Document: 373 U.S. 341 83 S.Ct. 1246 10 L.Ed.2d 389 Harold J. SILVER, doing business as Municipal Securities Company, et al., Petitioners,v.NEW YORK STOCK EXCHANGE. No. 150. Argued Feb. 25 and 26, 1963. Decided May 20, [Syllabus from pages 341-342 intentionally omitted] David I. Shapiro, Washington, D.C., for petitioners. A. Donald MacKinnon, New York City, respondent. Archibald Cox, Sol. Gen., the United States, amicus curiae, by special leave of Court. Mr. Justice GOLDBERG delivered opinion 1 We deal here today with question, great importance to public financial community, whether what extent federal antitrust laws apply securities exchanges regulated Exchange Act 1934. More particularly, question is Stock be held liable a nonmember broker-dealer under or regarded impliedly immune therefrom when, pursuant rules has adopted 1934, it orders number its members remove private direct telephone wire connections previously in operation between their offices those nonmember, without giving notice, assigning him any reason action, affording an opportunity heard. 2 The facts material resolution this are not dispute. Silver, who died during pendency entered Dallas, Texas, 1955, establishing predecessor petitioner (Municipal) primarily municipal bonds. having increased steadily, June 1958, established Securities, Inc. (Municipal, Inc.), trade corporate over-the-counter securities. Both firms registered broker-dealers National Association Dealers, (NASD); neither member respondent Exchange. 3 Instantaneous communication mainstream significance Exchange, Silver took steps see that was his firms. obtained bond departments (three which were Exchange) banks, Municipal, Inc., arranged wires trading well desks 4 Pursuant requirements Exchange's rules, all but one had granted applied approval connections.1 During summer 1958 'temporary approval' these, teletype connection firm City stock ticker service furnished petitioners directly floor 5 On February 12, 1959, prior notice firms, anyone connected them, Department Member Firms decided disapprove related applications. Notice sent involved, instructing them discontinue wires, directive compliance required Constitution rules. These turn notified would have discontinued, advised discontinuance service. removed beginning March. By calls, letters, personal trip York, sought explanation decision, repeatedly told policy disclose reasons such action.2 6 Petitioners contend volume dropped substantially thereafter profits fell, due combination forces stemming removal wires—their consequent inability obtain quotations quickly, inconvenience other traders calling petitioners, stigma attaching disapproval. As result change fortunes, contend, soon ceased functioning operating organization, remained only on greatly diminished scale. 7 present litigation commenced proprietor against April Southern District York.3 Three causes action asserted. first, seeking injunction treble damages,4 alleged had, violation §§ Sherman Act, conspired deprive second tortiously induced breach contracts third asserted constituted tort intentional wrongful harm inflicted reasonable cause. 8 moved summary judgment claim, accompanying permanent coercion into refusing provide refusal reinstate district judge, after considering respective affidavits parties, connections, 196 F.Supp. 209, holding ensuing collective continue per se § Act. judge so basis that, although power regulate conduct dealing listed securities, members' relations nonmembers regard sufficiently germane fulfillment duties self-regulation warrant being excused answer restraints occurred wires. He left issues damages costs later trial. With reference service, there triable fact could considered been concerted whether, if acted itself, occurred. therefore denied aspect petitioners' claims. 9 appeal grant partial States Court Appeals Second Circuit reversed over dissent judge. 302 F.2d 714. court 'gives Commission disciplinary powers respect transactions statute requires exercise these fully.' Id., at 720. This meant 'the bringing about cancellation * within general scope authority defined 1934 Act,' id., 716, dictated conclusion '(t)he exempt restrictions because exercising 721. court, however, did exclude possibility might some theory, remanded case consideration action. certiorari. 371 808, 53. What before us much first cause relates since attempt denial portion relating Summary never hence also issue time. II. 11 fundamental confronting created duty exchange pervasive constitute implied repealer our laws, thereby exempting liability similar cases. 12 It plain, begin with, would, context free regulation, was, simple terms, group boycott depriving valuable they needed order compete effectively market. Fashion Originators' Guild America v. Federal Trade Comm., 312 457, 61 703, 85 L.Ed. 949; Associated Press 326 1, 65 1416, 89 2013; Klor's, Broadway-Hale Stores, 359 207, 79 705, 741; Radiant Burners, Peoples Gas Light & Coke Co., 364 656, 81 365, 358. Unlike no central place traded counter. market numerous country through process constant another latest offers buy sell. connection, allows occur flip switch, essential part process. Without instantaneously available information provided dealer hampered crucial endeavor—to buy, customers own account, lowest quoted price sell highest price. membership network simultaneous communication, loses significant come easy accessibility. important advantages taken away members. Such 'concerted refusals long forbidden category,' U.S., 212, S.Ct., 709 'because inherent nature effect injuriously restrained trade,' American Tobacco 221 106, 179, 31 632, 55 663.5 Hence, absent justification derived otherwise, In case, presence statutory scheme, means beginning, end, inquiry. B. 13 difficult problem arises need reconcile pursuit theantitrust aim eliminating competition effective contemplating will engage may anti-competitive effects specific 14 regulation imposed properly understood both economic role played historical setting perform function life country. They serve, all, indispensable mechanism can bought sold. To enterprise element facilitating successful marshaling large aggregations funds otherwise extremely access. investment channel promises ready convertibility holdings cash. functions dollar terms vast—in 1962 far largest Commission, $47.4 billion stocks, rights, warrants (a figure represented 86% total exchanges). Report Special Study Markets (1963), c. IB, p. 6.6 Moreover, exchanges, addition level affects prices general, often indicator national health, economy cannot measured trading. Recognition exchanges' led House Committee Interstate Foreign Commerce declare report preceding enactment 'The upon millions dollars sold affected interest same degree utility.' H.R.Rep. 1383, 73d Cong., 2d Sess. 15 (1934). bodies limited members, each plays certain carrying out exchange's activities. limited-entry feature historically treated courts clubs, Belton Hatch, 109 N.Y. 593, 17 N.E. 225 (1888), given latitude disciplining errant Westwood Howard, Self-Government Business, Law Contemp. Prob. 518—525 (1952). became more Nation's system, private-club analogy increasingly inapposite ungoverned obviously inadequate, acceleratingly grave consequences. impotency ultimately summed up long-developing discussing purposes bill: 16 behind necessity bill leaders business, inertia, pressure vested interests, lack war able act protect themselves compelling continuous orderly program methods standards match system itself constantly changing *. repetition 1933 blindness abuses 1929 convinced patient enlightened self-interest leadership powerful necessary changes alone—that make must Government help protection.' supra, 3. therefore, enormous growth impact economy, unwillingness curb implications growth, Congress enact S.Rep. 792, 2—5 (1934); 2—5. 18 pattern governmental entry, displacement traditional self-regulation. intention rather, Douglas said, while Chairman S.E.C., 'letting take playing residual role. keep shotgun, speak, door, loaded, oiled, cleaned, use hope used.' Douglas, Democracy Finance (Allen ed. 1940), 82. Thus Senate stressed initiative responsibility promulgating regulations pertaining administration ordinary affairs remain themselves. where fail adequately protection investors authorized step compel do so.' 13. added give sufficient reform intervention Commission. 15. See Loss, Regulation (2d 1961), 1175—1178, 1180—1182. 19 arose federally mandated self-policing exchanges. Instead instances abuse, placed register 5, U.S.C. 78e, decreed registration unless submitted copies 6(a)(3), 78f(a)(3), 'just adequate insure fair investors,' 6(d), 78f(d). dimensions suggested 19(b) 78s(b), gives respecting subjects, set forth margin.7 20 One statutorily obligation formulate governing specifically 'unless include provision expulsion, suspension, proceeding inconsistent just equitable principles *,' 6(b), 78f(b). addition, requirement 6(d) investors' obvious relevance area regulating 21 6(b) together broadest relation problem, inevitably securities,8 inexorably brings contact dealings specialize accident permeated relationships including broker-dealers.9 A member's purchase unlisted behalf customer boiler-shop operation10 creates danger loss principal transaction, sale insufficiently capitalized customers' rights risks. potential injury investing unreliable reason, intercourse carries gravest engendering confidence kind damage significantly impair economy. Rules very pertinent aims Transactions circumstances mentioned described 'inconsistent indeed investors.' 22 constitutional connections11 unquestionably duties, facilitate further undesirably, injure whose contract made imperil future status sapping confidence. light Act's design major curbing obligating themselves, appears conclusively—contrary Court's conclusion—that performance duty, nonmembers. enforcement (as here) seriously than question. sweeping currents unavoidable; disposed substantive engaged outside boundaries C. 23 But, does follow of, did, adopt nonmembers, particular applications purview laws. Contrary conclusions reached below, proper approach view, analysis reconciles schemes rather completely ousted. 24 contains express exemption or, matter, statute. discerned matter implication, '(i)t cardinal principle construction repeals implication favored.' Borden 308 188, 198, 60 182, 84 181; Georgia Pennsylvania R. 324 439, 456—457, 725—726, 1051; California Power 369 482, 485, 82 901, 903, 54. Repeal work, even then minimum necessary. guiding reconciliation two schemes. Although request 19(b), impliedly, exchange, 6(a)(4), 78f(a)(4), jurisdiction review op. cit., 1178; Prob., 525. statute, thing, obviates consider resort relief coming court. Compare 455, 725. Commission's involve conflict coextensiveness coverage agency's regulatory power. supra; Radio Corp. America, 358 334, 354; Pan World Airways, 296, 476, 325.12 character objectives contemplated incompatible maintenance Maryland Virginia Milk Producers Ass'n 362 458, 80 847, 880. 26 absence jurisdiction, besides defining limits inquiry, contributes solution. There nothing built scheme performs insuring cases justified furthering legitimate self-regulative ends. providing agency check behavior cases, subject influences (improper action) proven exist hinder tasks confronted,' 460, 727; 200, 189; 465 466, 852—853. Enforcement particularly immense power, well, competitive issuer, broker-dealer, when imposition unjustified self-regulatory activity diminish integrity efficacy mechanism. Some form self-policing, administrative courts, Only year S. E. Cary observed 'some government oversight warranted, necessary, name discriminatory nor capricious.' Cary, Self-Regulation Industry, 49 A.B.A.J. 244, 246 (1963).13 Since among things, freedom, i.e., freedom individual units unhindered others, follows peculiarly appropriate anticompetitive acts operations honest viable. Applicability rests vindication positive freedom. Denial applicability defeat congressional reflected serving Should vehicle different presented. note supra. 27 Yet frank acknowledge exercises create problems entire self-regulation, idea barriers membership, contemplates unreasonable sanction elaborate time propriety various guidance warning regulative viewed excessive possessing proceed based considerations enumerated paragraphs. aegis rule concepts flexible enough permit breathing space carry mandate Terminal St. Louis, 224 383, 394 395, 32 507, 509—510, 56 810; Board Chicago 231, 238, 38 242, 243, 62 683. Although, we seen, compare Hale Hale, Competition Control VI: Application Antitrust Laws Regulated Industries, 111 U. Pa.L.Rev. 46, 48, 57—59 (1962), true fall assertion Claim. III. 28 final is, justified. not, totally unjustifiable circumstances. Notwithstanding prompt repeated requests, informed charges underlying decision invoke afforded explain refute them. 29 Given response achievement clear offered conducted method telling protesting non-member why invoked allowing reply position. No served hearing. Indeed, self-policing—to promote dealing—are defeated tremendous explaining acting, and, timely requested, hearing perpetration will, contrast, effectuating policies discouraging justifiable impetus refrain making unsupportable accusations laid bare, rebuttal many dissipate force ex parte proposes act. afford beneficial keeping straying areas wholly foreign And, too utilization procedure unauthorized enlarge likelihood incurred interfere ability efficaciously self-regulation.14 Provision moreover, contribute severely impeded deem obscure illuminate acted. Hence procedural safeguards substantively encourage lessening outlawed allow effectively.15 30 Our recognizes clearly holds affords according procedures.16 effecting designed thought sanctioned protected carried fundamentally unfair manner.17 point impose here, acting request, plainly exceeded threshold violation. perfectly offer denying hearing, violated thus Clayton 15, occasion pass sufficiency assigned action.18 define interposing suit brought challenge merits governed standard arbitrariness, good faith, reasonableness, measure. arises. Experience teaches, safeguards, serve facts, operates prevent erroneous decisions occurring. believe experience institutions, private. benefits guarantee are, here. little appreciation happened 1920's 1930's realize how ethical prevail every basically type partnership marks operate run. brake partner executing balance wheel compatible proceedings consistent opinion. ordered. 33 Judgment directions. 34 CLARK concurs grounds stated Court, dissenting Appeals, 35 STEWART, whom HARLAN joins, dissenting. 36 says 'whether 1934.' I agree presented, seems me unsatisfactory incomplete. 37 begins pointing out, correctly, commercial context.1 reviews length purpose, scope, structure holds, again correctly think, inside policy' next reminds us, 'apply ends.' So far, good. fairly thoroughly competing bearing basic involved case. But then—in last five opinion—the suddenly change. becomes involving confrontation, 39 should accorded injured invocation rule, hand, view sophisticated, subtle, highly technical fragile mercurial ingredients markets, demand least preliminary swift effectiveness. broad questions were, quite properly, briefed argued canvass resolve.2 questions, respectfully submit, most tangential now us. 40 failure accord 'procedural safeguards' ipso facto bucket-shop operator swindling collect For, understand opinion, allowed prove hypothetical plaintiff swindler, though proof absolute certainty available. frustrate purpose bear Even assuming agreed notions procedures forum enforce 41 Whether depends defendants' arbitrary. reasonableness pursued accomplish unlawful object fixed combination.' 468, 708, 949.3 considers 'fair procedures' 42 think errs using ends intended serve—to concept unrelated aftermath Duplex Printing Co. Deering4 lesson unwisdom irrelevant 43 provisions delegate working institution undertake, initiative, legal complex industry. self-initiating work threat penalties. achieve removes faith effectuate inquiry complained purpose. If end concerned—unless, course, mere alleged.5 44 vacate remand views expressed Municipal's Ultimately, pretrial stages litigation, disclosed summarized discussed opinions 216—217, 225—227, 714, 716. disposition hereafter, detail pending widow, Evelyn executrix estate, substituted him. forms 26. consensus arrived bound comply directives admitted Silver's qualifications blanket subscription possible excuse occur. 2013. Nor derive remaining willing Bigelow RKO Pictures, 327 251, 66 574, 90 652; Paramount 334 131, 167, 68 915, 934, 92 1260. others withheld That First 282 44, 51 45, 75 151; cf. Anderson 171 604, 618—619, 50, 55, 300. cited text recently issued segment study directed 1961 amendment 19(d), (Supp. III) 78s(d). Another figures reported illustrates property. 1961, individuals net savings $900,000,000,000, amounted half. insurance companies pension $93,000,000,000 trust $57,000,000,000. Study, pp. 2—3. alter supplement (an) matters (1) evasion partnerships; (2) limitation prohibition security specified period issuance primary distribution thereof; (3) listing striking security; (4) hours trading; (5) manner, method, soliciting business; (6) fictitious numbered accounts; (7) settlements, payments, deliveries closing reporting tickers maintained consent short sales, stopped sales issuers default, bankruptcy receivership, circumstances; (9) fixing rates commission, interest, listing, charges; (10) (11) odd-lot purchases sales; (12) deposits margin (13) matters.' accounted half fiscal 17—18, stocks 21.6% estimated gross income period, I, Table I—12. Of Art. XIV, 17, Constitution, permits sever repute suffer, 331—335, corporations associations (including broker-dealers) ownership connected. Equally Rule 403, prohibiting transaction bucket shop, 435, participation manipulative operation. commissions collected Article XV Arbitration dealt VIII, 6, Constitution. Various prohibit joint office approves (Rule 344), compensation gratuities employees employer's 350), paying expenses 369). 418 'surprise' audit And III, 355 installations, 11, infra. deposition, assistant director boiler shop 'usually physically small employs high salesmanship oversell quantity, quality.' said firm, shops, inadequately misrepresent withhold customers, seeks facilities. entitled 'Supervision Over Members, Allied Corporations,' provides, 'shall approve application non-member, wire, wireless, corporation require connection.' '(a) organization shall establish maintain radio, television wireless radio offices, (b) Every execute prescribed filed it, already file (c) Notification regarding signed Firms. notification, allied member, supplied letter form, concerning communication. (d) Each submit annually list non-members maintained. (e) discontinued.' 356, insofar relevant, whatsoever terminus organization.' Were judicial scrutiny ruling, 1938 Maloney amendments examine association (i.e., NASD), 15A(g), 15A(h), 25(a), 78o 3(g), 78o—3(h), 78y(a); H. Johnson 198 690 (C.A.2d Cir.1952), cert. denied, 344 855, 73 94, 97 664, arise activity, decide today. critical situations respondent, improper selling practices IIIB, 178—179, 183—184, suggests new govern dealers, 186. argues disclosure sources informants risk sued defamation instances. risk, met flexibility law conditional qualified privilege. Harper James, Torts (1956), 5.21, 5.25, 5.26, especially 442, n. privilege, informant expansion confining requested aggrieved parties dispute witnesses, limit dissemination defamatory matter. 5.30, 469. Similarly, concern exposes past accomplished ignores presumable familiar waiver, laches, estoppel bar failed protest burden Exchange; guaranteed 14, accused violating existence guarantees goes toward dispelling fears surely assumed wrongdoing nonmember. doubt, can, require, expeditiously investors. 1933, either aid obtaining restraining practice 20(b), 77t(b); 21(e), 78u(e). significant, restraint confined channels thereby, conferred 1938, wishes drastic suspending revoking NASD dealer, 'after *.' 15A(l), 78o—3(l). 352—353, 357 7, attendant However, consonant imperative like this. Absent adoption requiring procedure, utility compatibility securities-regulation principles, 361, incompatibility inheres announcement rule. Colorado Anti-Discrimination Comm. Continental Air Lines, 372 723—724, 1022, 1026—1027. hold today's indicated agencies, labor unions, have, right. Goldsmith Tax 270 117, 46 215, 70 494; Russell Duke Norfolk, (1949) All E.R. (C.A.); Fellman, Constitutional Rights Association, Supreme Review, (Kurland ed.), 74, 104, 112—113; Developments Law—Judicial Actions Private Associations, 76 Harv.L.Rev. 983, 1026—1037 (1963); authorities 18, infra; Vitarelli Seaton, 535, 968, 1012; Cafeteria Restaurant Workers Union, Local 473, AFL—CIO McElroy, 367 886, 894—895, 1743, 1748, 1230; Willner Character Fitness, 96, 1175. association's lacked state-court decisions, resting theories liability. Cason Glass Bottle Blowers Ass'n, Cal.2d 134, 231 P.2d A.L.R.2d 1387 (1951); Lahiff Saint Joseph's Total Abstinence Benevolent Soc., Conn. 648, 57 692, L.R.A. (1904); Malmsted Minneapolis Aerie, Minn. 119, 126 N.W. 486 (1910); International Brotherhood Carpenters, 52 Nev. 400, 288 P. 170 (1930); 54 332, 658, 448 (1932); Brooks Engar, 259 App.Div. 333, N.Y.S.2d 114 (1st Dept.), dismissed, 284 767, N.E.2d 514 (1940); Blek Wilson, 145 Misc. 373, N.Y.S. 443 (Sup.Ct.1932), modified aff'd, 237 712, 262 416 rev'd grounds, 253, 186 692 (1933); Glauber Patof, 183 47 762 (Sup.Ct.1944), aff'd mem., 269 687, 384 curiam 294 583, 63 181 (1945); O'Brien Papas, 521 (Sup.Ct.1944); Taxicab Drivers' Union 889 Pittman, 322 159 (Okl.1957); Pressmen Assistants' North Smith, Tex. 399, S.W.2d 729 (1946); Leo 612 Operating Engineers, Wash.2d 498, 174 523, 168 A.L.R. 1440 (1946) (alternative holding). Law, Harv.L.Rev., 1087—1095; Note, Procedural 'Due Process' Disciplinary Proceedings, Yale L.J. 1302 (1948). precedents undoubtedly rest recognition significance, serious irreversible possibly succeed accurately ascertaining retrospectively outcome instance. conditioning finding concomitant ultimate recovery party position See, e.g., 358; 949. assumed, almost actual threatened deal—a 'group boycott.' ante, 364, 16. suggestion, legislative attention machinery. 19(c) expressly ordered back legislation. following year, detailed account existing recommendations reform. H.R.Doc. 85, 74th 1st (Jan. 25, 1935). legislation, suggesting voluntarily. undertook surveillance 'such advisable government.' 17. 1935 Annual Report, voluntarily complied. S.E.C.Ann.Rep. (1935). continued. overhaul constitution effected informal Regulation, 1179—1182. 1941, proposals included extend rule-making discipline Proposals Amendments Print, Commerce, 77th (Aug. 1941). proposal upon. examined recent hearings noted, representatives testified actions informally agency. record. Hearings Subcommittee H.J.Res. 438, 87th 107—113. exhaustive current conditions, completion resulting imminent. Stat. 465, amended, 247, IV) 78s(d); (Apr. 3, 1963). pointed 'An trial appellate tribunals exists, determination garment copy design.' 462—463, 706. 709, 741. 254 443, 172, 349. Apex Hosiery Leader, 310 469, 982, 1311; Hutcheson, 219, 463, 788. For example, outsiders, attempted monopolize. 880; Allen Bradley IBEW, 325 797, 1533, 1939. Furthermore, shown machinery suppressing competition. Cf. Pacific Artic Ry. Nav. 228 87, 742. independent violation, does, simply

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