Bill seeks tougher antitrust standard
By Deborah Adamson
Advertiser Staff Writer
A bill advancing in the Legislature would make it easier for small businesses and consumers to win favorable settlements from large companies accused of artificially setting prices to stifle competition or gouge customers.
The measure, which has passed the House and awaits hearings in the Senate, would make Hawai'i the only state in the nation with antitrust legislation tougher than the federal standard.
Some businesses are worried that the bill would let frivolous lawsuits reach a jury and potentially cost them much more money to defend or settle out of court.
The bill's author, Rep. Ken Hiraki, D-28th (Iwilei, Downtown, Makiki), said the measure protects consumers and "levels the playing field" for small businesses.
"Is it really going to level the playing field or lead to more lawsuits so that lawyers will be making more money?" asked Stephany Sofos, principal of SL Sofo, a real-estate consulting firm.
The bill would remove a requirement that plaintiffs provide definitive evidence — before a case reaches a jury — that companies are working together to fix prices. Such a change would increase the chances of a case going to a jury trial, where it tends to be easier for a plaintiff to win.
At present, both federal and Hawai'i law require definitive evidence.
"It (the bill) would allow plaintiffs to go to trial if they have absolutely no evidence at all. You can dramatically increase your chances of a settlement," said Gary Slovin, an attorney at Goodsill Anderson Quinn & Stifel in Honolulu who has represented major corporations such as discount retailer Costco. "These trials are extremely expensive for everybody."
Hiraki said the bill would help consumers in cases such as the state's $2 billion antitrust lawsuit against Chevron and a dozen other oil companies in 1998 that accused them of keeping wholesale gas prices high in Hawai'i.
The case never went to to a jury trial because there was no direct evidence of collusion. It was settled three years later for about $35 million. Chevron and Texaco, which have since merged, each paid $5 million.
If the bill had been law back then, "it would have helped in the Chevron case in that the facts would have been given to a jury to look at," Hiraki said. "Whether the outcome would have been the same, I don't know."
There's nothing wrong with being a monopoly, Hiraki added, as long as you don't fix prices to drive rivals out of the market.
"Price-fixing means you prevent competition," he said.
The evidence plaintiffs are required to present before a case reaches a jury can be direct — such as wiretap recordings of executives agreeing to set prices. They also can be circumstantial, but companies must have acted in a way that defied business sense and the only logical answer is that they colluded, said Warren Grimes, an antitrust expert and law professor at Southwestern University School of Law in Los Angeles.
Without such evidence, a judge can dismiss the case during the summary judgment phase, based on the precedent set by the 1986 ruling on Matsushita Electronic Industrial Co. v. Zenith Radio Corp.
Matsushita basically shifted the burden of proof to plaintiffs, who must show that it is not possible the companies accused acted independently, said Tom Grande, a consumer class-action attorney with Davis Levin Livingston Grande in Honolulu.
Jeff Ono, an attorney who represented the state in its gasoline antitrust litigation, supports the bill. He said the burden of proof placed on the plaintiff in antitrust cases would then become the same as other civil lawsuits.
Ono, speaking at a House hearing, said that the state's case was built around circumstantial evidence of price fixing but there was no "smoking gun" or direct evidence of collusion. As such, "we faced a very difficult hurdle" to get to a jury trial, Ono said.
Slovin, the lawyer whose firm represents Costco, said corporations are worried that the bill would let even flimsy antitrust lawsuits reach a jury and potentially cost big businesses millions of dollars in legal fees. The summary judgment phase is where "weak" cases are dismissed, Slovin added.
Sen. Sam Slom, R-8th (Kahala, Hawai'i Kai) and head of Small Business Hawaii, said the focus shouldn't be on enacting more laws to restrict businesses.
Slom said he is against making society more litigious.
"The Democrats have made a major issue of Chevron," he said. "If they want to lower the price of gas tomorrow, they could drop the 56 cents in taxes we pay."
Slovin said businesses also are against another Hiraki bill that would triple the damages an indirect purchaser could receive in an antitrust lawsuit. An indirect purchaser is a consumer or entity that pays for a product or service through an intermediary. For instance, a consumer would be an indirect purchaser of a tube of toothpaste bought at a grocery store.
At present, the law lets the intermediary — such as the grocery store — sue the manufacturer if the price was fixed and get triple damages. If the state sues, damages can be tripled as well. But in a private lawsuit, consumers can only collect the amount they were overcharged.
The bill would let indirect purchases get as much as triple the amount they paid. Hiraki said the bill would make damage rewards equal for all classes of plaintiffs.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
