Law School Case Brief
United States v. S.-Eastern Underwriters Ass'n - 322 U.S. 533, 64 S. Ct. 1162 (1944)
For Constitutional purposes, certain activities of a business may be intrastate and subject to state control, while other activities of the same business may be interstate and subject to federal regulation. There is a wide range of business and other activities which, though subject to federal regulation, are so intimately related to local welfare that, in the absence of congressional action, they may be regulated or taxed by the states. In marking out these activities the primary test applied by the Supreme Court of the United States is not the mechanical one of whether the particular activity affected by the state regulation is part of interstate commerce, but rather whether, in each case, the competing demands of the state and national interests involved can be accommodated. The fact that particular phases of an interstate business or activity have long been regulated or taxed by states has been recognized as a strong reason why, in the continued absence of conflicting congressional action, the state regulatory and tax laws should be declared valid.
Defendants South-Eastern Underwriters Association, its membership of nearly 200 private stock fire insurance companies, and 27 individuals were indicted in federal district court for alleged violations of the Sherman Anti-Trust Act. The indictment alleged two conspiracies: (1) to restrain interstate trade and commerce by fixing and maintaining arbitrary and non-competitive premium rates on fire and specified "allied lines" of insurance in several states, in violation of § 1 of the Act, and; (2) to monopolize trade and commerce in the same lines of insurance in and among the same states, in violation of § 2. Defendants filed a demurrer to the indictment arguing that it was not required to conform to the Act on the ground that the business of insurance was not commerce, either intrastate or interstate. The district court granted the demurrer. The Government appealed.
Did the insurance business conducted by defendants fall within the definition of "commerce" under the Sherman Act?
The Supreme Court of the United States reversed the district court's judgment. The Court held that while a contract of insurance itself did not constitute interstate commerce, after the entire transaction was examined, there was a chain of events—such as transfer of funds, information, and communication over state lines—that became interstate commerce and subject to regulation under the Commerce Clause and the Sherman Act. The Court observed that the allegations of monopoly and interference with trade, virtually admitted to by defendants, was just the type of activity that Congress intended to prevent by enacting the Sherman Act.
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