Securities Regulation in the Shadow of the Antitrust Laws: The Case for a Broad Implied Immunity Doctrine

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NOTE CONTENTS

INTRODUCTION

I.  A DOCTRINAL DEFENSE OF BILLING
    A. The Trio of Pre-Billing Implied Immunity Cases
    B. The Decision in Billing
    C. Billing Is Consistent with Precedent

II. THE RISK OF OVERDETERRENCE
    A. The False Positives Concern
       1. The SEC's Comparative Advantage
       2. Counterarguments to the SEC's Comparative Advantage
          a. Is the SEC Focused on Competition?
          b. Agency Capture
          c. The Unavailability of Treble Damages
    B. The Excessive Liability Concern
       1. The Competitive Nature of the Securities Markets
       2. The Effect of the Variance of Antitrust Damage Awards

III. THE OPTIMAL IMPLIED IMMUNITY STANDARD
    A. The Effect of Time Constraints on SEC Regulation
    B. The Ability of Courts To Interpret SEC Regulations Correctly

CONCLUSION

INTRODUCTION

In Credit Suisse Securities (USA) LLC v. Billing, (1) the Supreme Court held that an antitrust suit challenging various alleged concerted marketing activities of underwriters of initial public offerings (IPOs) was impliedly precluded by the securities laws. The Court found the underwriters, whose actions included requiring customers to agree to purchase additional securities following the IPO, immune from antitrust liability based on the incompatibility of the securities laws and antitrust laws, even though the Securities and Exchange Commission (SEC) had condenmed much of the conduct alleged in the plaintiffs' antitrust complaint. (2) The Court reasoned that the distinction between activities that the SEC permits and those that it prohibits can be very fine and is subject to change and that "nonexpert" judges and juries are likely to have a comparative disadvantage in determining on which side of the line a particular activity falls. (3) In the Court's view, the possibility that courts adjudicating antitrust claims ("antitrust courts") might "make unusually serious mistakes" in this area would have a chilling effect on the securities industry, (4) and this justified giving the SEC exclusive jurisdiction over the underwriting activities at issue. (5)

The decision in Billing has generated significant criticism. A number of commentators have argued that the Court was wrong to focus on the potential for erroneous decisions in antitrust cases even when the SEC has not explicitly given the conduct in question its imprimatur or, as in Billing itself, when the SEC has in fact prohibited the conduct. (6) These critics have argued that a finding of implied immunity cannot be predicated merely on the SEC's jurisdiction over, or even review of, a particular class of conduct unless the SEC affirmatively permits the conduct and thereby immunizes it from an antitrust challenge. (7) Several commentators have also expressed concern that, as a policy matter, the preclusion of antitrust suits may lead to the underdeterrence of anticompetitive conduct in the securities industry. (8)

This Note responds to such criticism by offering both a doctrinal and a normative defense of the Court's implied immunity analysis in Billing. The Note proceeds in three Parts. Part I presents a doctrinal argument in support of Billing. It contends that critics of the decision have mischaracterized the relevant precedents and have invoked untenable bases on which to distinguish them from Billing. Instead, it argues that the Court's interpretation of the securities laws as impliedly precluding antitrust suits even in the absence of a manifest conflict between substantive securities and antitrust law is consistent with Supreme Court precedent in this area. (9)

The subsequent two Parts map out a normative argument in support of Billing's broad implied immunity standard. Part II argues that the SEC, which has an obligation to consider competition effects when promulgating regulations, (10) possesses a comparative advantage over antitrust courts in determining the scope of permissible conduct in the securities industry and that the latter can be expected both to prohibit socially beneficial conduct and to impose excessive liability, even for activities that should be prohibited. …