Recent EPA Enforcement Action Provides Wake-Up Call to Retailers of Products Making Misleading COVID-19 Claims
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The US Environmental Protection Agency (EPA) recently took enforcement actions that demonstrate the Agency's focus on online retailers that market and distribute products by making unlawful claims of effectiveness against the SARS-CoV-2 virus that causes COVID-19. To emphasize how seriously the Agency is taking this problem, EPA not only issued "Stop Sale" orders, but also issued a press release and posted the full text of each of the Stop Sale Orders online. This action is a timely warning to retailers of the importance of ensuring the products they distribute, especially those claiming to control the virus causing the current pandemic, comply with EPA's regulations.
Products that can mitigate viruses and other human pathogens are regulated by EPA as antimicrobials, a subset of pesticides subject to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). As described in our recent Advisory, EPA requires that any product that is distributed with claims that the product will control microorganisms on inanimate surfaces must meet stringent efficacy and labeling requirements and be manufactured only in facilities that have been registered with EPA. Because FIFRA makes it unlawful to "distribute or sell" non-compliant antimicrobial products, retailers may be liable for the sale or distribution of non-compliant products that have been produced by other entities.1 FIFRA enables EPA to enforce the statute using a variety of legal tools, including seeking civil penalties. In certain circumstances, entities that violate FIFRA also can be subject to criminal enforcement actions.
EPA's Action Orders Retailers to Immediately "Stop Sale" of Affected Products
EPA's recent actions allege that a variety of products made available by Amazon.com Services LLC (Amazon) and eBay Inc. (eBay) were being sold in violation of these regulations and the Agency served each of them with immediately effective Stop Sale Use or Removal Orders (SSUROs). Such Orders are typically reserved for violations that EPA considers egregious and those that represent potential threats to public health or the environment. SSUROs inevitably precede EPA's seeking administrative penalties that can exceed $20,000 per violation, and each individual sale of a product that violates FIFRA can result in a separate penalty. In this case, each of the Orders included a very lengthy list of specific products that can no longer be sold.2 The length of the list suggests EPA eventually expects to assess very stiff penalties against both Amazon and eBay.
The Agency has alleged numerous violations of FIFRA with respect to the sale of the listed products, including the unlawful distribution of:
- Pesticides that were not registered with EPA
- Pesticides and devices that lacked an EPA Establishment Number indicating where they were produced
- Pesticides and devices that made false or misleading claims with respect to mitigating COVID-19
- Pesticides classified for "restricted use"3 that were offered for sale to the general public
While EPA's SSUROs and public statements do not specifically state whether the Agency also is taking action directly against the various manufacturers of these products, those entities could eventually be penalized as well.
Retailers Should Follow These Three Simple Guidelines
As we have previously described, this is not the first enforcement action EPA has pursued against online retailers for distributing products alleged to violate FIFRA, and these allegations highlight the need for retailers and distributors to verify a product's compliance with FIFRA and other applicable laws before agreeing to market the product. In that regard, the allegations also are likely to affect the business arrangements the online retailers might have with their suppliers, the product importers and US manufacturers, who may have made representations to Amazon and eBay warranting that the products are in compliance with federal and local laws.
This due diligence process begins by understanding the basic regulatory landscape, which requires the supplier to verify and warrant that its product is compliant. While the specific legal requirements will necessarily vary depending upon an analysis of each situation, the following are some general guidelines for consideration:
First, a seller should recognize when a marketing or label claim is the kind regulated by EPA. If a product bears claims to "kill," "eliminate," "control," or otherwise mitigate in any way a harmful microorganism, such as a virus, "germ," or bacteria, then the product will be considered an "antimicrobial" or an "antimicrobial device." Such products, which are subject to EPA regulation, must, at a minimum, be produced in an establishment that has been registered with EPA (known as an authorized "pesticide producing establishment", or an "EPA Establishment").
Second, prior to marketing products subject to EPA regulations, the seller should seek representations from the manufacturer that the products conform with federal and state requirements that apply to antimicrobial products. Such terms are commonly included in retail supply agreements, and whose terms can sometimes be considerably enhanced with requirements that the supplier indemnify the seller if a product is determined to be unlawful under federal or state regulations.
Finally, sellers should take steps to verify and monitor compliance. Even when a supplier warrants that a product complies with the applicable rules, the seller often can independently scrutinize samples and labels for the indicators of regulatory compliance. For example, in the recent EPA enforcement actions, many of the products allegedly were not registered with EPA and lacked an EPA Establishment Number on their label. Sellers and distributors can easily inspect the labels of products for such information before adding them to their stock or website for sale.
In addition, sellers and distributors should also consider spot-checking products already listed for sale, because the potential for false claims is not limited to new products. To the contrary, manufacturers are often updating the packaging for many existing cleaning products and appliances to include claims of effectiveness against viruses, bacteria, and other pathogens.
The EPA press release accompanying the SSUROs makes clear the Agency considers products making unauthorized claims concerning the SARS-CoV-2 to be of "particular concern," suggesting there is likely to be continued vigilance on EPA's part—raising the specter of additional enforcement actions against antimicrobial product retailers.
Other Federal Authorities Are Monitoring COVID-Related Claims
The Federal Trade Commission (FTC), which has its own enforcement authority over misrepresentations and false or misleading marketing claims, has similarly taken action against those marketing antimicrobial products with misleading claims about their effectiveness against COVID-19.4 Both FTC and EPA have online portals for the public to report such false or misleading claims and other noncompliance, and businesses have used that avenue to bring enforcement scrutiny of products sold by their competitors.5
The SSUROs and EPA's press release are a stark reminder of EPA's and other government agencies' capacity to make their enforcement efforts very public and painful. The actions also are an important warning to both the distributors of antimicrobial products and devices to scrutinize product claims and to thoroughly understand their suppliers' regulatory obligations prior to marketing such products. Doing so is, of course, a good business practice and a necessity—particularly when EPA and FTC enforcement personnel can use simple online searches and routine surveillance of websites and social media to find evidence of noncompliance. The increased scrutiny of product claims during the COVID-19 pandemic has only heightened the importance for distributors and sellers of devoting the resources for due diligence as early as possible when considering the marketing of new products or partnering with new vendors.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.
U.S. Environmental Protection Agency, Stop Sale, Use, or Removal Orders issued to Amazon.com Services LLC (June 10, 2020); U.S. Environmental Protection Agency, Stop Sale, Use, or Removal Order issued to eBay, Inc.(June 10, 2020).
See, e.g,. Letter from Charles A. Harwood, Regional Director, Northwest Region, Federal Trade Commission, to LightAir International AB (April 3, 2020); Letter from Charles A. Harwood, Regional Director, Northwest Region, Federal Trade Commission, to Ecoshield, LLC (April 27, 2020).