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Credit Suisse: The Latest in a Series of Losses for Antitrust Plaintiffs

June 27, 2007

Last week, the Supreme Court dealt a significant blow to the ability of investors to invoke the antitrust laws and the threat of treble damages to challenge Wall Street activity.  In Credit Suisse Securities USA v. Billing, the Court held that securities law precludes the application of the antitrust laws to the initial public offering syndicates of investment banks.  The plaintiffs, a class of private investors, claimed that investment bank syndicates had violated Section 1 of the Sherman Act during the technology boom by obtaining "excessive commissions" through a variety of practices.  The Court acknowledged that the Securities and Exchange Commission ("SEC") disapproved of some of the conduct plaintiffs alleged, but concluded that allowing an antitrust case to proceed – even with respect to partially inappropriate conduct – would be "practically incompatible" with effective SEC enforcement because of the complexity of the SEC regulatory scheme.  Although it certainly does not go so far as to suggest that the securities laws completely preempt the antitrust laws, the Court's decision dramatically reduces the likelihood of successful investor antitrust lawsuits. 

The Credit Suisse decision, moreover, was only the most recent in a month-long series of significant losses for antitrust plaintiffs.  In Bell Atlantic Corp. v. Twombly, the Supreme Court considered whether allegations of parallel conduct are sufficient in and of themselves to allow a conspiracy claim under Section 1 of the Sherman Act to withstand a motion to dismiss.  Plaintiffs represented a class of local telephone and internet subscribers who alleged that regional service monopolies conspired to restrain trade by precluding entry and by failing to compete in each others' markets.  In its decision, the Court articulated a "plausibility" standard that requires "enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement."  Twombly makes clear that plaintiffs must do more than allege parallel business conduct or make bare assertions of conspiracy to state a claim under Section 1 of the Sherman Act.  Exactly what "plausibility" means and exactly what plaintiffs must allege, however, remains to be seen.  

Nor have private plaintiffs been the only victims of this apparent trend.  In the second half of May, the Federal Trade Commission ("FTC") suffered two major losses on the merger front.  On May 14, the U.S. District Court for the Western District of Pennsylvania denied the FTC's attempt to block Equitable Resources, Inc.'s proposed acquisition of The People's Natural Gas Co.  Affirming the regulatory power of the Pennsylvania Public Utility Commission ("PUC"), the court concluded that the state action immunity doctrine insulated the PUC's approval of the merger from federal antitrust scrutiny.  Two weeks later, the FTC was stymied again, this time at the hands of the U.S. District Court of New Mexico.  The FTC had alleged that the proposed merger of Western Refining, Inc. and Giant Industries, Inc. would reduce competition for the bulk supply of light petroleum products in northern New Mexico.  The court rejected the FTC's contention that Giant would increase the supply of gasoline absent the merger and found that the FTC had not proved that Western and Giant would be able to increase market prices once merged.  The deal closed two days later, making Western the fourth largest publicly-traded independent crude oil refiner and marketer in the United States.