Governor Walz Signs Executive Order 20-10 on Price Gouging in Response to Excessive Prices Amid COVID-19
On Friday, March 20th, Governor Walz signed Executive Order 20-10 (“Order”) to combat price gouging during the COVID-19 peacetime emergency. This is one of several executive orders he has recently issued to address the public health crisis presented by COVID-19 and the accompanying economic turbulence. The Order specifically prohibits what it calls “unconscionably excessive” pricing for “essential consumer goods or services.”
The Conduct Prohibited by Executive Order 20-10
Under the Order, “essential consumer goods or services” are those “vital and necessary for the health, safety, and welfare of the public.” That category includes, but is not limited to, the following:
- healthcare goods and services,
- medical supplies,
- personal hygiene, sanitation, and cleaning goods.
The Order prohibits “unconscionably excessive” pricing of these goods and services in two ways:
- By comparing the current price of a good or service with its past price, using the 30-day period between February 12, 2020, and March 13, 2020, as the baseline. If the current price has increased more than 20 percent, or if it otherwise reflects a “gross disparity” with past prices, it may be excessive under the Order.
- By comparing the current price of a good or service with the current price of other goods or services in the area. If its price “grossly exceeds” the price a consumer could pay for a “same or similar good” in the same “trade area,” then its price may also be excessive.
In either case, however, a significant price increase or a “gross disparity” in price may not be unconscionable if it is “substantially attributable to significant additional costs” outside of a business’s control. Notably, the Order puts the burden of demonstrating these additional costs on the business itself.
The Reach and Effect of Executive Order 20-10
On its own terms, the Order applies these prohibitions broadly to any business, entity, or individual that sells, causes another to sell, or offers to sell covered goods and services at unconscionable prices—in other words, a business can violate the Order without actually completing the sale of the good or service in question. It will likely apply not only to Minnesota-based businesses but also to those from
other states that do business in Minnesota.
In public statements, Governor Walz and Minnesota Attorney General Keith Ellison have both expressed concern about price gouging, and Ellison has asked the public to submit complaints to the Attorney General’s Office about companies that opportunistically raise prices during the COVID-19 ordeal. The Order states that it will be enforced by the Attorney General’s Office, which has the authority to investigate potential violations and seek civil penalties of up to $10,000 per violation, as well as other relief.
Questions for Affected Businesses
With Executive Order 20-10 taking effect at 5:00 pm on March 21, 2020, Minnesota businesses should consider the following, particularly if the goods and services you provide are facing an increased demand in light of COVID-19:
- Determine if your business involves the sale of “essential consumer goods or services.” If so, appreciating the increased demand for such goods and services, you should promptly conduct a price analysis with your past prices and those in the market to ensure your business’s prices are not unconscionably excessive.
- Determine reason for price increase. If your business is involved in the sale of essential consumer goods or services, and there is either a 20% difference or a gross disparity between your current and past prices, or if your prices grossly exceed those of competitors in your market area, you will need to determine the reason for this increase. If the reason is substantially attributable to significant additional costs outside of your business’s control, then an exception may apply. However, you should be documenting the legitimate business reasons for the price increase or disparity to justify your pricing decisions in the event you are required to defend them in an enforcement action.
- Determine appropriate authority for pricing decisions. Evaluate who is determining your pricing and make sure they are: at an authority and responsibility level qualifying them to make pricing decisions on your behalf. Also, make sure they are aware of, and fully-trained on, the requirements of the Order to ensure compliance. Finally, consider implementing additional measures to monitor, confirm, and approve pricing decisions at multiple levels in order to avoid inadvertent violations of the Order by individual employees.
Minnesota businesses that may be affected by the Order should thoughtfully consider their pricing and carefully document the factors that may require them to legitimately raise prices during this challenging time for Minnesota businesses and consumers.
If you have questions about the implications of Executive Order 20-10 for your business or you need assistance documenting your pricing decisions to avoid an enforcement action, please contact Shannon McDonough at firstname.lastname@example.org or Brad Hutter at email@example.com.