03/07/2011 03:15 PM House LABOR & COMMERCE

              HB 87-ANTITRUST VIOLATION PENALTIES                                                                           
                                                                                                                                
3:20:26 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE BILL  NO. 87, "An  Act relating to penalties  for antitrust                                                               
violations."                                                                                                                    
                                                                                                                                
3:20:33 PM                                                                                                                    
                                                                                                                                
JAMES WALDO,  Staff, Representative Lindsey Holmes,  Alaska State                                                               
Legislature, introduced himself.                                                                                                
                                                                                                                                
3:20:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES  moved  to adopt  the  proposed  committee                                                               
substitute (CS)  labeled 27-LS0331\I, Bannister, 2/16/11,  as the                                                               
working  document.   There  being  no  objection, Version  I  was                                                               
before the committee.                                                                                                           
                                                                                                                                
MR. WALDO  explained the proposed  CS would update  the penalties                                                               
for  antitrust  violations for  Alaska.    Currently the  maximum                                                               
penalty  for an  antitrust  violation is  $20,000  for a  natural                                                               
person  and  $50,000  for  an  organization.    This  bill  would                                                               
increase  the   maximum  penalty  for  antitrust   violations  to                                                               
$1,000,000  for   a  natural  person   and  $50,000,000   for  an                                                               
organization.   The federal penalties  are set at  $1,000,000 for                                                               
an individual and  $100,000,000 for a corporation.   He suggested                                                               
that the  level selected  would act  as a  deterrent.   The first                                                               
section  relates to  the criminal  violation, and  would increase                                                               
the offense from a misdemeanor to a class C felony.                                                                             
                                                                                                                                
3:23:51 PM                                                                                                                    
                                                                                                                                
MR.  WALDO related  that  proposed  Section 2  was  added in  the                                                               
proposed  CS,  to  allow  the  attorney  general  to  seek  civil                                                               
penalties.  This  would provide an extra tool  for the Department                                                               
of  Law (DOL)  to pursue  antitrust violations,  which while  not                                                               
frequently used is available to the department.                                                                                 
                                                                                                                                
CHAIR  OLSON  remarked that  he  and  Representative Holmes  have                                                               
worked with Mr. Sniffen on the language for this bill.                                                                          
                                                                                                                                
3:24:59 PM                                                                                                                    
                                                                                                                                
CLYDE  (ED)  SNIFFEN,  JR., Senior  Assistant  Attorney  General,                                                               
Commercial/Fair  Business  Section, Civil  Division  (Anchorage),                                                               
Department of Law  (DOL), said that the proposed  CS would update                                                               
the  antitrust  provisions  to add  a  civil  penalty  provision.                                                               
Currently,  the  DOL  does  not  have  a  civil  penalty  in  its                                                               
antitrust statute.   He pointed out that  the criminal violations                                                               
are more  difficult to  prosecute due to  the necessity  to prove                                                               
beyond a reasonable  doubt when making the case.   In multi-state                                                               
actions,  states with  the strongest  penalty  provisions end  up                                                               
with  more of  the settlement  money.   The state  has made  good                                                               
arguments but it would have been  nice to have had more authority                                                               
so it  could have argued  for a "bigger piece  of the pie."   The                                                               
amounts are  on the high side  compared to other states,  but not                                                               
to federal statutes.  In  2007, the federal statutes were amended                                                               
to  increase  the  penalty to  $10,000,000  for  individuals  and                                                               
$100,000,000 for corporations.                                                                                                  
                                                                                                                                
MR. SNIFFEN  recalled some states  are working to  increase their                                                               
penalty provisions.  He referred  to a chart in members' packets,                                                               
which  outlines the  penalty  statutes for  other  states.   Most                                                               
states were hoping that they could  amend their statutes to be in                                                               
line with federal statutes, he said.                                                                                            
                                                                                                                                
3:28:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MILLER  asked  whether  the  only  penalties  are                                                               
fines,  except for  imprisonment of  not more  than a  year.   He                                                               
surmised that a corporation could not be imprisoned.                                                                            
                                                                                                                                
MR.  SNIFFEN  answered  that  a   state  can  imprison  corporate                                                               
officials, and violations  by corporations can be  felonies.  The                                                               
federal government has imprisoned  corporate officials, which can                                                               
be difficult, but can occur.                                                                                                    
                                                                                                                                
3:29:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   CHENAULT   asked   whether  the   penalties   of                                                               
$1,000,000 and  $50,000,000, respectively, were  reasonable since                                                               
none of the other states' penalties were near that amount.                                                                      
                                                                                                                                
MR. SNIFFEN  agreed, except for  the federal penalties  which are                                                               
set at $10,000,000 and $100,000,000.   He offered his belief that                                                               
many of the  other states enacted their laws in  the 70s and 80s.                                                               
Some  are outdated.   Alaska  would definitely  on the  high side                                                               
compared to other states, he said.                                                                                              
                                                                                                                                
REPRESENTATIVE CHENAULT  expressed concern  that the  state would                                                               
strive to match the federal government.                                                                                         
                                                                                                                                
3:30:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON referred to  the chart previously referred                                                               
to,  noting that  Kansas  has a  $5,000 per  day  penalty and  he                                                               
wondered  how the  penalty is  implemented, from  inception until                                                               
the time it is resolved,  since the penalties could accrue pretty                                                               
rapidly.                                                                                                                        
                                                                                                                                
MR. SNIFFEN  related it is  difficult to determine the  start and                                                               
stop dates.   He explained the DOL likes to  avoid that method of                                                               
imposing a  penalty since it  can be difficult to  determine when                                                               
it  should start  or end.   Typically  a penalty  provision would                                                               
commence as soon  as the violation is detected and  if it goes to                                                               
court the  jury often will  often decide  the start and  when the                                                               
penalty is abated.  He  elaborated that determining the dates can                                                               
lead to  considerable discussion and  debate.  He  said sometimes                                                               
it can  be argued that  violations start or  stop when a  memo is                                                               
written to someone  in the company.  He further  related that the                                                               
per day penalty  provision can create a  factual question whereas                                                               
a  flat amount,  in particular,  a large  one, leaves  it to  the                                                               
court to decide based on the facts and the goal of deterrence.                                                                  
                                                                                                                                
REPRESENTATIVE JOHNSON asked  whether it would be  a deterrent to                                                               
have a $5,000 per day amount.                                                                                                   
                                                                                                                                
MR.  SNIFFEN agreed  with the  logic,  that it  would provide  an                                                               
incentive to settle,  but he said it also depends  on the company                                                               
since it may result in the  attitude of simply the company's cost                                                               
of  doing  business.    In  other instances  a  flat  rate  of  a                                                               
$50,000,000 fine can also an incentive.                                                                                         
                                                                                                                                
3:33:45 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  asked if he  was familiar  with the San  Diego based                                                               
Sempra  Energy litigation  with  the State  of California,  which                                                               
arose out of the Energy Crisis of 2000-2001.                                                                                    
                                                                                                                                
MR. SNIFFEN said he was unsure.                                                                                                 
                                                                                                                                
CHAIR  OLSON stated  it was  a price  fixing case  and the  state                                                               
settled  out  of court.    He  thought the  damages  collectively                                                               
reached nearly $2  billion.  He said the damages  were thought to                                                               
have been $32 billion and if so,  this bill might be on the light                                                               
side.                                                                                                                           
                                                                                                                                
3:35:06 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed public testimony on HB 87.                                                                                      
                                                                                                                                
REPRESENTATIVE CHENAULT  asked whether someone could  address the                                                               
Department of Law's fiscal note.                                                                                                
                                                                                                                                
MR. SNIFFEN  said he prepared  the fiscal note  and HB 87  has no                                                               
additional fiscal impact.                                                                                                       
                                                                                                                                
REPRESENTATIVE CHENAULT asked if the DOL would not be used.                                                                     
                                                                                                                                
MR. SNIFFEN  related that the  DOL currently handles  these types                                                               
of cases.   He was  unsure this would  create more work,  but the                                                               
bill  would   allow  for  additional  penalties   and  allow  the                                                               
department to have better recoveries.                                                                                           
                                                                                                                                
REPRESENTATIVE CHENAULT expressed general  concern on zero fiscal                                                               
notes.  As bills pass additional costs are incurred, he said.                                                                   
                                                                                                                                
CHAIR OLSON  noted the  bill has  another committee  of referral,                                                               
which he thought was the House Finance Committee.                                                                               
                                                                                                                                
3:37:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON asked how many  cases of this type the DOL                                                               
is currently handling.                                                                                                          
                                                                                                                                
MR. SNIFFEN  answered that  the DOL  just resolved  a multi-state                                                               
case involving  the drug Ovcon,  manufactured by  Warner Chilcott                                                               
pharmaceuticals.     He   stated  he   has  another   case  under                                                               
consideration  that probably  is  not worth  pursuing unless  the                                                               
state  had  provisions  such  as  this  in  place  to  allow  for                                                               
significant recovery.  He summarized  that there are a few cases,                                                               
not many.                                                                                                                       
                                                                                                                                
CHAIR OLSON corrected  an earlier statement.   The next committee                                                               
of referral is the House Judiciary Standing Committee.                                                                          
                                                                                                                                
3:38:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT  moved to  report the  proposed committee                                                               
substitute  (CS)  for  HB  87,  labeled  27-LS0331\I,  Bannister,                                                               
2/16/11,  out of  committee with  individual recommendations  and                                                               
the  accompanying zero  fiscal note.  There  being no  objection,                                                               
CSHB  87(L&C) was  reported  from the  House  Labor and  Commerce                                                               
Standing Committee.