FEDERAL TRADE COMMISSION, PETITIONER V. TICOR TITLE INSURANCE CO., ET AL. No. 91-72 In The Supreme Court Of The United States October Term, 1990 The Solicitor General, on behalf of the Federal Trade Commission, respectfully petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Third Circuit in this case. Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Third Circuit PARTIES TO THE PROCEEDING In addition to the parties named in the caption, Chicago Title Insurance Company, SAFECO Title Insurance Company (now operating under the name Security Union Title Insurance Company), Lawyers Title Insurance Corporation, and Stewart Title Guarantee Company were respondents before the Federal Trade Commission and petitioners in the court of appeals. First American Title Insurance Company was a respondent before the Commission; it settled the charges against it by consent agreement. TABLE OF CONTENTS Questions presented Parties to the proceeding Opinions below Jurisdiction Statutory provisions involved Statement Reasons for granting the petition Conclusion OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-38a) is reported at 922 F.2d 1122. The opinion and final order of the Federal Trade Commission (App., infra, 41a-136a), and the initial decision of the administrative law judge (App., infra, 137a-250a) are not yet officially reported. JURISDICTION The judgment of the court of appeals was entered on January 9, 1991. A petition for rehearing was denied on March 12, 1991. App., infra, 39a-40a. On June 2, 1991, Justice Souter extended the time for filing a petition for certiorari to and including July 10, 1991. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY PROVISIONS INVOLVED Section 5(a)(1) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), provides: Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. Section 5(c) of the FTC Act, 15 U.S.C. 45(c), provides, in pertinent part: Any person, partnership, or corporation required by an order of the Commission to cease and desist from using any method of competition or act or practice may obtain review of such order in the court of appeals of the United States, within any circuit where the method of competition or the act or practice in question was used or where such person, partnership, or corporation resides or carries on business, by filing in the court, within sixty days from the date of the service of such order, a written petition praying that the order of the Commission be set aside. * * * The findings of the Commission as to the facts, if supported by evidence, shall be conclusive. QUESTIONS PRESENTED 1. Whether private horizontal price-fixing is "actively supervised" by the State (for purposes of implied exemption from the federal antitrust laws) where prices are filed with a state agency but state officials do not determine whether the prices meet the State's regulatory criteria. 2. Whether the court of appeals properly deferred to the Federal Trade Commission's findings of fact. STATEMENT This case concerns horizontal price-fixing by five large title insurance companies. The ultimate issue in this case is the meaning of the requirement of "active state supervision" in the context of the state action doctrine of Parker v. Brown, 317 U.S. 341 (1943). Respondents insure buyers of real property against losses due to certain defects in title. Respondents charge their customers a relatively small fee for assuming the risk of such losses, and a relatively large fee for conducting a title search and examination. A title search is a compilation, in chronological order, of publicly recorded instruments in the chain of title. A title examination is an evaluation of the legal significance of those instruments. App., infra, 147a-180a. Beginning in the 1960s, respondents organized "rating bureaus" in a number of States to fix prices for title search and examination services. App., infra, 4a, 217a. The rating bureaus agreed on uniform rate schedules that were filed with state insurance departments. Under the States' insurance laws, respondents' rates were effective unless disapproved by state insurance officials. Although respondents' rates were not disapproved, there was no hearing, written decision, or other evidence that state officials had determined that the rates were consistent with the States' regulatory policies. The question in this case is whether respondents' price-fixing nevertheless met the legal criterion of being "actively supervised" by the States, and therefore is exempt from the federal antitrust laws, under the state action doctrine of Parker v. Brown, supra, and subsequent decisions of this Court. 1. In January 1985, the Federal Trade Commission issued an administrative complaint alleging that respondents had violated Section 5 of the FTC Act, 15 U.S.C. 45, by collectively setting rates for title search and examination services. The complaint listed 13 States as "(e)xamples of states in which one or more of the Respondents have fixed prices." App., infra, 45a (quoting Compl. para. 11). In their answer, respondents argued, among other things, that their price-fixing took place pursuant to clearly articulated state policies, and was actively supervised by the States at issue. Consequently, respondents argued, their price-fixing was exempt from the antitrust laws under the state action doctrine. In December 1986, the administrative law judge issued a decision concluding that respondents' activities, which plainly violated the FTC Act unless they were exempt from the federal antitrust laws, were exempt from those laws under the state action doctrine in some States, but not in others. App., infra, 137a-250a. 2. In September 1989, the Commission issued a final order and opinion prohibiting the companies from collectively setting prices for title search and examination services except "where such collective activity is engaged in pursuant to a clearly articulated and affirmatively expressed state policy and where such collective activity is actively supervised by a state regulatory body." App., infra, 42a. The Commission observed that the state action exemption applies only where state officials "have and exercise the power to review particular anticompetitive acts." Id. at 53a (quoting Patrick v. Burget, 486 U.S. 94, 101 (1988)). Thus, the Commission concluded that "(n)o clear inference of conscious state approval of the product of private collective ratemaking can be drawn from a state agency's passive acceptance or non-substantive review of rate filings." App., infra, 55a (quoting New England Motor Rate Carriers, No. 91-70 (F.T.C. Aug. 18, 1989) slip op. 15. Moreover, the Commission concluded, it is not sufficient that "the state statute * * * provides some mechanism for oversight." App., infra, 53a. Because "(t)he mere presence of some state involvement or monitoring does not suffice," 486 U.S. at 101, "isolated instances of review" by state officials will not shield unreviewed private activity from the antitrust laws. App., infra, 54a. Accordingly, the Commission "h(e)ld that the active supervision requirement is satisfied only where the state agency has acted affirmatively to review and approve the proposed tariff or rate." Id. at 55a. /1/ a. As to Wisconsin, the Commission adopted the ALJ's findings that "no hearing has ever been held * * * on any insurance rate filing" and that the State "followed a hands-off policy in dealing with title insurers." App., infra, 60a. The Commission noted that respondents' 1971 rate filing remained in effect for years, even though the supporting data needed to determine whether the rates met the State's regulatory criteria were not even filed with the State until 1978. Id. at 60a-61a. The Commission agreed with the ALJ's finding that respondents' 1981 filing, which raised rates by 11%, was "allowed to go into effect (i.e., not disapproved)" after state officials checked only the mathematical accuracy of the filing. Id. at 199a. Moreover, the 1982 filing was given "a cursory reading to the point that the supporting materials (statistical data and a pro forma analysis) were not even checked for accuracy." Ibid. In addition, "nearly two dozen endorsements and amendments went into effect without being examined by all." Id. at 63a. b. As to Montana, the Commission found that "the record demonstrates that rates from the 1983 filing went into effect without being examined." App., infra, 76a. The Commission observed that a rating bureau representative met with state insurance officials and was told that, although the increase would go into effect immediately, additional supporting data would have to be filed with the insurance department. Id. at 74a. Respondents never provided the required supporting data. Ibid. The Commission rejected the argument that the active supervision requirement was satisfied by hearings, "held three years before the formation of the rating bureau," concerning "restrictive legislation designed to keep * * * attorneys, real estate brokers, and lending institutions * * * out of the title insurance business." Id. at 75a. The Commission agreed with complaint counsel that "such hearings cannot substitute for supervision of the price-fixing in question." Id. at 75a-76a. Similarly, the Commission concluded that the Montana legislature's enactment of legislation after respondents' price-fixing does not constitute active supervision. "Otherwise," the Commission observed, "states would have carte blanche to enact laws retroactively immunizing entities from liability after they had violated a federal statute. Id. at 76a. /2/ 3. The court of appeals reversed. App., infra, 1a-38a. The court noted that respondents "do() not dispute the FTC's holding that the horizontal price-fixing agreements among five of the nation's largest title insurance companies * * * were anticompetitive and unfair within the meaning of Section 5 of the FTC Act." Id. at 2a. But the court held that respondents' price-fixing activities were exempt from the antitrust laws under the state action doctrine. /3/ The court of appeals recognized that "(i)n the aftermath of Patrick, it is clear that the active supervision test requires that the state 'have and exercise' the power to review the particular anticompetitive acts." App., infra, 27a. The court noted that this Court has considered four factors in determining whether the active supervision requirement is met: "(1) whether the state establishes the rates; (2) whether the state reviews the reasonableness of the rates; (3) whether the state monitors market conditions; and (4) whether the state ha(s) engaged in any 'pointed reexamination' of its program." Ibid. (citing 324 Liquor Corp. v. Duffy, 479 U.S. 335, 345 (1987); California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 106 (1980)). The court of appeals quoted language from the First Circuit's decision in New England Motor Rate Bureau, Inc. v. FTC, 908 F.2d 1064 (1990) (NEMRB), as "most instructive on what type of showing is necessary to satisfy Midcal's active supervision prong." App., infra, 27a. The court declared (id. at 28a (quoting NEMRB, 908 F.2d at 1071)): Where * * * the state's program is in place, is staffed and funded, grants to the state officials ample power and the duty to regulate pursuant to declared standards of state policy, is enforceable in the state's courts, and demonstrates some basic level of activity directed towards seeing that the private actors carry out the state's policy and not simply their own policy, more need not be established. The court of appeals agreed with the Commission that there was no evidence in the record that any of the States at issued monitored market conditions or engaged in a pointed reexamination of their program. But the court concluded that the States at issue nevertheless satisfied the test quoted above. Although the court of appeals did not elaborate on the amount or type of official activity necessary to satisfy its "basic level of activity" test, the court concluded that Wisconsin and Montana had satisfied the test even though it did not find that state officials had determined that the particular rates prescribed by the rate agreements at issue were consistent with the State's policies. The court held that Wisconsin actively supervised respondents' price-fixing. The court concluded that state officials had the power to regulate respondents' rates, because state law "required Wisconsin's state-run Insurance Department to make sure that all rate bureau filings complied with the statutory requirement that rates not be excessive, inadequate, or unfairly discriminatory," and "to reject rates following a hearing if they do not meet the statutory criteria." App., infra, 36a (citing Wis. Stat. Ann. Sections 625.11(1), 625.22 (West 1980)). The court of appeals also concluded that Wisconsin had exercised the power to supervise respondents' price-fixing. The court observed that "Wisconsin's program of supervision was in place during the relevant time and * * * was staffed and funded." App., infra, 36a. Moreover, the court said, Wisconsin officials had "ample power and the duty to regulate pursuant to declared standards of state policy," and the duty was enforceable through mandamus proceedings in the state courts. Ibid. Finally, the court concluded, Wisconsin officials "demonstrated some basic level of activity directed towards seeing that (respondents) carried out the state's policy." Id. at 36a-37a. The court noted that "Wisconsin's Insurance Department raised questions regarding the 1971 filing and later ruled it was acceptable. The Insurance Department checked the 1981 filing for accuracy. The 1982 filing also received some review from the Insurance Department." Id. at 37a. As to Montana, the court of appeals concluded that state officials were required to make sure that all rate bureau filings complied with state statutory requirements, and to reject any rates that did not meet the statutory criteria. App., infra, 34a (citing Mont. Code Ann. Sections 33-1-311, 33-16-201, 33-16-204 to 33-16-206, 33-16-211 (1989)). The court said that Montana's program of supervision was in place, staffed, and funded, and that an action for a writ of mandamus was available in the Montana courts to compel the insurance officials to determine whether a particular rate met the State's statutory criteria. App., infra, 35a. Finally, the court concluded that state officials in Montana had engaged in "some basic level of activity" directed towards assuring compliance with the State's regulatory policies. Ibid. The court observed that "someone from Ticor's rating bureau met with officials of Montana's Insurance Department. The state officials told Ticor's representative that the increase would go into effect immediately and approved the filing. However, the state officials requested additional supporting data." Ibid. (citations omitted). The court noted, however, that "(t)here was no evidence that (respondents) ever supplied this supporting data." Id. at 35a n.16. The court of appeals nevertheless concluded that "the quantity of Montana's actions (was) sufficient to allow (respondents) to invoke the state action doctrine." Id. at 35a. The Commission's petition for rehearing was denied, over three dissents. App., infra, 39a-40a. REASONS FOR GRANTING THE PETITION In this case a major multi-state investigation and enforcement proceeding by the Federal Trade Commission has been effectively nullified by a federal court of appeals through adoption of a recently minted legal standard that critically weakens the test this Court has devised to bring private anticompetitive conduct within the implied exemption from the antitrust laws established by Parker v. Brown, 317 U.S. 341 (1943). The court of appeals' decision represents a dramatic expansion of judicially created immunity from the federal antitrust laws. The holding, in practical effect, permits private parties to engage in horizontal price-fixing free from either federal antitrust scrutiny or state supervision. The court's decision significantly redefines and vitiates the carefully constructed "active supervision" requirement laid down by this Court in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), and applied in subsequent cases. The court of appeals' watered-down version of "active supervision" -- which requires only that a state agency with authority to regulate be staffed, funded, and engaged in "some basic level of activity" -- cannot be reconciled with this Court's firm insistence that the state action doctrine exempts only those "particular anticompetitive acts of private parties that, in the judgment of the State, actually further state regulatory policies." Patrick v. Burget, 486 U.S. 94, 101 (1988). Where, as here, the State has not determined whether particular prices fixed by competitors are consistent with State policy, "there is a real danger" that private parties are acting only "to further (their) own interests rather than the governmental interests of the State" reflected in a state regulatory program that suffices to protect the public interest in lieu of the antitrust laws. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 47 (1985). In addition to creating a category of private anticompetitive activity that is neither supervised by state officials nor subject to the federal antitrust laws, the court of appeals' vague and lax formulation of the "active supervision" requirement will generate uncertainty among businesses, consumers, and regulators. In place of the relatively clear requirement that private conduct is subject to the federal antitrust laws unless state officials actually determine that the conduct comports with the State's regulatory policies, the court of appeals has substituted a standardless "basic level of activity" test. Moreover, the court of appeals' test invites an intrusive inquiry into state administrative processes that is inconsistent with the principles of federalism that underlie the state action doctrine. The court of appeals' decision -- most particularly the legal standard it adopted and applied -- will have a substantial adverse effect on the Commission's enforcement program. Because the FTC Act permits any entity carrying on business in the Third Circuit to seek review of a Commission cease-and-desist order in that circuit, see 15 U.S.C. 45(c), the Commission is unlikely to have the opportunity to challenge the "basic level of activity" test in other circuits in future nationwide enforcement proceedings. Indeed, in this very case the States under discussion -- Wisconsin, Montana, Arizona, and Connecticut -- are all located outside the Third Circuit. The Third Circuit's decision will also affect antitrust enforcement by the Antitrust Division of the Department of Justice, as well as private antitrust actions. This Court should grant certiorari to make clear that the "active supervision" prong of the state action exemption requires a showing that the State "has acted affirmatively to review and approve" challenged private conduct. App., infra, 55a. 1. In Parker v. Brown, 317 U.S. 341 (1943), this Court held that the Sherman Act did not invalidate a California statute that authorized a state commission to impose price-enhancing restrictions on private raisin producers. Essential to the Court's decision in Parker was the fact that "it is the state, acting through the (state) Commission, which adopts the program." Id. at 352. The Court observed that "a state does not give immunity to (private parties) who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful." Id. at 351 (citing Northern Securities Co. v. United States, 193 U.S. 197, 332, 334-347 (1904)). In Midcal, the Court expressly held that the state action exemption of Parker v. Brown does not apply unless the challenged restraint is not only "clearly articulated and affirmatively expressed as state policy," but also "'actively supervised' by the State itself." 445 U.S. at 105 (quoting City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410 (1978) (opinion of Brennan, J.)). In Midcal, the Court concluded that, where the State does not establish prices, review the reasonableness of prices, monitor market conditions, or engage in any "pointed reexamination" of the program, a "gauzy cloak of state involvement" is not sufficient to confer antitrust immunity on private anticompetitive conduct. /4/ 445 U.S. at 106. The "active supervision" requirement is fundamental to proper confinement of the scope of the implied exemption recognized in Parker v. Brown. That exemption is based on reluctance to assume that the federal statutes broadly prohibiting anticompetitive commercial practices, even though comprehensively drafted, were meant to prohibit acts of the States themselves. Cf. Gregory v. Ashcroft, No. 90-50 (June 20, 1991). But that judicially implied exemption cannot properly be extended to allow the States merely to immunize private conduct from prohibitions enacted by Congress. It is not the province of the States to repeal the federal antitrust laws, industry by industry, and substitute authorization of privately imposed trade restraints. This Court, therefore, has consistently adhered to the rigorous "active supervision" requirement in decisions applying the state action exemption. In 324 Liquor Corp. v. Duffy, 479 U.S. 335 (1987), the Court held that state monitoring that fails to exert "significant control" over anticompetitive conduct does not constitute active supervision. Id. at 345 n.7. Most recently, in Patrick v. Burget, 486 U.S. 94 (1988), the Court explained that the active supervision requirement can be met "only if the State effectively has made (the challenged private) conduct its own." Id. at 106. The Court added that the active supervision requirement is designed to ensure that the state-action doctrine will shelter only the particular anticompetitive acts of private parties that, in the judgment of the State, actually further state regulatory policies. * * * The mere presence of some state involvement or monitoring does not suffice. * * * The active supervision prong of the Midcal test requires that state officials have and exercise power to review particular anticompetitive acts of private parties and disapprove those that fail to accord with state policy. Id. at 100-101. Accordingly, forms of "state involvement or monitoring" that do not "'exert() any significant control over' the terms of the restraint" are not sufficient to warrant displacement of national economic policy. Patrick, 486 U.S. at 101 (quoting 324 Liquor, 479 U.S. at 345 n.7). See generally Elhauge, The Scope of Antitrust Process, 104 Harv. L. Rev. 668, 695-696 (1991). 2. The court of appeals' decision in this case reduces the "active supervision" requirement to an empty formality. The court's novel standard is not only toothless; it cannot be reconciled with this Court's holdings that private anticompetitive activity does not qualify for the state action exemption unless state officials have made a judgment that the particular private conduct at issue furthers, or at least is consistent with, the State's policies. See California Retail Liquor Dealers v. Midcal, supra; Patrick v. Burget, supra; Cantor v. Detroit Edison Co., 428 U.S. 579 (1976) (state agency's passive acceptance of tariff does not confer state action immunity). In this case, state officials engaged in "some basic level of activity" -- by accepting submissions for filing, sometimes checking them for accuracy, and occasionally requesting additional data -- without determining whether the particular private price-fixing met the State's regulatory criteria. The court of appeals' unfocused inquiry into the activity level of state officials does not suffice as a basis for conferring an implied exemption from antitrust prohibitions. As leading commentators have noted, the essential inquiry is "whether the operative decisions about the challenged conduct (were) made by public authorities or by private parties themselves." 1 P. Areeda & D. Turner, Antitrust Law Paragraph 213b, at 73 (1978) (emphasis added). In this case, it is clear that respondents -- not state officials -- made the operative decisions. Respondents fixed prices through their private rating bureaus. Respondents then filed their rates with state insurance departments. The Commission found (and the court of appeals did not purport to reject its findings) that no state official determined that respondents' rates were consistent with the State's regulatory criteria. See App., infra, 61a, 74a. Thus, respondents' rates remained in effect only because state officials took no steps to disapprove them. /5/ In Wisconsin, for example, the court of appeals relied on the Commission's findings that state officials "checked the 1981 filing for accuracy" and that the 1982 filing "also received some review." App., infra, 37a. That is not a sufficient factual basis for the court of appeals' conclusion that "Wisconsin satisfied the first two of the four Midcal and 324 Liquor Corp. factors." Ibid. As to the first factor, the court of appeals' conclusion that the State "established the rates" is simply untrue. Respondents, not the State, established the collective rates through their rating bureau. Although the State could have established the rates itself (by holding a hearing and issuing an order) it did not do so. Nor did the State review the reasonableness of the rates established by respondents. Reviewing a filing for accuracy is not the same as reviewing the reasonableness of the rates; a filing may be both accurate and unreasonable. In Montana, state officials told respondents' representative that the collective rates would go into effect immediately, but that respondents would be required to submit additional supporting data. Respondents never supplied that information. It is formalism in the extreme to suggest, based on this record, that Montana somehow established the rates and reviewed the reasonableness of the rates. Indeed, the officials' unfulfilled request for additional data is itself a smoking gun; it powerfully indicates that state officials never determined that the rates were consistent with state policies. In sum, Wisconsin and Montana made no judgment that respondents' price-fixing furthered state policy. As Professors Areeda and Turner explain, where "(t)ariff provisions * * * take effect unless the (state) agency takes affirmative steps to suspend or disapprove them, * * * (a)gency inaction is not sufficient to justify immunity." 1 P. Areeda & D. Turner, Antitrust Law Paragraph 213f, at 77-78 (1978). 3. a. The court of appeals concluded that officials in both Wisconsin and Montana are required by state law "to make sure that all rate bureau filings complied with the statutory requirement that rates not be excessive, inadequate, or unfairly discriminatory" and to "reject any rates if they did not meet the statutory criteria." App., infra, 34a, 36a. Even if the court of appeals were correct on this point, we think respondents' price-fixing would violate the federal antitrust laws, because the States did not in fact determine that respondents' price-fixing met the States' regulatory criteria. But, in any event, the court of appeals was incorrect in suggesting that state law imposes on officials in Wisconsin and Montana a mandatory duty to review every filed rate and to reject all rates that do not meet the State's criteria. On the contrary, insurance officials in both States have discretion to review, or not review, particular rate filings. /6/ Where state officials have such discretion, their failure to act to disapprove a particular filed rate does not warrant a presumption that state officials have made an affirmative determination that the rate is in accord with state policy. On the contrary, inaction by state officials in the context of such a regulatory regime generally indicates nothing more than that the State has elected to allocate its resources to other matters. That falls far short of an actual determination that the rates are consistent with the state's regulatory criteria. See 1 P. Areeda & D. Turner, supra, Paragraph 213f, at 78. /7/ b. In Patrick, this Court reserved the question "whether judicial review of private conduct ever can constitute active supervision." 486 U.S. at 104. The court of appeals' decision in this case rests in part on its conclusion that, in each State at issue, private parties have a right to seek a writ of mandamus from a state court to compel state officials to determine whether a particular filed rate meets the State's regulatory standards. The court of appeals' erred in relying on this hypothesized remedy. In this case, as in Patrick, the judicial review available to consumers, if it "exists at all, falls far short of satisfying the active supervision requirements." Ibid. As noted above, state officials in each State at issue have discretion to decide whether to review particular rate filings to determine whether they meet the state's regulatory criteria. Mandamus is an extraordinary remedy, issued only in the discretion of the court and is, in any event, not available to compel state officials to exercise their discretion in a particular way. See, e.g., Jeppeson v. State Dep't of State Lands, 205 Mont. 282, 667 P.2d 428 (1983); Vretenar v. Hebron, 144 Wis. 2d 655, 424 N.W.2d 714, 716 (1988) (mandamus not appropriate "when the officer's duty is not clear and requires the exercise of judgment and discretion"). Accordingly, it cannot here afford the type of judicial review that arguably might satisfy the "active supervision" requirement. More generally, we think the "active supervision" requirement is not satisfied by the mere availability of a possible judicial remedy. Judicial review is a costly and time-consuming process. At best, a requirement that consumers resort to an action in state court will impose significant delays during which private parties may engage in anticompetitive behavior that ultimately is determined not to be consistent with the State's policies. At worst, consumers will not avail themselves of judicial review even where it is available. That is particularly true where, as here, the benefits of a successful lawsuit will be shared by many consumers, but the costs are likely to be borne by the few consumers who seek judicial review. In short, a State does not "actively supervise" private anticompetitive activity by shifting to consumers the burden of monitoring the marketplace and bringing an action in state court to enforce compliance with state standards. See generally Elhauge, supra, 104 Harv. L. Rev. at 712-717. 4. In describing the court of appeals' departure from this Court's standard for active state supervision -- under which the antitrust exemption for state action applies "only if the State effectively had made (the anticompetitive private) conduct its own," Patrick v. Burget, 486 U.S. at 106 -- this petition has focused on respondents' activities in Wisconsin and Montana. In addition, however, the court of appeals reversed the Commission's determinations that respondents' price-fixing in Arizona and Connecticut was not actively supervised by state officials. In so doing, the court disregarded the established rule that the Commission's findings are conclusive if supported by substantial evidence, see 15 U.S.C. 45(c); FTC v. Indiana Federation of Dentists, 476 U.S. 447, 454 (1986), and the corollary rule that, in reviewing Commission decisions, courts may not "make (their) own appraisal of the (evidence), picking and choosing for (themselves) among uncertain and conflicting inferences," 476 U.S. at 454. In particular, the court of appeals relied on testimony by an Arizona official that "every filing submitted from 1972 to 1983 'was examined to see if it met the statutory requirements. It was scrutinized and it was either approved or disapproved.'" App., infra, 31a. Similarly, the court of appeals relied on testimony by a Connecticut official that "the state's Insurance Department 'reviews every filing that we receive.'" Id. at 33a. In relying on these isolated bits of testimony, the court of appeals failed to recognize that the Commission considered the entire record in this case -- making credibility determinations and resolving conflicting evidence -- and arrived at a different appraisal of the facts. In Arizona, for example, the Commission found that there was "no convincing evidence that (respondents' 1968 rate filing) was * * * reviewed by the state." App., infra, 68a, 70a. Moreover, the Commission found that "in Arizona title insurance rates become effective 15 days after they are filed if the insurance department takes no action -- they are 'deemed' to meet the requirements of the statute. The 1968 filing was allowed to become effective in this manner." Id. at 69a. As to Connecticut, the court of appeals ignored the Commission's finding that "state officials had readily identified aspects of collective ratemaking that they themselves considered crucial but which were not being supervised at all," id. at 56a, and its additional finding that numerous endorsements and amendments filed by respondents without any supporting data were not reviewed by state officials, id. at 58a, 60a. Although the court's refusal to accept the Commission's appraisal of the evidence, standing alone, might not warrant certiorari, we think further review of that issue is warranted in the context of this case, which also presents the general question of the proper legal standard for applying the active supervision requirement to a regime of filed rates. If this Court determines, as we submit, that the court of appeals applied an incorrect legal standard, it could, of course, remand the case to the court of appeals for application of the correct standard by that court to Arizona and Connecticut. 5. This case concerns horizontal price-fixing. No antitrust offense is more "dangerous to society." FTC v. Superior Court Trial Lawyers Ass'n, 110 S. Ct. 768, 781 n.16 (1990) (quoting 7 P. Areeda, Antitrust Law Paragraph 1509, at 412 (1986)). Indeed, the price-fixing at issue here is even more dangerous than ordinary price-fixing, because the state agency provides a mechanism for monitoring and enforcing competitors' participation in the cartel. The court of appeals' decision thus threatens to abrogate the protections of the federal antitrust laws -- and to leave consumers substantially unprotected -- in a wide variety of industries, professions, and occupations that are nominally subject to state regulation. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. KENNETH W. STARR Solicitor General JAMES F. RILL Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General ROBERT A. LONG, JR. Assistant to the Solicitor General JAMES M. SPEARS General Counsel JAY C. SHAFFER Deputy General Counsel ERNEST J. ISENSTADT Assistant General Counsel LESLIE RICE MELMAN Attorney MICHAEL E. ANTALICS ANN MALESTER Assistant Directors Bureau of Competition Federal Trade Commission JULY 1991 /1/ As discussed below, the Commission ultimately held that respondents' activities were not actively supervised in four States -- Arizona, Connecticut, Montana, and Wisconsin. This petition focuses on respondents' activities in Wisconsin and Montana. These two examples are sufficient to frame the central legal issue presented by this case. In addition, the court's application of its "basic level of activity" test to those two States is particularly troubling, because the court did not suggest that officials in those states determined that respondents' price-fixing was consistent with state policy. We also submit however, for the reasons set out below, see pages 19-20, infra, that the court of appeals' decision -- in particular, its holdings as to Connecticut and Arizona -- does not accord sufficient deference to the Commission's findings of fact. /2/ The Commission also rejected respondents' arguments that title search and examination services are part of the "business of insurance," and therefore exempt from Commission review under Section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. 1012(b), App., infra, 78a-99a, and that respondents' price-fixing was protected under the Noerr-Pennington doctrine, id. at 99a-105a. /3/ The court did not reach respondents' additional arguments that their price-fixing was protected under the McCarran-Ferguson Act and the Noerr-Pennington doctrine. App., infra, 38a n.17. In addition, the court refused to consider respondents' separation of powers argument. Ibid. /4/ In Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985), which concerned collective ratemaking by motor carriers, the Court noted that, under the regulatory scheme there at issue, "(a) proposed rate becomes effective if the state agency takes no action within a specified period of time," and that the state agencies "have and exercise ultimate authority and control over all intrastate rates." Id. at 50-51. In that case, unlike this one, the government conceded that the state agencies actively supervised the private activity. Id. at 62. Accordingly, only application of the "clear articulation" prong of the Midcal test was at issue in this Court. Ibid. Indeed, the state agencies involved in the motor carriers case did in fact "consistently require hearings." United States v. Southern Motor Carriers Rate Conference, Inc., 467 F. Supp. 471, 476 (N.D. Ga. 1979). /5/ Although the Third Circuit purported to follow the First Circuit's decision in New England Motor Rate Bureau, Inc. v. FTC (NEMRB), supra, in fact the Third Circuit's decision goes considerably further than the First Circuit's decision in NEMRB. In NEMRB, the First Circuit concluded, on the basis of the parties' stipulations, that "the failure to suspend or reject a rate indicate(d) a determination that the rate has been found to meet the (substantive) regulatory criteria of the statute" and that "unreasonable rates (are) rejected" by state regulators. 908 F.2d at 1077. Here, in contrast, there were no such stipulations or findings. /6/ The provisions of state law cited by the court of appeals do not support its statements that state officials are required to determine whether every filed rate is consistent with the State's criteria. See Wis. Stat. Ann. Section 625.11(1) (West 1980) ("Rates shall not be excessive, inadequate or unfairly discriminatory."); id. Section 625.13 (insurers shall file all rates "within 30 days after they become effective"); id. Section 625.22 ("If the commissioner finds after a hearing that a rate is not in compliance with Section 625.11, the commissioner shall order that its use be discontinued"); Mont. Code Ann. Section 33-1-311 (1989) ("The commissioner shall enforce the provisions of this code and shall execute the duties imposed upon him by this code."); id. Section 33-16-201 ("Rates shall not be excessive or inadequate, as herein defined, nor shall they be unfairly discriminatory."). /7/ In a "somewhat similar," although "by no means identical," context, National Collegiate Athletic Ass'n v. Tarkanian, 488 U.S. 179, 194 n.14 (1988), the Court has rejected the argument that "inaction" or "mere acquiescence" by the State converts private action into state action. See Jackson v. Metropolitan Edison Co., 419 U.S. 345, 354-355 (1974) (termination rules included in utility company's tariff, but not considered in hearings on rate increases, are not state action for purposes of 42 U.S.C. 1983). See also Flagg Bros. v. Brooks, 436 U.S. 149, 164 (1978). APPENDIX