Antitrust Ruling Goes Against Investors

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The Supreme Court on Monday sided with Wall Street banks that allegedly conspired to drive up prices on 900 newly issued stocks.

In a 7-1 decision, the justices reversed a federal appeals court decision that had enabled investors to sue for anticompetitive practices.

The case deals with alleged industry misconduct during the dot-com bubble of the late 1990s.

The outcome of the antitrust case was vital to Wall Street because damages in antitrust cases are tripled, in contrast to penalties under the securities laws.

The question was whether conduct that is the focus of extensive federal regulation under securities laws is immune from liability under federal antitrust laws.

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 in the case and proper enforcement of the securities law.

In dissent, Justice Clarence Thomas said the securities laws contain language that preserves the right to bring the kind of lawsuit investors filed against the Wall Street investment banks.

In 2005, the 2nd U.S. Circuit Court of Appeals said the conduct alleged in the case is a means of "dangerous manipulation" and that there is no indication Congress contemplated repealing the antitrust laws to protect it.

Investors allege that the investment banks, including Credit Suisse Securities (USA) LLC, agreed to impose illegal tie-ins, or "laddering" arrangements. Favored customers were able to obtain highly sought-after new stock issues in exchange for promises to make subsequent purchases at escalating prices. The investment banks allegedly conspired to levy additional charges for the stock.

As a result of the conspiracy, the investors say, the average price increase on the first day of trading was more than 70 percent in 1999-2000, 8½ times the level from 1981 to 1996.

Private class-action lawsuits, say plaintiffs' attorneys, provide a significant supplement to the limited resources available to the Justice Department to enforce the antitrust laws.

The case is Credit Suisse v. Billing, 05-1157.

The Supreme Court did not yet rule on two important public school affirmative action cases and a campaign finance law case. As usual, the justices are leaving some of the biggest and most controversial cases for the end of the term, said CBS News legal analyst Andrew Cohen.
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    Scott Conroy is a National Political Reporter for RealClearPolitics and a contributor for CBS News.

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