04/06/2012 01:30 PM Senate JUDICIARY

                 HB 274-UNFAIR TRADE PRACTICES                                                                              
                                                                                                                                
2:14:15 PM                                                                                                                    
CHAIR  FRENCH announced  the  consideration of  HB  274, "An  Act                                                               
relating to the  exemption of certain acts  and transactions from                                                               
the  provisions dealing  with unfair  methods of  competition and                                                               
unfair or deceptive acts or practices."                                                                                         
                                                                                                                                
2:14:43 PM                                                                                                                    
REPRESENTATIVE  LINDSEY HOLMES,  sponsor of  HB 274,  stated that                                                               
the bill clears  up a potential ambiguity in  the Alaska Consumer                                                               
Protection Act (CPA). It clarifies that  the state can step in to                                                               
protect  Alaskan consumers  when  the federal  government is  not                                                               
doing  so.  The bill  makes  it  clear  that  the state  and  its                                                               
citizens are  not without remedy  due to a misapplication  of the                                                               
safe harbor provision in the CPA.                                                                                               
                                                                                                                                
2:15:42 PM                                                                                                                    
JAMES R.  WALDO, staff, Representative Lindsey  Holmes, confirmed                                                               
that  there  is an  ambiguity  about  where the  Alaska  Consumer                                                               
Protection Act can  apply when federal laws  prohibit or regulate                                                               
the same conduct, but don't explicitly preempt state law.                                                                       
                                                                                                                                
CHAIR FRENCH asked if that was in paragraph (1).                                                                                
                                                                                                                                
MR. WALDO said  yes; the safe harbor provision says  the CPA does                                                               
not apply  to conduct that  is regulated and prohibited  by state                                                               
or  federal  law. The  bill  removes  the exemption  for  conduct                                                               
regulated  and prohibited  by federal  law. He  said it's  a good                                                               
idea to preserve  the exemption for state law. For  example, if a                                                               
consumer finds  troubling conduct from an  insurance company, the                                                               
Division of  Insurance (DOI)  can solve  the problem  using state                                                               
insurance laws,  not the  Consumer Protection  Act. Additionally,                                                               
if the state decides that enforcement  is too much or too little,                                                               
it can change those laws as it sees fit.                                                                                        
                                                                                                                                
The state is  preempted when state law and  federal law regulates                                                               
or  prohibits the  same conduct.  However, there  are gray  areas                                                               
when there is shared jurisdiction  or when the federal government                                                               
has laws or  regulations it doesn't intend to  enforce or intends                                                               
the state  to so  its own  enforcement. In  those cases,  the CPA                                                               
arguably would not  apply. This was at issue in  a case involving                                                               
two pharmaceutical  companies. He  noted that the  judicial order                                                               
from Judge Beistline was included  in the packet. This bill would                                                               
make it  very clear that the  state has the power  to enforce the                                                               
CPA in  cases where the federal  government is not going  to take                                                               
action and the state sees need to protect Alaskan consumers.                                                                    
                                                                                                                                
SENATOR FRENCH  asked on what  page in the order  Judge Beistline                                                               
discusses the issues that impinge on the bill.                                                                                  
                                                                                                                                
MR. WALDO directed attention to page 18.                                                                                        
                                                                                                                                
2:19:41 PM                                                                                                                    
CLYDE   "ED"    SNIFFEN   JR.,   Assistant    Attorney   General,                                                               
Commercial/Fair Business  Section, Civil Division,  Department of                                                               
Law  (DOL),  said  his responsibilities  include  enforcement  of                                                               
Alaska's  consumer protection  and antitrust  laws. He  confirmed                                                               
that there have  been situations where a federal  court or agency                                                               
announced  shared state/federal  jurisdiction over  certain areas                                                               
like drug labeling. The state believes  it should be able to take                                                               
action against  companies that violate  the CPA on  those issues.                                                               
Because  of  the  ambiguity  in  statute, if  a  federal  law  or                                                               
regulation  covers that  conduct, whether  it's enforced  or not,                                                               
defendants  are  using  that  as a  shield  against  the  state's                                                               
enforcement activity.  HB 274 removes the  federal exemption from                                                               
the CPA and allows the state to take action if need be.                                                                         
                                                                                                                                
He  agreed with  Mr. Waldo  said that  the state  could not  take                                                               
action  if the  federal  government preempts  an  area, but  that                                                               
wasn't  really the  issue.  He  said there  are  cases where  the                                                               
federal government has specifically  found there is no preemption                                                               
and  the state  still can't  take action  because the  conduct is                                                               
still regulated or prohibited. The  state takes the position that                                                               
the statutory language  is strong enough that it  can take action                                                               
if the  federal government isn't  enforcing the law.  That's what                                                               
the  state is  arguing in  the  case referenced  above, but  this                                                               
amendment makes it very clear.                                                                                                  
                                                                                                                                
CHAIR FRENCH  asked if the bill  would make it easier  to protect                                                               
Alaskan consumers.                                                                                                              
                                                                                                                                
MR.   SNIFFEN  said   yes,  particularly   in  cases   of  shared                                                               
jurisdiction  where  the federal  government  is  not taking  any                                                               
action.                                                                                                                         
                                                                                                                                
CHAIR FRENCH announced he would hold HB 274 in committee.                                                                       
                                                                                                                                
2:22:03 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair French adjourned the meeting at 2:22 p.m.