Federal Trade Commission v. Ticor Title Insurance Co. - Opinion Announcement

Argument of Speaker

Mr. Speaker: The opinion of the Court in No. 91-72, Federal Trade Commission versus Ticor Title Insurance Company will be announced by Justice Kennedy.

Argument of Justice Kennedy

Mr. Kennedy: In this case, the Federal Trade commission versus Ticor Title Insurance Company, the Federal Trade Commission filed an administrative complaint against six of the nation's largest title insurance companies.

The allegation was horizontal price fixing in their fees for title searches and title examinations.

One company settled by consent decree but the other five firms continue to contest the matter.

The Commission charges the title companies with violating 5(a)(1) of the Federal Trade Commission Act which prohibits unfair methods of competition in or affecting commerce.

One of the principal defenses the companies assert is state action immunity from anti-trust prosecution as contemplated in the line of cases beginning with Parker versus Brown.

The commission rejected this defense and the firm sought review in the United States Court of Appeals for the Third Circuit.

Ruling that state action immunity was available under the state regulatory regimes in questions, the Court of Appeals reversed.

The Commission sought certiorari with respect to the regulatory regimes of Wisconsin, Montana, Connecticut, and Arizona.

We granted certiorari to consider two questions: First, whether the Third Circuit was correct in its statement and application of the state-action immunity doctrine; and second, whether the Third Circuit erred by departing in the findings of fact entered by the administrative law judge and adapted by the Commission.

We now reverse the Court of Appeals under the first question and remand for further proceedings under the second.

The preservation of the free market and of a system of a free enterprise without price fixing or cartels is essential to economic freedom.

Continued enforcement of the national anti-trust policy grants the states more freedom, not less, in deciding whether to subject discrete parts of their economy to additional regulation and controls.

It was against this background in Parker versus Brown that we upheld a state-supervised market sharing scheme against the Sherman Act challenge.

We announce there the doctrine that federal anti-trust laws are subject to suppression by state regulatory programs.

Our decision was grounded in principles of federalism.

Our decision since Parker, made clear that active supervision of the state's policy is required.

The inquiry is not to determine whether the state has met some normative standard such as efficiency in its regulatory practice.

Its purpose is to determine whether the state has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties.

The question is not how well state regulation works but whether the anti-competitive scheme is the states' own.

Federalism serves to assign political responsibility, not to obscure it.

Neither federalism nor political responsibility is well served by a rule that essential national policies are displaced by state regulations intended to achieve more limited ends.

For states which do choose to displace the free market with regulation, our insistence on real compliance with the test we have set out will serve to make clear that the state is responsible for the price fixing, it is sanctioned and undertaken to control.

Where prices or rates are set as an initial matter by private parties subject only to a veto if the state chooses to exercise it, the party claiming the immunity must show that state officials have undertaken the necessary steps to determine the specifics of the price fixing or rate setting scheme.

The mere potential for state supervision is not an adequate substitute for a decision by the state, and under these standards, we conclude that there was no active supervision in either Wisconsin or Montana.

The administrative law judge found and the Commission agreed that in these two states the rate filings were checked at most for mathematical accuracy.

Some were unchecked all together.

In Montana, a rate filing became effective despite the failing of the rating gear to provide additional requested information.

In Wisconsin, additional information was provided after a lapse of seven years during which time the rate filing remain in effect.

These findings are fatal to respondent's attempts to portray the state regulatory regimes as providing the necessary component of active supervision.

The findings demonstrate that whatever the potential for state regulatory review in Wisconsin and Montana, active state supervision did not occur.

Neither of these were expressed, we think the Court of Appeals should have the opportunity to reexamine its determinations with respect to the regulatory regimes of Arizona and Connecticut.

The judgment of the Court of Appeals is reversed and the case is remanded for further proceedings consistent with this opinion.

Justice Scalia has filed a concurring opinion; the Chief Justice has filed a dissenting opinion in which Justice O'Connor and Justice Thomas join; and Justice O'Connor has filed a dissenting opinion in which Justice Thomas joins.