Published January 13, 2015
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 dotcom 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.
The court said securities law bars the application of the antitrust laws in the lawsuit.
An antitrust action raises "a substantial risk of injury to the securities market," Justice Stephen Breyer wrote.
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, 8 1/2 times the level from 1981 to 1996.
The case is Credit Suisse v. Billing, 05-1157.