(This question applies mainly to the US although information from other federations would be interesting too.) I was thinking about price fixing, and laws against it. I hear mainly about Federal anti-price-fixing laws and Federal anti-trust in general, but now I’m wondering about state laws. I hear very little about them (googling various phrases hasn’t given me much). I’m not wondering about any state in particular, I’m wondering more about a very basic jurisdictional issue–if a state’s laws don’t apply outside its boundaries, what can and can’t a state do to protect its own consumers from actions made outside the state?
Made-up Example:
If I’m the state of Washington, can I do anything “myself” (i.e., not just running to the Feds) to deal with, say, grapefruits that are overpriced because of price-fixing / cartel-type behavior out-of-state? Let’s say the grapefruit growers are in Texas and they meet in Texas to make their arrangements. For some reason, neither Texas nor the Federal government will do anything (e.g., the anti-trust laws have been repealed, the relevant agencies are stacked with allies of the Grapefruit Trust, etc.), so it’s up to me.
Put another way, can I stop, maybe even criminalize, the sale of price-fixed grapefruits in my state (or can I not, since doing so would be tantamount to banning something from happening in Texas)? Would I need to prove that Texas and/or Federal law was broken, or would Washington state law suffice? Would relying on Texas law make the Washington Attorney General’s case stronger or weaker?
Enforceability is a different question. I know that it may be impossible for a state to get all the information it wants from other jurisdictions (and price-fixing might be hard to detect even if it happened next door!) I’m really thinking more about the theory of it all.
The legal term for what you are asking about is “private right of action,” and it comes up quite often. A statute will establish that certain conduct by a person or a corporation violates the law, and it provides a legal hook for the government to use to sue to enforce those prohibitions. The question then arises whether only the government can bring such a lawsuit, or whether a private individual also has the right to bring a lawsuit.
As a general rule, criminal statutes will never have a private right of action. One individual cannot put another in jail.
For civil statutes, where one would be suing to stop the misconduct or obtain damages, it will vary by statute. The Supreme Court has articulated some multi-factor tests to determine whether a private right of action exists, but the basic lay of the land is that the Court found private rights of action in several cases in the '60s and '70s (securities laws, Title IX) but courts since then have been less willing to do so (Davis-Bacon Act, HAMP). Offhand, I do not know much about antitrust laws; I think some provisions can be enforced privately and others cannot. State courts as to whether individuals can sue to enforce particular state laws are all over the map.
I think a state is typically equivalent to a private person, when it’s a question of suing under a federal law or the law of a different state. In other words, if a private right of action exists for you to sue someone over a violation of federal or Texas law, it probably exists for the state of Washington as well.
Where you and the state of Washington might differ would be the issue of “standing.” You might have to show that you personally were harmed (i.e., that you paid too much for grapefruit), although you might be able to lead a class action. The state of Washington might proceed similarly by showing that the state itself was harmed (i.e., that it paid too much for grapefruit for its prisons), but it might also be able to proceed on behalf of its citizens, by showing that people in Washington state generally paid too much for grapefruit. The latter case would be complicated for one state to bring under another state’s laws, though (and perhaps not even possible; I may be talking out of my bunghole at this point), and I think it would be more common in that circumstance for the state of Washington to try to sue someone in Texas for violating Washington state law, via misconduct whose effects reached across state lines.
Not a US situation, but on a recent trip to Iceland, we found that price fixing was NOT illegal there. We toured a greenhouse flower grower, and he talked about meeting with other growers to set the prices. However, he was talking about setting low prices in order to get more people to buy flowers.
How it works is that the state brings action against a private entity for it’s actions within that state.
Years ago, several state Attorney’s general threatened to sue Craigslist for enabling prostitution, so bringing action against out of state entities, isn’t impossible or unheard of.
This even works across international borders in certain situations. Just look at the megaupload/Kim Dotcom fiasco.
This is interesting. I was thinking about Tom Tildrum’s point that you have to have standing. I am not sure how a state AG would establish standing; I suppose it would matter whether or not the courts buy the idea that prostitution is a “victimless crime”. But I will look this up.
I will, thanks!
Thanks also to Tom Tildrum. Now I have a decent search term.
Generally, the sale takes place within the state, so the seller can be prosecuted there.
For example, the state could prosecute the grocer who sold the grapefruit at an illegally-fixed price, or the grocery wholesaler who sold them to the grocer, etc.
What’s interesting, IMO, is that there’s price fixing (in a way) mandated at the state level. On some items there’s a minimum markup law. It’s designed to keep keep the big dogs from driving the little places out of business. Every distributor has to offer the same product to every store at the same price. So if I buy some six packs of beer for $4.00 each and Walmart buys them for $4.00 each, Walmart can’t sell it for $3.50 for a few years in an attempt to drive me out of business. Walmart can’t sell anything for below cost, but certain items (alcohol and tobacco among them) have a minimum 6% markup. Price fixing?
And, with alcohol, there is ZERO competition at the state level…none, nada. Alcohol distributors have territories. And only one distributor per territory gets each brand. For example, I buy Sam Adams from one beer company, there is no other beer company that I can buy from that sells Sam Adams, I can’t shop around for a better price to pass along to my customers, I can’t even buy (as a reseller) directly from the brewery and there’s no reason why the beer distributor can’t sell it for a higher price, other than that the stores at the edges of their territories will end up losing customers to the next territory over…price fixing? Why isn’t competition allowed at the distributor level? I’m sure it’s to protect the brewers (and probably the quality of your beer), but if multiple people in one territory could sell the same brand, you’d probably see your favorite craft beer come down by 50¢ or a dollar. The problem is, all the pressure they’d put on the brewery might cause other issue, but that’s not the point.
Often times, when a customer asks me for a certain beer, I’ll call my beer guys and they’ll all tell me they don’t carry that one. When I pass it along to the customer, they tell me that they’ll check some of the other stores. I usually try to explain that if none of my beer distributors have it, they’ll have to go pretty far since if I can’t get it, nether can anyone else around me, so they should at least start in the next country, but they’ll probably end up going at least two counties over, depending on which beer distributor I’m talking about.
Joey P has brought up some interesting points. I understand why the voters / legislators would want to stop the big businesses from driving the small ones out of business, but I think mandated price fixing is very odd. I am suspicious of it for sort of Adam Smith reasons. Back in the olden days (post-Sherman Act, pro-Clayton Act), I wonder if this would be considered “a combination in restraint of trade”, but I don’t know if the Sherman Act would actually ties a state’s hands.
t-bonham has made an interesting point–if I can ban something from happening in my state based on facts from outside*, I could put a flat-out limit on the nationwide market share of anyone doing business in my state, as well as on statewide market share. I’m not sure anyone does this, and it may also have problems from the perspective of the Adam Smith-type economist, but at least it is a possible solution to oligopoly (not strictly to trusts and cartels though). You could also link maximum allowed statewide market share to actual nationwide market share–“No business with more than 25% share in the nationwide __ market shall exceed 30% of the statewide market for that product.” (I’m just brainstorming here.)
Such laws and regulations, if taken too far, would eventually become unconstitutional, surely. States can’t ban or even tax imports from other states. They also can’t discriminate against out-of-state companies (I think because of the 14th Amendment). But I think if you treated an overly-dominant business the same whether it was headquartered in your state or another, and whether it bought from in-state or out-of-state sources, then you’d be okay under the 14th.
Looking back, it is strange that I ever doubted this was possible. You couldn’t get around a state ban on sales to consumers of adulterated foods by adulterating them in a different state, although I think you could transport them across a state where they’re banned, if they were legal under Federal law and the laws of both the state of origin and the final destination.
I would imagine if the Texas growers, for example, sell to Washington grocers - does the transaction happen in Texas or Oregon? I guess that depends on where the ownership changes hands, etc. Washington couldn’t prosecute the Washington grocers, as they are not participants in the scheme, they are only buying what is presented to them on the open market.
If the sale “happens” in Washington, then the Washington law can be used… which brings us to the question of whether a fine levied in Washington can be collected in Texas? Presumably the state could seize any truckloads of fruit coming into their state if they can’t collect, but then all Texas growers have to do is use middlemen to resell there.
I assume the Washington grocers could launch a civil action; the question again being in which state? I presume a damages award made in Washington could be collected in Texas? You can’t escape a judgement debt by skipping across state lines?
Alcohol (in PA) has some extremely picky laws/regs. The bar I go to had a special, announced on Facebook, involving mixed six packs. Basically, you paid full price for five beers and number six was a penny.
The manager messed up his Facebook post and said that the sixth one was free. And he got in some trouble over it with the Liquor Control Board. A penny was OK, free was verboten. He had to talk his way out of a fine.