Legislature(2009 - 2010)BARNES 124
03/26/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB338 | |
| HB275 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 338 | TELECONFERENCED | |
| *+ | HB 275 | TELECONFERENCED | |
HB 275-ANTITRUST ACTIONS & PENALTIES
3:40:18 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 275, "An Act authorizing 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."
3:41:34 PM
GRETCHEN STAFT, Staff, Representative Max Gruenberg, Alaska
State Legislature, explained on behalf of the prime sponsor,
that HB 275 is a consumer protection bill. She paraphrased from
the sponsor statement, which read [original punctuation
provided]:
The purpose of HB 275 is threefold:
1. Increase the penalties for antitrust violations
2. Allow recovery for parties injured indirectly, as well
as directly, by antitrust violations
3. Allow the attorney general to bring an antitrust
action for additional equitable and monetary relief.
The first function of HB 275 is to increase the
penalties levied against those who violate antitrust
laws. Under current law, an antitrust violation under
AS 45.50.562 or 45.50.564 is only a misdemeanor and is
only punishable by a fine of $20,000 or $50,000,
respectively, for natural persons or organizations.
Because of the enormous profits that may potentially
be realized through antitrust violations, the current
penalties do not serve as significant deterrents. HB
275 will make an antitrust violation under AS
45.50.562 or 45.50.564 a class C felony. The bill will
also increase the fines for such violations to
$1,000,000 for natural persons and $50,000,000 for
organizations. This will provide a much stronger
deterrent to would-be antitrust violators.
The second purpose of the bill is to expand the pool
of parties who may bring an action against antitrust
violators. Under current law, only parties injured
directly by antitrust violations may bring a private
action. This bill will allow parties who are injured
directly or indirectly by antitrust violations to
bring an action to recover damages, terminate an
interlocking relationship, or both.
3:42:17 PM
REPRESENTATIVE CHENAULT asked for clarification on the "parties
who are directly or indirectly injured by antitrust violations."
MS. STAFT related a scenario in which a manufacturer of a
computer chip is engaged in illegal trade restriction by
artificially setting the price of its product too high. The
manufacturer subsequently sells its chips to a computer
manufacturer, who in turn sells the computer to the consumer.
Under current law, a person could not bring a lawsuit against
the computer manufacturer even though it raised the price of the
computer. Basically, the manufacturer paid more for the
computer chip, she stated. Under current law only the
manufacturer could bring the lawsuit, but under HB 275, the
consumer could initiate the lawsuit.
3:43:56 PM
REPRESENTATIVE CHENAULT related his understanding the consumer
would be the indirect purchaser.
MS. STAFT agreed that the consumer would be indirect purchaser.
3:44:30 PM
REPRESENTATIVE CHENAULT pointed out that the computer
manufacturer could bring the lawsuit based on artificial price,
but the computer manufacturer would not be directly damaged by
the increased cost of the computer chips since the manufacturer
would pass on the cost to the consumer.
MS. STAFT related that one could argue the computer manufacturer
is directly affected since the higher computer chip cost could
contribute to a decrease in the volume of the total sales.
Thus, consumers may decide not to buy the computer from the
manufacturer since the computer may cost more than one without
an inflated chip cost.
3:45:27 PM
MS. STAFT turned to the sectional analysis of HB 275. She
explained that Section 1 & 2 would allow a person injured
directly or indirectly by a violation of this statute to bring
an action to terminate the prohibited interlocking relationship.
MS. STAFT related that proposed Section 3 would provide that a
person bringing an action for antitrust violation shall mail a
copy of the complaint to the attorney general. This is to
provide notice in case it may wish to intervene and bring in
more citizens under the scope of the action.
MS. STAFT explained that proposed Section 4 would allow the
Attorney General (AG) to bring a civil action to secure
monetary, injunctive, and other equitable relief on behalf of
the state or its agencies injured directly or indirectly by an
antitrust violation. Under current law the AG can only obtain
monetary relief.
MS. STAFT highlighted that proposed Section 5 would allow the AG
to bring a civil action on behalf of persons doing business or
residing in the state to secure monetary, injunctive, and other
equitable relief for direct and indirect injuries sustained from
antitrust violations.
MS. STAFT noted that proposed Sections 6, 7, and 8 make
conforming changes.
MS. STAFT related that proposed Section 9 defines "person" and
adds governmental agencies including political subdivisions of
the state, home rule or general law, cities or boroughs and
other governmental agencies such as the Alaska Railroad
Corporation (ARRC) and the University of Alaska.
3:47:46 PM
MS. STAFT stated that any instance of "person" in the bill
refers to the expanded definition.
MS. STAFT related that proposed Section 10 provides "the meat"
of the bill. This provision would raise the criminal penalties
for an anti-trust violation. Thus, a violation of AS 45.50.562
or 45.50.564, which addresses restraint of trade and monopolies,
would be raised from a misdemeanor to a class C felony. This
section also raises the maximum criminal fines from $20,000 to
$1 million for a natural person and from $50,000 to $50 million
for an organization. She pointed out that these are maximum
fines and a judge would have discretion.
3:48:43 PM
MS. STAFT, in response to Representative Buch, agreed that the
penalties would not affect a business in the same way it would
affect a natural person. She commented that since a corporation
cannot be jailed, the fines are raised. She referred to page 4,
lines 11-12, noting that the penalty is a felony.
REPRESENTATIVE BUCH related his understanding that is the reason
that person and natural person are defined.
MS. STAFT agreed. She pointed out that a natural person would
likely have limited resources, but may not be able to do as much
damage as an organization.
3:50:02 PM
REPRESENTATIVE CHENAULT related he was contemplating the
expansion of political subdivision and home rule, as allowing
"anyone" to sue.
MS. STAFT offered her belief that one reason to add these
entities to the definition of a "person" is that it would allow
a city to recover taxpayers' money. She related a scenario in
which a person sold a product as an additive to asphalt to pave
streets. However, if the company artificially set the price of
its product too high it would cause the city to pay more to pave
the streets. This provision would allow the city to recover
taxpayers' money. She related that cities can be injured and
the Assistant Attorney General, Ed Sniffen, could better explain
the expanded definitions.
3:51:35 PM
REPRESENTATIVE CHENAULT understood antitrust lawsuits occur, but
commented that anyone who thinks they are affected would have
the ability to sue.
3:52:10 PM
CHAIR OLSON asked why some entities, such as the Alaska Housing
Finance Corporation (AHFC) and the Permanent Fund Corporation
(PFC) are excluded in the bill.
MS. STAFT suggested that some entities are subdivisions of the
state and can be represented by the attorney general. Other
organizations could bring suit since they are included in the
definition of person.
CHAIR OLSON referred to page 2, line 1 to the inclusion of the
Alaska Railroad Corporation (ARRC) and the University of Alaska
(UA).
MS. STAFT related that the ARRC and UA cannot bring private
actions, but the state's attorney general can bring actions on
either entity's behalf. This bill would allow either entity to
bring private actions. She explained that private attorney fees
are higher. She surmised that likely someone would alert the AG
of a proposed antitrust violation and the attorney general would
proceed. This provision would allow an option for either entity
to bring the suit. However, either entity would still have to
prove the same elements that the AG would have to prove.
3:54:15 PM
REPRESENTATIVE CHENAULT expressed concern that entities like the
ARRC or the University could bypass the safeguards that have
been put in place within the attorney general's office.
MS. STAFT related that other states have these provisions in
place to allow private citizens to bring lawsuits forward and it
has worked well.
REPRESENTATIVE CHENAULT maintained his concern if the AG did not
believe an action warranted lawsuit, the UA system or another
state agency could file a lawsuit. He offered his belief that
it is the attorney general's responsibility to handle state
matters.
3:56:00 PM
REPRESENTATIVE NEUMAN asked for clarification of the terms
"direct and indirect" injury.
MS. STAFT responded that only direct purchasers can bring a
lawsuit for antitrust violations. She restated her previous
scenario in which a computer chip manufacturer is engaged in
artificially setting the price to high for a computer chip, with
the manufacturer passing on the cost to consumer. In that
scenario, the consumer is the indirect party and under current
law could not bring a lawsuit. This bill would allow the
consumer to recover damages.
REPRESENTATIVE NEUMAN related an instance in which a refinery
manufactures gas and asked whether the consumer could file a
lawsuit.
MS. STAFT responded that she believed so, but noted that the
consumer must prove the elements. She deferred to Mr. Sniffen
for further clarification.
3:58:13 PM
REPRESENTATIVE NEUMAN maintained the lawsuit could still be
filed.
MS. STAFT agreed. She stated that the case would need to go
through a discovery process.
3:58:35 PM
MS. STAFT explained that proposed Section 11 would create a
civil penalty provision and would allow the AG to bring an
action for civil penalties and sets the maximum civil penalties
at $1 million for a natural person and $50 million for an
organization.
MS. STAFT related that proposed Section 12 would expand the
provision regarding proof of aggregate damages to cover any
action brought under AS 45.50.562-596. It provides the same
definition of "person" as seen earlier in the bill.
MS. STAFT offered that proposed Section 13 would provide
conforming changes and again uses the expanded definition of
person.
MS. STAFT stated that proposed Section 14 would add additional
remedies a court may use for antitrust violations, including the
revocation, forfeiture, or suspension of the business
organization's charter, franchise, certificate of authority,
privilege, or license, dissolution of the business organization,
and divesture of any asset. She noted that the language
provides that a court "may" rather than "shall" add additional
remedies.
4:00:15 PM
MS. STAFT offered that proposed Section 15 would provide
conforming changes and also provides for an expanded definition
of person.
MS. STAFT related that proposed Section 16 would repeal AS
45.50.576(b), AS 45.50.577(i), and 45.50.580(a).
4:00:44 PM
REPRESENTATIVE T. WILSON asked for the reason that this bill was
brought forward.
MS. STAFT explained that the sponsor attended a series of
meetings, and a national antitrust expert testified. The bill
sponsor asked how Alaska's antitrust statutes could be improved.
She related that the antitrust experts suggested that Alaska
could give its private citizens the ability to bring action and
that penalties could be increased. Mr. Sniffen provided input
and the bill was brought forth.
4:02:01 PM
REPRESENTATIVE BUCH recalled "digging" into the corporate
responsibilities. He stated that an agency was involved in
which an owner was instrumental in a corruption case. The
question arose as to whether the damages were high enough and
whether an owner who cooperated in the case could eliminate
liability to the company. He offered his belief that may have
been one reason the sponsor was interested in the antitrust
provisions.
REPRESENTATIVE NEUMAN agreed with Representative Buch.
4:03:32 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), offered that his responsibilities
include enforcement of the Consumer Protection Act and antitrust
statutes. He explained that under current law, only the AG has
the ability to bring an action for indirect damages. He related
that there is an actual case that Alaska, along with other
states, was involved in against a computer chip manufacturer in
California. He said that Alaska had to "pull out of that case"
because Alaska did not have authority to bring these kinds of
actions. That resulted in passage of our current statute that
allows the AG to bring actions against indirect damages. This
bill removes the restriction that only the AG can bring these
types of actions. The DOL does not necessarily have problems in
Alaska. In other states private parties can initiate actions.
This bill is limited to indirect damage cases. He referred to a
U.S. Supreme Court case called Illinois Brick vs. Illinois, so
it is referred to as the Illinois Brick Rule. The Alaska
statute is an Illinois Brick repealer, which gives the
government the opportunity to bring the cases. Most states
allow private parties to bring these actions, although he did
not know if other states extend the ability to political
subdivisions like the ARRC or the UA. He offered to look into
this and report back to the committee.
4:06:34 PM
MR. SNIFFEN explained the second part of the bill provides for a
civil penalty. The DOL supports this provision since the
current statutes do not provide for civil penalties, only
criminal penalties. Currently, it is a misdemeanor and up to a
$50,000 fine if a corporation or up to a $20,000 fine for a
violation. The criminal violation requires proof beyond a
reasonable doubt. He pointed out that almost every other state
has civil penalties. He reviewed approximately twenty states
and Ohio has a $500 per day penalty, California has a penalty up
to $1 million, or two times the gross gain or loss. Nevada uses
five percent of the actual sales as a potential penalty. He
stated that what really is prompting states to amend their
statutes is that the Federal Trade Commission (FTC) has
increased the federal antitrust penalties to $10 million per
individual and $100 million for an organization. Thus, the
penalties contained in HB 275 are penalties that should act as a
deterrent.
4:08:16 PM
MR. SNIFFEN referred to the question on the gasoline refinery.
He agreed that under current law it would be difficult to bring
a lawsuit against Tesoro Alaska Company (Tesoro) in the instance
that a consumer believed that gas prices were artificially high
and were set because Tesoro engaged in price fixing activity
with a refiner or distributers. The AG would be required to
bring the lawsuit, he stated.
4:08:41 PM
REPRESENTATIVE NEUMAN related his understanding that the AG
could file a lawsuit against a refinery.
MR. SNIFFEN agreed that the AG currently has the ability.
REPRESENTATIVE NEUMAN asked whether a gas station would be able
to sue.
MR. SNIFFEN answered yes. It would depend on whether the gas
station was buying direct from the refinery. Under this bill,
the gas station could also bring that action against a refinery.
In further response to Representative Neuman, he explained that
if the gas station is purchasing the product directly from
Tesoro and not through a distributor, the gas station would be
direct purchaser and would be entitled to any damages it
suffered.
REPRESENTATIVE NEUMAN related that if Tesoro has a pipeline to a
bulk plant in Anchorage, but a trucking company moves the gas,
the station pays the bill. He asked if the gas station would
have the ability to bring an action.
MR. SNIFFEN offered his belief that the trucking company would
just be a pass through and the gas station would have the
ability as the purchaser to bring antitrust action against the
refinery. However, this bill would definitely give them the
ability to do so.
4:12:14 PM
[HB 275 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB338 ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CS HB338 Draft ver R.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CS HB338 Sponsor Statement.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB338 Fiscal Note-1-2-021010-CED-N.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB338 Sponsor Statement ver A.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| CSHB 275 Draft ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 ver P.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB338 Fiscal Note-2-1-021010-REV-Y.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| Mar 26 Packet Info.pdf |
HL&C 3/26/2010 3:15:00 PM |
|
| HB338 Supporting Documents Letter-City of Kenai 2-10-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 |
| HB275 Sponsor Statement ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 Sectional Analysis ver T.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB275 Fiscal Note-LAW-CIV-03-19-10.pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 275 |
| HB338_SB269 Supporting Documents - AIDEA (2) (2).pdf |
HL&C 3/26/2010 3:15:00 PM |
HB 338 SB 269 |