulator for a number of industries and professions. Like any other agency or organization, we plan for crises.
But there are some crises you can never fully plan for.
That became clear on March 4, when Gov. Phil Murphy announced[1] New Jersey's first presumptive positive case of COVID-19 — the first of many painful announcements about a pandemic that has wreaked havoc and claimed about 16,000 lives across our state and over 10 times more across the country.
As one of the first states to be devastated by COVID-19, we confronted multiple challenges at once at the attorney general's office, quickly realizing that there was no playbook for this pandemic.
While attempting to ensure the safety and well-being of our 8,000-person workforce, we needed to:
- Advise the governor on his emergency powers and defend his executive orders in court — through our Division of Law.
- Build a statewide system for ensuring consistent enforcement of the governor's orders — through our Division of State Police and Division of Criminal Justice.
- Protect consumers from those who sought to exploit the crisis for personal gain —through our Division of Consumer Affairs.
- Streamline entry and reentry into the workforce, and the expansion of telehealth, for doctors and other health care professionals responding to the crisis — through our Division of Consumer Affairs and its professional and occupational licensing boards.
- Supply public health facilities with the emergency supplies they needed — through the New Jersey State Police's Office of Emergency Management.
We needed to do all of that in addition to meeting our existing duties and responsibilities, and we were able to rise to these challenges because of the resilience and dedication of the incredible public servants across our office. Although many stepped up in different ways to protect New Jersey residents, this article focuses on a single sliver of our response from the earliest days of the crisis — our statewide crackdown on price-gouging.
That is because this initiative offers a useful window for examining our broader enforcement efforts. On a moment's notice, we repurposed resources and restructured protocols. We developed creative solutions to unanticipated problems. We sought to make the best decisions possible with the limited information available.
And, throughout, we worked hard to protect the public from unscrupulous retailers while also protecting our essential workforce from a deadly virus. At a time of growing economic insecurity, this effort is central to our public service mission.
Adapting Our Playbook
Historically, New Jersey governors have declared states of emergency in a wide variety of circumstances: gas pipeline explosions; winter nor'easters; hurricanes, like Irene and Sandy; and government shutdowns. As a result of these prior crises, the career consumer protection professionals in our Division of Consumer Affairs anticipated an influx of price-gouging complaints related to COVID-19 because they knew unscrupulous merchants are always ready to take advantage of consumers in need in times of crisis.
They intended to leverage the strategies and tactics they had developed over the years to prosecute a variety of price-gouging abuses. But as we quickly realized, their existing playbooks did not contain the plays we found ourselves using over the months to come.
Murphy triggered the protections of New Jersey's price-gouging statute with his declaration[2] of a state of emergency on March 9, though some retailers had initiated unconscionable price increases, in violation of New Jersey's Consumer Fraud Act, even before then. Within days, we had received hundreds of consumer complaints, and we quickly issued guidance[3] to consumers and businesses about the protections of the price-gouging law.
We also created a surge team[4] of investigators to keep up with the increase in complaints. Drawing from across our Division of Consumer Affairs, we assigned roughly 55 investigators to inspect retail establishments throughout the state in response to price-gouging complaints.
In addition to investigators with experience handling price-gouging complaints, we trained and deployed investigators who ordinarily specialize in everything from securities fraud to legalized games of chance, like raffles and amusement games. Once they were ready, we sent them out to keep up with the rising number of complaints.
However, our initial all-hands-on-deck approach didn't last long. With the virus racing through large swaths of New Jersey, and personal protective equipment in short supply, we realized that we couldn't send investigators to dozens of heavily trafficked corner stores or supermarkets every day, even to resolve serious price-gouging complaints. To protect the health of our staff, we had to limit them to working remotely.
The facts on the ground were changing quickly for retailers too. Murphy issued executive orders limiting[5] on March 16, and then suspending[6] on March 21, the operation of many retail businesses across New Jersey. We expected the reduction in commercial activity to slow the pace of price-gouging complaints. But there was no immediate decline.
The consumer complaints continued to arrive — many of them focused on masks, hand sanitizers and disinfectant sprays, as well as food and bottled water. So while the pandemic tightened its grip on the state — with thousands of new cases daily from late March through early May — bad actors tightened their hold on scarce supplies and consumers by raising prices. Complaints continued to mount.
Further Adjustments
To meet the challenge, our team adapted.
Our Division of Consumer Affairs redesigned its online complaint portal to allow consumers to upload documents and photos that would allow the division to assess complaints more quickly, and without conducting in-person inspections. We intensified our public messaging to deter price-gouging.
To triage the increased volume of complaints, the division concentrated its investigative resources on the most egregious violators — retailers whose conduct generated large volumes of complaints or implicated public health — and sent warning letters to other businesses that generated complaints.
Unexpected Developments
The challenges did not end there. We found the pandemic's dramatic impact on New Jersey businesses reflected in our work. Retailers could not always timely respond to our subpoenas, in part because some had shut down their operations.
In more than a few instances, proprietors themselves had been stricken by COVID-19. Some, tragically, passed away. Our investigations, in other words, turned up evidence of the devastating impact of the pandemic on our communities.
We also found that in many cases, the price increases experienced by many consumers were not attributable to price-gouging by local stores, but rather were due to upstream price increases imposed by manufacturers and wholesalers. Many New Jersey businesses were caught between suppliers looking to protect or increase their own profits, necessary but painful restrictions on their operations imposed by executive orders to slow the spread of the virus, and angry customers who were increasingly turning to online shopping to fulfill basic needs.
In response, we adjusted our operations to account for all of these developments, including to avoid penalizing local businesses for circumstances beyond their control. Our team improved its capacity to work remotely, and as the number of COVID-19 cases in New Jersey decreased, we were again able to begin sending personnel into the field to conduct investigations.
We also forged partnerships and strategies to combat online price-gouging, in light of the massive shift toward online shopping. Our team has worked cooperatively with several online marketplaces to stop unconscionable pricing and to remove deceptive advertisements on their platforms. In addition, we leveraged our relationship with federal prosecutors and joined forces[7] with New Jersey U.S. Attorney Craig Carpenito, who was leading the countrywide effort to protect consumers.
By mid-July, our Division of Consumer Affairs had sent over 1,800 cease-and-desist letters in response to COVID-19-related consumer complaints, and taken several significant enforcement actions targeting businesses that inflate prices or misrepresent the health and safety of products related to COVID-19. These included actions against businesses that inflated the prices of N95 respirators, sold antibody tests for at-home use contrary to the manufacturer's instructions, and marketed serological tests in ways that conflict with U.S. Food and Drug Administration guidance.
Conclusion
As we look toward a potential resurgence of COVID-19 in New Jersey, and future public health emergencies, we are mindful of the lessons we have learned. We hope that our experience can serve as a guidepost for the many other states and communities struggling with these same issues.
By quickly adapting to novel and changing circumstances, and adjusting our enforcement strategies to the facts on the ground, we will better protect consumers in New Jersey and across the country by ensuring they have access to scare supplies at fair prices.
What we learned in the first few weeks of the outbreak continues to inform our work in other areas as well. In recent months, we have launched a series of major investigations related to the COVID-19 outbreak, including a statewide review of deaths in nursing homes and other long-term care facilities, as well as significant consumer protection investigations.
As these investigations develop and evolve, we are updating our playbook to account for the various challenges this virus presents. In other words, we're being resilient: We may face some challenges, but we are constantly tweaking and adding to our playbooks, not abandoning them.
Gurbir Grewal is the attorney general of New Jersey.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of Portfolio Media Inc. or any of its respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://nj.gov/governor/news/news/562020/approved/20200304e.shtml.
[2] https://nj.gov/infobank/eo/056murphy/pdf/EO-103.pdf.
[3] https://www.nj.gov/oag/newsreleases20/pr20200311b.html.
[4] https://www.nj.gov/oag/newsreleases20/pr20200312a.html.
[5] https://nj.gov/infobank/eo/056murphy/pdf/EO-104.pdf.
[6] https://nj.gov/infobank/eo/056murphy/pdf/EO-107.pdf.
[7] https://www.justice.gov/usao-nj/pr/us-attorney-carpenito-ag-grewal-acting-comptroller-walsh-announce-federal-state-covid-19.
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