Pennsylvania Record

Sunday, October 20, 2019

Critics come out to fight AG Shapiro's proposed antitrust rule; Law prof worries about impact on class actions

Federal Court

By Nicholas Malfitano | Oct 8, 2019


Pennsylvania Attorney General Josh Shapiro

HARRISBURG – Pennsylvania Attorney General Josh Shapiro wants to supplement regulations that are part of a state consumer protection law, but law scholars and business groups are concerned that he is trying to create a state antitrust statute in doing so.

In August, Shapiro and his Public Protection Division announced their intention to add the regulations of Chapter 311 under 37 Pa. Code, which governs unfair market trade practices.

“The purpose of this rulemaking is to define and clarify certain terms under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) in line with state and federal case law. The proposed regulation defines certain anti-competitive conduct as unfair methods of competition and unfair or deceptive acts or practices,” Chief Deputy Attorney General Tracy Wertz said in documents associated with the proposal.

Under the current version of the UTPCPL, it contains definitions of what qualifies as “unfair methods of competition” and “unfair or deceptive acts or practices," and details 21 types of acts that fall within those definitions.

Critics contend the proposal is a backdoor attempt to create a state antitrust statute, an act they believe is outside the authority of the Attorney General’s Office – while others are concerned that the proposed rule additions may be a unilateral move that bypasses the regular legislative process.

Pennsylvania Senate President Pro Tempore Joseph Scarnati issued a statement on the proposal.

“The Senate is currently engaged in conversations with experts on this subject matter, to determine if the Attorney General’s proposed changes without legislative input are outside the scope of proper regulatory oversight. Our government is made up of equal branches and it is crucial that each branch adhere to their defined roles, which are in place in order to create a strong balance,” Scarnati said.

Wertz maintained the proposed rule is both comparable to ones in other states and necessary to provide clear guidance to market participants and consumers on the scope of the UTPCPL covering all unfair and deceptive acts or practices in trade or commerce.

Wertz says it would make the state law synchronous with the Federal Trade Commission Act upon which it is based and clarify that the standing provision of the private right of action does not limit the scope of trade and commerce regulated by the Pennsylvania Attorney General.

Wertz added that the Attorney General’s Office “considered the status quo and determined that the clear articulation of the proposed unfair trade practices regulation is the least burdensome acceptable alternative” and the proposed rulemaking will “provide clarity to the public and facilitate compliance with the regulation.” If approved, it would be subject to annual review.

The deadline for public comment to be submitted was Sept. 30. Comments from the Independent Regulatory Review Commission must be sent in by Oct. 30.

Scholars and Organizations Offer Comment on Shapiro’s Proposal

Bruce Ledewitz, Professor at the Duquesne University School of Law, said that a general rule is that the state executive branch has less discretion to write rules under law than does the federal executive branch, and that the General Assembly has less discretion to delegate than does Congress.

“The stated purpose of the Attorney General is to conform to prior case law. If that is what is being done, that would probably be allowable,” Ledewitz said.

When mentioning that several state business organizations expressed concern and opposition over the fact that Shapiro’s goal with the proposal may have been to create a state antitrust statute, something the General Assembly has chosen not to do for years, Ledewitz added that type of argument had been successful before Pennsylvania courts in the past.

Herbert Hovenkamp, professor at the University of Pennsylvania School of Law, also commented on aspects of the proposal – though with the caveat that he only did so on his own behalf as a law scholar, and not as a representative of the university.

Notably, Hovenkamp expressed that the proposal in its current form conflicts with the federal Class Action Fairness Act.  

“[It] provides that both notice and the consent of the Office of the Attorney General is required before any settlement or release of a class action can be placed before a court for approval. This conflicts with a federal statute and…should be amended to harmonize with the federal statute,” Hovenkamp said.

“CAFA requires notice to the OAG of any class action settlement, but, instead of consent, provides opportunity for the OAG to object, it also requires that more information be provided to the OAG than is required by the proposed rule.”

Hovenkamp said that the proposal in its current form would “add great complication to resolution of class actions brought in federal court under the rule.”

In addition, a number of organizations submitted comments on the proposal prior to the Sept. 30 deadline.

The PA Chamber of Business and Industry, which seeks to be the voice of business statewide and advocates for job creation, was just one of them that did so.

“The proposed regulations, if finalized in their current proposed form, will have a substantial and far-reaching impact on our members, including our small business members, by: (I) Declaring unlawful ‘unfair’ conduct that is so broadly defined that no business could prospectively comply; (II) Creating a new anti-trust law without a legislative mandate; (III) Imposing substantial new litigation risk and costs for business by expanding the UTPCPL to allow for no-fault ‘unfair’ conduct claims that carry the potential for treble damages and fee-shifting regardless of fault; and (IV) Giving the OAG new authority to approve or reject settlements of private class actions involving UTPCPL claims,” said the group’s President and CEO Gene Barr.

In part, the PA Bankers Association commented that the state attorney general already has the power to enforce federal antitrust laws under 15 U.S.C. Section 15(c), and as a rule, cannot expand its powers to enforce antitrust laws beyond what is permissible through Section 204(c) of the Commonwealth Attorneys Act.

“Doing so both violates the Commonwealth Attorneys Act and converts the UTPCPL into a state anti-trust law. Over the last 30 years, PA attorneys general have sought to enact a state antitrust law, but these efforts have been consistently declined by the General Assembly. We do not believe that the Attorney General should be permitted by rule to do what he has not been authorized to do by law,” said J. Duncan Campbell III, President and CEO of the PA Bankers Association.                                          

Chesapeake Energy Corporation, a company focused on discovering and developing oil and natural gas sources in the U.S., also weighed in on the proposal.

Chesapeake said the proposal “omits important context that bears on the legitimacy and validity of the proposed regulations” – in the form of two pending petitions before the Supreme Court of Pennsylvania, connected to an appeal from a Commonwealth Court decision interpreting the UTPCPL.

“The notice of proposed rulemaking references the Commonwealth Court’s decision in the pending litigation, but fails to acknowledge the potential for review and reversal by the Supreme Court,” said Daniel T. Brier of Myers Brier & Kelly, on behalf of Chesapeake Energy.

“Because the Commonwealth Court decision is not yet final, it is premature for the Attorney General to seek to ‘codify’ that decision through proposed rulemaking. For this reason alone, consideration of new regulations purporting to interpret the UTPCPL should be deferred until appellate review is concluded.”

Along with considering whether the General Assembly intended the UTPCPL, a consumer protection statute, to provide a right of action on behalf of sellers against consumers, Chesapeake wants the Supreme Court to decide whether it can be used to pursue anti-trust violations when the General Assembly chose not to enact a state anti-trust statute.

The complete list of comments submitted on the proposal may be seen here.

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com

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Organizations in this Story

Chesapeake Energy Corporation Duquesne University School of Law Myers Brier & Kelly PA Chamber of Business and Industry Pennsylvania Office of the Attorney General University of Pennsylvania Law School

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