Close Close

Industry Spotlight > Broker Dealers

Commissioners Want Insurers' Antitrust Exception Abolished

Your article was successfully shared with the contacts you provided.

A federal commission recommended today that Congress consider eliminating insurers’ limited antitrust exemption, saying recent trends argue for ending such arrangements.

The recommendation was contained in the report of the Antitrust Modernization Commission. Four of the 12 commission members specifically called for repeal of the McCarran-Ferguson Act and 3 other antitrust exemptions: the Shipping Act, the Export Trading Company Act and the Webb-Pomerene exemption.

One member, John Shenefield, a lawyer at Morgan Lewis, Washington, said repeal of those exemptions “should not be delayed.” Shenefield was in charge of antitrust enforcement in the Carter administration,

The commission dismissed in its report the potential effect on small insurers of eliminating the exemption that allows them to collect and share loss data.

“Like all potentially beneficial competitor collaboration generally … such data sharing would be assessed by antitrust enforcers and the courts under a rule-of-reason analysis that would fully consider the potential pro-competitive effects of such conduct and condemn it only if, on balance, it was anticompetitive.”

Insurers would bear no greater risk than companies in other industries undertaking data sharing and other collaborative efforts, the commission added. “To the extent that insurance companies engage in anticompetitive collusion, however, then they appropriately would be subject to antitrust liability,” the group stated.

Various factors have driven the movement toward deregulation, the report said, noting that technological progress has facilitated the growth of competition in “industries previously considered natural monopolies.”

In addition, “critiques of regulation have pointed out that federal regulatory agencies were sometimes ‘captured’ by firms they regulated, to the detriment of the public interest, and that the costs of regulation were significantly more than anticipated,” the report said.

Jonathan Jacobson, a commission member from New York and an antitrust partner at Wilson Sonsini Goodrich & Rosati, added that exemptions enjoyed by the insurance and other industries “have outlived any utility they may have had and should be repealed.”

The commission heard substantial evidence of anticompetitive activities that are permitted, Jacobson said. “And in each case, the response was basically the same–that ‘our industry does many good things, does not restrain competition and needs the exemption to avoid potential treble damage litigation,’” he said. “This litany provides no basis for an exemption. Virtually every industry does good things. Conduct that does not restrain competition is not prohibited, with or without an exemption. And freedom from private litigation is something, again, that every industry would like.”

Jacobson added that the real question in is whether an exemption from normal antitrust rules is truly needed to ensure that some important public goal is served.

“None of the industries we examined came close to meeting that standard of proof,” he concluded.

Jacobson was joined in his comments by 2 other members of the panel, Debra Valentine and John Warden.