Minnesota needs a strong price gouging statute | Opinion
A gas station in Golden Valley, Minn. on March 15, 2022. Photo by Ricardo Lopez/Minnesota Reformer
In New York last week, Attorney General Letitia James launched a rule-making process aimed at combatting what her office called “illegal price gouging and corporate greed.” The move is an effort to shield New Yorkers from rising prices and is an innovative attempt to use the state’s price-gouging statute to challenge concentrated corporate power.
Here in Minnesota, we do not even have a prohibition on price gouging.
This is unfortunate, as the news on inflation is not getting any better. Last week the Bureau of Labor Statistics revealed prices in February had risen 7.9% over the past year, the largest annual increase in inflation in 40 years. In Minnesota, data for the Twin Cities in January showed a 7.2% hike in prices over the year prior. These cost increases have caused wages to fall back to their pre-pandemic levels.
To make matters worse, this data came in before Russia’s invasion of Ukraine sent gas prices even higher, and omicron forced lockdowns in China that will further disrupt global production. It is no wonder that voters are increasingly listing inflation as a top issue.
That concern has entered the halls of the State Capitol in St. Paul, where Gov. Tim Walz and legislators have started to debate a range of tax measures — from rebates to tax holidays to permanent cuts — meant to help ease the burden families are facing.
Unfortunately, election year tax gimmicks and bromides about “overspending” will do little to address the unchecked corporate power driving prices to record levels.
A variety of indicators reveal how inflation has been a boon for big corporations, while squeezing families and small businesses. Corporate profits in the final quarter of 2021 were nearly 35% higher than they were in the final quarter of 2019, right before the COVID-19 pandemic. In addition, profit margins in the final two quarters of 2021 were the highest recorded in over 70 years. Beyond the data, what companies are telling investors is further proof of how corporations are using their pricing power to raise prices and pad profits under the guise of “inflation.” Supply and demand matters little when you have no meaningful competition.
Some of Minnesota’s own Fortune 500 giants have been key players in the inflation game. The chief financial officer of 3M bragged to investors in January that “The team has done a marvelous job in driving price. Price has gone up from 0.1% to 1.4% to 2.6%.”
Meanwhile the four giant meatpackers (including Minnesota-based Cargill), which control 70% of beef sales in the United States, saw a 120% increase in gross profits last year. They are simultaneously paying producers less while raising prices on consumers.
Retail giant Target, on the other hand, was punished by Wall Street last year after trying to limit price hikes on its customers.
While supply chain snarls and shipping costs — also a product of our monopolized economy — are part of the ongoing rise in inflation, pricing power is estimated to account for as much as 70% of the past year’s price increases.
Back in September of 2021, Attorney General Keith Ellison sued Sparboe Farms Inc., one of Minnesota’s largest egg producers. The lawsuit alleged Sparboe had sold eggs at prices that violated an executive order from Walz prohibiting price-gouging. The executive order was issued while the governor’s emergency powers were in effect, but with the expiration of those powers in July, Minnesota is left without any redress against price-gouging, as it is one of just 13 states without a law against exorbitant price hikes.
Without a price-gouging statute, Minnesota is left without a tool to check corporate power. Minnesota should adopt a price gouging statute that creates clear triggers for an investigation and that factors in market power. For example, in its rulemaking notice in New York, the attorney general’s office pointed to monopolies in the beef and shipping industries as potential examples of firms using “unfair leverage or unconscionable means” in setting prices.
Minnesota is no stranger to taking on price-gouging monopolies. After forming the Anti-Monopoly Party, populists in the 1870s won seats in the Legislature and joined with Democrats to pass laws that took aim at the railroad monopolists and the high rates they were charging.
As legislators look for ways to ease costs on Minnesotans, they should dust off this historical playbook and pass a tough price-gouging statute that cracks down on corporate profiteering.
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