Legislature(1999 - 2000)

05/03/1999 01:15 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 212 - UNLAWFUL TRADE PRACTICES/ANTITRUST                                                                                     
CHAIRMAN KOTT announced the first order of business is House Bill                                                               
No. 212, "An Act relating to unlawful trade practices and antitrust                                                             
Number 0085                                                                                                                     
CORY WINCHELL, Administrative Assistant to Representative Pete                                                                  
Kott, came before the committee and presented the bill.  He stated                                                              
that the litigation surrounding antitrust and unfair trade                                                                      
practices, as well as the Consumer Protection Act are long, and                                                                 
often arduous matters, which result in a high amount of discretion                                                              
and sensitivity.  This bill would reinforce the confidential nature                                                             
of such a case by prohibiting certain public disclosures during,                                                                
and even after, an investigation.                                                                                               
MR. WINCHELL offered a sectional analysis of HB 212.  Section 1                                                                 
amends the confidentiality section of the state's Unfair Trade                                                                  
Practices Act.  It prohibits the attorney general from making the                                                               
names of persons alleged to have committed unlawful trade practices                                                             
public during and after an investigation.  This section also adds                                                               
investigation records and intelligence information of the attorney                                                              
general that are created in the course of an investigation and the                                                              
work product by exempting it out of public disclosure.  Section 2                                                               
adds a new section on articles of monopoly and restraints of trade.                                                             
The article provides that investigation records obtained or created                                                             
by the attorney general during an investigation are not considered                                                              
public records before or after an investigation.  He stated that it                                                             
does allow and provide for the attorney general to issue public                                                                 
statements warning the public about the present or future                                                                       
violations of the article, however.  The intent is to exempt highly                                                             
critical and complex statements from public disclosure during an                                                                
antitrust lawsuit.                                                                                                              
REPRESENTATIVE KOTT stated, according to his understanding, that is                                                             
how it was done until there was a court decision reversing the                                                                  
Number 0253                                                                                                                     
REPRESENTATIVE MURKOWSKI asked Mr. Winchell what precipitated this                                                              
MR. WINCHELL deferred the question to Mr. Daveed Schwartz from the                                                              
Department of Law.                                                                                                              
DAVEED SCHWARTZ, Assistant Attorney General, Commercial Section,                                                                
Department of Law, testified via teleconference from Anchorage.  He                                                             
specializes in antitrust and consumer protection cases.  The                                                                    
content of HB 212 was incorporated in HB 142 from a prior                                                                       
legislative session.  It was precipitated by concerns expressed by                                                              
the seafood processing industry regarding the confidentiality of                                                                
state antitrust records after an investigation was concluded.  This                                                             
issue also came before the Alaska Superior Court surrounding salmon                                                             
litigation in relation to price fixing in 1996.  A superior court                                                               
judge ordered the state attorney general's office to release all of                                                             
the investigative information in the state's closed investigative                                                               
file, and treated it as if it were public information.                                                                          
MR. SCHWARTZ explained that there are certain problems posed by                                                                 
treating investigative information as public information.  He said,                                                             
"During the investigation, it impedes the state's progress toward                                                               
an effective result, and then, afterwards, if the companies that                                                                
are cooperating with the state know that, after an investigation is                                                             
closed, which could be a month after it starts or several years                                                                 
after it starts, the companies would be less willing to cooperated                                                              
during the investigative stage or reticent in their statements to                                                               
the attorney general's office knowing that the information could                                                                
become a matter of public record."                                                                                              
MR. SCHWARTZ stated that Section 1 relates to the Consumer                                                                      
Protection Act and records thereof.  Currently, those records,                                                                  
during an investigation, are not available to the general public.                                                               
He said the change ensures that records collected during the                                                                    
investigation will not be public even after the investigation is                                                                
MR. SCHWARTZ further stated that Section 2 corrects an error in the                                                             
antitrust statute.  The statute currently says that information                                                                 
obtained under antitrust civil investigative demands in the form of                                                             
documentary evidence is confidential and cannot be released unless                                                              
ordered by a court for good cause.  The same confidentiality                                                                    
restrictions apply to testimony obtained under a civil                                                                          
investigative demand.  But for some reason he believes that is an                                                               
oversight.  The statute does not provide for the same level of                                                                  
confidentiality for testimony as it does for documentary material.                                                              
MR. SCHWARTZ further stated that Section 3 harmonizes the antitrust                                                             
statute with the consumer protection statute.  He said, "Often                                                                  
times, we're proceeding under both antitrust and consumer                                                                       
protection statutes.  Sometimes we proceed only under the antitrust                                                             
statute and we want to make sure that the records of investigation                                                              
are not considered public records during or after an investigation.                                                             
However, like the Consumer Protection Act, the attorney general                                                                 
would have the power to issue public statements describing                                                                      
(indisc.) course of conduct or conspiracy that would constitute a                                                               
violation of the antitrust laws."                                                                                               
Number 0614                                                                                                                     
REPRESENTATIVE GREEN commented that Mr. Schwartz is undoubtedly                                                                 
aware of the ongoing concern of the state regarding the merger                                                                  
between Exxon [Arco] and BP.  He asked,  "What is your feeling if,                                                              
on one hand, we say, 'Sure.  We can understand that there's going                                                               
to be proprietary information that the certain individuals within                                                               
the state might be privy to, but not the public.' ... What do you                                                               
see the dichotomy here, if any?"                                                                                                
MR. SCHWARTZ replied that, under the current wording of the                                                                     
antitrust laws, documentary material collected pursuant to a civil                                                              
investigative demand is confidential and cannot be released unless                                                              
ordered by a court [AS 45.50.592 (e)].  He is a member of the                                                                   
BP-Arco Merger Task Force in the executive branch.  He explained                                                                
that any information they collect, either from the Federal Trade                                                                
Commission or from the merging parties themselves or from third                                                                 
parties, in the form of documentary material will be confidential                                                               
under the present wording of the antitrust laws.  The antitrust                                                                 
laws are interpreted as allowing the state to issue public                                                                      
statements concerning investigations even now, and Section 3 will                                                               
simply clarify that current interpretation.                                                                                     
Number 0762                                                                                                                     
REPRESENTATIVE KERTTULA asked:  "If you had a request for the                                                                   
information and it was being created in the course of the                                                                       
investigation, and you're anticipating litigation, isn't that                                                                   
already going to be covered by work product?  I mean, you're not                                                                
going to be able to release that information anyway."                                                                           
MR. SCHWARTZ replied that is true.  He explained if there is a                                                                  
request for information during an investigation, then it would be                                                               
treated as not available under the Public Records Act.  He said:                                                                
     More often, what happens is we open up a case and close                                                                    
     it rather quickly, and, then, for some reason, whether by                                                                  
     interest of a news reporter or a competitor of a company                                                                   
     that we've looked into or a consumer group, wants to get                                                                   
     at our closed files. ... Our interest in protecting the                                                                    
     confidentiality of closed files has been interpreted by                                                                    
     courts in other states and nationally as being less than                                                                   
     if we had an ongoing investigation.  So, we have less                                                                      
     protection of confidentiality of closed files than we do                                                                   
     current investigations.  And this law would enhance our                                                                    
     ability to protect the identity of companies being                                                                         
     investigated or records collector (indisc.) created that                                                                   
     may cause some unnecessary embarrassment or public                                                                         
     spotlight and infringe on the ability of, or interest of,                                                                  
     companies to cooperate with the state in its                                                                               
Number 0874                                                                                                                     
REPRESENTATIVE KERTTULA asked what the case is that Mr. Schwartz                                                                
MR. SCHWARTZ replied in 1991 the state started an investigation of                                                              
possible antitrust violations in the seafood processing industry,                                                               
and in 1993 wrote a 41-page report detailing information uncovered                                                              
during that investigation.  The state said they did not have the                                                                
resources to pursue the investigation, so the case file was closed.                                                             
Thereafter, some plaintiffs became interested in bringing another                                                               
lawsuit against seafood processors, and requested access to the                                                                 
closed files, which was denied by the state.  A lawsuit was then                                                                
filed against the state for failing to release the information                                                                  
under the Consumer Protection Act and Public Records Act.  The                                                                  
superior court judge involved found that the state was required to                                                              
release their closed investigative files to the plaintiffs.  The                                                                
state appealed to the Alaska Supreme Court.  During the appeal                                                                  
process, the state worked out a settlement with the seafood                                                                     
processor plaintiffs where they could get the information in their                                                              
litigation, but keep it confidential under the terms of a                                                                       
protective order.                                                                                                               
REPRESENTATIVE CROFT asked Mr. Schwartz for a copy of the decision                                                              
allowing the release of those documents.                                                                                        
MR. SCHWARTZ commented he would provide a copy to Representative                                                                
Croft, but the order itself is unremarkable and it does not cite                                                                
any cases.                                                                                                                      
REPRESENTATIVE CROFT wanted to know why antitrust would be kept                                                                 
Number 1081                                                                                                                     
MR. SCHWARTZ stated it is highly unusual in Alaska to apply the                                                                 
antitrust laws to examine a merger.  More often the state has                                                                   
initiated an investigation of alleged price fixing, bid rigging,                                                                
monopolization, territorial restraints or other non-merger matters.                                                             
The reason to keep that information confidential during an                                                                      
investigation is not to impede the progress of the investigation                                                                
and to encourage cooperation of the parties.  To keep it                                                                        
confidential after the investigation is to encourage the                                                                        
cooperation of the parties not to release potentially embarrassing                                                              
information that would not have been made public anyway.  He stated                                                             
that, with respect to merger information, the usual result with                                                                 
infrequent merger examinations is to file a consent judgement with                                                              
the court detailing the facts of the case and moving forward with                                                               
the merging party to seek court approval under the antitrust laws.                                                              
Where a merger is challenged or approved, either way, there is                                                                  
going to be a public release of the information in the form of a                                                                
court filing.  He said no one will be left in the dark in terms of                                                              
merger enforcement matters.                                                                                                     
REPRESENTATIVE CROFT replied that he was left in the dark.  He                                                                  
mentioned the example of the Safeway-Carrs merger in which there                                                                
was a consent decree discussing some elements of it.  He said, "By                                                              
then, it's already an agreement between the AG's [attorney                                                                      
general's] office and the affected, in that case, grocery interest.                                                             
And it was virtually impossible for me to make an evaluation of the                                                             
merits of that decision.  I essentially had to trust - do trust -                                                               
the AG's office, but had to trust them and Safeway and Carrs that                                                               
it had come to the right public policy decision.  And it seems to                                                               
me that there may be a good argument during an investigation                                                                    
because you don't know whether these allegations are correct or                                                                 
not, and you don't want to have them splashed on the front page                                                                 
until you make a decision, but after you have reached some                                                                      
determination-there was merit to it, there wasn't, this is                                                                      
appropriate or it's inappropriate-why wouldn't that be the time to                                                              
involve the public; shield them when there's just an allegation                                                                 
that you haven't had a chance to look at, but why, instead of this,                                                             
shouldn't we say after an investigation everything becomes public?"                                                             
Number 1248                                                                                                                     
MR. SCHWARTZ replied if companies know going into an investigation                                                              
that, as soon as the attorney general's office is ready to close                                                                
its file, all the information that they have submitted in                                                                       
confidence would become public, then they would be less willing to                                                              
cooperate.  They would probably move for a protective order, and                                                                
would either have to litigate the terms of the protective order or                                                              
a breech of it.  If a protective order is agreed to then it would                                                               
be a court ordered confidentiality that would continue on through                                                               
after an investigation was closed.  If it had to be litigated, it                                                               
would take up a lot of resources every time an antitrust                                                                        
investigation was conducted and a subpoena was issued; protective                                                               
orders would have to be litigated.  As a practical matter, making                                                               
the files available after an investigation is closed could also                                                                 
impede the progress and effectiveness of antitrust investigation.                                                               
REPRESENTATIVE CROFT stated he understands why it would be more                                                                 
efficient for the attorney general's office and more convenient for                                                             
the parties.  He said, "I guess, I don't yet understand why it's                                                                
better public policy that that isn't, ... (indisc.) never                                                                       
understand why they would want to keep it confidential, but it                                                                  
seems to me the public might have something to say on it, too."                                                                 
REPRESENTATIVE CROFT further said that, on unlawful trade                                                                       
practices, a great job is done enforcing the consumer protection                                                                
laws.  He indicated that it has been a frustration of the                                                                       
complaining party in a consumer protection action that there is                                                                 
very little they can do to get the status of the case.  It seems to                                                             
him appropriate maybe only under the "5521 Section A (indisc.)" to                                                              
say, "Except that the AG may tell the complaining party - the                                                                   
person who said, 'I got swindled by this company.'  Maybe able to                                                               
at least keep them informed about the status of the case."  He                                                                  
asked Mr. Schwartz whether this would be the appropriate section to                                                             
put something like that.                                                                                                        
MR.  SCHWARTZ replied he does not see that either the current                                                                   
wording of the Consumer Protection Act (521 b (indisc.)) or the                                                                 
proposed wording in HB 212 as an obstacle to doing what                                                                         
Representative Croft just said.  If the complaining party wants to                                                              
know what the status is of an investigation of their own complaint,                                                             
there has never been constraint in terms of communicating that                                                                  
information.  On the other hand, if someone other than the                                                                      
complaining party requests the information, it is treated as a                                                                  
Public Records Act request.                                                                                                     
Number 1429                                                                                                                     
REPRESENTATIVE CROFT wondered whether he is confused.  He thinks                                                                
that there has been a couple of cases where that has been a                                                                     
MR. SCHWARTZ stated, if the complainant wants to know what the                                                                  
status of their complaint is, there has never been a constraint on                                                              
telling them whether their case is still under investigation or                                                                 
resolved.  If it is resolved, it is usually because a settlement                                                                
was agreed upon.                                                                                                                
REPRESENTATIVE KERTTULA asked Mr. Schwartz whether confidentiality                                                              
agreements could be entered into with the parties being                                                                         
MR. SCHWARTZ replied often times there have been agreements                                                                     
insisted upon by the parties.  Since there is no protection of                                                                  
confidentiality after an investigation is closed, the parties                                                                   
submit the records on the condition that the records are returned.                                                              
MR. WINCHELL stated that one of the policy concerns of interest is                                                              
facilitating or encouraging dialogue between the parties in a                                                                   
claim.  There are a lot of proprietary concerns over certain                                                                    
numbers as well.                                                                                                                
Number 1594                                                                                                                     
REPRESENTATIVE ROKEBERG made a motion to move HB 212 from the                                                                   
committee with individual recommendations and the attached zero                                                                 
fiscal note(s).                                                                                                                 
REPRESENTATIVE CROFT objected.  This is an area where there are                                                                 
legitimate confidentiality concerns, but there are also significant                                                             
public disclosure concerns not completely addressed to his                                                                      
satisfaction.  He believes the time to keep it confidential is in                                                               
an investigation, but he thinks care needs to be taken to report                                                                
back to the public with some fullness of what was done, what was                                                                
found, and why one thing or another was decided to be done.  He                                                                 
said he has seen the product that results from these antitrust                                                                  
discussions.  He does not feel the consent decree told him enough                                                               
as a private person in terms of whether the merger was a good idea                                                              
or a bad idea.  Even with executive sessions that he has sat in on,                                                             
where he got more information, he was not satisfied with the level                                                              
of information.                                                                                                                 
REPRESENTATIVE CROFT further stated that he thinks a balance needs                                                              
to be drawn closer to public evaluation.  Every step done on                                                                    
confidentiality may make it easier to settle a case and easier on                                                               
the parties to make a disclosure.  In that regard, there is the                                                                 
potential to undermine the confidence of the public in terms of                                                                 
whether the decisions made were good.  He thinks what should be                                                                 
done is to err on the side of telling what was done, what was                                                                   
found, and why it was appropriate.  He referred to the                                                                          
Safeway-Carrs issue and stated, "I have never gotten, despite                                                                   
repeated requests, just some blanket indication of what the merger                                                              
situation was.  That is, the number that approximates how                                                                       
monopolistic a grocery industry is before and after the merger.                                                                 
Even that level, this number that tells you how fractured or                                                                    
monopolistic a market is, which wouldn't tell me how much Safeway                                                               
had or Carrs had or Fred Meyer's had, but simply the level of                                                                   
monopolization.  They said that was too critical, too confidential.                                                             
So, I can't even say, at this point, that it decreased or increased                                                             
the level of monopolization or to what level.  And I don't know                                                                 
that, even in executive session.  My constituents don't know it,                                                                
and I think that does them a disservice.  I don't criticize the                                                                 
Judiciary Committee for putting this forward.  I think it probably                                                              
was the original intent of the statute, but I think we need to                                                                  
balance that statute in the other direction."                                                                                   
Number 1748                                                                                                                     
REPRESENTATIVE MURKOWSKI said she appreciates the fact that the                                                                 
consent decrees may be less than sufficient and that additional                                                                 
information ought to be made available so that whether it has been                                                              
in the public's best interest can be truly determined.  On the                                                                  
other hand, she is very sensitive to the chilling effect that the                                                               
release of certain information would have on the parties.  She                                                                  
indicated that if she were one of the parties and knew that the                                                                 
information was going to be made available to the public at the                                                                 
conclusion of an investigation, she would be less than forthcoming.                                                             
It needs to be ensured that those people reviewing the information                                                              
have absolute full disclosure.  She thinks, perhaps, the consent                                                                
decrees do not go far enough, but a certain level of                                                                            
confidentiality has to be allowed for.                                                                                          
Number 1810                                                                                                                     
REPRESENTATIVE KERTTULA commented that this is one of those great                                                               
balancing questions between the public's right to know and the                                                                  
parties' right to negotiate and come to a conclusion.  The state's                                                              
policy is very strong in regards to public records and making them                                                              
available.  She stated that there are many ways that records can be                                                             
held confidential.  Some records are created in the anticipation of                                                             
litigation, and they are going to be confidential anyway under the                                                              
current court rules.  She said if Mr. Schwartz is right, and this                                                               
is the way that he reads the law right at the moment, then she is                                                               
a little bit concerned about trying to do something that might                                                                  
conceivably make records be held confidential when it was not                                                                   
wanted for them to be.  She thinks that there are already a lot of                                                              
protections in place and she would not go this far.                                                                             
REPRESENTATIVE GREEN stated that he also has some concerns.  He is                                                              
somewhat reassured that what is being talked about is the attorney                                                              
general and not the legislature.  On occasion, the legislature has                                                              
had to go into executive session to get information that was very                                                               
sensitive.  He is really torn between what has been discussed                                                                   
before about the public's right to know, but he also balances that                                                              
as a "member of a cooperative electorate."  He explained that there                                                             
was an executive session almost weekly when he was on the board of                                                              
directors of Chugach Electric Association Incorporated.  It was so                                                              
common that it was actually an agenda item that was always there,                                                               
and the public never really scrutinized it.  That does not mean,                                                                
however, that the public did not want to know.  He is concerned                                                                 
that if "we were to bind ourselves with something like this with                                                                
confidential nature, and inadvertently allowed it (indisc.) that                                                                
then create any litigation potential from an injured party."  He                                                                
stated that since, the way he reads it, they are really talking                                                                 
about the attorney general's office; he agrees with moving the bill                                                             
from the committee but with reservation.                                                                                        
Number 1933                                                                                                                     
CHAIRMAN KOTT said he appreciates the concerns of Representatives                                                               
Croft and Green.  If he were an entrepreneur dealing with the                                                                   
attorney general, he would probably do as much as he could to not                                                               
provide every bit of information that was requested just to stymie                                                              
that investigation knowing that everything would be released.                                                                   
REPRESENTATIVE ROKEBERG said he is concerned also, but only in the                                                              
sense that he is waiting for an answer from the attorney general's                                                              
office as to why they lied to him about participating in the                                                                    
Safeway-Carrs merger.  He has not received a response and finds                                                                 
himself in agreement with Representative Croft regarding the                                                                    
forthrightness of the Attorney General and his ability to respond.                                                              
He said, "On the other hand, I find that (indisc.) proprietary                                                                  
information ... what to me is the complete constructive divesture                                                               
of Safeway's interest in the state of Alaska to allow them to buy                                                               
Carrs is kind of--I guess they, they divested themselves of enough                                                              
... of their property so they won't have a monopoly--I find that on                                                             
the face kind of obvious.  With that, I'll vote yes on the bill."                                                               
CHAIRMAN KOTT said, in defense of the attorney general's office,                                                                
they have probably been slow in getting a response to                                                                           
Representative Rokeberg because they are working on so many of                                                                  
these ongoing investigations and trying to get the parties to                                                                   
provide all the information.                                                                                                    
REPRESENTATIVE ROKEBERG commented that was last October.                                                                        
CHAIRMAN KOTT asked whether Representative Croft still had an                                                                   
Number 2038                                                                                                                     
REPRESENTATIVE CROFT withdrew his objection.                                                                                    
CHAIRMAN KOTT asked whether there is any further objection.  There                                                              
being none, HB 212 was so moved from the House Judiciary Standing                                                               

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