Source: http://www.chanrobles.com/usa/us_supremecourt/422/659/case.php
Timestamp: 2019-05-25 18:54:02
Document Index: 470400150

Matched Legal Cases: ['§ 19', '§ 19', '§ 19', '§ 19', '§ 19', '§ 19', '§ 1']

GORDON V. NEW YORK STOCK EXCHANGE, INC., 422 U. S. 659 (1975) - US SUPREME COURT DECISIONS ON-LINE
US Supreme Court Decisions On-Line> Volume 422 > GORDON V. NEW YORK STOCK EXCHANGE, INC., 422 U. S. 659 (1975)
Subscribe to Cases that cite 422 U. S. 659
BLACKMUN, J., delivered the opinion for a unanimous Court. DOUGLAS, J., filed a concurring opinion, post, p. 422 U. S. 691. STEWART, chanroblesvirtualawlibrary
In early 1971, petitioner Richard A. Gordon, individually and on behalf of an asserted class of small investors, filed this suit against the New York Stock chanroblesvirtualawlibrary
Respondents moved for summary judgment on the ground that the challenged actions were subject to the overriding supervision of the Securities and Exchange Commission (SEC) under § 19(b) of the Securities Exchange Act of 1934, 48 Stat. 898, as amended, 15 U.S.C. 78s(b), and, therefore, were not subject to the strictures of the antitrust laws. The District Court granted respondents' motion as to all claims. 366 F.Supp. 1261 (1973). Dismissing the exchange membership limitation and the Robinson-Patman Act contentions chanroblesvirtualawlibrary
On appeal, the Second Circuit affirmed. 498 F.2d 1303 (1974). Characterizing petitioner's other challenges as frivolous, the appellate court devoted its opinion to the problem of antitrust immunity. It, too, used Silver as a basis for its analysis. Because the SEC, by § 19(b)(9), was given specific review power over the fixing of commission rates, because of the language, legislative history, and policy of the Exchange Act, and because of the SEC's actual exercise of its supervisory chanroblesvirtualawlibrary
F. Eames, The New York Stock Exchange 14 (1968 ed). See generally R. Doede, The Monopoly Power of the New York Stock Exchange, reprinted in Hearings on S. 3169 before the Subcommittee on Securities of the Senate chanroblesvirtualawlibrary
The congressional reports confirm that, while the development of rules for the governing of exchanges, as enumerated in § 19(b), was left to the exchanges themselves in the first instance, the SEC could compel adoption of those changes it felt were necessary to insure fair dealing and protection of the public. See H.R.Rep. No. 1383, 73d Cong., 2d Sess., 15 (1934); S.Rep. No. 792, 73d Cong., 2d Sess., 13 (1934). The latter report, id. at 15, noted that registered exchanges were required to provide the SEC with "complete information" regarding its rules. chanroblesvirtualawlibrary
Under subsection (d) of § 19 of the Act (which subsection was added in 1961, 75 Stat. 465), the SEC was directed to investigate the adequacy of exchange rules for the protection of investors. Accordingly, the SEC began a detailed study of exchange rules in that year. In 1963, it released its conclusions in a six-volume study. SEC Report of Special Study of Securities Markets, H.R.Doc. No. 95, 88th Cong., 1st Sess. The study, among other things, focused on problems of the structure of commission rates and procedures, and standards for setting and reviewing rate levels. Id. pt. 5, p. 102. The SEC found that the rigid commission rate structure based on value of the round lot was causing a variety of "questionable consequences," such as "giveups" and the providing of special services for certain large, usually institutional, customers. These attempts indirectly to achieve rate alterations made more difficult the administration of the rate structure and clouded the cost data used as the basis for determination of rates. These effects were believed by the SEC to necessitate a complete study of the structure. Moreover, the SEC concluded that methods for determining the reasonableness of rates were in need of overhaul. Not only was there a need for more complete information about the economics of the securities business and commission rates in particular, but also for a determination and articulation of the criteria important in arriving at a reasonable rate structure. Hence, while the study did not produce any major immediate changes in commission rate structure or levels, it did constitute a careful articulation of the problems in the structure and of the need for further studies that would be essential as a basis for future changes. chanroblesvirtualawlibrary
Letter dated May 28, 1968, from SEC Chairman Cohen to NYSE President Haack, App. A285. In response to these communications, the NYSE (and Amex) eventually adopted a volume discount for orders exceeding 1,000 shares, as well as other alterations in rates, all approved by the SEC. See, chanroblesvirtualawlibrary
In 1971, the SEC concluded its hearings begun in 1968. Finding that "minimum commissions on institutional size orders are neither necessary nor appropriate," the SEC announced that it would not object to competitive rates on portions of orders above a stated level. Letter dated Feb. 3, 1971, from SEC Commissioner Smith to President Haack, App. A353. See also SEC Exchange Act Release No. 9007, Oct. 22, 1970, App. A348. chanroblesvirtualawlibrary
Further reduction followed relatively quickly. By March 29, 1973, the SEC was considering requiring the reduction chanroblesvirtualawlibrary
Upon the conclusion of hearings on the proposed rules, the SEC determined to adopt Rule 19b-3, but not Rule 10b-22. SEC Exchange Act Release No. 11203, Jan. 23, 1975, Doc. App. 109. Effective May 1, 1975, competitive rates were to be utilized by exchange members in transactions of all sizes for persons other than members of the exchanges. Effective May 1, 1976, competitive rates were to be mandatory in transactions for members as well, i.e., floor brokerage rates. Competition in floor brokerage rates was so deferred until 1976 in order to permit an orderly transition. [Footnote 9] The required chanroblesvirtualawlibrary
The SEC dismissed the arguments against competitive rates that had been raised by various proponents of the status quo. First, the SEC deemed the possibility of destructive competition to be slim, because of the nature of the cost curve in the industry. [Footnote 10] Second, there was substantial doubt whether maintenance of fixed rates, in fact, provided various subsidies that would be beneficial to the operation of the securities markets. For example, it was unlikely that small investors reaped a subsidy from higher rates charged larger investors, because of chanroblesvirtualawlibrary
The Subcommittee was perturbed at the SEC's actions regarding fixed commission rates for several reasons. First, the Subcommittee noted that, in litigation the SEC had taken the position that it had not approved NYSE rate changes in 1971, but had merely failed to object to the introduction of the new rates, id. at 58, referring to the SEC position in Independent Investor Protective League v. SEC (SDNY No. 71-1924), dismissed without chanroblesvirtualawlibrary
The House Committee on Interstate and Foreign Commerce, in a report issued only six months after the Senate Report supra, concluded that fixed rates of commission were not in the public interest and should be replaced by competitively determined rates for transactions of all sizes. Such action should occur "without excessive delay." H.R.Rep. No. 92-1519, pp. xiv, 141, 144-145, 146 (1972). Although prodding the SEC to take quick measures to introduce competitive rates for transactions of all sizes, the House Committee determined chanroblesvirtualawlibrary
The new legislation amends § 19(b) of the Securities Exchange Act to substitute for the heretofore existing provision a scheme for SEC review of proposed rules and rule changes of the various self-regulatory organizations. chanroblesvirtualawlibrary
This lengthy history can be summarized briefly: in enacting the Securities Exchange Act of 1934, the Congress gave clear authority to the SEC to supervise exchange self-regulation with respect to the "fixing of reasonable rates of commission." Upon SEC determination that exchange rules or practices regarding commission rates required change in order to protect investors or to insure fair dealing, the SEC was authorized to chanroblesvirtualawlibrary
This Court has considered the issue of implied repeal of the antitrust laws in the context of a variety of regulatory schemes and procedures. Certain axioms of construction are now clearly established. Repeal of the antitrust laws by implication is not favored, and not casually to be allowed. Only where there is a "plain repugnancy between the antitrust and regulatory provisions" will repeal be implied. United States v. Philadelphia National Bank, 374 U. S. 321, 374 U. S. 350-351 (1963). See also Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. at 414 U. S. 126; Hughes Tool Co. v. Trans World Airlines, Inc., 409 U. S. 363, 409 U. S. 385-389 (1973); Carnation Co. v. Pacific Conference, 383 U. S. 213, 383 U. S. 217-218 (1966); Silver v. New York Stock Exchange, 373 U.S. chanroblesvirtualawlibrary
Having determined that this case is, in fact, the "different case," we must then make inquiry as to the proper reconciliation of the regulatory and antitrust statutes involved here, keeping in mind the principle that repeal of the antitrust laws will be "implied only if necessary to make the Securities Exchange Act work, and even then only to the minimum extent necessary." 373 U.S. at 373 U. S. 357. We hold that these requirements for implied repeal are clearly satisfied here. To permit operation of the antitrust laws with respect to commission rates, as urged by chanroblesvirtualawlibrary
Our disposition of this case differs from that of the Seventh Circuit in Thill Securities Corp. v. New York Stock Exchange, 433 F.2d 264 (1970), cert. denied, 401 U.S. 994 (1971), where antitrust immunity for the NYSE's anti-rebate rule was claimed and denied. The Court of Appeals reversed a grant of summary judgment in favor of the NYSE, and remanded for further evidence chanroblesvirtualawlibrary
regarding the effects of the anti-rebate rule on competition, the degree of actual review by the SEC, and the extent to which the rule was necessary to make the Exchange Act work. 433 F.2d 270. This ruling is persuasively distinguishable on at least two grounds from the case at bar: first, there was no evidence presented regarding the extent of SEC review of the challenged rule. Second, the anti-rebate practice differs from fixed commission rates in that (1) it was not among the items specifically listed in § 19(b), although the practice might reasonably be thought to be related to the fixing of commission rates, and (2) it does not necessarily apply uniformly, and may be applied in a discriminatory manner. We do not believe it necessary, in the circumstances of this case, to take further evidence concerning the competitive effects of fixed rates or the necessity of fixed rates as a keystone of the operation of exchanges under the Exchange Act. To the extent that the Court of Appeals in Thill viewed the question of implied repeal as a question of fact, concerning whether the particular rule itself is necessary to make the Act work, we decline to follow that lead.
We also regard our specific disposition in Ricci v. Chicago Mercantile Exchange, supra, as inapposite for this case. In Ricci, an antitrust complaint charged that the Chicago Mercantile Exchange arbitrarily transferred a membership, in violation of both the Commodity Exchange Act, 42 Stat. 998, as amended, 7 U.S.C. § 1 et seq., and the exchange rules. We held that consideration of the antitrust claims should be stayed pending determination by the Commodity Exchange Commission as to whether the actions taken were in violation of the Act or the rules. Although we noted that the Act did not confer a general antitrust immunity, we stated that, if the actions complained of were in chanroblesvirtualawlibrary
The United States appears to suggest that only if there is a pervasive regulatory scheme, as in the public utility area, can it be concluded that the regulatory scheme ousts the antitrust laws. Brief for United States as Amicus Curiae 16, 35. It is true that, in some prior cases, we have been concerned with the question of the pervasiveness of the regulatory scheme as a factor in determining whether there is an implied repeal of the antitrust laws. See, e.g., Otter Tail Power Co. v. United States, 410 U. S. 366, 410 U. S. 373-375 (1973). In the present case, however, chanroblesvirtualawlibrary
We agree with the District Court and the Court of Appeals, and with respondents, that to deny antitrust immunity with respect to commission rates would be to subject the exchanges and their members to conflicting standards. It is clear from our discussion in 422 U. S. supra, that the commission rate practices of the exchanges have been subjected to the scrutiny and approval of the SEC. [Footnote 13] If antitrust courts were to impose different standards or requirements, the exchanges might find themselves unable to proceed without violation of the mandate of the courts or of the SEC. Such different standards are likely to result because the sole aim of antitrust legislation is to protect competition, whereas the SEC must consider, in addition, the economic health of the investors, the exchanges, and the securities industry. [Footnote 14] Given the expertise of the SEC, the confidence chanroblesvirtualawlibrary
In 422 U. S. supra, we outlined the legislative and regulatory agency concern with the fixing of commission rates. Beginning with the enactment of the Securities Exchange Act in 1934, the Congress persistently has provided for SEC authority to regulate commission rates. Although SEC action in the early years appears to have been minimal, it is clear that, since 1959, the SEC has been engaged in deep and serious study of the commission rate practices of the exchanges and of their members, and has required major changes in those practices. The ultimate result of this long-term study has been a regulatory decree requiring abolition of the practice of fixed rates of commission as of May 1, 1975, and the institution of full and complete competition. Significantly, in the new legislation enacted subsequent to the SEC's abolition of commission rate fixing, the Congress has indicated its continued approval of SEC review of the commission rate structure. Although legislatively chanroblesvirtualawlibrary
The mere existence of a statutory power of review by the SEC over fixed commission rates cannot justify immunizing chanroblesvirtualawlibrary
373 U. S. 361. The question presented by the present case, therefore, is whether exchange rules fixing minimum commission rates are "necessary to make the Securities Exchange Act work." [email protected] at 373 U. S. 357.