Spitzer: Repeal McCarran-Ferguson, Keep State Regulation

NY Attorney General Spitzer
Comments Filed With The Antitrust Modernization Commission
July 15, 2005

In comments filed with an obscure federal commission, New York State Attorney General Eliot Spitzer's office has submitted testimony saying that the 60-year-old McCarran-Ferguson Act is overdue for repeal. Spitzer was responding to a call by the Antitrust Modernization Commission for comments on immunities and exemptions from antitrust prosecution.

Spitzer's office also recommended preserving the state action doctrine, under which state-regulated business conduct can be immunized from federal antitrust liability so long as the action is clearly articulated and affirmatively expressed as state policy and the policy is actively supervised by the state itself. Spitzer's office said the doctrine could be applied to insurers in a way that would allow them to comply both with a broad spectrum of state regulation, as well as federal antitrust laws. The New York Attorney General has defended state regulation of insurance in the past, specifically as it applies to state consumer protection statutes.

"The more general goal of McCarran-Ferguson relates to preserving state regulation of the business of insurance," the Spitzer testimony states. "New York State's regulatory regime, like that of other states, comprehends far more than antitrust considerations. It governs insurance operations, reserves, notices to policyholders, forms of policies and other matters affecting the day-to-day business of insurance. Repeal of the McCarran-Ferguson exemption from the federal antitrust laws should not affect these aspects of state regulation. Repeal would simply permit federal enforcement agencies to police violations of the antitrust laws, without impairing the states' overarching regulatory authority."

McCarran-Ferguson grants the insurance industry a limited antitrust exception so that the sector may collectively collaborate for purposes of data collection and rate-and-form developments. It also exempts the sector from federal regulatory oversight as respects the "business of insurance", assigning that obligation "To The Several States."

It is important for everyone to appreciate the difference in McCarran between limited exceptions from Antitrust, and the exemption for federal regulatory oversight.  Because McCarran is so clearly drafted, and has been greatly litigated, it actually is stronger and grants more direct expressed authority to The States than a state action doctrine.

Unwittingly, Mr. Spitzer may be suggesting to give away a significant authority he already has with regard to oversight of the insurance sector, because McCarran does not say "The States' Insurance Departments only."

What It Means to Agents:  You will hear more and more about the building debate on many fronts, and for many reasons, on McCarran. It is important to keep clear what McCarran does & does not do, as well as the current pressures to change it.  That can mean and would mean - if modified or repealed - enormous changes in the day-to-day operations of PIA agencies.  PIA will keep you advised as more ideas & proposals surface.

What is the Antitrust Modernization Commission?  Created in 2002 by the Antitrust Modernization Act, the 12-member bipartisan commission is currently in the midst of reviewing recommendations to update U.S. antitrust law, with a goal of providing a full report to President Bush and Congress by April 2007.  It was born of Congress' concerns for the drug scandals building in Major League Baseball, and to review the nature scope and wisdom of their full-exemption from all antitrust laws (federal & state).  Baseball was not able to stop the measure, but they were able to get Congress and the President to make clear the scope of Commission's work was to look at all industries with antitrust exemptions, not just baseball.  Of course - it is a timely vehicle for all those looking to change insurance oversight, so insurance is a lead subject - thrown into consideration by the Spitzer et al broker compensation issues.

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