Legislature(2003 - 2004)

04/25/2003 01:10 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         SB 161-MONOPOLY AND RESTRAINT OF TRADE ACTIONS                                                                     
CHAIR SEEKINS announced SB 161 to be up for consideration.                                                                      
MR.  ED SNIFFEN,  Assistant Attorney  General, said  that SB  161                                                               
amends  the  existing  anti-trust  laws that  give  the  attorney                                                               
general  the  right to  recover  indirect  damages on  behalf  of                                                               
consumers who otherwise do not have such a remedy.                                                                              
Under current  federal and  state anti-trust law,  if there  is a                                                               
conspiracy between  two suppliers of  a product, that  results in                                                               
that  product's price  being overly  inflated and  that price  is                                                               
passed on to an importer, and  maybe a distributor and finally to                                                               
us  as the  consumer.  The consumer  right now  has  no right  of                                                               
action to  sue the upstream violator.  That rule of law  was laid                                                               
out  in a  1977 U.S.  Supreme  Court case  called Illinois  Brick                                                               
Company v. State of Illinois. The  court thought it would be very                                                               
difficult to  determine how  much profit  was actually  passed on                                                               
and it would  be cumbersome to litigate. Only  the importer could                                                               
sue,  because  they were  the  ones  that purchased  the  product                                                               
directly from the anti-trust violators.                                                                                         
In that  same case, the  Supreme Court  said states were  free to                                                               
enact their  own anti-trust laws  to provide for this  remedy and                                                               
30 states have  already done that. Alaska hasn't  and that's what                                                               
SB 161 does.                                                                                                                    
He  said that  these are  not  just theoretical  things that  are                                                               
happening; they are  happening within the state and  have cost us                                                               
a lot of money.                                                                                                                 
     We are involved in  multi-state litigation all the time                                                                    
     along with  other states to sue  large manufacturers of                                                                    
     products, pharmaceutical products,  contact lenses, and                                                                    
     a variety of different consumer products.                                                                                  
     In one  case two  years ago  called the  Vitamins Case,                                                                    
     there  were  two  vitamin manufacturers  who  conspired                                                                    
     with each other to keep  the price of vitamins high. We                                                                    
     joined  in with  30 other  states in  that suit  and we                                                                    
     reached a  settlement with the vitamin  companies along                                                                    
     with the  other states.  States who had  these Illinois                                                                    
     Brick repealer statutes  got $1 million a  piece in the                                                                    
     settlement.  States who  did not  have the  statute got                                                                    
     zero. We  argued with the settlement  committee in that                                                                    
     case that  we had other  laws that would entitle  us to                                                                    
     recovery and we in fact  were able to get $100,000 that                                                                    
     we distributed  to relevant organizations. But,  had we                                                                    
     had a  law like  this in  place, we  would have  seen a                                                                    
     much larger  recovery. We're involved in  several cases                                                                    
     now that involve these same kinds of claims.                                                                               
SENATOR THERRIAULT asked for examples of other cases.                                                                           
MR. SNIFFEN  responded that two  others come to  him immediately.                                                               
One  involves  a  conspiracy  among   a  bunch  of  contact  lens                                                               
manufacturers to  artificially keep  the price high.  Another one                                                               
is the  Nine West case that  involved the sales of  women's shoes                                                               
that  resulted  in a  lot  of  money  going  to the  states  with                                                               
Illinois  Brick repealer  statutes and  less money  going to  the                                                               
states without  it. He  just resolved  a case  recently involving                                                               
compact   music   discs  where   a   lot   of  distributors   and                                                               
manufacturers of  music set minimum  prices on CDs. They  did not                                                               
present  claims on  behalf  of injured  consumers  in that  case,                                                               
because they didn't  have this kind of  statute. Currently, there                                                               
are three other pharmaceutical cases  involving conspiracies up a                                                               
chain to  artificially inflate the price  of certain prescription                                                               
drugs. Another case  they decided not to get  involved in because                                                               
they  didn't   have  this  law   involves  sorbates,   which  are                                                               
preservatives that are  used in all kinds of foods.  "As a whole,                                                               
we could make big claims on  behalf of consumers to recover those                                                               
types of damages."                                                                                                              
TAPE 03-30, SIDE B                                                                                                            
2:01 p.m.                                                                                                                     
SENATOR  OGAN wanted  to  know  how our  state  laws would  reach                                                               
across oceans to reach suppliers  like OPEC that conspires to set                                                               
oil prices.                                                                                                                     
MR. SNIFFEN replied  that is a good question, but  in most cases,                                                               
the  issues don't  involve foreign  suppliers.  Under state  law,                                                               
ordinary consumers  don't have the  right to challenge  the price                                                               
of gas, for  example, if the conspiracy to keep  the price of gas                                                               
high occurred  upstream. However,  it's not  unheard of  for some                                                               
states  to  get  together  and  bring  causative  action  against                                                               
foreign suppliers of materials.                                                                                                 
SENATOR OGAN asked how they reach foreign countries.                                                                            
MR. SNIFFEN replied:                                                                                                            
     There  is   a  way   states  can   reach  international                                                                    
     boundaries  through  a  lot of  mechanisms....  We  can                                                                    
     extend  our  jurisdiction  to   companies  who  have  a                                                                    
     presence in  Alaska and are doing  business here. There                                                                    
     are international rules that allow us to do that.                                                                          
He said it  probably wouldn't happen very often  in Alaska unless                                                               
we join  with other  states that are  considering doing  the same                                                               
thing, but it can be done.                                                                                                      
CHAIR  SEEKINS asked  if having  subsidiaries in  the U.S.  makes                                                               
that possible.                                                                                                                  
MR. SNIFFEN answered that is correct.                                                                                           
SENATOR THERRIAULT said he doesn't  think it would work with OPEC                                                               
because they  conspire to manipulate  supply to  influence price;                                                               
they don't set the price.                                                                                                       
CHAIR  SEEKINS  wanted to  clarify  that  the retailer  bears  no                                                               
responsibility in this law, just  the persons who are involved in                                                               
the conspiracy.                                                                                                                 
MR.  SNIFFEN  replied  that  is correct.  The  retailer  is  just                                                               
passing prices on.                                                                                                              
SENATOR  THERRIAULT  asked  why  language  on  page  2  would  be                                                               
MR.  SNIFFEN replied  that  is a  good question  and  there is  a                                                               
second portion  to the bill  that removes from the  current anti-                                                               
trust that  you have to find  conduct on behalf of  an anti-trust                                                               
violator is willful before you  can recover treble damages. Right                                                               
now, a  federal law does  not have  that requirement and  you can                                                               
recover three  times your  damages; state law  has a  much higher                                                               
SENATOR  THERRIAULT  asked how  they  would  go about  proving  a                                                               
conspiracy that is not willful.                                                                                                 
MR.  SNIFFEN replied  conspiracy  is almost  always willful,  but                                                               
there  are also  times when  you can  violate the  anti-trust law                                                               
negligently  and  recklessly, like  in  the  current Bristol  Bay                                                               
SENATOR  THERRIAULT  noted  that  the bill  would  not  drop  the                                                               
finding down to knowingly, it would just drop the willingly.                                                                    
MR. SNIFFEN responded that would bring  this law in line with how                                                               
federal anti-trust laws are structured.                                                                                         
SENATOR OGAN asked how this law  would change the way the Bristol                                                               
Bay case is litigated.                                                                                                          
MR.  SNIFFEN said  if this  law had  been in  place, it  probably                                                               
wouldn't have  changed a thing.  In that case, all  the fishermen                                                               
had direct damages;  they purchased or sold fish  directly to the                                                               
processors and  there wasn't an intermediary  that prevented them                                                               
from bringing their claims.                                                                                                     
SENATOR OGAN  asked if this  would allow the attorney  general to                                                               
bring a case against a retailer.                                                                                                
MR. SNIFFEN replied the retailer  that is passing on the inflated                                                               
price from  upstream anti-trust behavior  would not  be affected.                                                               
In  this  instance,  the attorney  general  might  represent  the                                                               
thousands of consumers who might  have bought that product at $10                                                               
when it should have been $5.                                                                                                    
SENATOR  THERRIAULT commented  the fiscal  note doesn't  indicate                                                               
how much this will cost the state.                                                                                              
MR.  SNIFFEN explained  that the  fiscal  note is  indeterminate,                                                               
because the  department doesn't  know how  much revenue  the bill                                                               
will generate. "It's  unlikely to cost the state  any money; it's                                                               
more likely to increase revenue,  because we're involved in these                                                               
cases anyway..."                                                                                                                
SENATOR THERRIAULT  motioned to pass  SB 161 from  committee with                                                               
individual  recommendations  and  attached  indeterminate  fiscal                                                               
note. There was no objection and it was so ordered.                                                                             

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