Source: https://case-law.vlex.com/vid/422-u-s-659-606809922
Timestamp: 2020-05-25 00:51:37
Document Index: 746294629

Matched Legal Cases: ['§ 1', '§ 1', '§ 19', '§ 19', '§ 19', '§ 78']

422 U.S. 659 (1975), 74-304, Gordon v. New York Stock Exchange, Inc. - Federal Cases - Case Law - VLEX 606809922
Docket Nº: No. 74-304
Citation: 422 U.S. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463
Party Name: Gordon v. New York Stock Exchange, Inc.
Case Date: June 26, 1975
95 S.Ct. 2598, 45 L.Ed.2d 463
Held: The system of fixed commission rates, which is under the active supervision of the SEC, is beyond the reach of the antitrust laws. Pp. 663-691.
BLACKMUN, J., delivered the opinion for a unanimous Court. DOUGLAS, J., filed a concurring opinion, post, p. 691. STEWART,
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
Exchange, Inc. (NYSE), the American Stock Exchange, Inc. (Amex), and two member firms of the Exchanges.1 The complaint challenged a variety of exchange rules and practices and, in particular, claimed that the system of fixed commission rates, utilized by the Exchanges at that time for transactions less than $500,000, violated §§ 1 and 2 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. §§ 1 and 2. Other challenges in the complaint focused on (1) the volume discount on trades of over 1,000 shares, and the presence of negotiated, rather than fixed rates for transactions in excess of $500,000;2 (2) the rules limiting the number of exchange memberships; and (3) the rules denying discounted commission rates to nonmembers using exchange facilities.3
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
as without merit,4 the court focused on the relationship between the fixed commission rates and the Sherman Act mandates. It utilized the framework for analysis of antitrust immunity in the regulated securities area that was established a decade ago in Silver v. New York Stock Exchange, 373 U.S. 341 (1963). [95 S.Ct. 2602] Since § 19(b)(9) of the Exchange Act authorized the SEC to supervise the Exchanges "in respect of such matters as . . . the fixing of reasonable rates of commission," the court held applicable the antitrust immunity reserved in Silver for those cases where "review of exchange self-regulation [is] provided through a vehicle other than the antitrust laws." 373 U.S. at 360. It further noted that the practice of fixed commission rates had continued without substantial challenge after the enactment of the 1934 Act, and that the SEC had been engaged in detailed study of the rate structure for a decade, culminating in the requirement for abolition of fixed rates as of May 1, 1975.
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
Commission rates for transactions on the stock exchanges have been set by agreement since the establishment of the first exchange in this country. The New York Stock Exchange was formed with the Buttonwood Tree Agreement of 1792, and, from the beginning, minimum fees were set and observed by the members. That Agreement itself stated:
"We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other that we will not buy or sell from this day for any person whatsoever any kind of Public Stock at a less rate than one-quarter per cent. Commission on the Specie value, and that we will give a preference to each other in our Negotiations."
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
These fixed rate policies were not unnoticed by responsible congressional bodies. For example, the House Committee on Banking and Currency, in a general review of the stock exchanges undertaken in 1913, reported that the fixed commission rate rules were "rigidly enforced" in order "to prevent competition [95 S.Ct. 2603] amongst the members." H.R.Rep. No. 1593, 62d Cong., 3d Sess., 39 (1913).5 The report, known as the Pujo Report, did not recommend any change in this policy, for the Committee believed
the present rates to be reasonable, except as to stocks, say, of $25 or less in value, and that the
exchange should be protected in this respect by the law under which it shall be incorporated against a kind of competition between members that would lower the service and threaten the responsibility of members. A very low or competitive commission rate would also promote speculation and destroy the value of membership.
Despite the monopoly power of the few exchanges, exhibited not only in the area of commission rates but in a wide variety of other aspects, the exchanges remained essentially self-regulating and without significant supervision until the adoption of the Securities Exchange Act of 1934, 48 Stat. 881, as amended, 15 U.S.C. § 78a et seq. At the lengthy hearings before adoption of that Act, some attention was given to the fixed commission rate practice and to its anticompetitive features. See Hearings on S.Res. 84 (72d Cong.) and S.Res. 56 and 97 (73d Cong.) before the Senate Committee on Banking and Currency, 73d Cong., 1st and 2d Sess., pts. 13, 15, and 16, pp. 6075, 6080, 6868, and 7705 (1934) (hereafter Senate Hearings). See also Hearings on S.Res. 84 before the Senate Committee on Banking and Currency, 72d Cong., 1st Sess., pt. 1, p. 85 (1932); Hearings on H.R. 7852 and H.R...