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AG accuses Bloomfield Hills company of price-gouging on masks

Mark Hicks
The Detroit News

As reports of price-gouging related to COVID-19 grow statewide, Michigan Attorney General Dana Nessel sent a cease and desist letter Friday to a Bloomfield Hills-based company accused of over-charging for medical masks.

A consumer recently filed a complaint with Nessel's office that DiaMedical USA Equipment Inc. was trying to sell 10-packs of face masks through its website for nearly $100 each, according to the letter.

Similar model masks are sold at between $1.50 to $2.40 per mask, state officials wrote.

"Price-gouging has no place in our health care industry, especially during times of a public health crisis,” Nessel said in a statement. “Hospitals, doctors, nurses and other medical professionals depend on this equipment to perform their jobs and take care of people who are sick, and lives should not be put in jeopardy because businesses want higher profits.”

Her office alleges unfair trade practices as identified in Michigan’s Consumer Protection Act. The company has 10 days to respond and is ordered to provide the state all in-store and online sales data related to the face masks since March 1.

Attorney General Dana Nessel answers consumer complaint calls related to COVID-19 price-gouging and scams on Tuesday, March 17, 2020.

According to its website, DiaMedical USA "is a manufacturer and multi-vendor distributor of medical equipment, replacement parts, mattresses, furniture and supplies. We have become a trusted source and preferred vendor for thousands of hospitals, long term care facilities, surgical centers, and mental health facilities, both nationally and internationally."

Reached Friday, Gillian Peralta, its president, told The Detroit News in an email the company takes "price gouging accusations very seriously."

"Because we are only distributors of medical supplies, not the manufacturer, we too are frustrated with the increase in costs to provide these essentials to our healthcare workers," she said. "Since the beginning of the pandemic, I have been proud to see how hard our company has worked to source these products internationally and have them air shipped to us so that we can quickly provide the products to our customers. As distributors, we see how our costs on these products have risen over 1000%."

The company can opt to "pay the elevated rates so that we can bring the products into the country immediately and at least provide our customers with the products they need now," Peralta added. "I can assure you that we are paying way more than $1.50- $2.40 per mask not to mention the shipping and fulfillment costs associated. In fact, since we began importing these products, the acquisition costs have only increased."

In a statement to The News on Friday, DiaMedical CEO Jeff Ambrose said costs throughout the supply chain "have drastically increased" nearly tenfold and "sales of medical masks such as the N95 respirator mask have seen a more than 300 percent surge in national sales over the past month compared to the same time last year and wholesales prices have substantially increased. ... As supply increases we anticipate availability and wholesale costs to reflect that."

Last week, Gov. Gretchen Whitmer clarified an executive order that said no business or person may sell products grossly above the price at which they bought the product.

Under the order, a person cannot sell any product for more than 20% above what they paid for it as of March 9. The governor's update added an exception for goods that are not emergency supplies and cost more than $1,000. An exception is allowed if the seller can prove the price increase was attributable to an increase in cost of bringing the product to market or that an extraordinary discount was in effect March 9.

State officials have received numerous complaints of price-gouging during the coronavirus crisis involving items such as hand sanitizer and cleaning products.

As of 7 a.m. Friday, the Attorney General’s office had received 1,885 complaints related to COVID-19. That included 811 complaints submitted online through the Attorney General’s website, and 1,074 received via the Consumer Protection tip line. 

"While price-gouging complaints continue to be filed, investigators at the Attorney General’s office have noticed positive shifts in the market, in part due to the efforts of consumers, who have helped police the market by shaming gougers on social media and by sharing their experiences and receipts with the Attorney General’s office," state officials said Friday. "There have been recent instances in which investigators visited stores and found that, if there had been elevated prices, the situation had been corrected."

This week, Nessel's office joined a coalition of attorneys general nationwide calling on Amazon, Facebook, eBay, Walmart and Craigslist to boost monitoring of price-gouging by online sellers amid the coronavirus pandemic.