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There is no evidence Congress intended to repeal the antitrust laws and immunize “tie-in” agreements on initial public offerings, a federal appeals court ruled Wednesday. Reversing the dismissal of an antitrust action brought against major Wall Street underwriters, the 2nd U.S. Circuit Court of Appeals rejected a claim by the underwriters that “implied antitrust immunity arises from a potential specific conflict” between the antitrust laws and the securities laws. In Billing v. Credit Suisse First Boston, 03-9284, the court also rejected the underwriters’ claim that immunity from suit under the antitrust laws was implied because of the U.S. Securities and Exchange Commission’s “pervasive” regulation of the markets. The lawsuits allege what 2nd Circuit Judge Richard Wesley called “an epic Wall Street conspiracy” to manipulate the price of stocks in initial public offerings. The chief allegation among many in the lawsuits concerns “tie-in” agreements, whereby the underwriters demanded extra payment — or other commitments — in excess of the actual stock price from investors who sought allocations in hot initial offerings. Southern District of New York Judge William Pauley had dismissed the actions, finding that the “SEC, through application of its broad regulatory authority over the broad spectrum of conduct related to securities offerings, is empowered to regulate the conduct alleged” by the plaintiffs. “It is this sweeping power to regulate that spawns the potential conflict with the antitrust laws” that under the case law “requires a finding of implied immunity,” Pauley said in In re Initial Public Offering Antitrust Litigation, 01 Civ. 2014 and Pfeiffer v. Credit Suisse First Boston Corp., 01 Civ. 11420. Plaintiffs lawyers had argued that other extensively regulated industries are nonetheless subject to the restraints of the antitrust laws. In this sense, they characterized it as a “classic antitrust case” and analogized the securities industry to the oil or television industry. The defendants argued persuasively to Pauley that recent 2nd Circuit case law favored a finding of implied immunity in the securities context. But a 2nd Circuit panel of Judges Wesley, James Oakes and Robert Katzmann had a different reading of the meaning of that case law. The circuit last addressed the implied immunity issue in 2003 in In re Stock Exchanges Options Trading Antitrust Litigation, 3317 F.3d 134. There, the court recognized the defendants’ claim of immunity in a case where purchasers of equity options claimed that exchanges and exchange members had violated the Sherman Act by conspiring to restrict the listing and trading of particular options, so that options were only listed on a single stock exchange at a time. Although the SEC first approved of the practice and later changed its mind, Wesley said the circuit in that case found implied immunity, concluding “that antitrust principles directly conflicted with the SEC’s encouragement and affirmative approval of exchange plans for exclusive listings.” But the circuit in this case faced a different animal, with Wesley saying the claim of implied immunity for the tie-in arrangements is “in many ways, unlike any we have seen.” “Tie-in arrangements are recognized as means of dangerous manipulation, and there is no indication that Congress contemplated repealing the antitrust laws to protect them,” Wesley said. “Thus defendants insist that the SEC could exercise powers — powers the agency refuses to recognize — to immunize conduct that neither Congress nor the agency ever contemplated permitting.” Wesley went on to state that there “may be reasons why Congress might choose to immunize such conduct.” “The SEC and defendants have vigilantly reminded us that the securities markets in toto might be better entrusted to an expert agency than to the federal courts,” he said. “While we might agree, we do not have the responsibility for making national policy. Congress knows how to immunize regulated conduct from the antitrust laws. To date, it has not done so here either expressly or impliedly. Construing the statutes as written, we find no repeal.”

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