The Mccarran-Ferguson Exemption from the United Stated Antitrust Laws: Recent Developments

Abstract

This paper was presented at a conference sponsored by the Korean Competition Law Association on the subject of antitrust exemptions and the insurance industry. It analyzes recent developments in four areas: theoretical critiques of McCarran-Ferguson immunity, legislative developments, recent judicial interpretations and international approaches to antitrust exemptions. It argues that the allocation of power and deference is at the heart of the American doctrine and issues of federalism predominate. To the extent that McCarran-Ferguson was designed to clarify the balance of state and federal power to regulate and to set a clear substantive standard, the project has failed. Though the exemption has been criticized from all directions since adoption, legislative reform has been unavailing, demonstrating that a "one way rachet" is at work: once embedded in the law, exemptions are difficult to remove despite criticism, confusion among the courts, and proffers of compromise.

A version of the American immunity covering information exchanges among firms in the insurance industry, currently the subject of a block exemption of the European Commission, is due to sunset in 2010 unless extended. As part of its oversight responsibilities, DG Comp conducted a sector inquiry and opened a public consultation into the need for the block exemption, concluding, as a preliminary matter, that claims for the exemption are unpersuasive, and is inclined to allow the block exemption to expire and rely on the general competition rules to protect necessary and pro-competitive activities in the business of insurance.

At the end of the day, however, some consensus can be observed. There is wide agreement that antitrust laws are a consumer welfare prescription, exemptions should be adopted only when necessary to remedy market failures and then construed narrowly, and data dissemination and other agreements in the business of insurance are likely pro-competitive when analyzed under the rule of reason.

Keywords: antitrust, competition, immunity, exemption, insurance

JEL Classification: L40, L43, K23, K21, K10