Clayton and Robinson Patman Acts

I am confused about why Clayton and Robinson Patman acts apply to insurance. I thought the exception was that Sherman applied, and boycott, coercion and intimidation. These acts are about price discrimination. Or are these laws that are specifically about insurance?

Comments

  • The Sherman Act was the original antitrust legislation from 1890, but it was too vague and big companies found ways to circumvent it and continue to engage in anti-competitive practices.

    The Clayton Act (1914) and Robinson-Patman Act (1936) were updates that attempted to eliminate loopholes in the Sherman Act. The Clayton Act was more specific than the Sherman Act and prohibited activities such as: (PEM-1)

    • Price discrimination
    • Exclusive dealings
    • Mergers that lessen competition
    • 1 person being director of 2 competing corporations

    These acts apply to all business, not just insurance.

    There were then subsequent developments surrounding the concepts of:

    • antitrust
    • federal vs state regulation of insurance

    In particular, the McCarran-Ferguson Act (1945). It exempted insurance from most federal antitrust legislation regardless of state laws, but not the Sherman Act or boycott/intimidation. (See wiki for details.)

    The Clayton and Robinson-Patman Acts would be treated the same way as the Sherman Act since they are basically just updates to the Sherman Act. In other words, insurance is not exempt and they still apply.

  • Not related to the discussion above, but related to the PEM-1 mnemonic - here's what I came up with as an alternative:

    Clayton was supposed to show up for a duel at high noon. But since he was un(trust)worthy, he showed up at 1-P(E)M, an hour late. So it was ruled a "tie".

    Hope it helps!

  • Such drama! (Scroll up for original post)

    I've linked here from the wiki and for others, here is the wiki reference where this came from:

  • Prior to the SEUA decision in 1944, the Sherman Act didn't apply to insurance. Does that apply to the Clayton Act and Robinson-Patman Act too?

  • Yes it does. We made an edit in the wiki to further clarify this point. Thank you.
    https://battleacts6us.ca/wiki6us/Porter.2-Devlpt#1890:Sherman_Antitrust_Act.28and_others.29

  • For the Robinson-Patman Act, the wiki states:
    price discrimination - must be based on reduced operating costs of corporation.
    Could you please explain this with an example?

  • Sharmishtha, I was just looking at this today. Take a look at Fall.2016.1.

    Description of act:
    "The Robinson-Patman Act is an amendment to the Clayton Act that allows price
    discrimination only if it can be explain by operation efficiencies leading to competitive
    advantage"

  • What it means is that you must not discriminate your prices for reasons other than operating cost efficiencies. For example, if you offer different prices in two different states, it cannot be simply because one market can take on higher prices than the other: there must be an expense justification for it.

  • Understood, thank you!!

  • Sure, good luck.

  • While going through Fall 2017 I found and interesting note in the examiners report that may give a little more detail on the applicability of Clayton and Robinson Acts after McCarren Ferguson. The examiners report for part C says "Candidate was expected to know that federal antitrust regulation applies if there is no appropriately equivalent state law." Now combining this with the fact that I believe Sherman applies for Boycott, Coercion and Intimidate no matter the state law and that federal only supersedes if the federal law directly pertains to insurance, I think Clayton and Robinson may or may not apply depending on if there is a state law that address the details of those Acts. I think this may be why Tying still occurs in some states as the states may have passed a different law addressing this issue.

  • Yes, this makes sense. But I don't think any states make laws condoning tying. The key element if the prohibition of tying is whether the firm doing the tying has a monopoly over the market. If they don't, they may still be able to tie multiple products.

  • In the wiki, it says the McCarran-Ferguson Act "exempts insurance from most federal regulation including antitrust regulation (not exempt from Sherman Antitrust act).

    Should my takeaway be that federal regulation applying exclusively to insurance doesn't apply to insurance companies, but the Sherman Antitrust Act still does apply to insurance companies since Sherman antitrust act applies to both interstate commerce and insurance?

  • Federal regulation applying exclusively to insurance does apply to insurance companies.

    https://battleacts6us.ca/wiki6us/Porter.2-Devlpt#1945:_McCarran-Ferguson_Act:~:text=but%20federal%20laws%20applying%20exclusively%20to%20insurance%20supersede%20state%20laws

    Sherman Antitrust Act applies to interstate commerce including insurance.

Sign In or Register to comment.