On January 1, 2025, many new laws will go into effect in Minnesota. The debates over most were well-publicized during the legislative process; however, one new law that didn’t receive much public attention will have considerable impact on many businesses in the state. For the businesses it will impact, the clock is ticking to make some major changes.

What Is The New Law?

An amendment to the Minnesota Deceptive Trade Practices Act was the subject of significant debate, particularly on the floor of the Minnesota House of Representatives, at the end of the 2024 legislative session. However, while the duration of the debate significantly impacted the tenor of the final few days of the legislative session, H.F. 3438 (Greenman) passed without much media attention. The new law makes it illegal when a person “advertises, displays or offers a price for goods or services that does not include all mandatory fees or surcharges.”

While California is the only other state with a similar law on the books, similar legislation has been introduced in 12 other states. The goal of the new law is to increase transparency and help consumers accurately compare prices for goods or services before the point of sale.

What is a Mandatory Fee?

A “mandatory fee” includes, without limitation, any fee or surcharge that “(1) must be paid in order to purchase the goods or service being advertised; (2) is not reasonably avoidable by the consumer; or (3) a reasonable person would expect to be included in the purchase of the goods or services being advertised.” Some examples aren’t as cut and dry. We recently worked with a salon company that had an “environmental stewardship” fee on all personal care product transactions. This fee must now be lumped into the advertised or displayed price of the product and clearly and conspicuously disclosed to consumers.

What is Not a Mandatory Fee?

Taxes and shipping costs are not considered fees and do not need to be included. Additionally, if a fee or surcharge is reasonably avoidable by a consumer, it is not mandatory. These would include late fees and credit card processing fees because consumers can avoid both by paying on time or with cash. Accordingly, neither is required to be in the advertised or displayed price.

Who Does This Law Impact?

Anyone who advertises, displays or offers a price for goods or services and anyone who buys those goods or services will see a change. However, restaurants with mandatory health and wellness fees, required gratuities, surcharges and third-party delivery platforms are likely to be most impacted. Starting January 1, 2025, third-party delivery platforms must display all flat fees or delivery percentages at the time customers select a vendor or their items to purchase, and again prior to checkout. Where businesses cannot determine the total price at the outset because the price depends on consumer selections, or the price relates to distance or time, the business will be compliant with the law if it clearly and conspicuously discloses the factors that determine the total price, any mandatory fees associated with the transaction, and that the total cost of the services may vary.

What Should Businesses Be Doing Now?

Businesses in Minnesota must be compliant with the new law by January 1, 2025, except for industries regulated by the Metropolitan Airports Commission, where it takes effect on June 1, 2025. For restaurants and hotels, this will be a fairly heavy lift. Many businesses will need to reprint menus, signage or advertising and make changes to their websites if they allow for the purchase of goods online. Others will also need to work with their point-of-sale vendors to reprogram how their purchase systems are set up to accurately list prices on the front end. Franchisors should make their franchisees with location in Minnesota aware of the new law, as well as evaluate their own compliance obligations with respect to any company-owned locations in Minnesota.

While businesses must act quickly to be compliant with the law, the goal is to eliminate deceptive pricing. The law does not impact the cost of services or goods. Instead, it simply makes those prices more transparent and is meant to reduce consumer confusion.