08/26 - State court allows indirect suits against price-fixing - East Valley Tribune: News

08/26 - State court allows indirect suits against price-fixing

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Posted: Tuesday, August 26, 2003 9:55 am | Updated: 1:41 pm, Thu Oct 6, 2011.

Arizona consumers are entitled to sue tobacco companies and other manufacturers who conspire to fix prices, the Arizona Supreme Court ruled Monday.

The justices rejected arguments by various companies that only the people they sell their products to directly — wholesalers, retailers or distributors — have a legal right to claim they paid too much.

Instead, the high court concluded that if consumers can show they were harmed by the manufacturers, they have a right to demand recompense, even if others in the chain of distribution decided not to sue.

Sheldon Lazarow, an attorney representing a smoker who filed one of the lawsuits, said the ruling is significant because it means, for the first time ever, that the ultimate purchasers can pursue anti-trust lawsuits against some of the largest companies in the world.

Justice Rebecca Berch, writing for the majority, acknowledged that the Monday ruling directly contradicts a 1977 U.S. Supreme Court decision that only the people who buy directly from a manufacturer have standing to sue.

But she said Arizona law “broadly grants a right of action to any person injured in business or property by the anti-competitive acts of another.”

Anyway, Berch said, there are times that the consumer is the only one who has any interest in enforcing anti-trust laws.

For example, she said, an automobile dealer who is dependent on manufacturers for a steady supply of vehicles would have little interest in suing its only source of cars and trucks over a price increase “especially if it can pass along overcharges to purchasers.”

She said that makes the final car buyer the one who was injured — and the one who should be able to sue.

The ruling also gives an additional legal weapon to anti-smoking advocates.

Until now, lawsuits against tobacco companies have concentrated largely on the health effects of their products and whether the companies hid information they had about the links between smoking and disease.

This case, however, argues that the major tobacco companies engaged in a conspiracy going back to the 1980s to boost prices above and beyond any increase in costs, with the result that consumers have been paying far too much.

The lead plaintiff in this case is Michael R. Gray, a Benson physician who said he was a smoker from age 11 until five years ago. Monday’s ruling now permits him to take his case before a trial judge to prove his damages.

It also gives the go-ahead to some local glass companies to pursue their own claim against some of the largest manufacturers in the world that they illegally worked to fix prices.

Berch acknowledged that proving damages through multiple layers of distribution could be difficult. But she said that was no reason to preclude them from trying.

Only Justice Ruth McGregor dissented. She said it is up to the state Legislature, and not the courts, to decide whether consumers can sue manufacturers.

The case was so significant that it drew the attention and intervention of everyone from the state attorney general’s office to Microsoft Corp., all concerned about the outcome.

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