June 12, 2006
Collusion by Underwriters: Violation of Securities Law, Antitrust Law, Both or Neither?
SEC Commissioner Paul Atkins published a compelling editorial in this Saturday's Wall Street Journal ("A Serious Threat to our Capital Markets," WSJ, June 10, 2006, A12) urging the Supreme Court to grant review of Billing v. Credit Suisse First Boston et al, a 2nd Circuit decision holding that alleged market manipulation by securities underwriters might be actionable under the Antitrust laws, specifically Section 1 of the Sherman Act and Section 2(a) of the Robinson-Patman Act. The 2nd Circuit opinion (Download 039284p2.pdf ) overruled the district court's opinion, which found that the underwriters had implied immunity against the antitrust laws under securities regulations. Commissioner Atkins' editorial points out the SEC, in cooperation with the NASD, has kept a vigilant watch over the IPO market and that the type of conduct at issue in Billing has been dealt with by both the Commission and industry self-regulation. Citing Verizon v. Trinko, Mr. Atkins concludes that antitrust claims should be immunized when a detailed regulatory scheme, such as the securities laws, exists to correct the problem. When such regulation exists, "antitrust intervention offers only slight benefits and high potential costs." Among the costs mentioned are the effects of the spectre of antitrust class action litigation inhibiting investment in capital markets. In other words, the Commission is warning against securities class action litigation disguised as antitrust claims.
I hope the Court does grant review in Billing. In our post-deregulatory environment, it would be helpful if the Court clarified the relationship between regulated industries and antitrust law. Verizon v Trinko, while arguably providing the correct result, was a confused opinion, especially with Justice Scalia's stark language about antitrust law, the Magna Carta, and exceptions from competition for Congressionally approved monopolies. A clear opinion about implied preemption would be a useful corrective to Trinko.