Legislature(2003 - 2004)
04/25/2003 01:10 PM Senate JUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 161-MONOPOLY AND RESTRAINT OF TRADE ACTIONS
CHAIR SEEKINS announced SB 161 to be up for consideration.
MR. ED SNIFFEN, Assistant Attorney General, said that SB 161
amends the existing anti-trust laws that give the attorney
general the right to recover indirect damages on behalf of
consumers who otherwise do not have such a remedy.
Under current federal and state anti-trust law, if there is a
conspiracy between two suppliers of a product, that results in
that product's price being overly inflated and that price is
passed on to an importer, and maybe a distributor and finally to
us as the consumer. The consumer right now has no right of
action to sue the upstream violator. That rule of law was laid
out in a 1977 U.S. Supreme Court case called Illinois Brick
Company v. State of Illinois. The court thought it would be very
difficult to determine how much profit was actually passed on
and it would be cumbersome to litigate. Only the importer could
sue, because they were the ones that purchased the product
directly from the anti-trust violators.
In that same case, the Supreme Court said states were free to
enact their own anti-trust laws to provide for this remedy and
30 states have already done that. Alaska hasn't and that's what
SB 161 does.
He said that these are not just theoretical things that are
happening; they are happening within the state and have cost us
a lot of money.
We are involved in multi-state litigation all the time
along with other states to sue large manufacturers of
products, pharmaceutical products, contact lenses, and
a variety of different consumer products.
In one case two years ago called the Vitamins Case,
there were two vitamin manufacturers who conspired
with each other to keep the price of vitamins high. We
joined in with 30 other states in that suit and we
reached a settlement with the vitamin companies along
with the other states. States who had these Illinois
Brick repealer statutes got $1 million a piece in the
settlement. States who did not have the statute got
zero. We argued with the settlement committee in that
case that we had other laws that would entitle us to
recovery and we in fact were able to get $100,000 that
we distributed to relevant organizations. But, had we
had a law like this in place, we would have seen a
much larger recovery. We're involved in several cases
now that involve these same kinds of claims.
SENATOR THERRIAULT asked for examples of other cases.
MR. SNIFFEN responded that two others come to him immediately.
One involves a conspiracy among a bunch of contact lens
manufacturers to artificially keep the price high. Another one
is the Nine West case that involved the sales of women's shoes
that resulted in a lot of money going to the states with
Illinois Brick repealer statutes and less money going to the
states without it. He just resolved a case recently involving
compact music discs where a lot of distributors and
manufacturers of music set minimum prices on CDs. They did not
present claims on behalf of injured consumers in that case,
because they didn't have this kind of statute. Currently, there
are three other pharmaceutical cases involving conspiracies up a
chain to artificially inflate the price of certain prescription
drugs. Another case they decided not to get involved in because
they didn't have this law involves sorbates, which are
preservatives that are used in all kinds of foods. "As a whole,
we could make big claims on behalf of consumers to recover those
types of damages."
TAPE 03-30, SIDE B
2:01 p.m.
SENATOR OGAN wanted to know how our state laws would reach
across oceans to reach suppliers like OPEC that conspires to set
oil prices.
MR. SNIFFEN replied that is a good question, but in most cases,
the issues don't involve foreign suppliers. Under state law,
ordinary consumers don't have the right to challenge the price
of gas, for example, if the conspiracy to keep the price of gas
high occurred upstream. However, it's not unheard of for some
states to get together and bring causative action against
foreign suppliers of materials.
SENATOR OGAN asked how they reach foreign countries.
MR. SNIFFEN replied:
There is a way states can reach international
boundaries through a lot of mechanisms.... We can
extend our jurisdiction to companies who have a
presence in Alaska and are doing business here. There
are international rules that allow us to do that.
He said it probably wouldn't happen very often in Alaska unless
we join with other states that are considering doing the same
thing, but it can be done.
CHAIR SEEKINS asked if having subsidiaries in the U.S. makes
that possible.
MR. SNIFFEN answered that is correct.
SENATOR THERRIAULT said he doesn't think it would work with OPEC
because they conspire to manipulate supply to influence price;
they don't set the price.
CHAIR SEEKINS wanted to clarify that the retailer bears no
responsibility in this law, just the persons who are involved in
the conspiracy.
MR. SNIFFEN replied that is correct. The retailer is just
passing prices on.
SENATOR THERRIAULT asked why language on page 2 would be
deleted.
MR. SNIFFEN replied that is a good question and there is a
second portion to the bill that removes from the current anti-
trust that you have to find conduct on behalf of an anti-trust
violator is willful before you can recover treble damages. Right
now, a federal law does not have that requirement and you can
recover three times your damages; state law has a much higher
standard.
SENATOR THERRIAULT asked how they would go about proving a
conspiracy that is not willful.
MR. SNIFFEN replied conspiracy is almost always willful, but
there are also times when you can violate the anti-trust law
negligently and recklessly, like in the current Bristol Bay
case.
SENATOR THERRIAULT noted that the bill would not drop the
finding down to knowingly, it would just drop the willingly.
MR. SNIFFEN responded that would bring this law in line with how
federal anti-trust laws are structured.
SENATOR OGAN asked how this law would change the way the Bristol
Bay case is litigated.
MR. SNIFFEN said if this law had been in place, it probably
wouldn't have changed a thing. In that case, all the fishermen
had direct damages; they purchased or sold fish directly to the
processors and there wasn't an intermediary that prevented them
from bringing their claims.
SENATOR OGAN asked if this would allow the attorney general to
bring a case against a retailer.
MR. SNIFFEN replied the retailer that is passing on the inflated
price from upstream anti-trust behavior would not be affected.
In this instance, the attorney general might represent the
thousands of consumers who might have bought that product at $10
when it should have been $5.
SENATOR THERRIAULT commented the fiscal note doesn't indicate
how much this will cost the state.
MR. SNIFFEN explained that the fiscal note is indeterminate,
because the department doesn't know how much revenue the bill
will generate. "It's unlikely to cost the state any money; it's
more likely to increase revenue, because we're involved in these
cases anyway..."
SENATOR THERRIAULT motioned to pass SB 161 from committee with
individual recommendations and attached indeterminate fiscal
note. There was no objection and it was so ordered.
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