In Hartford Fire Insurance Co. v. California (1993), the United States Supreme Court held that the Sherman Act applies to foreign business conduct meant to cause a “substantial effect” in the United States, even if that conduct was legal in the country in which is occurred. In the case, United States-based insurance and reinsurance companies agreed with London-based reinsurance companies to pressure the Insurance Services Office in the United States to change standard forms in a way that made it more difficult for insureds to make insurance claims. The conduct in question did not violate British law, but it would have run contrary to federal anti-monopoly law under the Sherman Antitrust Act. Nineteen states, including California, brought suit against the insurance companies for conspiracy to violate § 1 of the Sherman Antitrust Act. The British reinsurance companies argued that the case against them should be dismissed in federal court because application of the Sherman Act against them would violate principles of international comity. The Supreme Court, in an opinion by Justice Souter, concluded that the domestic insurance companies’ alleged conduct was not immunized from antitrust liability by the McCarran-Ferguson Act, nor did principles of international comity preclude the federal district court from having jurisdiction over the foreign insurers’ conduct. The Sherman Antitrust Act made every contract, combination, or conspiracy in unreasonable restraint of interstate or foreign commerce illegal. The federal district court had jurisdiction over Sherman Act claims, especially since the London reinsurance companies engaged in conspiracies that would have substantially affected the insurance market in the United States. As for principles of international comity, the Supreme Court did not find the need to apply these principles, since there was no true conflict between US law and foreign (UK) law.
Sherman Antitrust Act
Definition
A federal anti-monopoly and anti-trust statute, passed in 1890 as 15 U.S.C. §§ 1-7 and amended by the Clayton Act in 1914 (15 U.S.C. § 12-27), which prohibits activities that restrict interstate commerce and competition in the marketplace.
Overview
Broad and sweeping in scope, § 1 of the Act states that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.” § 2 of the Act further prohibits monopolization or attempts at monopolizing any aspect of interstate trade or commerce and makes the act a felony. Federal district courts have the jurisdiction to enjoin violations of the Sherman Act, and these proceedings are instituted by United States Attorneys in their respective districts. The injured party (whether it is the federal government, an individual state, or a private party) is entitled to three times the amount of injury that it has suffered; this award is known as treble damages. The Act does not apply to trade or commerce with foreign nations unless there was conduct that has a “direct, substantial, and reasonably foreseeable effect” and that effect gives rise to a claim under the Act. For a full text of the Sherman Antitrust Act, see:
http://www.law.cornell.edu/uscode/15/usc_sup_01_15_10_1.html
In insurance law, the McCarran-Ferguson Act of 1945, 15 U.S.C. §§ 1011-15 vested regulatory authority of the insurance industry on the states; thus, the federal reach of the Sherman Act, the Clayton Act, and the Federal Trade Commission Act is applicable to the “business of insurance” only to the extent where: (1) such business is not regulated by state law [§ 1012], or (2) there are insurer or acts of, “boycott, coercion, or intimidation” [§ 1013]. For the full text of the McCarran-Ferguson Act, see:
http://www.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_20.html
Definition from Nolo’s Plain-English Law Dictionary
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:24 pm
“The meaning of the term ‘contract, combination … or conspiracy’ is informed by the ‘ “basic distinction” ’ in the Sherman Act ‘ “between concerted and independent action” ’ that distinguishes § 1 of the Sherman Act from § 2. Copperweld, 467 U.S., at 767, 104 S.Ct. 2731 (quoting Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984)). Section 1 applies only to concerted action that restrains trade. Section 2, by contrast, covers both concerted and independent action, but only if that action ‘monopolize[s],’ 15 U.S.C. § 2, or ‘threatens actual monopolization,’ Copperweld, 467 U.S., at 767, 104 S.Ct. 2731, a category that is narrower than restraint of trade. Monopoly power may be equally harmful whether it is the product of joint action or individual action.
“Congress used this distinction between concerted and independent action to deter anticompetitive conduct and compensate its victims, without chilling vigorous competition through ordinary business operations. The distinction also avoids judicial scrutiny of routine, internal business decisions.
“Thus, in § 1 Congress ‘treated concerted behavior more strictly than unilateral behavior.’ Id., at 768, 104 S.Ct. 2731. This is so because unlike independent action, ‘[c]oncerted activity inherently is fraught with anticompetitive risk’ insofar as it ‘deprives the marketplace of independent centers of decisionmaking that competition assumes and demands.’ Id., at 768-769, 104 S.Ct. 2731. And because concerted action is discrete and distinct, a limit on such activity leaves untouched a vast amount of business conduct. As a result, there is less risk of deterring a firm’s necessary conduct, courts need only examine discrete agreements; and such conduct may be remedied simply through prohibition. See Areeda & Hovenkamp ¶ 1464c, at 206. Concerted activity is thus ‘judged more sternly than unilateral activity under § 2,’ Copperweld, 467 U.S., at 768, 104 S.Ct. 2731. For these reasons, § 1 prohibits any concerted action ‘in restraint of trade or commerce,’ even if the action does not ‘threate[n] monopolization,’ Ibid. And therefore, an arrangement must embody concerted action in order to be a ‘contract, combination … or conspiracy’ under § 1.”
J. Stevens, American Needle, Inc. v. National Football League, 130 S.Ct. 2201, 2208-2209 (2010).
