The plaintiffs in this class action suit claimed that several of the nation’s largest underwriting firms entered into illegal contracts with purchasers of securities distributed in initial public offerings, and that through these contracts, the underwriting firms grossly inflated the price of the securities after the IPOs in the so-called aftermarket.
The trial court held that securities laws impliedly repealed federal antitrust laws and preempted state antitrust laws regarding the alleged conduct. It dismissed the complaints. The Second Circuit Court of Appeals reversed, finding that the defendants did not have implied immunity from antitrust claims based on securities laws.
The Supreme Court ruled that the antitrust laws do not apply to the process of selling new stocks after their initial offering on stock markets. An antitrust action raises ''a substantial risk of injury to the securities market,'' Justice Stephen Breyer wrote. He said there is ''a serious conflict'' between applying antitrust law to the case and proper enforcement of the securities laws. Hence, the Court held that the securities laws implicitly preclude application of the antitrust laws to the facts alleged. This does not mean, however, that all conduct involving securities is immune from antitrust scrutiny: there must first be active and ongoing SEC regulation and a serious conflict between the antitrust and regulatory regimes. But, given the SEC's broad regulatory mandate, it will be the rare case in which the antitrust laws will not give way to the laws governing securities.