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Keith Sharfman, Jun 29, 2007
Last week, in Credit Suisse Securities v. Billing, the U.S. Supreme Court dismissed a variety of antitrust claims brought by investors against underwriters from whom they had purchased securities, on the theory that securities underwriting is implicitly immune from antitrust scrutiny because it is an activity regulated by the securities laws. The underwriting firms had been accused, among other things, of “tying” the sale of some securities to the purchase of others, a practice of which both the SEC and antitrust (at least in some circumstances) disapprove.
Speaking for six members of the Court (Alito, Breyer, Ginsburg, Roberts, Scalia, and Souter), Justice Breyer’s majority opinion did not address the merits of the plaintiffs antitrust claims. Rather, it assessed whether the underwriting transactions in question qualified for implicit antitrust immunity under a “clear incompatibility” standard that applies when Congress (as here in the case of the securities laws) has been silent about whether conduct regulated by another body of federal law should receive antitrust immunity. The majority concluded that, in light of the Securities and Exchange Commission’s (SEC) extensive regulation of underwriters and the substantial risk that dual regulation could produce conflicting guidance to underwriters, antitrust immunity applied.
In a concurring opinion, Justice Stevens agreed with this outcome but not with the majority’s reasoning. In his view, the claims should have been dismissed as frivolous on the merits rather than on account of antitrust immunity. Justice Thomas dissented for similar reasons, arguing that the securities laws explicitly preserve remedies to securities purchasers beyond those specifically created by the securities laws themselves, including those available from antitrust (an argument that the Court had previously considered and rejected and that the majority chose here not to reconsider). Justice Kennedy did not take part in the case.
Credit Suisse has important implications for antitrust practice. The decision’s effect is to narrow the scope of antitrust law and to invite efforts by regulated industries to narrow it still further. The court’s “clearly incompatible” standard is new and (though it purports not to) seems to water down considerably the old “plain repugnancy” test of Gordon v. New York Stock Exchange, Inc. 422 U.S. 659, 682 (1975). Under the new incompatibility standard, there no longer has to be an actual conflict between antitrust and other federal law for antitrust implicitly not to apply. Even a mere regulatory overlap may now be sufficient to trigger antitrust immunity. (Recall that in Credit Suisse the Court assumed that both antitrust and the SEC disapproved of the tying and other practices in question, and yet the Court still considered the two bodies of law incompatible on account of the regulatory overlap.)
