'Credit Suisse First Boston LLC, Et Al. V. Billing, Et Al.' – Supreme Court Sides With Investment Banks In Antitrust Suit Over IPO Practices June 2007

The Supreme Court held that antitrust claims against investment bank underwriters who engaged in practices known as "laddering," "tying" and "excess compensation" in connection with initial public offerings, led to a "plain repugnancy" between the antitrust laws and the federal securities laws. As a result, in a 7-1 decision, the Court held that the securities laws implicitly preclude the application of the antitrust laws to these practices and dismissed the action. This decision may have a significant impact for the securities industry and other industries with heavy regulatory oversight, including the following:

It may be more difficult to bring antitrust suits challenging practices covered by the securities laws;

Other underwriting practices not covered by the decision, but regulated by the SEC, may be immune from antitrust liability; and

Based on the Court's rationale underlying this decision, industries with active regulatory oversight may be immune from antitrust liability.

The complaint in Billing was brought by a group of buyers of newly issued securities of technology-related companies against underwriting firms that marketed and distributed those securities. The buyers claimed that the underwriters unlawfully agreed with each other not to sell shares of a popular new issue to a buyer unless that buyer committed to: (1) buy additional shares of that security later at escalating prices, a practice called "laddering"; (2) pay unusually high commissions on subsequent security purchases from the underwriters; or (3) purchase from the underwriters other less desirable securities, a practice called "tying." The plaintiffs alleged that the underwriters abused the practice of combining into underwriting syndicates by agreeing among themselves to impose these conditions upon potential investors, thereby violating Section 1 of the Sherman Act and Section 2 of the Clayton Act.

The District Court granted the defendants' motion to dismiss, holding that the federal securities laws impliedly preclude application of the antitrust laws to the conduct in question. The Court of Appeals for the Second Circuit reversed, and reinstated the action. The Supreme Court granted certiorari and reversed the Court of Appeals.

The Court explained that regulatory statutes sometimes explicitly state whether they preclude application of the antitrust laws. But where, as here, the regulatory statutes are silent with respect to antitrust laws, courts must determine...