Price Gouging PPE? Yes, That’s a Crime.
By Charlotte Spencer
A Mississippi businessman was indicted January 12, 2021 for hoarding and price gouging PPE. Many who heard of such practices have found them distasteful, but did not realize they were actually illegal too. So does that mean there ought to be a law banning it? Yes, there already is one. In fact, these laws go back several decades. Though updated over the years, one of the laws the businessman broke was originally passed as part of the Defense Production Act of 1950 (50 U.S.C. § 4512). Others stretch back even further (18 U.S.C. § 371).
Although what we’re going through right now feels new, in a way it’s not. We’ve been through disasters, emergencies, shortages, and diseases before. We have suffered from people pulling this kind of scheme in times of need before. We’ve passed laws to address this already, but because it’s been so long since the last time something like this happened, many have forgotten, or never learned in the first place that this was a crime.
Ignorance of the law, however, is not a defense. We are responsible for following the law, regardless of whether or not we bother to learn it. It’s not clear whether this businessman knew that what he was doing was illegal, but it is clear that he knew he was endangering people and price gouging during desperate times.
Kenneth Bryan Ritchey Ritchey is accused of having people acquire all N-95 masks they could at normal retail prices ranging from $0.97 to $6.00 per mask, so that he could later resell them for up to $25.00 per mask. He purposefully created a situation in which no one could buy the masks elsewhere because he already had.
Many of us have seen this type of thing happen before with non-critical products, such as collectors items with sentimental value. This is different from that because under Executive order 13909 PPE was declared to meet the criteria for “critical strategic materials.” In other words that means:
“(1) that such material is a scarce and critical material essential to the national defense, and (2) that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal distribution of such material in the civilian market to such a degree as to create appreciable hardship.”
(50 U.S.C. § 4511).
This alone would be enough to get Ritchey into trouble with the law, but he made his situation worse by targeting V.A. hospitals for the expensive resales. Because of that he has now also been indicted under 18 U.S.C. § 371 and § 1349 for conspiring to defraud the United States.
If convicted, Ritchey would have been forced to forfeit all property and proceeds he got through this scheme, and could have faced fines and up to 5 years in prison for conspiracy to defraud the government, and fines and up to 1 year in prison for his violation of the Defense Production Act. (18 U.S.C. § 371 and 50 U.S.C. § 4513).
Ritchey wisely decided to plead guilty. As a result of the plea deal Ritchey will pay about $60,000 in restitution to the V.A. hospital he had price gouged. He will also still have to pay court costs and the fines specified under the laws he’s broken. In addition, the PPE in question was taken into the Attorney General’s office and distributed to first responders and healthcare workers.
To combat such crimes, the Department of Justice created the COVID-19 Hoarding and Price Gouging Task Force after former President Donald Trump issued an Executive Order pursuant to section 102 of the Defense Production Act, which prohibits hoarding of designated items.
The Secretary of the Department of Health And Human Services (HHS) even issued a notice designating certain categories of supplies that must not be hoarded. Those include:
- Personal protective equipment (PPE), including masks, shields and gloves
- Respirators
- Ventilators
- Drug product with active ingredient chloroquine phosphate or hydroxychloroquine HCl
- Sterilization services
- Disinfecting devices
- Medical gowns or apparel
Read more on the HHS list here.
If you have information on hoarding or price gouging of critical supplies, you can report it without leaving your home to the National Center for Disaster Fraud by calling the National Hotline at (866) 720-5721 or by submitting the NCDF Web Complaint Form.
The writer is a lawyer and a coder, and a member of the Arizona bar.
If you have feedback on this article, please write to us at marketing@biometrica.com.