Chapter 15 Antitrust State Attorneys General have accurately been characterized as “the guardians of the gates of effective antitrust enforcement.” During the past quarter century, state Attorneys General have played an increasingly significant role in ensuring the operation of the free market. Their unique ability to enforce both federal and state antitrust laws have led Attorneys General to bring multistate cases that are national in scope, in addition to local bid-rigging and price-fixing cases. Even before passage of the Sherman Act in 1890, the majority of states had some form of antitrust prohibition. The Sherman Act itself was designed to supplement these state laws. State Attorneys General actively enforced these laws, and important aspects of antitrust law, including the per se rule against price-fixing and remedying anticompetitive combinations with dissolution, were first developed under state law.[1] With the enactment of the Sherman Act, Attorneys General became less active in antitrust enforcement for several decades. Attorneys General resumed more vigorous antitrust enforcement in the mid-1970’s. This revival stemmed in part from new state laws authorizing Attorneys General to sue on behalf of their states and political subdivisions in state and federal courts. Two new federal laws, enacted in 1976, also encouraged antitrust enforcement activity by Attorneys General. The State Antitrust Grant Program amendment to the Crime Control Act [2] provided seed money for states to fund antitrust enforcement programs and the Hart-Scott-Rodino Antitrust Improvements Act authorized state Attorneys General to maintain federal parens patriae treble damage antitrust actions for their respective citizens.[3] Today, Attorneys General are using traditional enforcement tools in innovative ways, working together on multistate cases in both federal and state courts. Their goal now, as always, is to preserve competition, and accordingly lower prices, improve quality and a foster a greater variety of innovative new products for citizens of their states. Legal Authority Federal Law The Sherman Act of 1890 [4] and the Clayton Act of 1914 [5] are the primary federal antitrust statutes. Section 1 of the Sherman Act, which was modeled on several pre-existing state statutes, prohibits contracts, combinations and conspiracies in restraint of trade. Some restraints of trade, such as price-fixing, horizontal allocation of customers or territories, and certain boycotts are so inherently destructive of competition that they are deemed to be unlawful per se, that is, without further proof of injury from the conduct. Other trade restraints, primarily vertical nonprice restraints, are judged under the “rule of reason:” A trier of fact must decide whether the procompetitive effects of the restraint outweigh the anticompetitive effects on competition. Section 2 of the Sherman Act prohibits monopolization and attempts or conspiracies to monopolize trade or commerce. The Clayton Act and the Federal Trade Commission Act of 1914 [6] were designed to supplement the basic provisions of the Sherman Act. These federal laws prohibit actual or potential restraints of trade that may tend to reduce competition in the marketplace. Section 7 of the Clayton Act prohibits mergers that reduce or substantially tend to reduce business competition. An Attorney General may maintain an action for damages and/or injunctive relief for injury to the state, as well as its cities and other political subdivisions, under Section 4 of the Clayton Act. [7] These actions are brought to recover damages incurred by the state in its capacity as a direct purchaser of goods or services with high prices caused by alleged price-fixing conspiracies. [8] If the purchaser is a state agency or institution, state law determines whether the Attorney General may bring suit in the name of the state alone. In some states, the Attorney General may bring a class action on behalf of governmental entities and consumers affected by antitrust violations. The Attorneys General may not seek monetary damages for injury to the general economy of the state9 but Section 16 of the Clayton Act 10 does give Attorneys General authority to seek equitable relief for injury to the general economy of the state. Unlike actions for damages, injunctive actions may be brought by states in their common law capacity as parens patriae to forestall injury to the state’s economy. In bringing actions to challenge anticompetitive mergers under Section 16, states stand on the same footing as “private” plaintiffs and may obtain both preliminary and permanent injunctive relief, including, as the Supreme Court held in California v. American Stores Co.,[11] divestiture of assets. Attorneys General may also recover damages for the residents of their state as parens patriae under Title III of the Hart-Scott-Rodino Antitrust Act of 1976. [12] The Act authorizes a state Attorney General to bring an action for injuries caused by a violation of the Sherman Act to natural persons residing within the state. Damages established are trebled and may be distributed either in a manner authorized by the court in its discretion or to the state as a civil penalty, provided that each affected person has a reasonable opportunity to secure an appropriate portion of the relief. The constitutionality of the parens patriae legislation has been uniformly upheld,[13] and Attorneys General have brought numerous parens patriae actions since enactment of the provision. Parens patriae actions also have been recognized as “superior to a class action as a means for adjudication of collective claims” because they do not require certification to proceed.[14] State Law Kansas adopted the first comprehensive antitrust law in 1889. Although most states adopted their antitrust laws in the late nineteenth or early twentieth centuries, only a few states, including Missouri, New York, Texas and Wisconsin, had active enforcement programs before the mid-1960s. Generally, antitrust enforcement during the first part of the twentieth century was the province of the federal government. In 1973, the National Conference of Commissioners on Uniform State Laws adopted a model state antitrust statute. Several states adopted the model, including Arizona in 1974, Michigan, which included criminal penalties that were not part of the Model Act, in 1985, and North Dakota in 1987. By 1975, more that a dozen states had active antitrust enforcement programs. State enforcement was given a boost by the 1976 Crime Control Act.[15] Under the act, Congress appropriated $25 million in grants to the Attorneys General over three years as seed money to help states develop antitrust enforcement programs. Since then, Attorneys General have played a major role in antitrust enforcement around the country. All fifty states, as well as the District of Columbia, Puerto Rico and the Virgin Islands, have state antitrust statutes. Most are patterned on or analogous to Sections 1 and 2 of the Sherman Act. A smaller number of states have counterparts to Section 7 of the Clayton Act, which prohibits anticompetitive mergers, and the Robinson-Patman Act, which forbids price discrimination. Other state laws contain unique variations. For example, the Pennsylvania law covers only bid rigging and New York’s Donnelly Act prohibits anticompetitive “arrangements.” Many states also have antitrust statutes that apply to specific industries.[16] All state statutes designate the Attorney General as an antitrust enforcement official. The majority of statutes also authorize enforcement by local prosecutors and private rights of action by persons injured by the antitrust violation. Some states, including Nevada, New Mexico, North Dakota and South Dakota, limit the authority of local prosecutors by requiring them to obtain authorization of the Attorney General to bring an antitrust action. In California and New York, local prosecutors are required to notify the Attorney General before filing suit, and, in California, before settling. Almost every state has some form of criminal penalty for anticompetitive conduct,[17] with fines varying from $1,000 to $1million per violation as well as possible imprisonment. Attorneys General also use other provisions of a state’s criminal code to address antitrust violations, including provisions on criminal conspiracy, grand theft or larceny by false pretenses.[18] Additional penalties under state law include voiding of contracts that are in violation of state antitrust law,[19] debarment from state contracting opportunities for violation of state or federal antitrust law, [20] and provisions that restrict a violator’s right to do business in the state or can force the forfeiture of a company’s corporate charter.[21] Almost every state includes in its antitrust legislation an exemption for organized labor and for agriculture cooperatives, but state laws vary widely in their grant of exemptions to other industries. Despite variations in statutory language, state antitrust laws are usually construed in a manner consistent with federal law, at least with respect to what constitutes a violation. Nearly half the state antitrust statutes direct that the legislation be construed in light of analogous federal antitrust laws. In other jurisdictions, state courts frequently refer to and follow interpretations of comparable federal antitrust law. The practice has tended to harmonize federal and state legal developments in the antitrust area during a period of increasing state enforcement. In some cases, however, state courts have refused to follow U.S. Supreme Court construction of federal antitrust laws when interpreting state antitrust laws. The most significant difference between state and federal antitrust law, discussed more fully below, is that a number of states, either by statute or by judicial decision, permit indirect purchasers injured by antitrust violations to seek damages. Another area of some difference is state statutes authorizing parens patriae actions for violations of state antitrust laws.[22] Some of those state laws extend the scope of the parens patriae authority beyond the “natural persons” covered by the federal statute. [23] Enforcement Multistate Litigation During the past decade, the trend in state antitrust enforcement has been toward multistate litigation filed by a number of the Attorneys General on cases with national impact. The Multistate Antitrust Task Force of the National Association of Attorneys General was created in 1983 to coordinate the exercise of the powers of the individual Attorneys General in antitrust matters. The Task Force is a staff level group which includes all states. The Task Force organizes the conduct of multistate investigations and the filing of multistate actions. A single Attorney General or group of Attorneys General will take the lead in an investigation, and one of the lead Attorneys General issues subpoenas or civil investigative demands. The parties are told that their responses will be shared with other interested Attorneys General. The Attorneys General have found that this process can not only reduce the burden on respondents, but can increase coordination among the states and allow the most efficient use of state resources. Multistate litigation typically includes cost sharing arrangements among the Attorneys General and may also include deputization of staff attorneys from one state to act as assistant attorneys general in other states for investigation and litigation purposes. Some examples of successful multistate coordination in antitrust cases include the following •The Attorneys General pursued several vertical price fixing cases in the shoe industry. In 1993, all fifty states and the District of Columbia settled claims that Keds had fixed the prices at which retailers could sell certain models of Keds shoes. [24] Similarly, the Attorneys General settled claims that Reebok International Ltd. sought to set retail prices on its athletic shoes. [25] The Attorneys General and the FTC reached a similar settlement with Nine West, a manufacturer of women’s shoes.[26] In each of these settlements, the court approved plans for alternative distribution of the damages because of the cost and difficulty of making refunds to individual consumers. Attorneys General challenged vertical price-fixing in the agricultural chemical industry. All 50 states, the District of Columbia, and Puerto Rico reached settlements with American Cyanimid and Zeneca to resolve claims that the companies, manufacturers of agricultural chemicals, illegally agreed with dealers to grant monetary rebates only when retail sales were made above agreed- upon “floor” prices.[27] • There also have been coordinated multistate challenges to tying arrangements and attempted monopolization in the pharmaceutical industry. In 1990, twenty-two Attorneys General brought suit against the supplier of a drug used to treat schizophrenia for unlawfully tying the sale of the drug to the purchase of a blood monitoring and lab system from a laboratory company with which it had an exclusive agreement. [28] In 1998, 33 Attorneys General and the Federal Trade Commission sued a manufacturer of generic anti- anxiety drugs, alleging that it had entered into long-term exclusive contracts with its suppliers in order to drive up prices on its drugs. The case was resolved through a $100 million settlement. [29] • Recent multistate cases have focused on a number of anticompetitive activities designed to delay entry by generic competitors in the pharmaceutical industry and to invoke antitrust immunity under federal antitrust laws. Attorneys General recently settled multistate actions against Bristol-Myers Squibb for improper listing and anticompetitive agreements that prevented the distribution of generic Buspar,[30] and for illegal monopoly maintenance and fraudulent patent procurement for Taxol.[31] Attorneys General also reached a settlement resolving claims that manufacturers had conspired to keep generic Cardizem off of the market.[32] • Attorneys General challenged the Minimum Advertised Price or “MAP” policies of music distributors. The States’ complaint alleged that these policies, which were imposed on music retailers by music distributors, prevented retailers from advertising discounts both inside and outside of their own stores. A settlement resulted in injunctive relief and $143 million in damages.[33] • In 1998, Attorneys General from twenty states and the District of Columbia filed suit alleging that software manufacturer Microsoft had abused its monopoly power in the market for desktop operating systems and had destroyed competition.[34] The States’ case was consolidated with a case brought by the U.S. Department of Justice. After a lengthy and well publicized trial, nine states[35] and the Department of Justice entered into a Revised Proposed Final Judgment (“RPFJ”) with Microsoft.[36] The remaining nine states along with the District of Columbia [37] did not agree with the remedies outlined in the RPFJ and drafted their own remedial proposals for consideration by the district court in the remedies trial. In November 2002, the district court upheld the RPFJ previously entered into by the Department of Justice and Settling States, but issued some revisions based on the Non-Settling States’ remedial proposals.[38] Individual State Enforcement The antitrust dockets of individual Attorneys General usually comprise cases involving sectors of the marketplace that are vital to the welfare of consumers and the state’s economy. Individual state antitrust cases have involved products and services such as milk, bread, gasoline, home heating oil, highway construction and solid waste disposal. Notable cases included the following: • The Florida Attorney General reached settlements with two large paper manufacturers resolving claims that the companies conspired with other paper manufacturers to fix the price of sanitary paper products. As part of the settlements, Georgia-Pacific Corporation donated 271 acres of environmentally sensitive land to the state land preservation program.[39] • The Attorney General of Hawaii challenged an arrangement between the publishers of the only two daily newspapers in Honolulu, Hawaii, which were operating under a Joint Operating Agreement.[40] Under the arrangement, the afternoon paper would receive a payment from the morning paper and would stop publishing. The transaction was enjoined. • The Attorney General of Michigan settled a suit against an international dialysis company alleging monopolization of the outpatient kidney dialysis markets in three Michigan counties. The Attorney General alleged that the company, which manufactured kidney dialysis machinery and provided dialysis services, had entered into covenants not to compete with a providers of inpatient acute dialysis services and with nephrologists. The company agreed to sell three clinics and to allow local nephrologists to solicit patients to switch to alternative clinics. It also made a donation to the National Kidney Foundation, 75 percent of which was to be used to benefit patients in the affected counties.[41] • The Attorney General of New York successfully challenged an arrangement between two hospitals in Poughkeepsie, New York through which they negotiated jointly with third-party payers and allocated services among themselves. [42] The Attorney General alleged that this arrangement, which was characterized by the hospitals as a “virtual merger,” was actually a way for the hospitals to fix the rates, terms and conditions for services provided at each hospital and divide the market for the provision of various hospital services. The parties reached a settlement, under which the hospitals agreed to dissolve their joint venture.[43] • The California Attorney General reached a settlement with a ferry company accused of forcing customers to purchase tickets for other cruises in order to obtain tickets to its most popular destination, Alcatraz Island. The ferry company had monopoly rights to distribute tickets to Alcatraz Island under a contract with the National Park Service. The company agreed to stop tying Alcatraz tickets to other cruises. [44] • The Attorney General of Maine successfully challenged a collective purchase agreement between the Maine Health Alliance, a network of 11 hospitals and 325 physicians, and its payors. [45] Under the terms of the settlement, the defendants cannot impose collective purchase agreements on their health care payors and must allow its members to deal with payors outside of the alliance’s network. Mergers Attorneys General have actively pursued merger cases at both the federal and state levels. Recent examples include: • Twelve Attorneys General challenged a joint venture formed by VISA and MasterCard to develop and market a point-of-sale debit card. The Attorneys General alleged that the card would create a monopoly in the debit card market because Visa’s and MasterCard’s members included virtually every major bank in the United States. The parties reached a settlement under which VISA and MasterCard were required to terminate the debit card transaction and to provide advance notice and disclosure of various actions to the Attorneys General.[46] Oil company mergers have led to several challenges by Attorneys General. Fourteen Attorneys General worked with the FTC to investigate the proposed merger of Exxon Corp. and Mobil Corp. The Attorneys General entered into four separate consent agreements with the oil companies addressing different aspects of the merger on a regional basis.[47] California, Oregon and Washington entered into a settlement agreement to resolve concerns about the proposed $26 billion merger of BP Amoco and Atlantic Richfield Co, under which the merging parties agreed to maintain competition by selling assets in Alaska to another competitor.[48] A group of states and the FTC agreed to consent judgments in the proposed merger of Conoco Inc. and Phillips Petroleum requiring both companies to divest assets and agree to certain conduct-based relief in order to complete the merger. [49] • Attorneys General have also focused on anti-competitive mergers in the trash-hauling industry. The Attorney General of Utah filed suit and entered into a consent judgment in connection with a waste-hauling acquisition which the Attorney General alleged would lessen competition in the market for commercial waste hauling services in Washington County, Utah. [50] The acquirer agreed not to discriminate in the provision of landfill services to competing haulers, not to bundle charges for recycling and waste hauling services, and to limit the terms of customer contracts. The Ohio Attorney General settled a state court suit seeking to enjoin a waste-hauling acquisition in the Mansfield, Ohio area. [51] The company agreed to divest a transfer station and four small container commercial routes to a purchaser acceptable to the Attorney General. It also agreed not to challenge the environmental, zoning, or other permits or applications for permits or licenses pertaining to the divested assets. • The Connecticut Attorney General settled a suit against an ambulance service company which had engaged in a series of acquisitions that led to a highly concentrated market for commercial ambulance services within the state. [52] Under the terms of the settlement, the company agreed to sell its fleet of ambulances, surrender 30 ambulance licenses, and renounce its rights to portions of two service areas. • The Attorneys General of Connecticut and Massachusetts announced an agreement resolving concerns about the acquisition of two medical waste disposal companies by a third. Under the agreement, the company had to divest a waste disposal plant in Massachusetts and sell some of its ownership stake in one of the acquired companies to its only competitor in Connecticut.[53] • The Attorney General of Pennsylvania filed suit in federal district court to enjoin the sale of a graphite electrode business unit that were being sold as part of a Chapter 7 liquidation proceeding.[54] The proposed acquirer was one of three companies in the world that made large graphite electrodes. The Bankruptcy Court noted the Attorney General’s complaint and awarded the assets to a fourth company, which successfully purchased the assets, formed a new company, and began production. Criminal Prosecution In addition to more traditional criminal charges associated with bid-rigging on public contracts, some Attorneys General with criminal jurisdiction have used their antitrust statutes to prosecute certain patterns of official corruption that did not fit neatly with more traditional criminal statutes. In New Jersey, for example, the Attorney General has used the antitrust laws to prosecute official misconduct because of the additional flexibility in the extent of the relief available. In one case, the New York Attorney General indicted public officials, who awarded a contract without competitive bids, by analogizing the conspiracy to a traditional bid rigging involving several potential vendors. In another action, the New York Attorney General indicted a public official and commercial property owners who received and gave kickbacks in the process of leasing private office space to the state. This case exemplifies a trend to indict and prosecute such “inside-outside” collusion as an antitrust conspiracy. Recent examples of criminal antitrust enforcement include: • Executives of seven school bus transportation companies in New Jersey were fined and ordered to perform community service work after admitting to corporate misconduct in illegally dividing up bus routes for handicapped pupils in two New Jersey counties. [55] One defendant, who was a township committee member at the time, was ordered to serve two years of probation, and the others were required to perform community service. • The Wisconsin Attorney General charged four Wisconsin corporations who conducted inspections of flammable and combustible liquid storage tanks with criminal conspiracy to restrain trade when they allegedly agreed not to compete for business outside their territory. [56] In anticipation of submitting bids for new state contracts for these services, the defendants allegedly agreed not to compete for business in each other’s territories. • The Tennessee Attorney General charged a waste oil heating equipment corporation with felony bid-rigging in connection with bids submitted to the Tennessee Department of Environment and Conservation. [57] • Arizona took both criminal and civil action against several companies and individuals for rigging bids on contracts with two Arizona school districts. [58] Competition Advocacy As the enforcers of state and federal antitrust laws and as the chief legal officers of their respective states, the Attorneys General have a substantial interest in ensuring that antitrust laws are applied in a manner that is consistent with underlying Congressional policy and federal judicial precedent. Accordingly, the Attorneys General communicate their views on antitrust and competition policy through amicus briefs, comments on proposed federal regulations, legislative advocacy and NAAG resolutions. In recent years, the Attorneys General have filed amicus curiae briefs in various antitrust cases. Thirty-seven Attorneys General filed an amicus brief urging the Supreme Court to affirm the per se rule against vertical maximum price-fixing, although the federal antitrust authorities had each urged that the rule be overruled. The States were granted time at oral argument to present their views.[59] In the Microsoft litigation, twenty-four states submitted amicus briefs opposing Microsoft’s claims that the States’ lacked standing to pursue the case independent of enforcement by federal antitrust agencies. The amici described the legal basis for the States to independently pursue antitrust enforcement actions in federal court. The court held that the States’ standing had been recognized in earlier decisions and was now the law of the case. The Court also dismissed Microsoft’s arguments that the Constitution forbade separate state enforcement of federal antitrust laws, holding that parens patriae actions by a state were well established for federal antitrust actions. It also noted the rights of States to supplement federal antitrust laws with state antitrust laws.[60] Twenty states filed an amicus brief with the United States Court of Appeals for the First Circuit in support of Puerto Rico’s authority to oppose Wal-Mart’s proposed acquisition of a large grocery store chain. Puerto Rico was appealing from a district court decision that barred Puerto Rico’s Secretary of Justice [61] from any further investigation that would impede the Wal-Mart acquisition. [62] Wal-Mart had entered into a consent decree with the FTC which required divestiture of four stores. Puerto Rico’s Secretary of Justice sought additional information about this divestiture, which she believed was not an arm’s-length transaction. Wal-Mart refused to provide the information and the Secretary of Justice sought to enjoin the acquisition. Wal-Mart immediately filed a civil rights claim in federal district court, claiming that the investigation was violating its constitutional rights under the Commerce Clause. The District Court issued an injunction preventing the Secretary from proceeding with her investigation of the merger. Among other issues, the states’ amicus brief addressed Wal-Mart’s constitutional claims, arguing that Puerto Rico’s antitrust statute and antitrust enforcement do not violate the Commerce Clause because Wal-Mart has neither shown that it is disadvantaged, relative to other companies in Puerto Rico, nor that Puerto Rico sought to enjoin the merger because Wal-Mart is a foreign firm. Wal-Mart settled the case and the district court’s decision was vacated. Preventive Antitrust Education of state and local government officials on the fundamentals of the antitrust laws is an important function performed by many Attorneys General. In Alabama, Colorado, Maryland, Nebraska, New York and Oregon, among other states, the Attorneys General have written and distributed pamphlets on state antitrust enforcement. Many Attorneys General review state contracts, professional licensing board regulations, and proposed business practices for anticompetitive effects. The Maine and Virginia Attorneys General review proposed business practices submitted to their offices voluntarily by the parties. Other states review contemplated business practices on an informal basis, without binding either party to the evaluation. In Indiana, the Attorney General reviews state contracts to ensure that they do not inhibit competition or encourage bid rigging and other unlawful practices. In Virginia, the Attorney General reviews proposed State Bar Legal Ethics Opinions for anticompetitive effects. In at least 11 states, the Attorney General reviews the regulations of state boards and agencies to determine whether they unnecessarily limit competition. The regulations of professional licensing boards concerning advertising, solicitation of business, and location of offices are typical regulations reviewed by the Attorneys General. Some Attorneys General actively conduct review of regulatory boards and conduct programs to encourage competition. These include the Attorneys General of California, Florida, Maryland, Massachusetts, Minnesota, Ohio, Pennsylvania, Puerto Rico, South Dakota, Texas, Utah and Virginia. In some states, such as Maryland, the written reviews of regulations are available to the public. Defense of State Actions State statutes and regulations often seek to affect the marketplace for the protection of the public, such as by limiting entrance to a profession or regulating prices to avoid market disruption or predatory conduct. The Supreme Court has exempted from the Sherman Act state action that limits competition when it is a clearly articulated and affirmatively expressed state policy and when the policy is actively supervised by the state itself. [63] Attorneys General, as the chief law officers of their states, may find themselves defending monopolies run by the state itself, as with the prison canteen successfully defended in Jordan v. Mills, [64] or where the state oversees a cartel that restricts production for the purpose of price maintenance, as was successfully defended for the raisin industry in Parker v. Brown. [65] In their role as competition advocates, however, Attorneys General have successfully urged close scrutiny of the state action defense. For example, thirty-six Attorneys General filed an amicus brief supporting the Federal Trade Commission in a challenge to alleged horizontal price fixing by title insurance companies through the use of state rating bureaus. The Attorneys General argued, and the Supreme Court held, that the states did not actively supervise the establishment of title insurance rates.[66] Enforcement Guidelines The Attorneys General have sought to provide the public with guidance as to their enforcement priorities and their analysis of potential cases through adoption of the NAAG Vertical Restraints Guidelines [67] and the NAAG Horizontal Merger Guidelines. [68] These guidelines reflect the antitrust philosophy of the Attorneys General and “embody [the] general enforcement policy of NAAG and its members.” The NAAG Vertical Guidelines, adopted in 1985 and amended most recently in 1995, state the general enforcement policy of the fifty Attorneys General, under both federal and state antitrust law, with respect to resale price maintenance and nonprice vertical restraints. The two stated primary purposes of the NAAG Vertical Guidelines are (1) to mark the boundaries between per se unlawful agreements (horizontal and vertical) and those that have their legality determined by the rule of reason, and (2) to identify the factors that the attorneys general deem relevant in a rule of reason analysis. In 1987, NAAG approved guidelines for prosecution of actions against certain horizontal mergers. The guidelines were revised in 1993. Although the NAAG Horizontal Merger Guidelines have largely been harmonized with the federal merger guidelines published in 1992, [69] they differ in, among other things, their approach to market definition and their special scrutiny of mergers involving a leading firm in the market or an innovative firm. Key Issues Indirect Purchasers In the case of Illinois Brick v. Illinois, [70] the U.S. Supreme Court held that only direct purchasers of price-fixed items may sue the price fixers for treble damages. Persons who purchased a product through a middleman are precluded from recovering any damages they may have suffered; they may only seek injunctive relief. The impact of the Illinois Brick decision on state antitrust enforcement was significant, but in 1990, the Supreme Court held, in California v. ARC AmericaCorp.,[71] that state statutes permitting recovery by indirect purchasers were not preempted. The Supreme Court found that recovery under state law did not pose obstacles to enforcement of federal antitrust policy because liability under state laws would be in addition to, not in lieu of, liability under federal law. The ARC America decision has led to enactment of state statutes and decisions by state courts that now permit recovery of indirect damages by 70% of all consumers in the United States. Twenty-four states, the District of Columbia and Puerto Rico have statutes that specifically permit indirect purchasers to recover damages for state antitrust law violations. [72] In a number of states, courts have interpreted state antitrust and consumer protection statutes to permit indirect purchaser suits. Most recently, a federal district court has held that states whose antitrust statutes are to be interpreted consistently with Section 5 of the Federal Trade Commission Act[73] can maintain actions for restitution or disgorgement on behalf of indirect purchasers. [74] This ability of some Attorneys General to pursue claims on behalf of indirect purchasers has led to a novel multistate litigation technique in which suits brought in various state courts are resolved by a single settlement. Twenty-three Attorneys General entered into a settlement with vitamin manufacturers to resolve indirect purchaser claims resulting from a ten-year price-fixing conspiracy.[75] The Attorneys General’ settlement totaled $225.2 million, of which approximately half was for distribution cy pres by Attorneys General for the benefit of end user consumers; the other half was to be distributed among commercial indirect purchasers via a multi-state claims procedure. The settlement was complex, because it required resolution of numerous separate state court actions, rather than a single federal case, through the mechanism of a single agreement. The settlement also allowed end-users to obtain some redress despite the significant barriers to proving claims that are up to six or seven transactions removed from the initial sale. Finally, the portion of the settlement funds for commercial indirect purchasers was administered on a multistate basis so as to maximize efficiencies, minimize administration costs, and reflect the commercial reality of multistate commerce. Access to Premerger Documents Section 7A of the Hart-Scott-Rodino Antitrust Act, amending the ClaytonAct, [76] requires parties to certain large corporate mergersand acquisitions to file a premerger disclosure statement with the federal antitrust enforcement agencies. The required filing is designed to disclose potential “competitive” problems with the proposed merger which are “likely substantially to lessen competition or tend to create a monopoly” and therefore may lead an enforcement agency to seek an injunction against their merger pursuant to 15 U.S.C. §18. Until1985,and the decisions in Mattoxv.FTC, [77] and Lieberman v.FTC, [78] theHart-Scott-Rod in opremerger disclosure was provided to Attorneys General for their use in assessing the competitive consequences of a merger and taking appropriate action. In the above- cited cases, the courts held that Hart-Scott-Rodino filings could not be disclosed to Attorneys General. In response to those decisions, the Attorneys General through NAAG adopted a voluntary Pre-MergerCompact [79] where by merging parties may file an additional copy of their federal Hart-Scott-Rodino filing with a Compact member state. Such voluntary filings would be confidential, and Attorneys General participating in the Compact agree to seek voluntary production of supplemental materials prior to resort to compulsory process. The NAAG Compact creates an understanding among the attorneys general of signatory states and territories concerning the sharing of information on proposed mergers and acquisitions and coordination of the investigation of such transactions for possible challenge by one or more Attorneys General. A party invoking the Compact must provide the Attorneys General with all materials given to the federal agencies whether they are included in a formal filing or not. In addition, the election to utilize the Compact will automatically constitute a waiver of the confidentiality provisions of federal law applicable to premerger review as to the Attorneys General. Attorney General Operations Funding an antitrust section remains a critical issue. Most Attorneys General find their antitrust programs through the normal budgetary process, but at least 15 states have antitrust revolving funds into which some or all of the damages recovered by Attorneys General are deposited for use in future enforcement efforts. States with revolving funds include California, Delaware, Florida, Indiana, Iowa, Massachusetts, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon, South Dakota, Utah, and West Virginia. Funding also is obtained through awards of attorneys’ fees and costs in court actions brought by the Attorneys General. FOOTNOTES 1 See United States v. Trenton Potteries Co., 273 U.S. 392, 400 (1927) (holding price fixing among competitors illegal per se, relying on prior state case law to the same effect); California v. American Stores, Inc., 495 U.S. 271 (1990) (holding divestiture is an available remedy and citing state statutes. 2 Pub.L. 94-503, Title I, § 116, 90 Stat. 2415 (1976). 3 15 U.S.C. § 15c (1994). 4 15 U.S. C. §§1-7 (2005). 5 15 U.S.C. §§ 12, 13, 14-19, 20, 21, 22-27 (2005). 6 15 U.S.C. §§41-51 (2005). 7 15 U.S.C. § 15 (2005). 8 See, e.g., New York v. Julius Nasso Concrete Corp., 202 F.3d 82 (2d Cir. 2000), in which the state sought to recover overcharges in connection with bid-rigging on the New York City Convention Center. ). 9 Hawaii v. Standard Oil Co., 405 U.S. 251, 263-64 (1972). 10 15 U.S.C. § 26 (2005). 11 California v. American Stores Co., 495 U.S. 271 (1990). 12 Pub. L. No. 94-435, § 301, 90 Stat. 1383, 1394 (1976) (codified at 15 U.S.C. §§ 15c-h 13 See, e.g., Iowa v. Scott & Fetzer Co., 1982-2 Trade Cas. (CCH) ¶ 64,873 (S.D. Iowa 1982). 14 Pennsylvania v. Budget Fuel Co., 122 F.R.D. 184, 185 (E.D. Pa. 1988); see also In re Montgomery County Real Estate Antitrust Litig., 1988-2 Trade Cas. (CCH) ¶ 68,230 (D. Md. 1988). 15 42 U.S.C. §3739. (2007). 16 E.g., Pa. Stat. Ann. tit. 62 § 4501 (2001) (Anti Bid-rigging Act); Cal. Bus. & Prof. Code § 17043 (West 1997); Colo. Rev. Stat. § 6-2-105 (1996); Pa. Stat. Ann. tit. 73, § 213 (1993) (below-cost sales regulation). 17 The Attorneys General of Connecticut, Idaho, Kansas, North Dakota, and Washington do not have criminal jurisdiction for any antitrust violation 18 See, e.g., People v. Johnson, Sac. Super. Ct. No. 88-407013 (Cal. 1988) (grand theft by false pretenses and antitrust count); People v. Durfee Chevrolet-Oldsmobile, Inc, Brighton Town Ct., Monroe Co., State of New York (Dec. 10, 1990) (criminal facilitation of conspiracy in restraint of trade). 19 See, e.g., Cal Bus. & Prof. Code § 16722 (West 2001). 20 See, e.g., Ariz. Rev. Stat. § 34.257; Md. State Fin. & ProC. § 16-203 (1995). 21 See, e.g., Cal. Bus. & Prof. Code § 16752 (West 1987); Ind. Code Ann. § 24-1-4-2 (Burns 1996); Kan. Stat. Ann. § 50-105 (2000); MiCh. Comp. Laws Ann. § 750.154 (West 1991); Ohio Rev. Code Ann. § 1331.07 (Anderson 1998); Wis. Stat. Ann. § 133.12 (West Supp. 1995). 22 Cal. Bus. & Prof. Code § 16750 (West 2001); Colo. Rev. Stat. § 6-4-111(3) (West 2001), Conn. Gen. Stat. § 35-32 (West 2001); Del. Code Ann. tit. 6, §2107 (2000); D.C. Code Ann. § 28-4507 (1999); Fla. Stat. Ann. §542.22 (West 2001); Haw. Rev. Stat. § 480- 14 (2000); Idaho Code § 48-108 (2000); 740 Ill. Comp. Stat. 10/7(8) (West 2001); Kan. Stat.Ann.§50-103(2000);Md.CodeAnn.Com.Law §11-209(2000);Minn.Stat. Ann. § 325D.59 (West 2001); Neb. Rev. Stat. § 59-828 (2000); Nev. Rev. Stat. § 598A.160 (2000); Ohio Rev. Code Ann. § 109.81(A) (Anderson 1998), Okla Stat. Ann. tit. 49 § 205 (West 2000); R.I. Gen. Laws § 6-36-12(g) (2000); S.D. Codified Laws Ann. § 37-1-33 (2000); Utah Code Ann. § 76-10-916 (2000). Vt. Stat. Ann. tit. 9, § 2458 (2000); Va. Code Ann. § 59.1-9.15 (2000); W. Va. Code §47-18-17 (2000). 23 See, e.g., Conn. Gen. Stat. Ann. § 35-32(c) (West 2001). 24 New York v. Keds Corp., 1994-1 Trade Cas. (CCH) ¶ 70,549 (S.D.N.Y., settlement approved Mar. 17, 1994). 25 New York v. Reebok Int’l Ltd., 903 F. Supp. 532 (S.D.N.Y. 1995), appeal dismissed, 96 F.3d 44 (2d Cir. 1996). 26 Florida v. Nine West Group, Inc., No. 00-Civ. 1707 (S.D.N.Y. Dec. 14, 2000) (final judgment and consent decree). 27 Missouri v. American Cyanamid Co., Dkt. No. 97-4024-CV-C-SOW (W.D. Mo. Jan. 30, 1997); Texas ex rel. Morales v. Zeneca, Inc., 1997-2 Trade Cas. (CCH) ¶ 71,888 (N.D. Tex. 1997). 28 Connecticut v. Sandoz Pharm. Co., 90-CV 8062 ( JFK) (S.D.N.Y. filed Dec. 18, 1990); see 59 Antitrust & Trade Reg. Rep. (BNA) 896 (Dec. 20, 1990). This case was transferred to the Northern District of Illinois as In re Clozapine Antitrust Litig., MDL No. 874, No. 91 C 2431 (N.D. Ill. filed Apr. 16, 1991). 29 Connecticut v. Mylan Labs. Inc., No. MDL 1290 (D.D.C. April 27, 2001) (order preliminarily approving settlement). 30 In re Buspirone Antitrust Litigation, No. 01-Cv. 11401, MDL 1413 (S.D.N.Y. Mar. 7, 2003) (preliminary approval granted) (alleged monopolization of drug markets through patent abuse). 31 Ohio v. Bristol-Myers, Squibb Co.,2003 WL 21105104 (D.D.C. May 13, 2003) (preliminary approval granted) (alleged monopolization of drug markets through patent abuse) 32 In re Cardizem CD Antitrust Litigation, 391 F.3d 812 (6th Cir. 2004) (alleged customer allocation among generic and brand name drug manufacturers) 33 In re Compact Disc Minimum Advertised Price Antitrust Litigation, WL 21685581 (D. Me. 2003) 34 New York v. Microsoft Corp., No. 1:98CV1233 (D.D.C. May 15, 1998). 35 The nine original settling states are New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina and Wisconsin. 36 U.S. v. Microsoft, 231 F.Supp.2d 144 (D.D.C. 1998). 37 California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Michigan, Utah, West Virginia and the District of Columbia. 38 New York v. Microsoft Corp., 224 F.Supp.2d 76 (D.D.C.2002). 39 State ex rel. Butterworth v. Kimberly-Clark Corp., No. 1:97CV086-MP (N.D. Fla. July 28, 1999) (settlement agreement). 40 The Newspaper Preservation Act of 1970, 15 U.S.C. §§ 1801-1804 (1994), provides that a newspaper in probable danger of financial failure is eligible to enter into such a joint operating agreement with a competing paper. 41 Press Release, Office of Attorney General of Michigan, July 12, 2000. 42 New York v. St. Francis Hosp., 94 F. Supp. 2d 399 (S.D.N.Y. 2000). 43 Id. 44 Alexis Chiu, San Francisco Bay Tourboat Antitrust Case Is Settled, San Jose Mercury News, Sept. 13, 2000. 45 Maine v. Maine Health Alliance, No. CV03-135 (Me. Super. Ct. Kennebec Cty. June 18, 2003). 46 New York v. VISA, U.S.A., Inc., 1990-1 Trade Cas. (CCH) ¶ 69,016 (S.D.N.Y. 1990). See also 58 Antitrust & Trade Reg. Rep. (BNA) 709-11 (May 10, 1990). 47 New Jersey v. Exxon Corp., No. 1:99CV03183 (D.D.C. Nov. 30, 1999) (consent decree and final judgment); Alaska v. Exxon Corp., No. A-99-618-CV (D. Alaska Nov. 30, 1999) (consent decree and final judgment); California v. Exxon Corp., No. CIV-99-12466 RSWL (C.D. Cal. Nov. 30, 1999) (consent decree and final judgment); Texas v. Exxon Corp., No. 3- 99CV2709-L (N.D. Tex. Dec. 3, 1999) (final consent judgment). 48 California v. BP Amoco, Case No. C000420 (N.D. Cal. Apr. 13, 2000) (consent decree and final judgment). 49 Consent Judgments were filed by Colorado, Idaho, Oregon, Utah and Washington in Utah federal court, Texas and New Mexico in Texas federal court and by Missouri in Missouri federal court. A copy of the consent judgment can be found at http://www.ftc.gov/os/2002/08/ conocophillipsdo.pdf 50 Utah v. Allied Waste Industries, No. 2:99-CV-00303J (D. Utah June 29, 1999) (consent judgment). 51 State v. Allied Waste Industries, Inc., No. 00-388H (Ohio Comm Pleas Ct., Richmond Cty., May 12, 2000). 52 Connecticut v. American Medical Response, Inc., No. CV-99-589962 (Conn. Super. Ct., June 3, 1999) 53 In the Matter of Stericycle Inc., No. 03-124 (Mass. Sup. Ct. Jan. 3, 2003). 54 Commonwealth of Pennsylvania v. SGL Carbon, LLC, No. 03 126 E (W.D. Pa. filed April 15, 2003) (see also In re: The Carbide/Graphite Group, Inc., No. 01-29744 (Bankr. W.D.Pa.) 55 Elaine Silvestrini, 7 School Bus Companies Fined for Collusion, Asbury Park Press (Neptune, NJ), March 25, 2000, at A-1. 56 State of Wisconsin v. Western Wisconsin Inspection, Inc., Nos. 1365-1370 (Wis. Cir. Ct. Dane County June 30, 1999). 57 Tennessee Attorney General, Press Release, Tennessee Announces Bid Rigging Settlement with Ga. Corporation., Sept. 23, 1999. 58 State of Arizona v. Everett, Cause No. CR-97-06002 (Ariz. Super. Ct. Maricopa County Feb. 3, 1999); State of Arizona v. Everett, Cause No. CV97-08506 (Ariz. Super. Ct. Maricopa County Aug. 12, 1999). 59 The Court overruled the per se prohibition on maximum vertical price-fixing. State Oil Co. v. Khan, 522 U.S. 3 (1997). 60 New York v. Microsoft Corp., 209 F.Supp.2d 132 (D.D.C., June 12, 2002) 61 The Secretary of Justice is the Attorney General of Puerto Rico. 62 Wal-Mart Stores, Inc. v. Rodriguez, 238 F.Supp.2d 395 (D.P.R. 2002). The Second Circuit vacated and remanded the case after settlement. Wal-Mart Stores, Inc. v. Rodriguez, 322 F.3d 747 (1st Cir. 2003). 63 See California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). 64 473 F. Supp. 13 (E.D. Mich. 1979). 65 317 U.S. 341 (1943). 66 Federal Trade Commission v. Ticor Title Insurance Co., 504 U.S. 621 (1992). 67 Reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,400. 68 Reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,406. 69 U.S. Dep’t of Justice & Federal Trade Comm’n, Horizontal Merger Guidelines (1992), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,103. 70 431 U.S. 720 (1977). 71 490 U.S. 93, 101 (1989) (finding state antitrust laws to be within “an area traditionally regulated by the states” for which there is a “presumption against pre-emption,” and holding indirect purchaser recovery statutes were not preempted). 72 Ala. Code § 6-5-60(a) (2001); Ark. Code Ann. §4-75-212, §4-75-315; Cal. Bus. & Prof. Code § 16750(a) (West 1997); Colo. Rev. Stat. §§6-4-101; D.C. Code Ann. § 28- 4509(a) (1999); Haw. Rev. Stat. § 480-3 (2000); Idaho Code § 48-108 (2000); 740 Ill. Comp. Stat. 10/7(2) (West 2001); Kan. Stat. Ann. § 50-161 (2000); Me. Rev. Stat. Ann. tit.10,§1104(1)(WestSupp.1995);Md.Code Ann.,Com.LawII§11-209(b)(2)(1990); MiCh. Comp. Laws Ann. § 445.778 (West 1989); Minn. Stat. Ann. § 325D.57 (West 1995); Miss. Code Ann. § 75-21-9 (1991); Neb. Rev. Stat. §§59-821; Nev. Rev. Stat. §§ 598A.160, 598A.210 (2000); N.M. Stat. Ann. § 57-1-3 (Michie 1995); N.Y. Gen. Bus. Law § 340(6) (1999); N.D. Cent. Code §§51.08.1.08; OR REV. STAT.; P.R. Laws Ann., tit. 32, §§ 3341- 3344; R.I. Gen. Laws § 6-36-12(g) (2000); S.D. Codified Laws Ann. § 37-1-33 (2000); Vt. Stat. Ann. tit. 9, § 2465 (2000); Wis. Stat. Ann. § 133.18(1)(a) (West 1989). 73 15 U.S.C. § 45 (1994). 74 FTC v. Mylan Labs., Inc., 99 F. Supp. 2d 1, 4-5 (D.D.C. 1999). 75 Giral v. F. Hoffmann-La Roche Ltd., No. 98 Civ. 7487 (D.C. Sup. Ct. Apr. 26, 2001) (preliminary approval of master settlement agreement). 76 15 U.S.C. §18a. 77 752 F.2d 116 (5th Cir. 1985). 78 771 F.2d 32 (2d Cir. 1985). 79 Reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,410.