Legislature(1999 - 2000)
05/03/1999 01:15 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 activities." 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 ways. Number 0253 REPRESENTATIVE MURKOWSKI asked Mr. Winchell what precipitated this legislation. 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 concluded. 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 investigation. Number 0874 REPRESENTATIVE KERTTULA asked what the case is that Mr. Schwartz explained. 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 confidential. 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 problem. 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 investigated. 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 objection. 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 Committee.