1977, January, Pg. 1. Antitrust Enforcement in Colorado: New Directions, New Concerns.

• Author: by Francis J. Burke, Jr.

6 Colo.Law. 1

Colorado Lawyer

1977.

1977, January, Pg. 1.

Antitrust Enforcement in Colorado: New Directions, New Concerns

1Vol. 6, No. 1, Pg. 1Antitrust Enforcement in Colorado: New Directions, New Concernsby Francis J. Burke, Jr. and William E. Walters IIIFrancis J. Burke and William E. Walters, Dever, are associated with the firm of Dawson, Nagel, Sharman & Howard.

1Interest in antitrust litigation is on the rise: in fiscal 1976, 1,574 new antitrust suits were filed in U.S. District Courts, only a 7.3 percent increase over fiscal 1975 but a 68.7 percent increase over fiscal 1970.(fn1) Correspondingly, the level of Congressional interest in antitrust enforcement has increased with the continuation of high inflation and the realization that antitrust violations can have a profound effect on the prices that consumers pay for goods and services. Congress has provided very large increases in the budgets of both the Antitrust Division of the Department of Justice, and the Federal Trade Commission,(fn2) and in 1974 it raised the fines and jail terms for criminal antitrust cases.(fn3)

Congress now appears eager to enlist state attorneys general in the antitrust enforcement effort. Just this year, it authorized a large amount of money to be distributed to state attorneys general to bolster state antitrust enforcement efforts.(fn4) On September 30, 1976, President Ford signed into law a bill which provided for premerger notification to federal antitrust authorities, expanded the investigative powers of the Justice Department and, most significantly, expanded the antitrust enforcement powers of state attorneys general by permitting them to recover damages on behalf of natural persons residing in their state for violations of the Sherman Act.(fn5) With this new addition at hand, a review of the antitrust enforcement powers of the Colorado Attorney General and the application of those powers seems timely.

Until 1975, enforcement of state and federal antitrust laws by the State of Colorado was intermittent and sporadic. Then, in the summer of 1975, the Attorney General of Colorado appointed Robert F. Hill as First Assistant Attorney General in charge of a newly created Antitrust Section. Since that time, antitrust enforcement in Colorado has increased dramatically.(fn6)

In August of 1975, the Antitrust Section filed treble damage actions on behalf of the State of Colorado in federal court against several major sugar companies and the nation's four major lock companies.(fn7) Shortly thereafter, the state filed suit in federal court against two major operators of Colorado ski areas seeking injunctive relief against alleged price fixing for lift ticket rates and package plans.(fn8)

The Antitrust Section's first efforts to enforce the state antitrust statutes focused on anticompetitive practices by various professional groups. Cases

2against the Professional Land Surveyors of Colorado and the Colorado Shorthand Reporters Association resulted in the entry of consent decrees which prohibited any further use of minimum fee schedules or professional codes of ethics to maintain or fix prices.(fn9) Following extensive "jaw boning" by the Antitrust Section, the State Board of Examiners of Architects agreed to drop its rule which defined "fraud or deceit" to include competitive bidding, thereby opening the way for competitive bidding by the state's architects. More recently, the Section advised the Board of Governors of the Colorado Bar Association that it had serious reservations regarding the propriety of the state's present rules prohibiting advertising by attorneys.

Following the repeal of the state's Fair Trade Act, the Antitrust Section launched a series of injunctive cases directed at retail price maintenance agreements. The targets of those efforts included Salomon/North America, Inc. (ski bindings),(fn10) James B. Beam Distilling Co. (Jim Beam bourbon),(fn11) and Simmons Co. (Beautyrest mattresses).(fn12) The disposition of the Jim Beam case is typical of the way those actions were handled by the Antitrust Section. It resulted in a consent decree forbidding the producers and distributor from setting prices at the retail level and requiring the defendants to take affirmative steps to advise distributors and retailers of the decree. While each of these actions to date has been resolved by a consent decree, Hill indicated that the Section is inclined to take a tougher stance regarding future defendants in actions of this type.(fn13)

The Antitrust Section has made its presence felt in a variety of other industries as well. It filed an action in state court against fifteen dry cleaning establishments, alleging price fixing of dry cleaning and laundry services.(fn14) It has been in charge of the state Grand Jury's investigation of the dairy industry that has already resulted in the indictment of two major dairies in the State of Colorado.(fn15) And, it recently supervised the state Grand Jury's investigation of bidding irregularities in the sale of rock salt to the state Highway Department and various Colorado cities and counties, which resulted in a Grand Jury report recommending that a civil antitrust action be filed.

Currently, the Antitrust Section is directing its investigative efforts primarily in the area of bid-rigging and other price fixing resulting in injury to the State of Colorado and other governmental entities within the state.(fn16)

The success of these actions may anticipate additional state enforcement when coupled with the fact that funding for state antitrust enforcement may include funds in addition to those appropriated by the Colorado legislature.(fn17) Recent amendments to the Omnibus Crime Control and Safe Streets Act authorized $30,000,000 in federal aid to state antitrust enforcement agencies over the next three years.(fn18) Also, parens patriae actions may be "farmed out" by state attorneys general to private attorneys, with attorneys' fees awarded by the court (discussed below).

The overall increase in Colorado's state enforcement, coupled with the possibility of federal funding, is further enhanced by other developments in antitrust enforcement which affect Colorado. One year ago, the Federal Trade Commission moved its Regional Office from Kansas City to Denver and its impact has yet to be measured on the state level. In addition, neighboring states, particularly Arizona, have initiated aggressive statewide enforcement of state antitrust laws.

This increased level of activity will have a marked influence on the practitioner who must advise his or her client of these changes in the Colorado legal environment. For example, exchanging

3price information, at whatever level, is all too often a precursor to liability under the federal or state antitrust laws.(fn19) In the past, that liability was usually considered in the context of private enforcement litigation. Now, the potential for criminal penalties, state damage actions, and consent decrees must also be considered in advising the business client. This article will first review the law of price fixing and then highlight the applicable Colorado and federal statutes which have recently piqued the interest of the Colorado Attorney General's Office.

A PRIMER ON PRICE FIXING

The Basic ProhibitionAlthough there may be disagreement over how vigorously the antitrust laws should be pursued to affect the structure of industries, there appears to be a widespread consensus that the antitrust laws should be strictly enforced when illegal conduct (i.e., price fixing, group boycotts, tying agreements, limiting production, allocating markets and customers, committing fraud on the Patent Office) is discovered. Of all conduct which violates the antitrust laws, price fixing has always been considered the most pernicious.

In 1974 criminal price fixing was made a felony under the Sherman Act with possible imprisonment for up to three years, a $100,000 fine for individuals and $1,000,000 fine for corporations.(fn20) A significant amount of antitrust activity has always involved price fixing violations. For example, over the past nine years, the Justice Department initiated 579 suits: Of these, 290 involved price fixing violations, and 457 individuals were indicted under the federal antitrust statutes. There are at present nearly 100 antitrust grand juries in operation.(fn21) In light of this effort against price fixing violations, it is easy to see why Congress was receptive to the parens patriae legislation and eager to enlist state attorneys general in the enforcement effort.

In the face of such severe penalties and increased interest in antitrust enforcement, it is difficult to comprehend why price fixing continues. Three reasons have been suggested: (1) some businessmen, cognizant of the law, continue to flout it because the benefits of price fixing are deemed to outweigh the risks of being caught, or because they feel that it is necessary in light of conditions in their industry; (2) some businessmen

4rationalize price fixing, arguing that the prices set are fair, the public is not gouged, and the worst forms of "dog-eat-dog" competition are avoided; (3) some businessmen may not know that price fixing is illegal or, more likely, may not realize the extent to which price fixing law has evolved.(fn22) It is the last of those reasons upon which Colorado lawyers may have some effect, particularly since, as Business Week reports, most price fixers who get caught are...