Chapter I. Overview and Context of State Antitrust Enforcement

• Pages: 1-43

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CHAPTER I

OVERVIEW AND CONTEXT OF STATE

ANTITRUST ENFORCEMENT

A. Introduction

This book focuses on how state attorneys general exercise their

authority to investigate antitrust concerns and to secure remedies for

antitrust violations.1 State attorneys general have now exercised this

authority for more than a century, and the constitutional issues raised by

opponents have been resolved. Whether one views antitrust enforcement

by state attorneys general as “an important part of the enforcement

network”2 or as “free riding,”3 as achieving “rough justice,”4 or as a force

for “imprecision, duplication and costs,”5 attorneys general are an

1. For a state-by-state analysis of antitrust laws, see ABA SECTION OF

ANTITRUST LAW, STATE ANTITRUST PRACTICE AND STATUTES (3d ed.

2004) [hereinafter ABA STATE ANTITRUST TREATISE]. A fourth edition

of this treatise is forthcoming. In this three-volume work, practitioners,

government attorneys, and academics cite and analyze the statutes and

case law from each American jurisdiction, provide a historical overview

of state enforcement and private antitrust litigation under state statutes,

and highlight differences between state and federal law. The treatise also

describes the role of state attorneys general in enforcing federal antitrust

laws on behalf of the states and their entities and as parens patriae on

behalf of natural person consumers pursuant to § 4C of the Clayton Act,

15 U.S.C. § 15c. Unlike the ABA State Antitrust Treatise, this Handbook

is organized by substantive topic, rather than by individual state.

Moreover, this book focuses primarily on actual practices o f state

attorneys general, rather than on what they are legally enabled to do.

2. Harry First, Delivering Remedies: The Role of the S tates in Antitrust

Enforcement, 69 GEO. WASH. L. REV. 1004, 1041 (2001).

3. Richard A. Posner, Antitrust in the New Economy, 68 ANTITRUST L.J.

925, 940 (2001).

4. Richard Wolfram & Spencer Weber Waller, Contemporary Antitru st

Federalism: Cluster Bombs or Rough Justice?, in ANTITRUST LAW IN

NEW YORK STATE 1, 1 (Robert Hubbard & Pamela Jones Harbour eds.,

2d ed. 2002).

5. Michael L. Denger & D. Jarrett Arp, Does Our Multifaceted Enforcement

System Promote Sound Competition Policy?, ANTITRUST, Summer 2001,

at 41, 45.

2 State Antitrust Enforcement Handbook

independent force, with independent decision-making authority, and they

must be reckoned with in many antitrust investigations.

The chapters that follow focus on specific aspects of attorney general

authority. Chapter II describes multistate investigations and litigation;

Chapter III analyzes state merger enforcement; Chapter IV, state criminal

enforcement; Chapter V, health care markets; Chapter VI, confidentiality

issues; and Chapter VII, state settlements. This chapter provides an

overview of state enforcement authority as the context for the following

chapters.

Civil antitrust enforcement by state governments under the state and

federal antitrust laws is a complex system, sometimes involving a

multiplicity of actors, laws, and jurisdictions.6

States have significant rights under federal and state antitrust law.

These rights are exercised in the main by state attorneys general, who

fulfill their enforcement responsibilities within a federal system in which

each state is sovereign.7 Each state has the right to make enforcement

decisions that differ from those of other state and federal enforcers.8

Moreover, state enforcers can rely on state antitrust law, which generally

is not preempted by federal antitrust law even when federal antitrust law

differs from state antitrust law. State enforcers can also assert state-law

claims as supplemental claims in federal court.9

State attorneys general have broad authority to address competition

concerns that affect three constituencies.

6. See generally ABA STATE ANTITRUST TREATISE, supra note 1.

7. The National Association of Attorneys General has 56 members,

including officials from 50 states, 1 district, 2 commonwealths, and 3

territories. The antitrust law and practice in each of these 56 jurisdictions

are detailed in the ABA STATE ANTITRUST TREATISE, supra note 1.

8. Different enforcement decisions can be made for reasons other than the

merits of an antitrust claim, including when one enforcer decides not to

take action in light of an action already being taken by another enforcer.

Different enforcement decisions on the merits can occur in the context of

mergers, such as California v. American Stores Co., 495 U.S. 271 (1990),

in which California secured divestitures beyond those secured by the

Federal Trade Commission (FTC), and Bon-T on Stores v. May

Department Stores, 881 F. Supp. 860 (W.D.N.Y. 1994), in which New

York secured a preliminary injunction even though the FTC had not

issued a second request. Having multiple antitrust enforcers was not an

“afterthought, [but rather] an integral part of the congressional plan for

protecting competition.” American Stores, 495 U.S. at 284.

9. See California v. ARC Am. Corp., 490 U.S. 93, 103 (1989).

Overview and Context 3

First, as chief legal officers of their states, attorneys general often

pursue proprietary claims—that is, claims as direct purchasers of goods

or services—on behalf of state agencies, divisions, and programs.10

Proprietary claims constitute a significant part of state enforcement.11

Second, state attorneys general represent consumers, pursuing

injunctive relief and damages on their behalf under both federal and state

laws.12 Where consumers (including state agencies) are “indirect”

purchasers who are unable to recover damages under federal law because

of the Supreme Court’s holding in Illinois Brick Co. v. Illinois,13

attorneys general in a number of states can pursue claims on these

consumers’ behalf, primarily under state laws.14

Third, states have broad authority to represent the public interest.

State law often gives state attorneys general criminal authority15 and

broad investigatory powers.16 Moreover, and in addition to the typical

10. See, e.g., N.Y. EXEC. LAW § 61.

11. See, e.g., Texas v. Organon USA Inc. (In re Remeron End-Payor

Antitrust Litig.), No. Civ. 02-2007 FSH, 2005 WL 2230314 (D.N.J.

2005); Ohio v. Bristol-Myers Squibb Co. (In re Buspirone Antitrust

Litig.), No. 1:02-CV-01080(EGS), 2003 WL 21105104 (D.D.C. 2003);

New York v. Aventis, S.A. (In re Cardizem CD Antitrust Litig.), No. 01-

CV-71635 (E.D. Mich. 2003); Alabama v. Bristol-Myers Squibb Co. (In

re Buspirone Antitrust Litig.), No. 01-CV-11401 (S.D.N.Y. 2003). The

settlements in these cases are available at www.abanet.org/

antitrust/committees/state-antitrust/settlements.html. See also Ohio v.

Bristol-Myers Squibb Co. (In re Buspirone Antitrust Litig.), No. 1:02-

CV-01080(EGS), 2003 WL 21105104 (D.D.C. 2003) (order preliminarily

approving proposed settlement in Buspirone Antitrust Litigation); In re

Cardizem CD Antitrust Litig., 218 F.R.D. 508 (E.D. Mich. 2003)

(approval of settlement in Cardizem Antitrust Litiga tion); Ohio v. Bristol-

Myers Squibb Co. (In re Buspirone Antitrust Litig.), MDL No. 1413,

2003 WL 22330972 (D.D.C. 2003) (amended settlement agreement in

Buspirone Antitrust Litigation).

12. See 15 U.S.C. §§ 15c-15h.

13. 431 U.S. 720 (1977).

14. For example, litigation brought by state attorneys general concerning the

pharmaceutical industry from 2000 to 2005 was based in large part on

state-law claims to recover money for consumers. A recent compilation

of these state-law claims can be found at www.abanet.org/antitrust/

committees/state-antitrust/agconsumer.pdf.

15. See the ABA STATE ANTITRUST TREATISE, supra note 1, for a discussion

of criminal authority in each state.

16. See the ABA STATE ANTITRUST TREATISE, supra note 1, for the relevant

statutes in each state.