Silver v. New York Stock Exchange/Dissent Stewart

Mr. Justice STEWART, whom Mr. Justice HARLAN joins, dissenting.

The Court says that the fundamental question in this case is 'whether and to what extent the federal antitrust laws apply to securities exchanges regulated by the Securities Exchange Act of 1934.' I agree that this is the issue presented, but with all respect it seems to me that the answer which the Court has given is both unsatisfactory and incomplete.

The Court begins by pointing out, correctly, that removal of the petitioners' wire connections by collective action of the Exchange and its members would constitute a violation of the Sherman Act, had it occurred in an ordinary commercial context. The Court then reviews at length the purpose, scope, and structure of the Securities Exchange Act and holds, again correctly I think, that the substantive act of regulation engaged in here was inside 'the boundaries of the public policy' established by the Exchange Act. The Court next reminds us, correctly, that the Exchange Act contains no express exemption from the antitrust laws, and that a stock exchange or its members might in some cases 'apply its rules so as to do injury to competition which cannot be justified as furthering legitimate self-regulative ends.'

So far, so good. The Court has fairly and thoroughly stated the competing considerations bearing upon the basic problem involved in this case. But then-in the last five pages of the Court's opinion-the nature of the problem seems suddenly to change. The case becomes one involving due process concepts of notice, confrontation, and hearing.

It may be that a hearing should be accorded a member or nonmember of an exchange, injured by the invocation of an exchange rule, in all cases. On the other hand, in view of the sophisticated, subtle, and highly technical nature of the problem of what are 'just and equitable principles of trade,' or because of the fragile and mercurial ingredients of public confidence in the securities markets, there might be cases in which the public interest would demand that at least preliminary disciplinary action be taken with swift effectiveness. These broad policy questions were, quite properly, neither briefed nor argued in the present case. They are questions well within the power of Congress and of the Securities and Exchange Commission to canvass and to resolve. But they are questions, I respectfully submit, which have only the most tangential bearing upon the issues now before us.

The Court says that because of the failure to accord 'procedural safeguards' to the petitioners, the respondent Exchange is ipso facto liable to them under the antitrust laws. This means that a bucket-shop operator who had been engaged in swindling the public could collect treble damages from a stock exchange which had denied him its wire connections without first according him notice and a hearing. For, as I understand the Court's opinion, the exchange would not be allowed to prove in this hypothetical antitrust case that the plaintiff was such a swindler, even though proof of that fact to an absolute certainty were available. This result seems to me completely to frustrate the purpose and policy of the Securities Exchange Act, and to bear no relevance to the purpose and policy of the antitrust laws. Even assuming that Congress agreed with the Court's notions of the appropriate procedures under the Exchange Act, I cannot believe that Congress would have provided an antitrust forum and private treble damage liability to enforce them.

Whether there has been a violation of the antitrust laws depends not at all upon whether or not the defendants' conduct was arbitrary. As this Court has said, 'the reasonableness of the methods pursued by the combination to accomplish its unlawful object is no more material than would be the reasonableness of the prices fixed by unlawful combination.' Fashion Originators' Guild of America v. Federal Trade Comm., 312 U.S. 457, 468, 61 S.Ct. 703, 708, 85 L.Ed. 949. Yet the Court today says that because the Exchange did not accord the petitioners what the Court considers 'fair procedures' under the Exchange Act, the Exchange has therefore violated § 1 of the Sherman Act.

I think the Court errs in using the antitrust laws to serve ends they were never intended to serve-to enforce the Court's concept of fair procedures under a totally unrelated statute. I should have thought that the aftermath of Duplex Printing Press Co. v. Deering would have provided a sufficient lesson as to the unwisdom of such a broad and basically irrelevant use of the antitrust laws.

The purpose of the self-regulation provisions of the Securities Exchange Act was to delegate governmental power to working institution which would undertake, at their own initiative, to enforce compliance with ethical as well as legal standards in a complex and changing industry. This self-initiating process of regulation can work effectively only if the process itself is allowed to operate free from a constant threat of antitrust penalties. To achieve this end, I believe it must be held that the Securities Exchange Act removes antitrust liability for any action taken in good faith to effectuate an exchange's statutory duty of self-regulation. The inquiry in each case should be whether the conduct complained of was for this purpose. If it was, that should be the end of the matter so far as the antitrust laws are concerned-unless, of course, some antitrust violation other than the mere concerted action of an exchange and its members is alleged.

I would vacate the judgment of the Court of Appeals and remand the case to the District Court for further proceedings consistent with the views expressed in this dissenting opinion.