An Overview of the Principal Federal Antitrust Statutes

• Pages: 5-23

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CHAPTER II

AN OVERVIEW OF THE PRINCIPAL FEDERAL

ANTITRUST STATUTES19

A.The Principal Federal Statutes

1.The Sherman Act

The original and most important federal antitrust statute applicable to

the insurance industry is the Sherman Act, enacted in 1890.

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The

Sherman Act is written in succinct and sweeping language that has been

elaborated upon by the courts for over a century, giving rise to an

enormous body of precedent. The key substantive provisions of the

Sherman Act are Sections 1 and 2.

a.Section 1

“Every contract, combination . . . or conspiracy, in restraint of trade or

commerce among the several States, or with foreign nations,

is . . . illegal.

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b.Section 2

“Every person who shall monopolize, or attempt to monopolize, or

combine or conspire with any other person or persons, to monopolize any

part of the trade or commerce among the several States, or with foreign

nations, shall be deemed guilty of a misdemeanor . . . .”

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19. Thisdiscussiontouchesonlyonthehighlightsoftheantitrustcaselaw

as itappliestotheinsuranceindustry. For a morethoroughanalysis of

antitrust law,seeALD(7th ed. 2012).

20. This chapter does not address those federal antitrust la ws that do not apply

toinsurance. Theseprincipallyinclude:(1)theRobinson-Patman Act,15

U.S.C. §§13,13a,13b,and2la,whichprohibitspricediscrimination

butdoes notapplytothesaleofservices,suchasinsurance;and(2)the

exclusivedealing provisionsoftheClaytonAct,15U.S.C. §14, which

similarlyapplyonlyto commodities.

21. 15U.S.C. §1.

22. 15 U.S.C. §2.

6Insurance Antitrust Handbook, 3d Ed.

2.The Clayton Act

The Clayton and Federal Trade Commission Acts were enacted in

1914 during the Wilson administration to strengthen perceived weaknesses

in the Sherman Act. The Clayton Act is much more specific than the

Sherman Act, focusing on particular practices such as exclusive dealing

arrangements, price discrimination, acquisitions, and interlocking

directorates. Among the provisions that are or may be applicable to

insurers, the two most important are Section 7, prohibiting mergers and

acquisitions that may substantially lessen competition or tend to create a

monopoly in any line of commerce,

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and Section 8, prohibiting, with

certain exceptions, the directors or officers of one corporation from serving

as directors or officers of competingcorporations (“interlocking

directorates”).

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3. The Federal Trade Commission Act

The Federal Trade Commission Act (FTC Act),25the fraternal twin of

the Clayton Act, created the Federal Trade Commission (FTC), a five-

member administrative agency. The FTC’s antitrust jurisdiction is

conferred by Section 5(a)(l) of the FTC Act,

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which provides that,

“[u]nfair methods of competition in or affecting commerce, and unfair or

deceptive acts or practices in or affecting commerce, are hereby declared

unlawful.”

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Unfair methods of competition include not only violations of the letter

of the antitrust laws,

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but also practices that violate its spirit by exhibiting

the same “central competitive characteristic[s]” as those constituting

Sherman Act violations.

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Section 5also applies to incipient violations

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23. 15 U.S.C. §18. The Hart-Scott-Rodino Act, Section 7A of the Clayton Act,

15 U.S.C. §18A, requires the parties to certain acquisitions, mergers, and

joint ventures to p rovide advance notice to the Federal Trade Commission

and the U.S. Department of Justice (so-called premerger notification). See

Chapter Xfor a more in-depth discussion of antitrust scrutiny of mergers

and acquisitions.

24. 15 U.S.C. §19.

25. Act of Sept. 26, 1914, ch. 311, §5, 38 Stat. 717, 719 (codified as amended

at 15 U.S.C. §§41-58).

26. 15 U.S.C. §45(a)(l).

27. Id.

28. SeeFTCv. Cement Inst.,333U.S. 683,694(1948).

29. Atlantic Ref. Co. v. FTC,381U.S. 357,369(1965).

30. FTCv. MotionPictureAdver . Servs. Co.,344U.S. 392,394(1953).