Legislature(2011 - 2012)BARNES 124
04/11/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB72 | |
| SB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 72 | TELECONFERENCED | |
| += | SB 23 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 72-ANTITRUST ACTIONS & PENALTIES
3:26:02 PM
CHAIR OLSON announced 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." [A
motion to adopt the proposed committee substitute (CS), Version
M, for HB 72 was left pending.]
3:26:13 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
referred to a flowchart in members' packets. He explained that
last week the committee heard HB 72. He offered to answer
questions and discuss concepts. He related that the chart shows
that the current statute with respect to antitrust violations.
Price fixing happens when several suppliers conspire to fix the
price of a component of a product. He recalled a current
attorney general's case on price fixing between several
manufacturers of Dynamic Random Access Memory (DRAM) known as
computer memory chips. He briefly described that the path a
computer memory chip product would take from the time it is
imported until it was sold to a consumer. The chip would be
manufactured, transferred to a distributor and wholesaler,
placed in a product such as a computer, and subsequently sold to
a store such as Best Buy. When a component such as a DRAM is
artificially priced, the consumer pays slightly more for the
product since a component of the product was "price fixed."
3:28:14 PM
MR. SNIFFEN stated that when Alaskan consumers purchase such a
product they are without a remedy since the consumer is not the
direct purchaser of the computer memory chip. He highlighted
that when consumers buy the product at Best Buy they purchase
the computer and are not solely purchasing the chip. Thus, the
computer purchase represents an indirect purchase of a "price
fixed" product. The U.S. Supreme Court indicated that the
consumer is not in direct line with the company that fixed
prices so he/she does not have right to sue for damages.
However, the U.S. Supreme Court has allowed states to adopt
their own laws to provide a remedy for consumers to sue for
indirect damages. In 2006, Alaska passed such a law. He
reported that these laws are referred to as Illinois Brick
repealers since the initial case that did not allow consumers to
sue was a U.S. Supreme Court Case, Illinois Brick Co. v.
Illinois, 431 U.S. 720 (1977). Currently, Alaska allows
consumers to bring actions against the suppliers who engage in
illegal conduct. He reiterated indirect purchasers are
purchasers who buy a product that contains a price-fixed item.
3:29:40 PM
MR. SNIFFEN related that in 2006, when Alaska's initial bill
passed the legislature it limited any price-fixing lawsuits
actions to the attorney general. The legislation could have
allowed both the attorney general (AG) and private parties to
bring action but it did not do so. At the time, a number of
states decided that it would be appropriate for the AG to bring
actions against the parties. However, one concern was that if
private parties and the AG were both involved in class action
lawsuits that it could complicate the process. In fact, Mr.
Sniffen indicated that he had testified in favor of an AG only
law. Since then, some issues have arisen with an AG only
limitation. This bill would allow private parties and class
action plaintiffs to bring cases against conspirators in this
case for indirect damages. He referred to a map in members'
packets that highlights which states have AG only laws and which
ones allow for private indirect purchaser laws. He pointed out
that a majority of states allow both the AG and private parties
to sue. A number of states have brought action against the
computer chip supplier and the states with an AG only law have
had a difficult time. The class action plaintiffs cannot settle
the case for all consumers since only the AG can do so in states
with an AG only law, like Alaska. Changing the law to also
allow private individuals to bring action would alleviate some
of the issues, he said. He recalled that this bill contains a
provision that would actually require anyone bringing a class
action lawsuit for indirect damages to notify the AG's office.
The AG's office would have a number of days to decide whether it
would pursue any action. In the event that the AG's office
declined to pursue the case the private parties could still
pursue the case. He commented when the AG's office had multiple
lawsuits simultaneously filed that conflicts could arise as to
evidence and prosecution. He concluded that this bill would
change the law to allow private parties to bring these types of
actions as opposed to limiting it to the AG.
3:33:00 PM
REPRESENTATIVE SADDLER asked whether the AG would relieve the
private party or if it would work in conjunction with the AG in
cases in which the private party notifies the AG.
MR. SNIFFEN responded that the AG could determine to bring the
action or may decide it would be an opportunity for a joint
effort. The AG could also join the case simply to recover
penalties but it could allow the class action case handle any
penalties.
3:34:12 PM
REPRESENTATIVE SADDLER asked whether fines could be assessed.
MR. SNIFFEN answered that under current statute the state could
assess penalties of up to $25,000 for every price-fixing
violation. He mentioned another bill is pending this year that
could strengthen the penalty provisions for antitrust
violations.
3:34:40 PM
CHAIR OLSON reported that the specified bill is moving in the
other body.
REPRESENTATIVE CHENAULT asked whether the work draft had been
adopted.
REPRESENTATIVE SADDLER removed his objection. Version M was
before the committee.
3:36:02 PM
CHAIR OLSON asked for clarification on the effect of HB 72 on
foreign corporations.
MR. SNIFFEN related his understanding that one issue has been
whether the state could enforce price fixing cases against
foreign corporations doing business in Alaska. He answered
probably yes. Most foreign corporations have subsidiaries that
operate in Alaska such as BP Alaska whose main corporation is
domiciled in London. Many bigger companies have subsidiaries in
Alaska that operate under an Alaska name and are most likely
registered with the Department of Commerce, Community & Economic
Development (DCCED) Division of Corporations, Business, and
Professional Licensing. He added that the AG's office can
prosecute foreign companies doing business in Alaska.
3:36:46 PM
REPRESENTATIVE SADDLER reiterated he has removed objection to
the work draft labeled 27-LS0381/M, Bannister, 3/22/11. Version
M was before the committee.
CHAIR OLSON asked for clarification on the repealers in proposed
Section 14 of Version M.
MR. SNIFFEN explained the sections being repealed refer to
sections that limit the type of recovery to only the AG. The
modifications to other sections would allow private parties or
the AG to bring these actions, he said.
3:37:33 PM
REPRESENTATIVE JOHNSON asked for an estimate of the number of
cases that might be filed if this bill passed and whether it
would be 1,000 or if it would be 1 case.
MR. SNIFFEN predicted it would not be 1,000 but probably would
be more than 1. He explained that in the past ten years the
AG's office has had about a dozen multi-state cases that have
implicated this statute in one way or another. The AG's office
has been unable to pursue claims since it did not have the
statutory authority early on. Now that it has statutory
authority, the state can join other cases to recover damages.
The computer chip case mentioned earlier is one case and two
years ago the state took action against a pharmaceutical
company, Warner Chilcott Corporation, for price-fixing a drug
called Ovcon. At the time the state could have recovered
additional damages had the changes contained in HB 72 been in
place. He offered his belief that a number of patent challenges
for generic drugs have implicated indirect purchaser damages.
He recalled the state did not pursue a few other cases that this
bill may or may not have affected. He offered his belief the
the bill would assist the AG in cases with broader price fixing
conduct in the U.S. which also affected Alaskans. He
acknowledged that it really is hard to predict.
3:39:26 PM
REPRESENTATIVE JOHNSON asked whether Alaska is currently
prohibited from taking action in federal cases on class action
suits.
MR. SNIFFEN answered no. He agreed that Alaska could
participate relating that federal anti-trust law gives all
states the jurisdiction to enforce federal law in federal court.
Federal law restricts the collection of indirect purchaser
damages under the "Illinois Brick" rule previously mentioned.
The federal law has not been repealed so the Alaska cannot
pursue indirect damages in those cases.
3:39:58 PM
REPRESENTATIVE JOHNSON asked whether the state is limited to
indirect damages in state court.
MR. SNIFFEN clarified the state could pursue state court claims
in federal court, referred to as pendent jurisdiction claims,
that follow along with federal court action. Pendent
jurisdiction refers to the court's authority to adjudicate
claims it could not otherwise hear. The state has had the
authority to pursue pendent jurisdiction claims since 2006 when
the price-fixing law passed.
3:40:26 PM
REPRESENTATIVE JOHNSON asked for further clarification. He
related his understanding that the state can bring action even
though the federal law prohibits individuals from initiating
claims.
MR. SNIFFEN acknowledged that this is a little confusing. He
referred to the DRAM computer chip case which was a case
initiated in a California Federal District Court as previously
mentioned. In that case Alaska and 30 other states joined in
the lawsuit. When Alaska joined the lawsuit, it filed an
amended complaint that included a section that contained all
Alaskan claims. In that case, the conduct occurred prior to
enactment of the Alaska "Illinois Brick" repealer statute.
Therefore, Alaska was not allowed to join the federal lawsuit
since it could not pursue damages on behalf of the consumers.
He reported that prior to the state being precluded from
participating in the federal antitrust case the state settled
some claims on behalf of consumers and is still in the process
of recovering those settlement amounts. However, all other
states with "Illinois Brick" repealers were able to assert their
claims. In those instances the federal court has been applying
state law in federal court, he said.
3:41:47 PM
REPRESENTATIVE JOHNSON related his understanding that Alaska
needs this authority.
MR. SNIFFEN responded that it would help in cases in which the
state decided not to pursue claims and for global settlement in
cases with private class action lawsuits that have joined in the
case. Currently, the AG cannot settle those types of cases
since only the AG can represent the individual, he said. Given
that the AG often represents state agencies, the AG frequently
leaves it to the class action lawsuits to represent individual
consumers. He thought the authority would help in some cases,
but would be curious to see if more consumers filed lawsuits if
they were allowed to do so.
3:43:21 PM
REPRESENTATIVE SADDLER referred to page 4 of Version M. He
asked whether other states with the "Illinois Brick" provisions
use statistical sampling as a means to recover aggregate
damages. He also referred to the chart in members' packets
titled "Explicit Indirect Purchaser Antitrust Claim Statutes" to
the states listed in red. He further asked whether revocation
of business charter or license provision in proposed Section 12
are common elements of those states with private indirect
purchaser actions authorized.
MR. SNIFFEN answered yes and no. He explained that the proposed
Section 12 enforcement provision which authorize the forfeiture
or suspension of a business license is unique in Alaska. The
aggregate damages in proposed Section 10 are common in most
repealers since it makes calculating damages a lot easier by
using aggregate sampling. The state can take a certain number
of sales and calculate the average harm to each consumer instead
of having to determine how much each person paid for his/her
computer, he said.
3:45:02 PM
REPRESENTATIVE CHENAULT asked for the average cost for the state
to intercede in these cases.
MR. SNIFFEN answered that he was unsure. He agreed that it uses
Department of Law's resources to intercede on behalf of state
agencies in instances when the AG's office determines
significant harm to the state has occurred. He considered the
effort as effort to recover damages the state would not
otherwise recover. He reiterated that he was unsure if it would
cost less if private parties were involved. He thought the
state may have decided to pursue cases anyway, but it is
possible the state may allow the private parties to pursue the
claim if the state thought it was an effective way to stop the
conduct and still obtain recovery for consumers.
3:46:03 PM
REPRESENTATIVE JOHNSON asked whether this bill would add to the
case load of the court system.
MR. SNIFFEN answered that it is hard to predict. He thought
allowing private parties may add a few case but the number of
cases would be fairly limited.
REPRESENTATIVE JOHNSON asked whether people would be more or
less likely to settle when fines are increased.
MR. SNIFFEN responded that this bill does not address the
penalty provisions. He agreed a balance exists in terms of
litigation and settlement. Thus, exposure to penalties and
fines could act as an incentive to either settle or litigate.
He suggested the outcome depends on many things including the
size of company, the issues, and the level of importance to set
precedent for other cases. He related that in his experience
states with stronger enforcement tools seem to settle more
quickly and favorably.
3:48:09 PM
CHAIR OLSON referred to page 4, to proposed Section 12 of
Version M. He asked whether this sampling indicated would be
similar to the federal Medicare reimbursement sampling. He
recalled that the sampling may determine 3 of 100 billings are
not accurate but the formula assumes the remaining billings are
in line with sampling.
MR. SNIFFEN answered yes, the process would be similar.
3:49:02 PM
REPRESENTATIVE CHENAULT asked him to predict whether this bill
might add to additional individual lawsuits. He recalled
watching late night television advertising in which attorneys
offered to represent clients who had suffered from exposure to
various chemicals or products. He expressed concern that if HB
72 passed it could create burgeoning class-action lawsuits that
might ensue at the state level and its impact on the court
system. He referred to the zero fiscal note in members' packets
and reiterated his concern of the costs to the court system.
MR. SNIFFEN responded that he did not think HB 72 would increase
the number of lawsuits the AG's office would file. He offered
his belief that late night advertising by attorneys would happen
anyway but currently these lawyers cannot represent Alaskans
whereas under the bill they could do so. In further response to
Representative Chenault, he said he was unsure if more lawsuits
would be filed in Alaska. He thought it was more likely that
the lawsuits would be filed elsewhere and the court would
certify the class that includes Alaska's consumers. He
suspected it would not substantially increase the number of
cases.
REPRESENTATIVE CHENAULT remarked that anytime the court system
is involved it costs money.
3:52:55 PM
REPRESENTATIVE JOHNSON expressed concern that price fixing may
have happened with respect to gasoline costs in Alaska. He
asked whether individual citizens could join in a lawsuit on a
"witch hunt." He pointed out the state has three oil producers.
He asked whether 20 people could file a lawsuit in which gas
stations or refineries would be affected.
MR. SNIFFEN answered yes. He agreed this could represent a risk
since consumers buy gasoline. If one of the refineries was
engaging in price-fixing conduct and had conspired with other
refineries or suppliers to fix prices. He said the additional
costs would be passed on through the distributors, the jobbers,
and the retail stations to consumers. The consumers would be
the recipient of the price-fixed product and as an indirect
purchaser. He related that it would be difficult for consumers
to pursue cases against the producers since they do not have
direct dealings with them. He pointed out that the gas itself
does not change. This bill would clearly remove any barrier and
allow consumers in most cases to pursue price-fixing claims.
3:55:03 PM
REPRESENTATIVE JOHNSON asked whether consumers could sue the
State of Alaska (SOA) since it sells royalty oil to the North
Pole refinery in the event of allegations of price fixing.
MR. SNIFFEN answered that he was unsure since that issue would
be more complicated to sort through. He said he did not think
it would happen since the SOA enjoys immunity. Even so, the
parties would not likely be successful if they did sue the
state. He offered his belief that merely supplying the oil
would not generate a cause of action so consumers would have to
find some other problem. He reiterated that the state would
likely have immunity. In response to Representative Johnson,
reducing the cost of fuel to Fairbanks residents would not apply
to this bill. This bill would merely allow for a private
individual to bring claims in addition to the AG.
3:57:08 PM
REPRESENTATIVE JOHNSON asked for further clarification on the
scenario since he viewed the SOA selling royalty oil for less
than fair value would represent grounds for a lawsuit. He added
that his scenario would also include a Tesoro station buying
from an independent oil refinery. He asked whether the state
would be subject to numerous lawsuits filed by people who are
inclined to think that price fixing is involved since Alaska
only has one refinery.
MR. SNIFFEN said he was unsure. He acknowledged that HB 72
would provide a cause of action that does not currently exist
for any consumers who suffer indirect damages. Under the
scenario, just given if an antitrust claim of indirect harm is
made based on upstream activity, the AG would be the only party
that could bring the claim. This bill would allow private
individuals an opportunity to bring the claim if indirect
damages resulted from upstream conduct. In further response to
Representative Johnson, he answered that it would be a policy
call to determine whether the bill created any undue risk.
3:58:57 PM
CHAIR OLSON related that about a year and a half ago he
contacted the AG's office with respect to a price gouging bill.
The AG's office investigated the matter including examining
activities of Tesoro Alaska Company (Tesoro) and Flint Hills
Resources (Flint Hills) but did not find any issues. He further
recalled the House Judiciary Standing Committee also reviewed
Alaska's gasoline prices. During this time the committee did
not have an antitrust bill before either committee, he stated.
REPRESENTATIVE JOHNSON remarked on the level of confidence he
has with Mr. Sniffen. He was concerned about expanding this
beyond the AG's ability to file lawsuits.
4:00:33 PM
REPRESENTATIVE SADDLER asked whether the SOA is immune to
antitrust violations.
MR. SNIFFEN answered that the answer is somewhat complicated.
He stated that generally speaking state legislatures can
authorize price fixing in some instances, which is fine.
However, if the SOA acts like a competitor as a market
participant, the SOA would be subject to antitrust laws.
However, when the SOA actively engages and authorizes activity,
that type of conduct falls under a doctrine which affords the
state immunity.
REPRESENTATIVE JOHNSON asked whether the SOA would be subject to
antitrust issues as a result of tax credits given to Cook Inlet
producers.
MR. SNIFFEN answered not to his knowledge. He indicated he has
not studied the issue but he did not think any antitrust issues
were raised.
REPRESENTATIVE JOHNSON asked for clarification, noting that one
member, Representative Holmes, is shaking her head no.
REPRESENTATIVE CHENAULT offered his belief that tax credits were
not exclusively offered to any one company. He referred to
Flint Hills and asked whether the royalty oil is sold at a
premium rate.
MR. SNIFFEN agreed the cost of the oil sold to Flint Hills
Refinery has been at a premium rate and not a discount. In
further response to Representative Chenault, he reiterated that
royalty oil was sold at a premium rate.
4:03:32 PM
REPRESENTATIVE JOHNSON asked for clarification on whether any
issue would result if the SOA sold its royalty oil below that
cost as result of policy decisions.
REPRESENTATIVE CHENAULT asked to state for the public record
that the Cook Inlet oil is sold at a premium and not at a
discount.
4:04:10 PM
REPRESENTATIVE SADDLER asked for the general value of direct and
indirect damages in antitrust violations.
MR. SNIFFEN answered that he did not have any exact splits or
percentages. He stated that the federal courts pursue direct
damages. He was unsure of the proportion of direct and indirect
damages, noting that the indirect damages come primarily from
states, which he thought were fairly significant.
4:05:21 PM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, stated
that he did not recall any "blue" states, or states with no
express statute, authorized via case law on the chart in
members' packets, titled "Explicit Indirect Purchaser Antitrust
Claim Statutes." He pointed out that the map indicates 22 red
states, 8 Brick states, 5 blue states and 15 gray states. The
previous chart Mr. Sniffen referred to was a chart used for
prior legislation that gave the AG the authority to take action.
This bill would simply extend that authority to private
individuals. He stated that HB 72 would not cause any new cause
of action, but would allow a broader group of people to be able
to bring the same cause of action. He offered his belief that
this is particularly important because the Commercial/Fair
Business Section or "consumer protection" section is fairly
small. The result is that in many instances the cases the AG's
office pursues involve national corporations. This bill would
allow citizens in any of the "red" states, such as Nebraska or
California to join the lawsuit. The legend for "red" states
reads, "AG & Private Indirect Purchaser Actions Authorized." The
other states' citizens would be added to any lawsuit filed but
the respective state laws would apply.
4:08:25 PM
REPRESENTATIVE GRUENBERG recapped the process. Generally these
cases are filed in federal court based on diversity
jurisdiction. This rule would apply in the event that certain
thresholds were met to resolve disputes between the citizens of
different states. Nevada's citizens would proceed under the
Nevada law. Nebraska's citizens would join the lawsuit. This
bill would allow the Alaskans to join in under Alaska's law.
Currently, Alaska's citizens are precluded from doing so, he
said. Since computer chips are sold by "Best Buy" all over the
country, it seems unfair to Alaskans when people in the Lower 48
can sue and be made whole but Alaskans cannot. He offered his
belief Alaska should protect its citizens and there isn't any
reason not to do so.
4:09:55 PM
REPRESENTATIVE GRUENBERG answered a question Representative
Johnson previously asked with respect to the legislature
determinations. He clarified when something is permitted under
state law it is not illegal. The fact that the activity is
permitted under the law also provides the SOA an absolute
defense. The antitrust law protects against illegal collusion
and allows parity but is not designed to create an impediment.
He related his understanding this type of law represents a
national trend.
4:11:36 PM
REPRESENTATIVE GRUENBERG related a scenario in which two
companies from another country are colluding. He recalled an
earlier question as to whether the companies can be sued and the
answer is yes, so long the action occurred in Alaska. He
referred to Alaska Statutes AS 09 to a jurisdictional statute,
which indicates that when the legal activity happens in Alaska
or affects Alaskan consumers, that the state has jurisdiction to
apply state law if the case is filed in Alaska. The statute
allows Alaska law and the courts of Alaska to reach to the
maximum extent constitutionally permissible. He recalled that
California's civil code simply says it has jurisdiction to the
maximum extent constitutionally permissible. He recalled that
has been how Alaska's antitrust statute has also been
interpreted. He further recalled a question arose with respect
to collection of a judgment on a case filed in Nebraska. He
offered his belief that the consumer would likely obtain a money
judgment rather than an injunction.
4:13:41 PM
REPRESENTATIVE GRUENBERG pointed out that the divesture of
business licenses has specifically been modeled after Idaho's
law. He said was not aware of any instance in which "we're
inventing the wheel." He referred to two statutes in Alaska
Statutes that applies. He explained that in AS 09.30.200-270,
the Uniform Enforcement of Foreign Judgments Act would allow a
party to register an Alaska judgment in another state and obtain
a writ of execution. He further explained that this was
designed to domesticate the judgment and is very simple. He
related that virtually all states have adopted this uniform act.
Secondly, of the action happens in a foreign country, the
Uniform Foreign Money Judgments Recognition Act would apply. He
offered his belief that this act would allow enforcement of a
foreign money judgment from another country.
[HB 72 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB23 Draft Proposed CS ver G.pdf |
HL&C 4/11/2011 3:15:00 PM |
SB 23 |
| SB23 Opposing Documents - Email Jerry LaVine with attachment 4-8-2011.pdf |
HL&C 4/11/2011 3:15:00 PM |
SB 23 |
| SB23 Supporting Documents - States With Film Tax Credits.pdf |
HL&C 4/11/2011 3:15:00 PM |
SB 23 |
| HB72 Supporting Documents - Flow Chart AAG Sniffen.pdf |
HL&C 4/11/2011 3:15:00 PM |
HB 72 |
| HB72 Supporting Documments - Illinois Brick Repealer Map.pdf |
HL&C 4/11/2011 3:15:00 PM |
HB 72 |
| SB23 Letter - DCCED to Rep Johnson 4-11-11.pdf |
HL&C 4/11/2011 3:15:00 PM |
SB 23 |
| SB23 Letter - Rep Johnson to Commissioner Bell 4-10-2011.pdf |
HL&C 4/11/2011 3:15:00 PM |
SB 23 |