COVID-19 Price-Gouging Lawsuit Filed in Windsor

The first COVID-19 price-gouging lawsuit filed in Canada accuses Waterloo-based Caonic Systems Inc. of reselling N95 face masks at a price that’s more than five times higher than the regular listed price. The lawsuit was filed Tuesday on behalf of 3M in the Ontario Superior Court of Justice in Windsor.

3M’s Canadian headquarters and manufacturing facilities are located in London, Ontario.

During the COVID-19 pandemic, health care professionals and others have struggled to find personal protective equipment (PPE) such as masks and gloves. Some companies have reportedly sought to take advantage of this need and have resorted to selling this protective gear at drastically inflated prices.

David Campbell of Michigan law firm Bowman & Brooke LLP filed the lawsuit on April 21 against the directors of Caonic Systems. Campbell practices law in both the United States and Canada, the Windsor Star reports.

According to the COVID-19 price-gouging lawsuit, Caonic Systems was re-selling 3M’s N95 face masks online at a much higher price than the list price.

N95 respirators are an important form of PPE for frontline workers during the COVID-19 pandemic. They protect the wearer from airborne transmission of infectious diseases. However, these masks have been hard to come by during the crisis and hospitals have been scrambling to secure enough PPE for their employees.

The COVID-19 price-gouging lawsuit also accuses Caonic’s directors Zhiyu Pu and Harem Mander of “falsely affiliating” themselves and their company with 3M.

3M, which had revenues of US$33 billion in 2018, accuses Pu of ordering thousands of respirators from a Nigerian supplier and selling them online from a website on the Shopify platform that looks like it’s affiliated with 3M.

The website, www.3M-Health.com, advertised 3M respirators for US$17 when the actual list price of the respirators was only US$3 — a markup of 466 percent.

3M accuses Pu and Mander of “profiteering,” “price-gouging,” and “falsely affiliating” themselves with 3M.

A senior counsel for 3M filed an affidavit with the court stating that 3M is “committed to helping combat the fraudulent, price gouging, and counterfeit activity that is unfortunately occurring in connection with COVID-19.”

The company also indicated that it would be “aggressively pursuing third parties seeking to take advantage of the crisis,” and noted that it was “working with law enforcement to eliminate price gouging.”

According to Campbell, an initial court application was filed against Shopify because the identity of the operators of the www.3M-Health.com website was unknown. Shopify reportedly cooperated with 3M and shut down the website for fraud on March 31.

According to the COVID-19 price-gouging lawsuit, the website immediately relaunched as www.tormenhealth.com and used social media to associate the website with 3M.

The Windsor Star reportedly attempted to contact Pu, Mander, and their lawyer, but their attempts were unsuccessful. Their lawyer has reportedly assured Campbell that the masks in dispute are not being sold online any longer.

3M is seeking to have the price-gouging lawsuit expedited due to the critical importance of PPE during the COVID-19 pandemic. The company says it is cooperating with authorities regarding its accusations against Caonic and its directors.

“We are dedicated to putting a stop to those who are trying to cash in on this crisis and have taken legal action when we’ve identified illegal behaviour in New York, California, Florida, Texas, and now Canada,” Denise Rutherford, who is 3M’s senior vice president of corporate affairs, said in a statement.

3M maintains that it has not changed the list price for its respirators during the COVID-19 pandemic. The company also says that it will provide any damages it is awarded to “COVID-19-related nonprofit organizations.” If any authentic 3M respirator are seized, the company will support their use in the fight against COVID-19.

This COVID-19 price-gouging lawsuit is just the first of what may be many lawsuits filed against companies that illegally hike up the prices on PPE.

On March 28, Premier Doug Ford warned that the province would be “coming down hard on price gougers.” Penalties for those convicted of price gouging may include a fine of up to $500,000 and a year in jail. Corporations that are convicted of price gouging could face up to $10 million in fines.

Have you experienced price-gouging for PPE or other supplies during the COVID-19 pandemic? Let us know in the comments below.

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