Colorado Antitrust Reform Carries Broad State Impact

This article was originally published by Law360 on August 3, 2023 and is republished here with permission.

During its 2023 legislative session, the Colorado General Assembly repealed the state’s prior antitrust law — the Colorado Antitrust Act of 1992 — and passed the Colorado State Antitrust Act of 2023.

On June 7, Colorado Gov. Jared Polis signed the 2023 act into law. The 2023 act significantly broadens Colorado’s state antitrust law, with implication not only for state enforcers but also for private litigants.

For those doing business in Colorado or whose actions may affect Colorado consumers or workers, the 2023 act expands what, when and how antitrust actions may be brought.

This article discusses the 2023 act’s changes and their significance.

Indirect Purchaser Standing

In the 1977 Illinois Brick Co. v. Illinois decision, the U.S. Supreme Court held that, for purposes of federal antitrust law, so-called indirect purchasers lack standing to sue for damages.

Indirect purchasers are customers that purchase products or services from an intermediary or middleman in the chain of distribution, as opposed to buying them directly from the source of the alleged antitrust violation.

Since the Supreme Court ruling, many states have allowed indirect purchasers to bring claims under their respective state antitrust laws, either through so-called Illinois Brick repealer statutes or through judicial interpretation. Under the 1992 act, Colorado had what could be labeled a partial Illinois Brick repealer.

The Prior Act permitted the Colorado attorney general to bring actions on behalf of any governmental or public entity that was injured either directly or indirectly. Private litigants that allegedly purchased products or services through an intermediary — and thus indirectly — did not have antitrust standing.

Now, under the 2023 act, indirect purchasers have standing to bring a civil action for an alleged violation of the antitrust law. Further, the Colorado attorney general may bring actions on behalf of individual indirect purchasers — not just governmental entities — as parens patriae.

Expansion of Available Remedies

The 2023 act expands the remedies the attorney general may seek for violations of Colorado’s antitrust law.

For example, the 2023 act increases the maximum criminal fines for companies from $1 million to $5 million. And potential civil penalties increased from $250,000 to $1 million per occurrence. Colorado’s civil penalties now exceed those of many other states.

Importantly, the 2023 act also removed a provision of the 1992 act that precluded the attorney general from filing criminal charges against persons or entities that the attorney general has already prosecuted civilly based on the same conduct.

The upshot is that payment of civil penalties or damages in a civil suit brought by the attorney general is no longer a shield against criminal prosecution.

In addition to civil penalties and criminal fines, the attorney general also may request restitution and disgorgement.

Increased Investigative Authority

The 2023 act also expanded and clarified the attorney general’s authority when conducting investigations. It clarifies that the attorney general can seek information — through questions or subpoenas for documents or testimony — not only from persons whom the attorney general has reasonable cause to believe have engaged in a violation but also from those who may have information related to a violation.

Further, responses to such inquiries are required even if the attorney general has alleged only a potential violation. The 2023 act also added a provision clearly stating that the attorney general may issue statements describing or warning of a course of conduct or alleged conspiracy that violates the law.

With the 2023 amendments, Colorado now joins other states that have some version of a so-called little Federal Trade Commission Act that makes unfair or deceptive conduct unlawful.

The 2023 act grants the attorney general the authority to institute “actions to prevent or restrain unfair methods of competition in or affecting commerce.”

The 1992 act did not have an unfair methods of competition cause of action, presenting some new uncertainty as to what conduct or practices the attorney general could choose to investigate or challenge.

Changes to Statute of Limitations Timing

Although the 2023 act retained the prior act’s statute of limitations for civil actions, it added language concerning the accrual of a cause of action for limitations purposes.

Under both the prior act and the 2023 act, a cause of action accrues when “circumstances giving rise to the cause of action are discovered or should have been discovered in the exercise of reasonable diligence.”

This accrual standard differs from the federal antitrust injury rule, which specifies that an antitrust cause of action accrues at the time a claimant suffers injury to business or property.

The 2023 act adds that a cause of action also accrues “on the date that the last in a series of acts or practices in violation of this article 4 occurred, including any acquisitions or series of acquisitions that, in the aggregate, may constitute a violation.”

The result of this new language is that some acquisitions older than four years and small enough individually to evade scrutiny could nevertheless fall within the scope of the 2023 act.

In addition to statute of limitations, the 2023 act includes language likely targeted at the doctrine of laches. The doctrine of laches may bar claims where a plaintiff unreasonably delays in filing a suit and the defendant alleges harm from the delay.

The 2023 act provides that except as expressly provided in the act, no other limitation terminates the period within which the attorney general may file an action. With the expansion of when a cause of action accrues and the language seemingly targeted to address laches, the Colorado attorney general likely could pursue actions in which some transactions or conduct occurred more than four years before.

The 2023 act also provides that its statute of limitations is suspended whenever the U.S. has a civil or criminal proceeding concerning the subject matter of the claim, and for one year after.

Other Amendments

The 2023 act includes several other amendments. For example, the 2023 act removes the 1992 act’s harmonization provision, which directed courts to look to federal antitrust precedent when interpreting Colorado’s law.

The removal of the harmonization provision leaves some ambiguity in how courts should interpret the 2023 act in the absence of applicable Colorado law.

The 2023 act codifies a trend seen in antitrust enforcement generally — a focus on labor and workers.

The 2023 act’s legislative declaration states that “[c]ompetiton is fundamental to” both a “free market system” and “[a] healthy marketplace that protects workers and consumers.” As a result of this legislative declaration, it is expected that the Colorado attorney general and private parties alike may increasingly focus on workers and labor issues as part of any antitrust investigation or challenge.

Conclusion

Recent years have seen an uptick in state legislatures updating and expanding their antitrust laws. Colorado is now the latest among this group, enacting an updated antitrust law that could have significant impacts on enforcement and private litigation in the state.

For those doing business with a potential impact in Colorado, the landscape may have substantively changed with the enactment of the 2023 act.