Sherman Antitrust Act

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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.