Federal Trade Commission v. Ticor Title Insurance Company

• Decision Date: 12 June 1992
• Docket Number: No. 91-72,91-72
• Citation: 504 U.S. 621,119 L.Ed.2d 410,112 S.Ct. 2169
• Parties: FEDERAL TRADE COMMISSION, Petitioner, v. TICOR TITLE INSURANCE COMPANY, et al
• Court: U.S. Supreme Court

112 S.Ct. 2169

504 U.S. 621

119 L.Ed.2d 410

FEDERAL TRADE COMMISSION, Petitioner,

v TICOR TITLE INSURANCE COMPANY, et al.

No. 91-72.

Argued Jan. 13, 1992.

Decided June 12, 1992.

Syllabus

PetitionerFederal Trade Commission filed an administrative complaint charging respondent title insurance companies with horizontal price fixing in setting fees for title searches and examinations in violation of § 5(a)(1) of the Federal Trade Commission Act.In each of the four States at issue—Connecticut, Wisconsin, Arizona, and Montana—uniform rates were established by a rating bureau licensed by the State and authorized to establish joint rates for its members.Rate filings were made to the state insurance office and became effective unless the State rejected them within a specified period.The Administrative Law Judge held, inter alia, that the rates had been fixed in all four States, but that, in Wisconsin and Montana, respondents' anticompetitive activities were entitled to state-action immunity, as contemplated in Parker v. Brown,317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315, and its progeny.Under this doctrine, a state law or regulatory scheme can be the basis for antitrust immunity if the State(1) has articulated a clear and affirmative policy to allow the anticompetitive conduct and (2) provides active supervision of anticompetitive conduct undertaken by private actors.California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc.,445 U.S. 97, 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233.The Commission, which conceded that the first part of the test was met, held on review that none of the States had conducted sufficient supervision to warrant immunity.The Court of Appeals reversed, holding that the existence of a state regulatory program, if staffed, funded, and empowered by law, satisfied the active supervision requirement.Thus, it concluded, respondents' conduct in all the States was entitled to state-action immunity.

Held:

1.State-action immunity is not available under the regulatory schemes in Montana and Wisconsin.Pp. 632-640.

(a) Principles of federalism require that federal antitrust laws be subject to supersession by state regulatory programs.Parker, supra,317 U.S., at 350-352, 63 S.Ct., at 312-14;Midcal, supra;Patrick v. Burget,486 U.S. 94, 108 S.Ct. 1658, 100 L.Ed.2d 83.Midcal § two-part test confirms that States may not confer antitrust immunity on private persons by fiat.Actual state involvement is the precondition for immunity, which is conferred out of respect for the State's ongoing regulation, not the economics of price restraint.The purpose of the active supervision inquiry 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.Although this immunity doctrine was developed in actions brought under the Sherman Act, the issue whether it applies to Commission action under the Federal Trade Commission Act need not be determined, since the Commission does not assert any superior pre-emption authority here.Pp. 632-635.

(b) Wisconsin, Montana, and 34 other States correctly contend that a broad interpretation of state-action immunity would not serve their best interests.The doctrine would impede, rather than advance, the States' freedom of action if it required them to act in the shadow of such immunity whenever they entered the realm of economic regulation.Insistence on real compliance with both parts of the Midcal test serves to make clear that the States are responsible for only the price fixing they have sanctioned and undertaken to control.Respondents' contention that such concerns are better addressed by the first part of the Midcal test misapprehends the close relation between Midcal § two elements, which are both directed at ensuring that particular anticompetitive mechanisms operate because of a deliberate and intended state policy.A clear policy statement ensures only that the State did not act through inadvertence, not that the State approved the anticompetitive conduct.Sole reliance on the clear articulation requirement would not allow the States sufficient regulatory flexibility.Pp. 635-637.

(c) Where prices or rates are initially set by private parties, subject to veto only if the State chooses, the party claiming the immunity must show that state officials have undertaken the necessary steps to determine the specifics of the price-fixing or ratesetting scheme.The mere potential for state supervision is not an adequate substitute for the State's decision.Thus, the standard relied on by the Court of Appeals in this case is insufficient to establish the requisite level of active supervision.The Commission's findings of fact demonstrate that the potential for state supervision was not realized in either Wisconsin or Montana.While most rate filings were checked for mathematical accuracy, some were unchecked altogether.Moreover, one rate filing became effective in Montana despite the rating bureau's failure to provide requested information, and additional information was provided in Wisconsin after seven years, during which time another rate filing remained in effect.Absent active supervision, there can be no state-action immunity for what were otherwise private price-fixing arrangements.And state judicial review cannot fill the void.SeePatrick, supra,486 U.S., at 103-105, 108 S.Ct., at 1664-65.This Court's decision in Southern Motor Carriers Rate Con- ference, Inc. v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36, which involved a similar negative option regime, is not to the contrary, since it involved the question whether the first part of the Midcal test was met.This case involves horizontal price fixing under a vague imprimatur in form and agency inaction in fact, and it should be read in light of the gravity of the antitrust offense, the involvement of private actors throughout, and the clear absence of state supervision.Pp. 637-640.

2.The Court of Appeals should have the opportunity to reexamine its determinations with respect to Connecticut and Arizona in order to address whether it accorded proper deference to the Commission's factual findings as to the extent of state supervision in those States.P. 640.

922 F.2d 1122(CA31991), reversed and remanded.

KENNEDY, J., delivered the opinion of the Court, in which WHITE, BLACKMUN, STEVENS, SCALIA, and SOUTER, JJ., joined.SCALIA, J., filed a concurring opinion.REHNQUIST, C.J., filed a dissenting opinion, in which O'CONNOR and THOMAS, JJ., joined.O'CONNOR, J., filed a dissenting opinion, in which THOMAS, J., joined.

Lawrence G. Wallace, Washington, D.C., argued, for petitioner.

John C. Christie, Jr., Washington, D.C., argued, for respondents.

Justice KENNEDYdelivered the opinion of the Court.

The Federal Trade Commission filed an administrative complaint against six of the nation's largest title insurance companies, alleging horizontal price fixing in their fees for title searches and title examinations.One company settled by consent decree, while five other firms continue to contest the matter.The Commission charged the title companies with violating § 5(a)(1) of the Federal Trade Commission Act, 38 Stat. 719,15 U.S.C. § 45(a)(1), which prohibits "[u]nfair methods of competition in or affecting commerce."One of the principal defenses the companies assert is state-action immunity from antitrust prosecution, as contemplated in the line of cases beginning with Parker v. Brown,317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315(1943).The Commission rejected this defense, In re TicorTitle Ins. Co., 112 F.T.C. 344(1989), and the firms sought review in the United States Court of Appeals for the Third Circuit.Ruling that state-action immunity was available under the state regulatory schemes in question, the Court of Appeals reversed.922 F.2d 1122(1991).We granted certiorari.502 U.S. ----, 112 S.Ct. 47, 116 L.Ed.2d 25(1991).

I

Title insurance is the business of insuring the record title of real property for persons with some interest in the estate, including owners, occupiers, and lenders.A title insurance policy insures against certain losses or damages sustained by reason of a defect in title not shown on the policy or title report to which it refers.Before issuing a title insurance policy, the insurance company or one of its agents performs a title search and examination.The search produces a chronological list of the public documents in the chain of title to the real property.The examination is a critical analysis or interpretation of the condition of title revealed by the documents disclosed through this search.

The title search and examination are major components of the insurance company's services.There are certain variances from State to State and from policy to policy, but a brief summary of the functions performed by the title companies can be given.The insurance companies exclude from coverage defects uncovered during the search; that is, the insurers conduct searches in order to inform the insured and to reduce their own liability by identifying and excluding known risks.The insured is protected from some losses resulting from title defects not discoverable from a search of the public records, such as forgery, missing heirs, previous marriages, impersonation, or confusion in names.They are protected also against errors or mistakes in the search and examination.Negligence need not be proved in order to recover.Title insurance also includes the obligation to defend in the event that an insured is sued by reason of some defect within the scope of the policy's guarantee.

The title insurance industry earned $1.35 billion gross revenues in 1982, and respondents accounted for 57 percent of that amount.Four of respondents are the nation's largest title insurance companies: Ticor Title Insurance Co., with 16.5 percent...