Allegations of Deception Fuel Effort to Counteract Price-Gouging

Published on
April 22, 2020

Update (April 22, 2020): 3M brought its efforts against price-gouging north of the border on Tuesday as it launched a lawsuit against an Ontario company in Windsor, claiming false affiliation. The lawsuit alleges that Caonic Systems Inc., while purporting to be a certified supplier of 3M, sold N95 respirators through e-commerce platform Shopify at more than five times the retail price and used 3M trademarks without authorization. 3M appeared to acknowledge the unconventional nature of the lawsuit, as discussed in the original post below, but relayed its intention to advance comprehensive trademark infringement claims against the impugned parties in the future. Indeed, 3M’s immediate goal is to prevent the sale of the masks and redistribute them, if proven authentic, to healthcare workers.

3M Files Trademark-Related Lawsuit in Effort to Stop Price-Gouging

With worldwide supplies of essential medical equipment running low, some companies are capitalizing on the COVID-19 pandemic by charging higher than normal prices, sometimes called “price gouging.” One manufacturing company is turning to the courts in an attempt to combat such practices.

3M Co., a maker of N95 respirator masks, filed four lawsuits against resellers in the past week in New York, California, Texas, and Florida. 3M’s lawsuits allege improper use of its trademarks, false advertising, and that the resellers’ activities undermined the value of the 3M brand.

3M’s claim comes as a response to companies reselling N95 masks to the US Strategic National Stockpile, New York City government, and a California medical center at markups of up to 600% over 3M’s list price. Thus far, federal and state attempts at curtailing this price-gouging have proved unsuccessful.

3M’s lawsuits maintain that any damages, costs, or fees recovered through the actions will be donated to charitable COVID-19 relief efforts.

Trademark Allegations May Be Successful in an Indirect Manner

3M’s lawsuits allege that firms have been attempting to sell masks at inflated prices by pretending to be legitimate vendors of 3M – for example that purchaser quotes have contained 3M trademarks in an effort to confuse and deceive unwitting purchasers into thinking the sellers are authorized distributors of 3M products. The lawsuits also assert that the sellers have no rights in and to 3M’s trademarks.

Trademark law in the United States seeks to protect a business’ commercial identity or brand by discouraging other businesses from adopting names or logos (i.e.trademarks) that may be confusingly similar with existing trademarks. Most countries, Canada included, have analogous laws.

3M’s claim is somewhat unique in that the products sold by the resellers are authentic 3M products. The allegation contemplates consumer deception flowing from the impugned companies’ relationship to 3M, rather than the deception surrounding the source and maker of the products.

3M likely needs to demonstrate that the purchasers of the masks (in this case, government actors and healthcare professionals, presumably with sophisticated procurement teams) believed that the impugned companies were affiliated with 3M. If 3M is unsuccessful, the economic law of supply and demand may prevail, given that organizations and governments were willing to pay exorbitant prices for the masks.

Even if 3M is not successful, the lawsuit has raised awareness of the issue. It may be that the public backlash resellers are surely to face is enough to, at least partially, address these pricing practices.