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The U.S. Supreme Court has asked the Office of the Solicitor General to weigh in on an antitrust class action that threatens the widespread reliance on syndicates to underwrite initial public offerings. The request indicates that the justices seek a unified federal position on a case that has split two key government agencies. The Solicitor General’s Office, a part of the Department of Justice, now must settle a dispute between DOJ’s Antitrust Division and the Securities and Exchange Commission (SEC). Currently, DOJ has a leg up in the dispute, after the 2d U.S. Circuit Court of Appeals last September overturned a district court’s initial ruling in the SEC’s favor. The bottom line is whether the case, Glen Billing v. Credit Suisse First Boston Ltd., proceeds. Billing alleged that the underwriters’ practices, common in syndication, actually constitute a conspiracy to set prices and divide the market among themselves in violation of antitrust law, which then cost him and people like him, who bought stock at initial public offering prices and saw them tank, a great deal of money. Plaintiffs in antitrust cases can get three times the damages they prove, unlike most other areas of law. An ‘implied immunity’ The SEC argues that it regulates the securities industry, that antitrust law doesn’t always apply and that the court should find “implied immunity” from antitrust laws when a pervasive regulatory scheme is in place. DOJ’s Antitrust Division, on the other hand, argues that nefarious behavior should not be shielded by a regulatory scheme that doesn’t adequately prevent harms that could be addressed by antitrust laws. “The call for the views of the solicitor general [SG] is a very serious step forward for this case,” according to Roy Englert, a partner at Washington’s Robbins, Russell, Englert, Orseck & Untereiner who represents a group including the Securities Industry Association, the Bond Market Association and the U.S. Chamber of Commerce in this case. If the SG advises the justices to take the case, it could be heard next April. The SG will have to balance the views of both regulatory agencies, and may even seek input from the Federal Trade Commission, which shares antitrust regulatory authority with DOJ, according to Englert. The White House, which is rarely asked for its opinions, also may want to express them in this case, according to Doug Melamed, a partner at Wilmer Cutler Pickering Hale and Dorr and former acting head of DOJ’s Antitrust Division. There may be a variety of input, but that’s because the SG’s brief is likely to receive deference from the high court, Melamed said. “When they ask for the SG’s view, they matter,” he said. Melamed said earlier that he’s hoping that DOJ recognizes the import of this case for business. The SEC has already explained just how important this case is to the lower courts. “Underwriters and other participants in the underwriting process should not be subjected to the fear that in interpreting and applying the comprehensive governing body of securities laws rules, they could find themselves not only liable for violating the securities laws, but also in an antitrust treble damages action,” the SEC’s general counsel, Giovanni P. Prezioso, wrote to the 2d Circuit in response to a request for guidance. “By discouraging useful interactions among participants in the offering process that are permitted under the securities laws, the fear of potentially crippling treble damages awards could over-deter conduct that would serve the interests of the markets and the capital formation process,” Prezioso wrote. Prezioso said that because of the regulation by the SEC, the court should find that there is “implied immunity” from antitrust laws. However, DOJ convinced the 2d Circuit that the antitrust laws should rarely be ignored. Because the offensive conduct referred to in the pleadings is not permitted under SEC regulations, antitrust law should be enforced, according to then-Assistant Attorney General for Antitrust R. Hewitt Pate. “Viewed in the context of the relevant case law, the SEC’s active efforts to enforce the regulatory prohibitions neither conflict with nor relieve defendants of their obligations to comply with the federal antitrust laws,” he wrote to the court last May, influencing the 2d Circuit to reinstate the case. The SG’s brief is likely to be filed by January 2007, according to Englert.

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