Pandemic Profiteers Facing Federal Lawsuits

The COVID-19 pandemic saw numerous legal questions arise surrounding discrimination as a result of vaccination status, face mask requirements, and the legitimacy of mail-in voting ballots. However, significant issues also arose regarding business practices and ethics during times of international turmoil and economic crisis. Modern economic theory relies heavily upon the assertion that the supply of a particular good and the consumer demand for that good must reach a mathematically determined equilibrium in order to have an efficient market [1]. While this system for determining prices and production is efficient in theory, the COVID-19 pandemic clearly demonstrated how this system of unregulated pricing and free market production can significantly harm the population and economy at large.

When the pandemic began, there were significant shortages of personal protective equipment for essential workers and citizens alike. Due to supply chain and production issues, products such as face masks, latex gloves, and even toilet paper were in short supply, raising the overall consumer demand for these goods dramatically [2]. Some unscrupulous business leaders, such as SuperGoodDeals.com owner Kevin J. Lipsitz, saw an opportunity to utilize the shortages and increased demand for their own gain. The FTC alleges that Lipsitz knowingly lied about their stocks of Personal Protective Equipment (PPE) and made false promises to consumers regarding the delivery of these products, along with other unrelated frauds [3]. Further, the FTC states that despite numerous complaints made by consumers, Lipsitz never refunded consumers who requested it [3].

It is possible that Lipsitz could argue that their shipping operations were delayed as a result of the same logistical issues that plagued the global economy and that their promises of timeliness to customers were accurate to the best of their knowledge. Likewise, Lipsitz could argue that refunds were never authorized due to the struggling state of the company. While Lipsitz would have to provide evidence of such financial claims, it is plausible that SuperGoodDeals.com was under significant stress considering the state of the economy during the pandemic [4]. Regardless of the argument that Lipsitz tries to make, though, the FTC case presents significant questions regarding the role of businesses in times of economic and social difficulty. If Lipsitz is ultimately found liable for damages caused as a result of his profiteering efforts, it would suggest that other businesses that produce essential goods may face heightened scrutiny for engaging in similar practices.

Corporate Social Responsibility (CSR), is defined by the Harvard Business School writer Tim Stobierski as the obligation of business owners, “to do what’s best—not just for their companies, but people, the planet, and society at large” [5]. Naturally, the practice of pandemic profiteering would appear to violate this informal code of incredibly vague ethics. However, a court ruling against Lipsitz could begin to enshrine the principles of CSR into precedent, but only if the court finds Lipsitz's practices detestable on the grounds that they exploited a crisis. Such a decision would be monumental because smaller companies such as SuperGoodDeals.com were not the only corporation to be accused of profiteering during the pandemic. Pharmaceutical giants such as Moderna and Pfizer have also been accused of profiteering through their distribution of vaccines based on wealth rather than need [6]. Thus, corporations that produce such essential products, especially pharmaceutical companies, may not be able to engage in the sort of antics that characterize free market economies, leading to more affordable goods and more ethical businesses.

[1] David Gale, The law of supply and demand, 3 MATHEMATICA SCANDINAVICA 155 (1955).

[2] Peter S. Goodman & Niraj Chokshi, How the world ran out of everything The New York Times (2021), https://www.nytimes.com/2021/06/01/business/coronavirus-global-shortages.html (last visited Feb 26, 2024).

[3] Staff in the Office of Technology and The Division of Privacy and Identity Protection, FTC takes action against marketer that falsely promised consumers next day shipping of facemasks and other personal protective equipment Federal Trade Commission (2021), https://www.ftc.gov/news-events/news/press-releases/2020/07/ftc-takes-action-against-marketer-falsely-promised-consumers-next-day-shipping-facemasks-other (last visited Feb 26, 2024).

[4] Alexander W Bartik, The impact of covid-19 on small business outcomes and expectations ... The impact of COVID-19 on small business outcomes and expectations (2020), https://www.pnas.org/doi/10.1073/pnas.2006991117 (last visited Feb 26, 2024).

[5] Tim Stobierski, What is Corporate Social Responsibility? 4 types: HBS Online Business Insights Blog (2021), https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility (last visited Feb 26, 2024).

[6] Sarah Johnson, “profiteering” of Covid pandemic must never be repeated, World figures warn The Guardian (2023), https://www.theguardian.com/global-development/2023/mar/11/profiteering-of-covid-pandemic-must-never-be-repeated-world-figures-warn (last visited Feb 26, 2024).