Legislature(2011 - 2012)BARNES 124

04/01/2011 03:15 PM LABOR & COMMERCE

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03:23:34 PM Start
03:23:46 PM HB72
04:08:41 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled 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                                                               
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                                                               
3:46:48 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  for  other  examples of  antitrust                                                               
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                                                               
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                                                               
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                                                               
REPRESENTATIVE MILLER referred to page  4, line 28, of Version M.                                                               
He inquired as to whether  which court is indicated in subsection                                                               
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                                                               
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