A federal commission has recommended that Congress consider eliminating insurers’ limited antitrust exemption, saying recent trends point to the benefit of ending such arrangements.
The recommendation was contained in the report of the Antitrust Modernization Commission. Four of the 12 members of the commission specifically called for repeal of the McCarran-Ferguson Act and 3 other antitrust exemptions, including the Shipping Act, the Export Trading Company Act and the Webb-Pomerene exemption.
One member, John Shenefield, a lawyer at Morgan Lewis Washington who was in charge of antitrust enforcement in the Carter administration, said the repeal of those exemptions “should not be delayed.”
In addition, he said, Congress should create another commission to examine all the other exemptions “now on the books.”
A top life insurance agent trade group official said the report “buttresses our position that the McCarran-Ferguson Act should be retained as is.”
Michael Kerley, senior vice president/federal government relations, for the National Association of Insurance and Financial Advisors, said a detailed reading of the report and an analysis by NAIFA’s lawyers found one of the recommendations “modifies the overall tenor of the report.”
Kerley said the report makes a number of recommendations, one of which is crucial to consideration of the continuation of McCarran-Ferguson: “No statutory change is recommended to the current role of the states in non-merger civil antitrust enforcement.”
“NAIFA thinks this recommendation is critical because the report otherwise fails to differentiate in any way between naked exemptions from the antitrust laws–like the major league baseball exemption, for example–and the McCarran-Ferguson-type exemption which applies only to the extent that the states are actively regulating the insurance-related conduct.”
Kerley said the McCarran-Ferguson Act “does not really function as a true exemption to the federal antitrust laws.”
Instead, he said, the law dictates that the state insurance regulators–who are charged with regulating the business of insurance under both the McCarran-Ferguson Act and the 1999-enacted Gramm-Leach-Bliley Act–”are the appropriate arbiters of what is permissible conduct in this context, and they are able to ground that determination in their overall regulatory scheme based on their unique expertise in regulating the industry.”
If the state regulatory authority is to truly be preserved as stated under Recommendation 32, Kerley said, “then the logical conclusion is that McCarran should be preserved.
“To repeal the limited exemption from federal antitrust enforcement authority it contains would undermine the state insurance regulatory system mandated by the McCarran-Ferguson Act to the near-term detriment of both that regulatory regime and the insurance policyholder consumers that regime is designed to serve,” Kerley said.
On behalf of the American Council of Life Insurers, Whit Cornman, associate director of media relations, said, “Obviously this is an extensive report covering a wide-range of anti-trust laws.
“With regard to McCarran-Ferguson, we continue to believe that a discussion of McCarran belongs as part of a broader discussion regarding insurance regulatory reform and modernization and an optional federal charter,” he added.
The commission dismissed in its report the potential effect that eliminating the exemption from collecting loss data would have on small insurers. “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.”
The commission added, “Insurance companies would bear no greater risk than companies in other industries engaged in data sharing and other collaborative undertakings.”
It also noted, “To the extent that insurance companies engage in anticompetitive collusion, however, then they appropriately would be subject to antitrust liability.”