Legislature(2011 - 2012)BARNES 124
04/01/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB72 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 72 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 72-ANTITRUST ACTIONS & PENALTIES
3:23:46 PM
CHAIR OLSON announced that the only order of business would be
HOUSE BILL NO. 72, "An Act authorizing and relating to certain
causes of action for relief for direct or indirect injuries
sustained as a result of antitrust violations; repealing the
provision limiting to the attorney general the recovery of
monetary relief for injury directly or indirectly sustained as a
result of an antitrust violation; and relating to criminal and
civil penalties for antitrust violations."
3:25:14 PM
REPRESENTATIVE JOHNSON moved to adopt the proposed committee
substitute (CS) labeled 27-LS0381\M, Bannister, 3/22/11 as the
working document.
REPRESENTATIVE SADDLER objected for the purpose of discussion.
3:25:56 PM
GRETCHEN STAFT, Staff, Representative Max Gruenberg, Alaska
State Legislature, on behalf of one of the joint prime sponsors,
explained the changes contained in the proposed committee
substitute (CS) for HB 72. The main change to the CS was to
remove Sections 10 and 11 of the original bill, which were the
sections that pertain to criminal and civil antitrust penalties
actionable by the attorney general. Those provisions are
contained in another bill, she said. She referred to page 2,
line 17 or the original bill and noted that the phrase "this
chapter" was replaced with AS 45.50.562-45.50.570" to clarify
that the provisions only applied to antitrust violations. The
remaining provisions in the chapter were inadvertently included
in the bill drafting process. She related that conforming
changes were made to the title.
3:27:41 PM
MS. STAFT explained that HB 72 would expand the pool of
individuals who can bring an antitrust lawsuit. Currently, only
the attorney general (AG) or direct purchasers can bring a
lawsuit for antitrust violations. The AG can recover indirect
damages from upstream violators but no private right of action
is allowed for indirect or direct damages. She related a
scenario in which two computer chip manufacturers were colluded
and artificially set high prices for their computer chips. The
manufacturers then sold the computer chips to a computer
manufacturer, such as Dell, who subsequently selling the
computers to consumers. Under current law, the consumer could
not sue the computer chip manufacturer for any antitrust
violations even though the consumer paid a much higher price for
the computer. Only Dell could bring a lawsuit since it directly
bought the computer chips from the computer chip manufacturer.
3:29:32 PM
MS. STAFT stated HB 72 would allow the consumer to bring a
lawsuit against the antitrust violator if the consumer could
prove an antitrust violation occurred. The main reason to make
a change is the AG has limited resources and does not always
have staff to move forward on every lawsuit. Creating a private
right of action for indirect purchasers would represent an
efficient means for the state to ensure its citizens have
redress without expending state funds. The bill would require
individuals to notify the AG when a lawsuit is filed so the AG
could intervene if necessary. The trend has been to allow for
private right of action for individuals. She referred to a map
in members' packets and stated that about 30 states allow
individuals to file private right of action lawsuits and only 9
restrict the right of action to the AG. The remaining 21 states
allow for private individuals to bring lawsuits for individual
damages, as well. She pointed out that these states have not
seen flood of lawsuits filed.
3:31:39 PM
REPRESENTATIVE SADDLER related his understanding that private
individuals bringing action must notify the AG and then the AG's
office can join in.
MS. STAFT answered yes.
3:32:05 PM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature,
explained that the reason for this bill because of a U.S.
Supreme Court decision in Illinois Brick Co. v. Illinois, 431
U.S. 720 (1977). He related that "Illinois Brick" construed the
federal antitrust statutes. It held that the federal law does
not authorize a lawsuit for indirect damages. However, states
are free to pass their own "little antitrust acts" allowing
indirect damages. Normally, someone "way up the line is
colluding, he said. He related a scenario in which gravel
manufacturers collude to set gravel prices. The gravel is used
in the manufacturer of asphalt, which is sold to the contractor,
and the contractor uses it to pave the municipal streets. This
bill would allow the municipality or the ultimate consumer,
including a business, to obtain recompense.
3:34:08 PM
REPRESENTATIVE GRUENBERG continued. Traditionally, states did
not have any statutes for indirect damages since states assumed
these matters were covered by federal law. Initially, some
concern was expressed that allowing people to file individual
lawsuits would open the flood gates. The first step was to
allow the AG the authority to bring these types of cases. As
people have become more comfortable, some states are now
allowing private individuals to bring lawsuit. He offered his
belief that this is important because these are very tough
cases, often involving big manufacturers and businesses and
people must band together and file class-action suits. Usually,
one lawsuit proceeds into federal court and everyone else joins
in and the case is consolidated. The AG, through the National
Association of Attorneys General, communicates to indicate the
main case that is proceeding, which is why the AG is being
notified in these cases.
3:35:48 PM
REPRESENTATIVE GRUENBERG explained that the AG would then advise
individuals how to proceed to join the main case and seek
intervention, as necessary. He pointed out that this process
provides check and balance. Mr. Sniffen advises that having
this authority has not "opened the flood gates." Current law
allows the AG to bring indirect damage lawsuits and the state
has now had six or seven years to consider the law. He said it
is very difficult, particularly for a small state like Alaska to
pursue these cases alone so it is much better to join with other
states. The effect of the bill would be to allow the 1,000 or
so Alaskans who were damaged by the price fixed computer chips
to seek to intervene in the lawsuit in the state that has filed
in federal court, such as Nebraska. This would add an
additional count to the lawsuit under Alaska state law. He
pointed out that it would be necessary to do this through state
law since the federal law does not allow it. The action would
demonstrate that Alaska's consumers have standing to join the
lawsuit and receive recompense. He stressed the importance of
passing HB 72 since it will protect Alaska's consumers.
3:38:13 PM
REPRESENTATIVE JOHNSON asked whether anything would prevent an
individual Alaskan from joining a lawsuit.
REPRESENTATIVE GRUENBERG answered no. This will not affect the
right but unless the damage occurred in Nebraska the individual
would not have any recourse. In further response to
Representative Gruenberg, he answered that normally the court
would apply the law where the transaction occurred.
3:39:55 PM
REPRESENTATIVE HOLMES related her understanding that if she had
purchased a product in question, such as Celebrex, in Anchorage
and a class-action suit was filed in Nebraska that she could not
join the Nebraska lawsuit. However, under the bill she could do
so.
REPRESENTATIVE GRUENBERG agreed. He clarified that it is not a
question of joining the lawsuit but rather if the individual has
a cause of action. In further response to Representative
Johnson, he answered that being wronged does not allow for a
cause of action.
REPRESENTATIVE HOLMES agreed.
REPRESENTATIVE GRUENBERG advised that the individual only has a
cause of action if the law of the jurisdiction where you
suffered the damage gives you a cause of action.
REPRESENTATIVE JOHNSON related his understanding that in
antitrust violations an individual cannot join the lawsuit since
the state does not have the provision in law to allow
individuals to do so.
REPRESENTATIVE GRUENBERG clarified that the purpose of this bill
is to allow Alaskan who have been damaged by antitrust issues to
get reimbursed and obtain treble damages.
3:41:28 PM
REPRESENTATIVE JOHNSON recalled television advertising for
class-action damages and asked why advertising is being run to
reach Alaskans if they have no recourse.
REPRESENTATIVE GRUENBERG offered his belief that the cases he
referenced are generally not antitrust cases but are product
liability cases. It may be that ship workers are damaged due to
asbestos poisoning. Additionally, every state allows you to sue
in cases in which a faulty bolt causes a lawnmower blade to
injure a person. He explained that the antitrust laws are an
unusual area of law. The law firm acts as clearinghouse to
determine whether an individual has the right to sue and the
associated lawyer in Alaska would determine whether a cause of
action exists, and if so, the individual would join the lawsuit.
3:43:04 PM
REPRESENTATIVE JOHNSON asked for clarification on the number of
antitrust lawsuits.
REPRESENTATIVE GRUENBERG answered that he did not know. In
further response to Representative Johnson, he responded that
this bill is to remedy a serious defect in law.
3:43:40 PM
REPRESENTATIVE THOMPSON inquired as to whether Nebraska has
different antitrust laws that would apply. He further asked how
that would relate to Alaska law.
REPRESENTATIVE GRUENBERG explained the process. He related a
scenario in which 10 of 70 people were named in lawsuit in
federal court. The first part of the complaint would address
jurisdiction and would state that plaintiffs are residents of
various states. It would list the names of the people from each
state and would name the defendant as the Delaware Corporation
with its main operations in Omaha. The actions would have
occurred in numerous states through the sale of computer chips.
The complaint would list the defendants who colluded to price
fix the computer chips, would indicate the people bringing suit
suffered, and would seek damages to be determined at trial. The
individuals who were harmed in Arizona would recover damages
under Arizona statutes, and those in Alaska would recover
damages under Alaska statutes. The complaint would set forth
the statutory basis of each state and the Alaska individual
would be under Alaska law. He commented that the complaint
would be lengthy, but would be carefully constructed to only
cover Alaskans who purchased the computer chip product in
Alaska.
3:46:48 PM
REPRESENTATIVE SADDLER asked for other examples of antitrust
violations.
MS. STAFT answered that other antitrust cases might involve drug
companies artificially setting drug prices high. Drug
manufacturers would sell to distributors, who would sell to
pharmacies. The consumer would be the indirect buyer since
he/she would purchase the drug from a pharmacist. An indirect
purchaser is one who would not directly pay the corporation.
"It's basically an upstream issue," she said.
3:48:21 PM
REPRESENTATIVE SADDLER asked for clarification on the level of
direct and indirect injury is involved in antitrust violations.
3:48:54 PM
CYNTHIA DRINKWATER, Senior Assistant Attorney, Commercial/Fair
Business Section, Department of Law (DOL), stated she works in
the Consumer Protection Unit in the Department of Law. She
admitted she did not having much experience in antitrust
matters. She suggested that Ed Sniffen would be knowledgeable
in this area.
MS. STAFT presented a section-by-section analysis of Version M.
She stated that Section 1 would allow indirect and direct
purchasers to terminate the prohibited interlocking
relationship.
3:52:55 PM
MS. STAFT related that Section 2 would allow a person to recover
money damages up to three times the amount of damages plus
reasonable attorney fees, and can also get an injunction to
enjoin the unlawful practice.
3:53:32 PM
MS. STAFT stated that Section 3 would require the plaintiff
commencing an antitrust action to mail a copy of the complaint
to the attorney general (AG).
3:53:59 PM
MS. STAFT referred to Section 3, which she said would also
define a person to take on the meaning in Title 1, and would
apply to all Alaska Statutes. It would include the state, a
political subdivision of the state, including home rule or
general law, city or borough, and other government entities,
including the Alaska Railroad Corporation and the University of
Alaska.
MS. STAFT related that Section 4 would allow the AG to bring a
civil action for monetary, injunctive, and equitable relief on
behalf of citizens of Alaska.
MS. STAFT referred to Section 6-11, which she said represents
conforming and clarifying changes technical stylistic in nature.
MS. STAFT related that Section 12, which clarifies that the
remedies listed are available at the discretion of the judge.
Those remedies include order a revocation of the business
organization's franchise, certificate of authority, or license.
She explained that this reiterates the current law to be certain
there is not any confusion.
3:56:22 PM
REPRESENTATIVE GRUENBERG referred to Section 12 of Version M.
He stressed the importance of this provision since it would
expand the ability of the court to order additional remedies and
is based on an Idaho law. He referred members to page 4, and
read: "...the court may order the revocation, forfeiture, or
suspension of the business organization's charter, franchise,
certificate of authority, privilege, or license, or any
combination of them, and may order the dissolution of the
business organization or the divestiture of any asset. He
characterized this as an extremely important tool. He said that
merely the threat is often enough to obtain compliance and have
people abide by the law.
3:57:30 PM
REPRESENTATIVE JOHNSON asked whether he was suggesting the state
would threaten to dissolve a Japanese company who manufactures
computer chips.
REPRESENTATIVE GRUENBERG asked to reserve the question. He did
not think Alaska would have jurisdiction in Japan, but would
like to ask Mr. Sniffen.
3:58:12 PM
REPRESENTATIVE MILLER referred to what he characterized as the
Japanese question. He asked whether Japan would have an
antitrust law that would fall under any American jurisdiction.
REPRESENTATIVE GRUENBERG answered that two parts exist in a
lawsuit, one is liability, and the other is remedy. This bill
pertains to remedy. He suggested that the question of liability
does not depend on where the corporation is located but where
the illegal action took place. He offered his belief that if in
the illegal price fixing took place in Japan the U.S. would not
have any jurisdiction. However, if the injury took place in
Alaska, the consumer could get money damages. He further
asserted that Alaska would have jurisdiction over the company in
Japan since it was conducting business in the U.S. but that the
U.S. law could not order dissolution.
4:00:04 PM
REPRESENTATIVE MILLER related a scenario in which price fixing
occurred in New Jersey. He asked which court would have
jurisdiction if consumers purchased the product in Alaska.
REPRESENTATIVE GRUENBERG answered that the Alaskan consumer
could sue the company in either New Jersey or Alaska since the
consumer was damaged in Alaska. He related his understanding
that the consumer would have a choice. He highlighted that the
question is different than what choice of law would apply. He
elaborated that an Alaska court could apply either Alaska law or
New Jersey law. The third question would be whether the case
would be brought in state court or in federal court. He
recapped the questions are which jurisdiction, which law will be
used for liability, and which choice of law will be used for the
remedy. He stated that this is logical from the legal point of
view.
REPRESENTATIVE MILLER referred to page 4, line 28, of Version M.
He inquired as to whether which court is indicated in subsection
(c).
REPRESENTATIVE GRUENBERG asked to defer. He suggested that the
corporation charter or business license is under the auspices of
the State of New Jersey. He offered his belief that Alaska
would not have jurisdiction and the provision most likely
applies to an Alaska Corporation.
4:03:41 PM
REPRESENTATIVE JOHNSON asked whether federal law would allow an
individual to sue for indirect damages in federal court.
REPRESENTATIVE GRUENBERG answered no, explaining that is why the
"Illinois Brick" lawsuit was filed.
4:04:01 PM
REPRESENTATIVE HOLMES agreed to defer the final answer to Mr.
Sniffen. She suggested that this provision may not force New
Jersey to take away New Jersey's certification, but the State of
Alaska could deny the business from operating in Alaska.
REPRESENTATIVE GRUENBERG answered that Alaska may be able to
order the company to do something. He thought Alaska would have
jurisdiction over the company. He deferred to the Department of
Law.
4:04:45 PM
MS. STAFT referred to Sections 13 and 14 of Version M, which
consist of conforming sections and the repealer section.
CHAIR OLSON asked whether this law would apply to a California
case against Sempra Energy, a California corporation, Southern
California Gas Company, a California corporation ("SoCalGas").
He stated that considerable information is available on the
case. He also recalled the case settled out of court. He
related that the defendants were sued by 200 California
subdivision, the State of California, manufacturers, and
business owners.
MS. STAFT agreed to review the matter.
REPRESENTATIVE GRUENBERG referred to Section 14 of Version M and
asked to discuss the repealers at the next hearing.
4:06:33 PM
REPRESENTATIVE GRUENBERG brought committee members' attention to
proposed Section 10 of Version M, which relates to aggregate
damages. Currently, the attorney general can use statistical
sampling methods to estimate damages. He highlighted that this
language provides an important tool in the prosecution of these
types of cases. He asked to consider this provision of the bill
relating to indirect damages.
CHAIR OLSON recalled a similar bill had been discussed during
the last legislature. This bill is more concise, he said.
4:07:32 PM
REPRESENTATIVE MILLER referred to page 3, line 1, of Version M,
to a Latin phrase "parens patriae." He asked for clarification
on its meaning.
MS. STAFT explained that the term means that the attorney
general would be bringing the lawsuit on someone's behalf as the
guardian of their rights.
REPRESENTATIVE GRUENBERG related it is a legal term of art.
[HB 72 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB72 Version A.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Sponsor Statement.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Sectional Analysis.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Fiscal Note-LAW-CIV-03-25-11.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Draft Proposed CS version M.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Supporting Documents - Explanation of Changes ver A to ver M.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |
| HB72 Supporting Documments - Illinois Brick Repealer Map.pdf |
HL&C 4/1/2011 3:15:00 PM |
HB 72 |