Application of the Antitrust Laws to Insurance Company Mergers

• Pages: 157-171

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CHAPTER X

APPLICATION OF THE ANTITRUST LAWS TO

INSURANCE COMPANY MERGERS

Mergers and acquisitions are subject to antitrust scrutiny under both

federal and state laws, primarily under Section 7 of the Clayton Act, which

prohibits the acquisition of assets or shares where “the effect of such

acquisition may be substantially to lessen competition, or to tend to create

a monopoly.”

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Most merger challenges are brought by either the Federal

Trade Commission (FTC) or the Department of Justice Antitrust Division

(DOJ).

This chapter addresses (A) whether insurance company mergers are

immune from federal antitrust challenge; (B) reporting and waiting

requirements; (C) enforcement policies; and (D) state regulation of

insurance mergers.

A. McCarran-Ferguson Act Immunity

Both federal antitrust enforcement agencies have adopted the position

that the McCarran-Ferguson Act

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does not provide insurance company

mergers and acquisitions with immunity from the federal antitrust laws. In

1972, the FTC decided that it had jurisdiction to hear a challenge under

Section 7 of the Clayton Act to a merger of insurance companies, citing

two grounds.

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First, the FTC decided that the “business of insurance”

was not involved, because “the challenged merger does not affect the

contractual relationship of the companies to their insureds.”

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Second, the

FTC determined that no state law had regulated, or could regulate, an

interstate merger for its anticompetitive effects.

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“Congress did not

664. 15 U.S.C. §18. Mergers and acquisitions can also be challenged under the

Sherman Act and the Federal T rade Commission Act, but Section 7 of the

Clayton Act usually has broader scope, because it reaches transactions that

do not result in an actual restraint of trade or monop oly but that nonetheless

indicate a tendency to lessen competition.

665. 15 U.S.C. §§1011 et seq.

666. American General Ins. Co., 81 F.T.C. 1052 (1972).

667. Id. at 1057.

668. Id. at 1060.