RESPONDENT: National Association of Securities Dealers, Inc.
LOCATION: Interstate Highway 5, approximately 4 miles south of San Clemente
DOCKET NO.: 73-1701
DECIDED BY: Burger Court (1972-1975)
CITATION: 422 US 694 (1975)
ARGUED: Mar 17, 1975
DECIDED: Jun 26, 1975
Gerald P. Norton - argued the cause for the United States
Lee Loevinger - argued the cause for the appellees
Walter P. North - argued the cause for the Securities and Exchange Commission as amicus curiae urging affirmance
Facts of the case
Media for United States v. National Association of Securities Dealers, Inc.Audio Transcription for Oral Argument - March 17, 1975 in United States v. National Association of Securities Dealers, Inc.
Audio Transcription for Opinion Announcement - June 26, 1975 in United States v. National Association of Securities Dealers, Inc.
Warren E. Burger:
The judgment and opinion for the Court in No. 73-1701, United States against National Association of Securities Dealers, an opinion written for the Court by Mr. Justice Powell will be announced by Mr. Justice Blackmun who will also have opinions of -- which he has written for the Court to announce in 73-6650, Brown against Illinois, 74-22, Ivan Allen Company against the United States, and 74-304, Gordon against New York Stock Exchange.
Harry A. Blackmun:
Well, the first one Mr. Justice Powell's opinion, he being absent today, in United States against National Association of Securities Dealers.
The United States brought this antirust action under Section 1 of the Sherman Act to challenge certain sales and distribution practices commonly used in the sales of securities of mutual fund companies.
The complaint alleged that the NASD in certain mutual funds and underwriters and broker-dealers had conspired to restrict trading in mutual-fund shares.
United States charge that various agreements had imposed vertical and horizontal restrictions on the market for mutual-fund shares with the result that secondary market trading was discouraged to a greater extent than contemplated by Congress when it enacted the Investment Company Act of 1940.
The District Court dismissed the complaint, finding that the challenged activities were immunized from antitrust liability by Sections 22 (d) and (f) of the Investment Company Act.
It further found that apart from this specific immunity, the pervasive regulatory scheme established by the Investment Company Act and the Maloney Act displaced the antitrust laws in the field of the sales and distribution of mutual-fund shares.
The Court today affirms although on somewhat different grounds.
We agree with the United States that the challenged practices are not immunized by Section 22 (d) of the Investment Company Act.
That Section which requires the dealers maintain an established price in most mutual-fund shares does not extend the sales in which the dealers acts in a capacity of broker rather than as a statutorily defined dealer.
The statute defines its terms carefully and we find no justification for expanding the mandate of Section 22 (d).
We further conclude, however, that the challenges to the alleged vertical restrictions on the marketing practices are immunized by Section 22 (f) of the Act.
That Section authorizes the funds to impose restrictions on the transferability and negotiability of mutual fund-shares provided they are properly disclosed and do not contravene SEC regulations.
Our examination of the history of the Investment Company Act persuades moreover, that Congress intended to authorize the imposition of limitations on the distribution system as well as on the actual shares themselves.
The primary evils to which the Act was addressed were problems of that distribution system and it would be artificial indeed to prevent the SEC and industry from addressing those problems at their source.
Moreover, our determination that these limitations are authorized by the Investment Company Act necessarily requires that they be immunized from antirust liability for we can see no way to reconcile SEC approval of these practices with Section 1 of the Sherman Act.
Finally, we conclude that the alleged horizontal restrictions on the marketing and mutual-fund shares are immunized by pervasive regulatory schemes of the Maloney and Investment Company Acts.
The activities here challenged are related to and are supportive of those immunized by Section 22 (f) of the Investment Company Act.
Subjecting them to antitrust liability would lead to possibly inconsistent and conflicting judgments between the courts and the SEC that would limit the Commissions' flexible mandate to regulate the mutual-fund industry.
Mr. Justice White has filed a dissenting opinion and is joined in that opinion by Justices, Douglas and Brennan, and Marshall.