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Svetlana Gans, Connie Robinson, Jun 29, 2007
Introduction
In a 7-1 decision, the U.S. Supreme Court recently determined that the Securities and Exchange Commission (SEC) is better equipped than judges and juries to determine the legality of underwriting activities, such as syndication and marketing techniques, taking place during initial public offerings. Credit Suisse Sec. (USA) LLC v. Billing, No. 05-1157, 127 S.Ct. 2383 (2007). The Supreme Court found the conduct impliedly immune from the antitrust laws, broadening that immunity to conduct that the SEC itself had disapproved. The Court concluded that in the face of the SEC’s active and ongoing regulation, where a serious conflict arises between the antitrust and securities regulatory scheme, the securities laws are deemed “clearly incompatible” with the antitrust laws, and thus the conduct is immune from the antitrust laws. This decision follows an established line of Supreme Court precedent finding antitrust immunity when there is a clear regulatory structure and active supervision of conduct at the heart of the industry.
The Case and the Supreme Court Decision
In January 2002, a group of 60 investors filed two antitrust class actions against 10 leading investment banks under Sections 1 and 2 of the Sherman Act, the Robinson-Patman Act, and state antitrust laws. The complaint alleged that the defendant banks agreed to impose anticompetitive rates over and above the price of IPO shares and underwriting commissions through the use of: (i) laddering agreements, in which investors agreed to buy additional shares of the securities at higher prices; (ii) tying arrangements, in which investors agreed to purchase other, less attractive securities; and (iii) additional commissions related to follow-up or secondary public offerings. The banks moved to dismiss the investors complaints on the ground that federal securities laws impliedly immunized the conduct at issue. The Southern District of New York dismissed the complaints, but the Second Circuit reversed.
