Dive Brief:
- The Federal Trade Commission (FTC) won lawsuits against two companies that allegedly made false promises to consumers and failed to deliver personal protective equipment (PPE) soon after the outbreak of the COVID-19 pandemic.
- The FTC alleged that QYK Brands and American Screening LLC deceived consumers about the availability of masks, face shields, hand sanitizer, gowns and other PPE gear. The commission said it won both actions on summary judgment, recovering $17.6 million for wronged consumers.
- Consumers seeking protection against the spread of the coronavirus in early 2020 “waited weeks or even months for their orders to be filled, if at all,” the FTC said. QYK Brands, doing business as Glowyy, made bogus claims that its “Basic Immune IGG” powder would treat or avert COVID-19 sickness.
Dive Insight:
The FTC litigation is the latest success in a federal effort to punish perpetrators of COVID-19 scams. Since the start of the pandemic, the Securities and Exchange Commission (SEC) has brought charges against several companies and top executives for making false claims about coronavirus test kits, face masks and thermal scanners used to detect fevers.
The SEC has also ferreted out coronavirus-related stock manipulation and often targeted microcap companies.
In the FTC litigation, a court found that Glowyy began advertising hand sanitizer and other PPE gear online in March 2020 and promised to ship the goods the same day that they were ordered. “But defendants repeatedly failed to make good on those promises,” and did not offer refunds to consumers or allow them to consent to the delay, the FTC said.
Similarly, a court’s summary judgment order found that American Screening at the start of the pandemic promised on its website that its products were in stock and would ship within 24 to 48 hours. It marketed the gear in bulk to individual consumers, local governments, hospitals and nursing homes.
American Screening “did not have a reasonable basis for its shipping claims” and, with many orders, did not provide the goods within the promised time period, the FTC said.
For example, a March 2020 order for protective gowns for essential workers totaling more than $10,000 had not arrived six weeks later, “with no word of any kind from the company about its status,” the FTC said.
The court agreed with the commission that American Screening should turn over $14 million in “monetary relief.”
Glowyy is required to follow an injunction to stop selling products that purport to treat COVID-19, no longer mislead consumers about the timing of product deliveries and surrender $3.1 million to the FTC for refunds to consumers.
QYK Brands denied that Glowwy said its product was effective against COVID-19 and that it made false promises about the availability of its PPE gear.
“Every consumer that ordered the product received the product — all consumers that requested refunds received refunds,” a QYK Brands spokesperson said in an email. “There were some late shipments during the early weeks of the pandemic and Glowwy apologizes for this.”
American Screening did not respond to a request for comment.
The SEC in May charged New York-based SCWorx and its former CEO for announcing bogus orders for coronavirus test kits. The agency cited an April 2020 company press release claiming that a buyer had ordered 2 million COVID-19 rapid test kits and planned weekly orders for an additional 2 million kits for 23 weeks valued at $35 million per week.
Shares in SCWorx, which was financially troubled, soared 425% on a trading volume of 96.2 million, or more than 900 times the prior three-month average daily volume.
Among several other cases, the SEC in April 2020 announced charges against Praxsyn and its CEO for allegedly making false claims that it could supply customers with large numbers of N95 and other masks.
