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Mask on and Gloves Off: Supplier Accused of Price Gouging While Masquerading as Authorized Distributor of 3M Products

| Radhika K. RamanCatherine Holland

On April 10, personal protective equipment (“PPE”) manufacturer 3M filed suit against Performance Supply LLC for trademark infringement, deceptive practices, and false advertising.[1] In its complaint, 3M alleges that Performance Supply offered to sell several million N-95 respirator masks to New York's Office of Citywide Procurement in March.[2] An exhibit filed with the complaint shows a price quote offered to the city, with Performance Supply quoting seven million masks at between $6.05 to $6.35 per mask.[3] In contrast, 3M's suggested retail price for the respirators is between $1.02 and $1.31 per mask.[4] Beyond mere price gouging, Performance Supply is not an authorized distributor of 3M masks and is not affiliated with 3M in any way. “To dupe city officials into thinking Performance Supply was an authorized distributor, the lawsuit says, the company used the 3M trademark throughout the price quote document and technical specification sheets.”[5]

3M is the largest U.S. and global manufacturer of FDA-approved N-95 masks, with a list of approved distributors worldwide.[6] In the wake of COVID-19’s spread, N-95 respirator masks are the literal must-have accessory of the season for healthcare workers. To help meet demand, President Trump invoked the Defense Production Act (“DPA”) to facilitate the production of more N-95 masks for the U.S. by 3M.[7] In addition to increased production overall, the DPA requires 3M to prioritize masks for Federal Emergency Management Agency (“FEMA”) orders.[8] More broadly, President Trump called on 3M to halt sending US-made respirators to other countries, and prioritize US distribution.[9]  3M responded that "[T]here are significant humanitarian implications of ceasing respirator supplies to healthcare workers in Canada and Latin America, where we are a critical supplier of respirators,"adding that such a move would "likely cause other countries to retaliate and do the same."[10]

Some authorized and unauthorized distributors of N-95 masks alike view the current global shortage of respirators caused by COVID 19 as a financial opportunity. Prior to filing the Performance Supply Lawsuit, 3M faced accusations from billionaire business-magnate Mark Cuban last month of failing to control the price-gouging conduct of its own authorized distributors.[11] In an interview with Fox News, Cuban stated "It would have been very easy for them to say very strongly, 'If you don't sell, if you don't take the inventory we're providing you, and sell directly to hospitals and healthcare providers that need the masks, when your contract comes up, we're going to end that contract,' but that's not what they did. And I have a huge problem with that. "[12] Cuban continued that “3M's distributors have been selling the N95 masks to resellers in black markets who are jacking up the prices even higher than the distributors did.”[13] Cuban claims he was first made aware of these tactics because he received personal emails from purported 3M distributors and resellers offering masks at steep prices.[14]

In response, CEO of 3M Mike Roman penned a letter to U.S. Attorney General William Barr (among others), indicating support for curbing the practices of “pandemic profiteers.”[15] “On behalf of 3M and our 96,000 employees worldwide, I would like to offer our support as you protect the public from counterfeiting and price-gouging with respect to critical medical devices, including the respirators and masks that are critical to our country’s medical personnel,” Roman wrote.[16] The letter also clarified and confirmed in bold lettering that 3M had not and would not raise its respirator prices.[17] In addition to offering its support and cooperation to federal and state governments to stop price gouging, 3M’s lawsuit against Performance Supply represents an individual company’s effort in the fight against pandemic profiteering.

Editor: Catherine Holland

[1] 3M Co. v. Performance Supply LLC, No. 20-cv-2949, complaint filed, 2020 WL 1817080 (S.D.N.Y. Apr. 10, 2020).

[2] Id.

[3] Id.

[4] Id.

[5] https://www.kare11.com/article/news/local/suit-by-3m-alleges-price-gouging-by-new-jersey-company/

[6] https://www.cnn.com/2020/04/03/business/3m-defense-production-act-response/index.html

[7] https://www.whitehouse.gov/presidential-actions/memorandum-order-defense-production-act-regarding-3m-company/

[8] https://www.cnn.com/2020/04/03/business/3m-defense-production-act-response/index.html

[9] Id

[10] Id.

[11] https://www.businessinsider.com/mark-cuban-says-3m-distributors-price-gouge-n95-face-masks-2020-3

[12] Id.

[13] Id.

[14] Id.

[15] https://news.3m.com/English/3m-stories/3m-details/2020/CEO-3M-supports-work-to-curb-pandemic-profiteers/default.aspx

[16] Id

[17] Id.