Title: An act relating to actions under chapter 19.86 RCW, the consumer protection act.

Brief Description: Revising provisions concerning actions under the consumer protection act.

Sponsors: Senate Committee on Judiciary (originally sponsored by Senators Kline, McCaslin and Weinstein; by request of Attorney General).

Brief History:

Judiciary: 3/23/07 [DP].

HOUSE COMMITTEE ON JUDICIARY

Majority Report: Do pass. Signed by 11 members: Representatives Lantz, Chair; Goodman, Vice Chair; Rodne, Ranking Minority Member; Warnick, Assistant Ranking Minority Member; Ahern, Flannigan, Kirby, Moeller, Pedersen, Ross and Williams.

Staff: Bill Perry (786-7123).

Background:

Under the state's Unfair Business Practices - Consumer Protection Act (CPA), various business practices are declared unlawful. These practices include:

• engaging in unfair methods of competition and unfair or deceptive acts or practices in the conduct of commerce, including contracts, trusts or conspiracies in restraint of trade;
• monopolizing or attempting to monopolize trade;
• entering agreements not to purchase from the competitors of a particular seller when the agreement substantially lessens competition or tends to create a monopoly; and
• acquiring corporate stock when the acquisition substantially lessens competition or tends to create a monopoly.

Several statutes elsewhere in the code also declare violations of their provisions to be violations of the CPA.

A party injured by a violation of the CPA may bring an action for damages. Recovery may include the trebling of actual damages (not to exceed $10,000 for some violations) and reasonable attorneys' fees. For some violations, civil penalties of up to $100,000 in the case of an individual, and up to $500,000 in the case of a corporation, may also be imposed. A civil penalty of up to $2,000 per violation may be imposed for each violation amounting to an unfair method of competition or an unfair or deceptive act in the conduct of commerce. In addition, the Attorney General may bring an action to restrain a person from violating the CPA.

The CPA's grant of authority to the Attorney General is expressly for the purposes of bringing an action "in the name of the state." Such an action by the Attorney General may seek to prevent or restrain violations of the CPA and may seek restoration for persons injured by violation of the CPA. As an outgrowth of federal court rulings, a question has arisen as to whether the authority of the Attorney General extends to bringing an action for a CPA violation on behalf of persons who are themselves "downstream" or "indirect" purchasers of goods or services. An example of an indirect purchaser might be the ultimate consumer of a product that was bought from a retailer who bought from a producer who violated the CPA. The retailer would be the direct purchaser, and the consumer would be the indirect purchaser of the product.

The U.S. Supreme Court in Illinois Brick Co v. Illinois, 431 U.S. 720 (1977), held that under federal antitrust law, indirect purchasers may not bring an action. Only a party who directly purchases from the violator can sue. However, Illinois Brick left open the possibility of states enacting their own laws to allow indirect purchasers to sue for unfair business practices. Many states have enacted so-called "Illinois Brick Repealer" laws. Some of these laws allow an indirect purchaser to bring a suit directly, while others allow such suits only when brought by the Attorney General on behalf of the indirect purchasers.

Washington has not enacted an "Illinois Brick Repealer." However, based in part on dicta from the state Court of Appeals decision in Blewett v. Abbott Laboratories, 86 Wn. App 782 (1997), the state Attorney General has brought suits on behalf of indirect purchasers under the common law doctrine of parens patriae. In Blewett v. Abbott Laboratories, while the court rejected a CPA suit by indirect purchasers by citing Illinois Brick, the court noted that some of the CPA's restrictive language with respect to suits brought by indirect purchasers does not extend to suits brought by the Attorney General. The common law parens patriae doctrine allows the state to bring legal actions or seek remedies on behalf of individuals in order to protect them from harm. The Attorney General reports, however, that in at least one multistate case, a federal judge has rejected the Attorney General's attempts to sue on behalf of indirect purchasers.

Summary of Bill:

The Attorney General is given explicit authority to bring parens patriae actions under the CPA on behalf of persons residing in the state.

In cases in which the Attorney General has brought an antitrust action under the CPA, the court is authorized to order restoration for an injured party regardless of whether the injury was the result of a direct or indirect purchase of goods or services.

The ability of the state itself to sue for damages under the CPA is expressly made applicable to cases in which the state is indirectly injured by an antitrust violation of the CPA.

Courts are required to prevent duplicate recoveries for a single CPA violation and are encouraged to consolidate cases where practicable.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill contains an emergency clause and takes effect immediately.

Staff Summary of Public Testimony:

(In support) The bill explicitly reinstates a right that has been assumed for many years under the common law. Because of a court decision in another state, doubt has been raised as to the Attorney General's ability to bring law suits on behalf of Washington residents. The bill provides statutory authority for these suits. Eighty percent of the other states already have some form of this authority.

(Opposed) None.

Persons Testifying: Senator Kline, prime sponsor; and Mark Brevard, Office of the Attorney General.

Persons Signed In To Testify But Not Testifying: None.