If you sell personal protective equipment (PPE) such as face masks, beware! The Feds have charged a seller in New York who sold PPE in his retail store and online with violating the Defense Production Act of 1950, and if found guilty, he could serve up to 1 year in prison.
In its complaint against the retailer, the government noted the rapidly dwindling stock of PPE needed by healthcare providers to care for seriously ill patients with COVID-19, and pointed to the President's Executive Order declaring 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."
The seller sold sneakers and apparel at his retail store, but the government said in mid-March, he began accumulating PPE. An excerpt of the Department of Justice (DOJ) press release claims that between March 25 and April 8th, the retailer allegedly received deliveries of disposable face masks, disposable surgical gowns, hand sanitizer, and digital thermometers at his retail store and warehouse.
The DOJ alleged the retailer advertised and sold PPE at prices "far in excess of prevailing market prices." For example, three-ply disposable face masks purchased for a per-unit price of $0.07 were resold for a per-unit price of $1.00, it alleged.
The government said Postal Inspectors executed a search warrant at the seller's New York retail store and warehouse on April 14, 2020, and seized 23 pallets containing more than 100,000 face masks, 10,000 surgical gowns, nearly 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves.
In its press release
, the US Attorney's Office for the Eastern District of New York said the retailer's "amassing of critical personal protective equipment during a public health crisis and reselling at huge markups places him squarely in the cross-hairs of law enforcement armed with the Defense Production Act." It also noted that the charges in the complaint were allegations, and the defendant is presumed innocent unless and until proven guilty.
, which reported on the case on Friday, said it was the first case involving hoarding and price gouging to invoke the Defense Production Act of 1950 during the current public health crisis.
The defendant's lawyer spoke with Law360 and said he called into question the legality of the DOJ's move, characterizing the allegations as "unconscionable and unsustainable in a court of law."
The Department of Justice
has taken President Trump's Executive Order seriously, and US Attorney General Barr created a task force to address COVID-19-related market manipulation, hoarding, and price gouging.
As far as federal prosecutors are concerned, the regular rules of retail and liquidation do not apply to items like face masks that are in short supply due to the pandemic - consider yourself warned.