ECJ: national competition authorities may assess infringements outside competition law when establishing a dominance abuse

Four years after a landmark decision by the German Federal Cartel Office (FCO) (decision of 6 February 2019, B6-22/16) finding that a major technology company acted abusively due to an alleged General Data Protection Regulation (GDPR) infringement, the European Court of Justice (ECJ) recently confirmed the FCO’s decision in that, depending on the circumstances of the specific case, a GDPR violation can be considered part of a dominance abuse (decision of 4 July 2023, C-252/21). In addition, the court expressed its doubts about the legality of the data processing mechanism in question.

I. The FCO’s decision

Early in 2019, the FCO intervened in the gathering, assigning and processing of data by a major technology company, claiming it did not give its users the option to opt-out from personalised advertising. According to the FCO, this amounted to an exploitative abuse of the company’s alleged dominant market position within the meaning of German competition law (Section 19, paragraph 1 and, paragraph 2, no. 2 of the ARC).

The relevant terms and conditions applied by the technology company at the time determined that users of its social network could only be members if the company was permitted to gather and assign data from all of its own services, as well as collecting and assigning data from third parties. In addition, the company in question carried out data mining where users had disabled web tracking in their browser settings.

In the view of the FCO, due to the company’s allegedly overwhelming dominance in the social network market concerned, an obligatory tick in the acceptance of the terms and conditions of the company was not considered to be sufficient to constitute consent to such extensive data processing. According to the FCO, users had to choose to either accept excessive data terms or waive their membership of the company’s social network. In these circumstances, the FCO declined to view the acceptance of the terms by users to be voluntary and held that personalised advertising cannot be based on the Art. 6 (1b) GDPR performance of contract justification.

The FCO also took into consideration the requisite legal standard to be applied under the GDPR. In the FCO’s opinion, the company was unable to justify under the requirements of the GDPR such data processing from the company’s network services or third-party platforms or assigning such data to user accounts.

Taking these data protection considerations into account, the FCO found that the terms and conditions applied by the technology company were inappropriate terms to the detriment of both private users and competitors. The FCO concluded that by being a manifestation of market dominance, the terms were abusive within the meaning of the German prohibition of dominance abuse, Section 19, paragraph 1 of the ARC. Therefore, it prohibited the use of such terms and conditions and required the company to change them within 12 months.

II. Procedural developments to date

Against this decision, the technology company filed an appeal to the Higher Regional Court of Düsseldorf (Appeal Court), seeking an annulment of the FCO’s decision. Additionally, in preliminary proceedings, the company requested that its appeal should have a suspensive effect on the FCO’s decision due to serious doubts as to the legality of the decision.

Based on the Appeal Court’s order, the FCO’s decision was then suspended. However, in a second instance, the German Federal Supreme Court (Supreme Court) overturned the Appeal Court’s preliminary decision in favour of the FCO and waived the suspensory effect.

In the main proceedings, which are ongoing, the Appeal Court applied to the ECJ for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) regarding:

Whether a national competition authority (NCA) of an EU member state, which is not the responsible supervisory authority within the meaning of Article 51 et seq. of the GDPR, may, for the purposes of monitoring abuses of competition law, make findings on GDPR provisions and order the termination of infringements.
Whether the NCA can take into consideration GDPR provisions when assessing a balance of interests in decisions under competition law.
How to interpret certain provisions of the GDPR.

III. The ECJ’s key competition considerations

In response to the Appeal Court’s application, on 4 July 2021, the ECJ ruled that when examining an abuse of a dominant position, it can be legitimate for the competition authority to consider unlawful behaviour more generally, such as possible infringements of the GDPR.

The dominant undertaking’s compliance with rules other than competition rules can legitimately be considered when assessing whether that conduct entails resorting to methods governing normal competition and when assessing the consequences of a certain practice in the market, including for consumers.

Depending on the circumstances, infringements may be crucial to establish whether that conduct has the effect of hindering the maintenance or growth of the competition left in the market.

The ECJ particularly considered the high relevance which access to and use of personal data have for competition in the digital economy.

In this context, the ECJ states:

“Therefore, excluding the rules on the protection of personal data from the legal framework to be taken into consideration by the competition authorities when examining an abuse of a dominant position would disregard the reality of this economic development and would be liable to undermine the effectiveness of competition law within the European Union.”

IV. Consistency requirements imposed on national competition authorities

As the FCO is not entitled to enforce GDPR infringements, it cannot issue such decisions regardless of the responsible supervisory authority.

The ECJ clarified that when making findings on the GDPR, the FCO has a duty of sincere cooperation with the supervisory authorities. For consistent application of the GDPR, the national competition authorities must ensure that their legal interpretation does not contravene that of the relevant competent enforcers.

Therefore, when considering other areas of law for their competition analysis, the ECJ proposes in terms of consistency and cooperation among the regulators the following:

The NCA must ascertain whether the conduct in question or similar conduct has already been the subject of a decision by the competent national supervisory authority. If that is the case, the NCA cannot depart from it, although it remains free to draw its own conclusions for the purposes of applying competition law.
Where it has doubts as to the scope of the assessment carried out by the competent national supervisory authority, the NCA needs to consult and seek the national supervisory authority’s cooperation in order to dispel its doubts or determine whether it must wait for the national supervisory authority concerned to make a decision before starting its own assessment.
Where the national supervisory authority is called upon by a NCA, it must respond to such a request within a reasonable period, providing the NCA with the information in its possession capable of dispelling any doubts.
Only when there is no reply within a reasonable period can the NCA continue its own investigation. The same applies where the competent national supervisory authority and the lead supervisory authority have no objection to such an investigation being continued without having to wait for a decision on their part.

Accordingly, if the data protection authorities find certain conduct to be in line with GDPR provisions, NCAs cannot take a different position.

V. Main takeaways

Considering an infringement of a norm outside competition law to be an abuse of market power is not entirely new. Although this is subject to an ongoing controversy, infringements outside competition law have in the past occasionally (though rarely) been claimed to amount to an abuse of market power, mainly because of having been considered to distort the level playing field for other market participants.

With its decision in 2019, the FCO went a step further in that it prohibited the relevant conduct and requested that the addressee of its decision should remedy the underlying conduct, although the GDPR enforcement fell outside the FCO’s competence.

So far, the question of the relationship between the FCO and primarily responsible authorities had not been addressed by the courts. The ECJ has now clarified that, subject to compliance with its duty of sincere cooperation with the supervisory authorities, the FCO can establish a dominance abuse based on an alleged data protection infringement as this might constitute abusive conduct by a dominant company.

VI. Outlook

The Appeal Court will now resume the main proceedings, considering the ECJ’s decision (in addition to the Supreme Court’s previous assertions).

For now, the decision of the ECJ should not be understood as meaning that any type of unlawful conduct can be considered an abuse of market power. Rather, infringements outside competition law must have the potential to appreciably affect competition to be caught under the dominance rules. Accordingly, the ECJ contended that the competition concerns in this case specifically derive from the significance of access to data for competition in the light of the relevant digital services.

The ECJ’s ruling has clearly strengthened the FCO’s position in relation to its competition enforcement in the digital economy. While it remains to be seen how the ECJ’s considerations will impact the Appeal Court’s decision, the ECJ has clarified important aspects of the analysis relating to the abuse in question.

Third Circuit Rules Office of the Inspector General Need Not Abide By Statutory Filing Deadlines in Whistleblower Retaliation Case

By Elizabeth Leavy, Lawrence Sher and Ariya Serbest on 6 April 2023 Posted in Government Contracts & Grants

In a case decided this week, the United States Court of Appeals for the Third Circuit turned government filing deadlines on their head by holding that federal Offices of the Inspector General (“OIG”) are not actually bound by the statutory language stating that the OIG “shall” issue an investigative report within 180 days after receiving a whistleblower complaint.

In Jacobs Project Management Co. v. U.S. Department of the Interior, Jacobs petitioned for a review of a final order issued by the Department of the Interior (“DOI”) concluding that Jacobs retaliated against a former employee for whistleblowing in violation of 41 U.S.C. § 4712. In this case, a Jacobs’ employee filed a whistleblower reprisal claim in 2015 alleging that his employer failed to renew his employment contract in retaliation for his having disclosed payment discrepancies under Jacobs’ government contract. Pursuant to Section 4712, the OIG had 180 days to issue a report, and an additional 180 days after properly extending the deadline with the consent of the complainant. However, the OIG did not complete its report until February 2017, well beyond the 360-day deadline. Three years went by before DOI sent Jacobs a letter indicating it had never received a response to the 2017 report. In response, Jacobs first claimed it had never received the report from the OIG, and then it subsequently declined to submit a response to the OIG’s report because the report was issued after the statutory deadline – more than 360 days and in violation of Section 4712. A year later, beyond the 30-day deadline, DOI issued a final order concluding that Jacobs had engaged in prohibited reprisal against the complainant employee in violation of Section 4712 and awarding the complainant $803,906.08.

Jacobs appealed this final order, claiming that DOI lacked jurisdiction to issue the final order after the statutory deadline had passed. Specifically, Jacobs pointed to the mandatory language in Section 4712, which expressly states: “the Inspector General shall make a determination that a complaint is frivolous, fails to allege a violation of the prohibition in subsection (a), or has previously been addressed in another Federal or State judicial or administrative proceeding initiated by the complainant or submit a report under paragraph (1) within 180 days after receiving the complaint.” 41 U.S.C. § 4712(a). Or alternatively, “[i]f the Inspector General is unable to complete an investigation in time to submit a report within the 180-day period specified in subparagraph (A) and the person submitting the complaint agrees to an extension of time, the Inspector General shall submit a report under paragraph (1) within such additional period of time, up to 180 days, as shall be agreed upon between the Inspector General and the person submitting the complaint.” Id. at § 4712(b).

Notwithstanding the use of the word “shall,” which in most statutory interpretation indicates a nondiscretionary, mandatory requirement, the Third Circuit denied Jacobs’ petition for review, finding no timeliness bar to the OIG report issued more than 360 days after filing of the initial complaint. In reasoning that the word “shall” did not actually impose a filing deadline on the OIG, the Court offered the following reasons:

The use of the word “shall” in the statute (e.g. the IG “shall” make a determination within 180 days) alone does not indicate that the deadlines are jurisdictional.
“[T]he text of the statute does not contain a consequence for the agency’s failure to comply with the statutory deadlines.” The result of an agency’s tardiness only equates to an exhaustion of remedies and provides the complainant another avenue to seek relief – it does not mean that the agency cannot continue to act if a lawsuit is not filed.
“[I]nterpreting the deadlines in § 4712 as jurisdictional would be contrary to the statute’s primary purpose” of protecting whistleblowers from reprisal.
There are “less dramatic remedies” available for failure to meet a statutory deadline. Jacobs could have filed suit under the Administrative Procedure Act to “compel agency action unlawfully withheld or unreasonably delayed.”
The Court is reluctant to construe statutory deadlines as jurisdictional when a statute requires the agency to resolve an entire dispute within a specified timeframe.
The Court is “reluctant to conclude that a deadline is jurisdictional ‘when important public rights are at stake.’”

The Court’s ruling, that this deadline is not jurisdictional, presents an interesting enforceability question and an apparent double standard for government contractor litigants in disputes against the government. The Court of Federal Claims, the Comptroller General, and the Boards of Contract Appeals have all strictly applied deadlines to initiate bid protests, claims, and administrative litigation when brought by contractors filing suit against the government, and regularly dismiss protests and claims as untimely when not brought within the strict deadline set forth in the federal regulations.

Yet in this case, the Third Circuit found that, despite the use of the word “shall” in Section 4712, “the statutory deadlines for agency action in § 4712 are best interpreted ‘as a spur to prompt [agency] action, not as a bar to tardy completion.’” In so ruling, the Third Circuit essentially converted a statutory requirement (“shall”) into a loose guideline (claiming there is a “permissive nature [to] the language”) that does not actually limit an agency’s power to act if it fails to comply with a statutory deadline.

Going forward, the impact of this decision remains unknown. It is likely, however, that Courts may similarly relax the statutory filing deadline for the Department of Defense (“DOD”) OIG reports brought under the corollary whistleblower retaliation statute, 10 USC § 4701, which similarly requires that the OIG “shall” issue a report in response to a whistleblower retaliation claim within 180 days after receiving the complaint. The decision also begs the question whether the Third Circuit, by loosening the requirement for government filings, will have paved the road for contractors who, in seeking relief from untimely protests or claims against the government, also may argue that the use of the word “shall” in the applicable regulations is not jurisdictional and therefore not a bar to filing an otherwise untimely claim.

At least one takeaway is clear: the Third Circuit’s decision serves as a warning to contractors who may be facing whistleblower reprisal claims under Section 4712. The OIG’s investigations are not necessarily over at the expiration of the statutory deadlines. Contractors who have not received an investigation report or a final order from the agency at the expiration of the deadline should request timely reports or orders that an investigation has been concluded.

Department of Defense issues interim rule proposing to restrict acquisition of personal protective equipment from non-allied foreign nations

By Elizabeth Leavy, William Kirkwood and Ozra Ajizadeh on 14 February 2023 Posted in Government Contracts & Grants

The U.S. Department of Defense (DoD) has recently issued an interim rule that proposes to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to limit, with some exceptions, the acquisition of personal protective equipment (PPE) and certain other products from non-allied foreign nations, including the Democratic People’s Republic of North Korea, the People’s Republic of China, the Russian Federation, and the Islamic Republic of Iran. Some of the covered items include surgical masks, face shields and protective eyewear, vinyl gloves, isolation gowns, and sanitizing and disinfecting wipes, test swabs, bandages, and gauze. This rule is intended to implement section 802 of the National Defense Authorization Act (NDAA) for fiscal year 2022 (Pub. L. 117–81) (10 U.S.C. 2533e) and section 881 of the NDAA for fiscal year 2023 (Pub. L. 117–263). Though broad in its objective, the rule only applies to a relatively narrow band of contracts that fall within $150,000 to $250,000 in value. The government has not yet proposed a similar limitation on contracts in excess of the simplified acquisition threshold (SAT), which is currently set at $250,000.

If enacted in its proposed form, the new rule will establish a new contract clause, DFARS 252.225-7061, Restriction on the Acquisition of Personal Protective Equipment and Certain Other Items from Non-Allied Foreign Nations. This clause will be applied to solicitations and contracts, including for the acquisition of commercial products, commercial services, and commercially available off-the-shelf items, with an estimated value in excess of $150,000 and below the SAT. The restriction would not apply to acquisitions for covered items to be used outside of the United States. In addition, the rule would leave open the option for the head of the contracting activity to waive the restriction if they determine that the agency cannot otherwise procure covered items of satisfactory quality and quantity at a reasonable price. As the rule is still in interim format, many questions remain regarding its implementation, for example, whether the rule would apply retroactively and/or allow contracting officers to amend existing contracts to add this supply chain restriction.

Takeaway:

The goal of this rule is to decrease the DoD’s dependence on PPE and other items identified in section 802 that originate from non-allied countries, while also promoting national security and public health, and aiming to decrease the number of counterfeit PPE within the U.S. supply chain. However, as a practical matter, the rule change may create hardships by increasing supply chain costs for government contractors that have contracts that exceed the $150,000 threshold and that presently acquire covered items from covered countries.

China, for example, is a major U.S. and global supplier of PPE. Accordingly, if the new DFARS clause is implemented as written, contracting officers will be burdened with the task of searching for, identifying, and securing PPE suppliers in the United States or other allied nations. Additional challenges and time-consuming efforts on the part of the contracting officers will also be required to ensure that any potential supplier can provide the PPE that meet the quality and quantity standards required by each respective contract. By eliminating China from the pool of potential suppliers, contracting officers will have limited options and must prepare for increased costs as demand rises.

The DoD has invited comments on the interim rule. Contractors that are currently supplying PPE from China to the United States via a government contract should consider providing a comment to the proposed rule. All comments on the interim rule must be submitted in writing on or before April 3, 2023, to be considered in the formation of the final rule. If you would like assistance in submitting a comment, please reach out to one of the Reed Smith attorneys named in this article.

Singapore High Court issues revised sentencing framework for private sector corruption

By Calvin Chan, Steven Li, Min Jian Chan and Ruiteng Liu on 3 November 2022 Posted in Government Investigations & White Collar Criminal Defense

The Singapore High Court recently issued a revised sentencing framework for private sector corruption offences involving agents in Singapore.

Singapore’s anti-corruption regime

The Prevention of Corruption Act 1960 (PCA) is the primary anti-corruption legislation in Singapore. The main offences can be found stated in sections 5 and 6 of the PCA, which prohibit:

individuals corruptly soliciting or receiving bribes (section 5(a));
individuals corruptly giving or offering bribes (section 5(b));
agents corruptly accepting or obtaining bribes in relation to their principals’ business (section 6(a)); and
individuals corruptly giving or offering bribes to agents in relation to their principals’ business (section 6(b)).

Sentencing framework for private sector corruption involving agents

In Goh Ngak Eng v. Public Prosecutor [2022] SGHC 254, Goh pleaded guilty under section 6(a) of the PCA to being part of a conspiracy to obtain bribes. Goh and another accused had referred vendors to a co-conspirator for jobs at a shipyard. The co-conspirator, who was an employee and agent of the shipyard, awarded jobs to the vendors referred by Goh. These vendors provided invoices to the shipyard that included commissions for securing jobs at the shipyard. Goh shared the commissions with his co-conspirators. Goh also pleaded guilty to giving bribes under section 6(b) of the PCA.

The High Court in Goh set out a two-stage, five-step sentencing framework for private sector corruption cases involving agents under sections 6(a) and 6(b) of the PCA. This sentencing framework was modelled after the two-stage, five-step framework in Logachev Vladislav v. Public Prosecutor [2018] 4 SLR 609, which was a case involving offences under the Casino Control Act 2006.

In the first stage, the court determines an indicative sentence as a starting point which reflects the intrinsic severity of the offending act. This involves the following three steps:

Step one: the court identifies, by reference to factors specific to the particular offence, (i) the level of harm caused by the offence; and (ii) the level of the offender’s culpability. Factors to consider in assessing the level of harm include actual loss caused to the principal, the benefit obtained by the bribe giver, and whether a strategic industry was involved. As regards culpability, factors include the sums given or received as bribes, the degree of planning, and the level of sophistication.

Step two: the court identifies the indicative sentencing range with reference to the level of harm caused by the offence and the level of the offender’s culpability. For offences under sections 6(a) and (b) of the PCA, sentences range from a fine at the lowest end (for offences where the levels of harm and culpability are low) to a maximum sentence of five years’ imprisonment (for offences where the levels of harm and culpability are significant).

Step three: the court identifies the appropriate starting point within the sentencing range identified in step two, by looking at the specific details of the case with reference to the same offence-specific factors considered in step one.

In the second stage, the court may revise the indicative sentence identified in the first stage to arrive at a sentence reflecting the individual circumstances of the offender. This involves the following two steps:

Step four: the court may revise the identified sentencing starting point to take into account aggravating and mitigating factors specific to the offender.

Step five: if the offender has been convicted of multiple charges, the court will consider whether to make further adjustments to the sentences for each charge. This to ensure that the overall sentence is “sufficient and proportionate to the offender’s overall criminality”.

Significance of this decision

The decision in Goh overrules the sentencing framework set out in the previous High Court decision of Takaaki Masui v. Public Prosecutor [2021] 4 SLR 16. The court in Masui used graphs and 3D models in a modified version of the Logachev sentencing framework. This sought to establish a single starting indicative sentencing point depending on specific levels of harm and culpability for each offence. However, the High Court in Goh found that the Masui approach was “excessively complex and technical”. Rather, arriving at an indicative starting sentence was not a mathematical exercise, and the court instead focused on the two-stage, five-step sentencing framework without considering the tools used in Matsui.

This decision brings the sentencing approach to private sector corruption cases involving agents in line with public sector corruption cases (with the Logachev framework having already been adopted in Public Prosecutor v. Wong Chee Meng [2020] 5 SLR 807).

Further, this decision underscores the Singapore judiciary’s commitment to deterring corruption in the private sector. The High Court significantly increased Goh’s sentence from 17 months and three weeks’ imprisonment to 37 months and three weeks’ imprisonment, even though the prosecution did not appeal the original sentence.

Reed Smith has extensive experience advising and conducting investigations in relation to corruption and fraud-related matters throughout the Asia-Pacific region. Reed Smith’s Singapore office provides Singapore law advice and handles Singapore court litigation through our formal alliance law firm, Resource Law LLC.

“We won’t accept business as usual”: DOJ cracks down on corporate misconduct

By Daniel Ahn, Mark Bini, Calvin Chan, Rosanne Kay, Michael J. Lowell, Rizzy Qureshi, Katherine Seikaly, Thomas Suddath, Justin Angotti, Min Jian Chan, Kaela Dahan, Ruiteng Liu, Steven Li and Anthony Todd on 25 October 2022 Posted in Government Investigations & White Collar Criminal Defense

What are the key changes to the DOJ’s corporate criminal enforcement program? We look at the updated guidance on individual and corporate accountability, independent compliance monitors, and corporate compensation in our latest alert.

Preserving business communications on employees’ personal devices

By Calvin Chan, Michael J. Lowell, Rizzy Qureshi, Mark Bini, Daniel Ahn, Rosanne Kay, Steven Li, Ruiteng Liu, Min Jian Chan and Stefanie Dai on 24 October 2022 Posted in Government Investigations & White Collar Criminal Defense

Why is it important to monitor and preserve business communications conducted through instant messaging platforms on employees’ personal devices? In our recent alert, we look at what is behind the SEC and CFTC’s nearly $2 billion fines on companies failing to monitor and retain business communications on messaging platforms, consider enforcement activity in the UK and APAC, and suggest some practical compliance tips.

An interview with New York Attorney General, Letitia James

By Divonne Smoyer, Stuart Cobb and Hubert Zanczak on 29 September 2022 Posted in State Attorneys General

In the October edition of IAPP’s Privacy Advisor, Divonne Smoyer, Hubert Zanczak, and Stuart Cobb interview New York State Attorney General, Letitia James, about her view of consumer privacy, her work to date in enforcing existing laws, as well as helping introduce new ones, and her thoughts about the future of privacy in New York and around the country.

Protecting consumers online: FTC and CFPB team up with State AGs

By Divonne Smoyer and Eric Manski on 17 August 2022 Posted in State Attorneys General

Man using mobile online banking and payment, Digital marketing. Finance and banking networking. Online shopping and icon customer network connection, cyber security. Business technology.

The recent National Association of Attorneys General Presidential Summit marked a clear partnership between state AGs, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) to accomplish Iowa AG Tom Miller’s “fight back” presidential initiative: Consumer Protection 2.0: Tech Threats and Tools. Given this, we expect to see enhanced coordination and enforcement between these regulators. Find out more in our latest Technology Law Dispatch Blog.

Mental Health Parity is Garnering Attention From State AGs – Is A Multistate Enforcement Effort On the Horizon?

By Divonne Smoyer, Martin Bishop, Nicole Aiken-Shaban and Samantha Sedivy on 28 July 2022 Posted in State Attorneys General

Congress passed the Mental Health Parity and Addiction Equity Act (MHPAEA), which amended the Mental Health Parity Act of 2016 to fill in loopholes impacting the coverage of mental health care, in 2008. Several states have since passed similar legislation on the state level. The possibility of subsequent legislation to further update provisions in this area has been looming on the horizon. These types of changes may have an impact on commercial payors, especially in light of a report by the U.S. Department of Labor (DOL), which concluded that all payors audited in 2021 were not complying with MHPAEA.

This audit by DOL comes in the wake of an increasing history of enforcement actions by state insurance departments and a series of actions by the New York Attorney General. As a result, numerous state attorneys general (AGs) have shown an interest in this issue and may later choose to exercise their enforcement powers under MHPAEA, their own states’ parity laws, or under unfair and deceptive acts and practices (UDAP) laws, which are on the books in most states – or under all three.

The possibility of individual or multistate efforts in this area was recently discussed during a program sponsored by the National Association of Attorneys General (NAAG). This program, which was entitled “State and Federal Behavioral Health Coverage Parity Enforcement and the Role of Attorney General Offices,” was held on July 14, 2022. It was facilitated by NAAG’s National Attorneys General Training and Research Institute division via funding from the prior settlement of a multi-state litigation and legislative activity. The program speakers were from the American Psychiatric Association, the Colorado Coalition for the Homeless, and the Massachusetts AG’s office.

The American Psychiatric Association set forth the history of behavioral health parity over the years and the current regulatory and compliance environment, including the DOL report and a related study by the Department of Health and Human Services, which concludes that non-compliance with MHPAEA remains an issue.

The Colorado speakers conveyed first-hand their experiences with the current system, including prior authorization requirements for urgent treatments that they contend are a barrier to treatment for those suffering from opioid and fentanyl addiction or otherwise from mental health conditions, leading to escalating rates of suicide arising out of the pandemic, all of which are top bi-partisan priorities for AGs.

The Massachusetts AG representative presented the findings of the office’s study on compliance with MHPAEA by payors operating in the Bay State. The representative identified the following areas in which compliance remains a challenge:

· Accuracy of mental health provider directories;

· Network adequacy;

· Provider reimbursement; and

· “Utilization management” practices (e.g., prior authorizations).

The presenter also emphasized that practices that violate MHPAEA may also violate the consumer protection laws of the Commonwealth under Massachusetts General Law chapter 93A, which provides for civil penalties as well as injunctive relief for violations. The results of the Massachusetts study have also led the office to consider more robust parity legislation in the Commonwealth – which could be replicated in other states ‒ as well as more stringent proposed insurance regulations.

It appeared that this video program was well-attended by representatives from other states. Questions to the panelists indicated a pointed interest in the topic.

A final question to the panel, and most notably to Massachusetts, was: “What is your top piece of advice?” It drew the response: “Dig in and understand.”

Oh the Places They’ll Go (and Come From): Exploring the Roles of State AGs, Where They Come From, Where They Go, and Why It Matters

By Divonne Smoyer, Samantha Sedivy and Edrius Stagg on 21 July 2022 Posted in State Attorneys General

There is a joke that NAAG, the acronym for the National Association of Attorneys General, also stands for the “National Association of Aspiring Governors.” State attorneys general (“AGs”) have been perceived as politically ambitious and “upwardly” mobile, with the intent of using their position as a launch pad for “higher office.” Time and time again, they have been referred to as the “farm team” for other offices, and the assumption is that they come from positions in state legislatures.

However, these generalizations often are not the case and discount the substantive importance and powerful role of a state AG in the United States, along with the talents and varied backgrounds of the individuals seeking the office. While partisan gridlock in the U.S. Congress and extreme public pressure and scrutiny on governors may hamstring their effectiveness in governing, the state-wide office of AG is imbued with highly potent powers – ranging from legislative and advisory to investigations and litigation – that can escape some of the road blocks encountered in other offices. Indeed, it has been state AGs who have effectively led big policy and legal changes in diverse areas such as in the realm of privacy and data security, opioid addiction and treatment, pharmaceutical sales and marketing, tobacco and vaping promotions, mortgage and student lending, human trafficking and in other key areas of consumer protection across the United States.

As a result, the office of AG has become extremely attractive to those who want to get things done – increasingly drawing individuals who have served in so-called “higher” offices or from other diverse professional backgrounds. Notable office holders drawn to the office of AG include former California Governor Jerry Brown, who served twice as Governor, separated by a term as AG. Another is Ohio Governor Mike DeWine, who previously served as AG, prior to which he served in the U.S. Senate.

At the same time, their track records while serving as AGs bear a close watch as they often are indicative of their priorities and positions after they leave office. Of particular note is the keen interest in privacy and consumer protection by US Senator Richard Blumenthal of Connecticut, who honed this interest during his long service as the AG of Connecticut.

This post explores the roles of state AGs before and after they serve as their state’s “top cop” to give some context to this important role and the individuals who serve in it – and also to encourage those who are or who may be touched by the activities of a state AG to pay attention their actions and interests as they serve in the role.

Justices of the Supreme Court of the United States

Several former state AGs have gone on to serve as a justice of the United States Supreme Court. Most recently, Associate Justice David Souter, who was nominated to the Supreme Court by President George W. Bush, previously served as the 20^th AG of New Hampshire. Previously, Associate Justice Nathan Clifford, who is one of the few people to have served in all three branches of the U.S. Federal government, was the AG of Maine before his nomination to the Supreme Court by President James Buchanan. Also, Chief Justice Roger Taney was the AG of Maryland long before he was appointed by President Andrew Jackson.

President of the United States

The resumes of two U.S. Presidents include the role of AG. Most recently, Bill Clinton, the 42^nd President, began his political career as the AG of Arkansas. He later went on to serve two terms as the Governor of Arkansas before defeating President George H.W. Bush. Martin Van Buren, the 8^th President, served as the AG of New York. He had previously served in local office and then as a member of the New York Senate. Van Buren was elected to serve as AG while he was still serving as a state Senator, and he held both positions simultaneously for several years. After his tenure as AG, Van Buren went on to serve as a U.S. Senator, the Governor of New York, the U.S. Secretary of State, a U.S. Minister to the United Kingdom, Vice President to President Andrew Jackson, and then, finally, President.

Vice President of the United States

Ten percent of all Vice Presidents previously served as a state AG.^[1] Martin Van Buren, noted above, served as Vice President before he became President. Other Vice Presidents who previously served as a state AG include: Aaron Burr (2^nd AG of New York), George Dallas (17^th AG of Pennsylvania), Walter Mondale (23^rd AG of Minnesota), and now Kamala Harris (32^nd AG of California), who may be the most prominent former AG to serve as Vice President to date. Vice President Harris served as a district attorney before she was elected as the California AG, where she made data privacy and security a key issue in California. After two terms, she went on to run for U.S. Senate, before becoming the Vice President of the United States.

Federal Agency Leadership Appointments

A number of former AGs have been appointed to serve in the federal government. Most recently, former California AG Xavier Becerra was appointed by President Joe Biden to lead the Department of Health and Human Services in 2021. Former Michigan AG and Governor Jennifer Granholm is now the Secretary of the Department of Energy. President Trump selected former Oklahoma AG Scott Pruitt to serve as the Administrator of the Environmental Protection Agency. Other examples are former Idaho AG Larry Echo Hawk, who was appointed by President Barack Obama in 2009 to serve as the Assistant Secretary of the Interior for Indian Affairs, as well as Gale Norton, former AG of Colorado and then US Secretary of Interior, appointed by President George W. Bush in 2001.

U.S. Congress – House Representatives and Senators

It is not uncommon for state AGs to later run for U.S. Congress, and there are several instances of AGs going on to serve as House Representatives and Senators. Currently, there are 8 members of Congress who are former state AGs: Representative Charlie Crist (35^th AG of Florida and also a prior Florida Governor) and Senators Richard Blumenthal (23^rd AG of Connecticut), John Cornyn (49^th AG of Texas), Catherine Cortez Masto (32^nd AG of Nevada), Josh Hawley (42^nd AG of Missouri), Dan Sullivan (27^th AG of Alaska), and Sheldon Whitehouse (71^st AG of Rhode Island). On the flip side, there are three state AGs who previously served in Congress: Indiana AG Todd Rokita, Louisiana AG Jeff Landry, and Minnesota AG Keith Ellison, and there likely will be three more starting in January 2023 – Congressman Raul Labrador of Idaho, Former Congressman (and current Lt. Governor) Tim Griffin of Arkansas and Congressman Anthony Brown of Maryland.

Governor and Lieutenant Governor

Of course, as the joke goes, many AGs do in fact go on to serve as the governor of their state – the sitting Governors of Kentucky, Maine, North Carolina, Ohio, South Carolina and Texas each previously served as AG. The role of AG provides exposure to a statewide audience, and provides a bird’s eye view into nearly all the functions of state government. As a result, many state AGs are well-equipped to serve as governors of their states. Currently, the following sitting AGs are running to be the governor: Kansas AG Derek Schmidt; Daniel Cameron of Kentucky; and Massachusetts AG Maura Healey. Similarly, AG Leslie Rutledge is running to be the Lieutenant Governor of Arkansas.

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All in all, the office of State AG is a powerful one that draws a diverse and dynamic group of people who often take hard-hitting positions on key issues in their – and our – days. Watchers of politics and law – or those who are subject to state policy and law enforcement by AGs would do well to monitor the activities and interests of AGs in their jurisdictions.

[1] Ryan Greenstein, NAAG, From Burr to Harris: AG to VP (Jan. 19, 2021), available at https://www.naag.org/attorney-general-journal/from-burr-to-harris-ag-to-vp/.