Although many states of emergency have expired, new lawsuits that allege price gouging continue to be filed.  On September 3, 2021, Minnesota Attorney General Keith Ellison filed a complaint in Minnesota state court against Sparboe Farms, Inc. alleging the company engaged in price gouging for the sale of eggs in violation of the Minnesota Governor’s executive order.

The case is significant because Minnesota does not have a price gouging statute. Instead, Minnesota Governor Tim Walz issued Executive Order 20-10 on March 20, 2020, prohibiting “unconscionably excessive increases in the prices of essential items during the COVID-19 peacetime emergency.”  Under the executive order, “unconscionably excessive increases” includes charging a price more than 20 percent greater than the amount charged for the same product in the 30 days prior to March 13, 2020, when the state of emergency was declared.  The case alleges as its sole substantive violation a failure to comply with the Executive Order.

According to the complaint, during March and April 2020, Sparboe—one of the nation’s leading shell egg producers—sold its eggs at double and triple the prices charged in February and March.  In February and March, the Attorney General alleges the average price for a dozen Sparboe eggs was between $0.84 and $1.00.  The complaint then alleges the price for a dozen Sparboe eggs rose to almost $3.00 in late March and early April.  The Attorney General also details alleged communications among Sparboe employees regarding the prices.  For instance, the complaint alleges the Sparboe president exchanged messages with her employees that conveyed that “demand” and reduced outputs had “led to strong buying interest,” so strong that the price of eggs could jump from $1 per dozen to $3 per dozen.

The Attorney General also alleged retail and wholesale customers asked Sparboe to lower their prices eggs during March and April of 2020.  According to the complaint, the company received an email raising concerns about having “seen 52% plus cost increases and now are up to 134% from three weeks ago.” The email asked Sparboe to “consider a cost decrease” due to the “abundance of complaints over the drastic price increases.”  Another wholesaler asked Sparboe to “please consider passing to us a cost decrease next week, regardless of what the ‘market’ would indicate.”  In response to customers, Sparboe pointed to market indices that continued to rise throughout that period, including contracts that were tied to those indices.

The complaint seeks disgorgement of profits and penalties of up to $25,000 for each separate violation of the executive order.  The extent of the monetary damages may be considerable, because the penalties can apply to each allegedly wrongful sale.

This case follows similar cases in other states alleging price gouging of consumer goods during the pandemic.  While certain states of emergency may have expired, conduct during the emergency period still may come under scrutiny from state officials and private plaintiffs.  This case raises interesting questions on several fronts that should serve as a caution for other companies.  Here, without a clear price gouging statute, the Attorney General relies on the Governor’s executive order, which has the force and effective of law under Minn. Stat. § 12.32.  As with gubernatorial stay-at-home orders, challenges have come to such orders imposing fines or penalties.  Second, Sparboe appears to rely on both market indices and contracts tied to such indices as justification for its price increases (which may not be viable defenses), though it is unclear the extent to which Sparboe may have had cost increases to justify such increases—a specific defense listed in the executive order.

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Visit Proskauer on Price Gouging for antitrust insights on COVID-19.

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Photo of Christopher E. Ondeck Christopher E. Ondeck

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters…

Chris Ondeck is co-chair of the Firm’s nationwide Antitrust Group. He represents clients in civil and criminal antitrust litigation, defending mergers and acquisitions before the U.S. antitrust agencies, defending companies involved in government investigations, and providing antitrust counseling.

Chris has handled antitrust matters for clients in a number of industries, including advertising, aerospace, alcoholic beverages, appliances, building materials, consumer products, defense, franchise, medical devices, metals, mining, natural resources, oil and gas, packaging, pharmaceuticals, software and telecommunications. He also has developed substantial experience advising clients regarding the application of the antitrust laws to the pharmaceutical industry, the agriculture industry, trade associations and the energy industry.

Photo of John R. Ingrassia John R. Ingrassia

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and…

When competition or antitrust questions arise, John Ingrassia is sought out for his knowledge, reputation and credentials.

John is a recognized authority on Hart-Scott-Rodino antitrust merger review, and for more than 20 years has counselled businesses facing the most challenging antitrust issues and helped them stay out of the crosshairs — whether its distribution, pricing, channel management, mergers, acquisitions or joint ventures.

John is a senior counsel at the Firm, advising on the full range of antitrust matters in diverse industries, including chemicals, pharmaceutical, medical devices, telecommunications, financial services and health care, among others.  His practice focuses on the analysis and resolution of antitrust issues related to mergers, acquisitions, and joint ventures, and the analysis and assessment of pre-merger notification requirements. John has extensive experience with the legal, practical, and technical requirements of merger clearance and is regularly invited to participate in Federal Trade Commission and bar association meetings regarding Hart-Scott-Rodino practice issues.

Photo of Shannon D. McGowan Shannon D. McGowan

Shannon McGowan earned her J.D. from the University of Virginia School of Law, where she captained the school’s Philip C. Jessup International Law Moot Court team.

Prior to law school, Shannon served as a legislative assistant to state representatives at the Oklahoma State…

Shannon McGowan earned her J.D. from the University of Virginia School of Law, where she captained the school’s Philip C. Jessup International Law Moot Court team.

Prior to law school, Shannon served as a legislative assistant to state representatives at the Oklahoma State House of Representatives.

Photo of Jennifer Tarr Jennifer Tarr

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including…

Jennifer E. Tarr is a senior associate in the Litigation Department, and a member of Proskauer’s Sports Law and Antitrust Groups. She regularly litigates on behalf of sports leagues and counsels clients active in the sports industry on a variety of matters, including issues pertaining to antitrust, team relocation, league governance, contract disputes, sponsorship and fan-league relationships.

In addition to sports antitrust work, Jennifer also has experience counseling and defending clients on issues related to mergers and acquisitions, claims related to unlawful conspiracy and anticompetitive agreements, monopolization claims, and price fixing claims. Jennifer is also a member of the firm’s price gouging team.

In 2019, she was a panelist on the Environmental Law Institute’s Managing Private Sector Environmental Initiatives panel, where she spoke about the Antitrust Implications of Corporate Environmental Collaborations.

Jennifer maintains an active pro bono practice and is a member of the Firm’s Pro Bono Committee. She received Proskauer’s Golden Gavel Award for excellence in pro bono work in 2018 and 2019.

Prior to joining Proskauer, Jennifer clerked for the Honorable Lorna G. Schofield on the United States District Court for the Southern District of New York. She also was a Staff Attorney at the Environmental Law & Policy Center, where she represented clients as lead counsel in litigation before multiple federal district and appellate courts and in federal mediation.

While in law school, Jennifer was a member of the Harvard Legal Aid Bureau, one of three honors societies at the law school and the nation’s oldest student-run legal services center. In that capacity, she argued and won a case of first impression before the Massachusetts Supreme Judicial Court. She also argued over 20 motions in state trial court and successfully represented clients in federal mediation and before federal administrative tribunals.