Ftc v. Travelers Health Association, 362 U.S. 293 (1960)

MR. JUSTICE HARLAN, whom MR. JUSTICE FRANKFURTER and MR. JUSTICE WHITTAKER join, dissenting.

This case marks the second time within a year that the Court has made inroads upon the policy of the McCarran-Ferguson Act by which Congress pervasively restored to the States the regulation of the business of insurance, a function which until this Court’s decision in United States v. South-Eastern Underwriters Association, 322 U.S. 533, traditionally had been considered to be exclusively theirs. Last Term the Court held variable annuity policies, sold across state lines, subject to regulation by the Securities and Exchange Commission. See Securities & Exchange Comm’n v. Variable Annuity Life Ins. Co., 359 U.S. 65, 93-101 (dissenting opinion). Today it holds that advertising materials mailed into other States by a health insurance company, already regulated under the laws of its own State with respect to the out-of-state transmission of such materials, are subject also to regulation by the Federal Trade Commission at least to the extent that such advertising matter is unregulated by the laws of the State into which it is sent.

The Court’s holding is based upon its conclusion

that when Congress provided [in § 2(b) of the McCarran-Ferguson Act] that the Federal Trade Commission Act would be displaced to the extent that the insurance business was "regulated" by state law, it referred only to regulation by the State where the business activities have their operative force.

I think the data on which the Court relies is much too meagre to justify this conclusion, and believe, as the Court of Appeals did, that Nebraska’s regulation of these activities of the respondent foreclosed Federal Trade Commission jurisdiction.

What is referred to in the majority opinion as "specific legislative history" on the issue before us seems to me to fall far short of being persuasive towards the Court’s view of the statute. The report on the original House bill, on which so much store is placed, was directed, as I read it, not to differentiating between the kinds of state insurance regulation which would, after the moratorium period provided in the statute had ended,{1} exempt from federal regulation and control the business of insurance in all but limited aspects,{2} but to the general proposition that the new statute would not enlarge or narrow state regulatory power as it had existed before this Court’s decision in the South-Eastern Underwriters case, supra. That no more than this can be got out of the report on the original House bill is made manifest by Senator McCarran’s explanation of the conference bill when he presented it to the Senate -- an episode to which the Court refers. Quoting from the report, the Senator said:

That expression [meaning the report] should be made a part of this explanation. In other words, we give to the States no more powers than those they previously had and we take none from them.{3}

91 Cong.Rec. 1442.

I believe that the fragments from the ensuing Senate debate, on which the Court further relies, indicate no more than does the report.{4} The same is true, in my opinion, of expressions made during the debate relating to the desirability of leaving insurance regulation to local authorities because they were, so to speak, on the ground, expressions which, the Court correctly observes, reflected "a basic motivating policy behind the legislative movement that culminated in the enactment of the McCarran-Ferguson Act." And since the Court very gingerly throws out possible constitutional questions, I think it appropriate to say that the right of Nebraska to police its own insurance company domiciliaries, with respect to their advertising sent from Nebraska into other States, is not seriously open to constitutional doubt. See Hammond Packing Co. v. Arkansas, 212 U.S. 322; Sligh v. Kirkwood, 237 U.S. 52. There is certainly nothing in AlaskaPackers Ass’n v. Industrial Accident Commission, 294 U.S. 532, which points to the contrary.

The temptation is strong, no doubt, to ask the Court to innovate with respect to the McCarran-Ferguson Act when state regulation may be thought to have fallen short. Two years ago, we declined to do so when invited by the Federal Trade Commission in the National Casualty case, supra, at 564-565. I think it unwise for us now to yield to this encore on the part of the Commission. One innovation with the Act is apt to lead to another, and may ultimately result in a hybrid scheme of insurance regulation, bringing about uncertainties and possible duplications which should be avoided.

Obviously Congress’ purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance. This was done in two ways. One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation. The other was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest, and that the business and all who engage in it "shall be subject to" the laws of the several states in these respects.

Moreover, in taking this action, Congress must have had full knowledge of the nationwide existence of state systems of regulation and taxation; of the fact that they differ greatly in the scope and character of the regulations imposed and of the taxes exacted; and of the further fact that many, if not all, include features which, to some extent, have not been applied generally to other interstate business. Congress could not have been unacquainted with these facts, and its purpose was evidently to throw the whole weight of its power behind the state systems notwithstanding these variations.

Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-430. See also Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 318-321; Securities & Exchange Comm’n v. Variable Annuity Life Ins. Co., supra, at 68-69, and dissenting opinion at 93 et seq.

If innovations in the policy of the McCarran-Ferguson Act are thought desirable, they should be made by Congress, not by us.

I would affirm.

1. In addition to § 2(b) set forth in note 1 of the Court’s opinion, ante, p. 295, § 3(a) of the Act provides:

Until June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, and the Act of June 19, 1936, known as the Robinson-Patman Anti-discrimination Act, shall not apply to the business of insurance or to acts in the conduct thereof.

2. Section 3(b) of the Act provides:

Nothing contained in this Act shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate or act of boycott, coercion, or intimidation.

3. Senator McCarran’s reading of the report on the original House bill stopped short of the last clause (following the citation of cases) quoted in the Court’s opinion. Ante, p. 301.

4. It is worth observing that one of the hypothetical questions put to Senator Ferguson by Senator Pepper of Florida, an opponent of the bill, related to whether the bill would permit Florida, in disregard of the federal antitrust laws, to authorize the sale in Florida of insurance at rates fixed by an out-of-state insurance rating bureau, and that Senator Ferguson replied in the affirmative. 91 Cong.Rec. 1481. Yet the Court now finds it offensive to the concept of the statute to consider that other States may be content to rely on Nebraska’s regulation of advertising material mailed to their citizens by Nebraska insurance companies. The Court reserves "for what they are worth" the questions that would arise were such other States to legislate against the out-of-state mailing of insurance advertising into their jurisdictions. Yet, even if such legislation proved abortive as a practical matter, because of a foreign insurance company having no office, agents, or assets within the State so legislating, such legislation would nonetheless presumably exclude Federal Trade Commission jurisdiction unless we were to depart from our holding in Federal Trade Comm’n v. National Casualty Co., 357 U.S. 560, to the effect that it is the existence of state regulatory legislation, and not the effectiveness of such regulation, that is the controlling factor. The distinction between such a case as that and the one before us seems to me to be one without a difference.