SIFMA Files Amicus Brief in Antitrust Case Involving LIBOR-Based Manipulation
Commentary by Bob Zwirb
SIFMA filed an amicus brief with the Second Circuit Court of Appeals in opposition to an appeal challenging a 2013 federal district court order dismissing all of the antitrust claims from multidistrict litigation over LIBOR manipulation. The lawsuit follows in the wake of global enforcement actions accusing a number of banks of rigging submissions for the determination of LIBOR.
SIFMA's brief urges the Court not to apply antitrust principles to the LIBOR benchmark setting process. According to SIFMA, that process is not "set through competition," but instead through a voluntary, cooperative and noncompetitive process. The brief argues that LIBOR is a noncompetitive and standardized contract term, not a product that is bought, sold or traded, and that the mere submission of rates to the British Bankers' Association ("BBA") is not an activity that involves buying, selling or any competition at all. Rather, it is "a cooperative endeavor wherein otherwise-competing banks agree to submit estimates of their borrowing costs to the BBA each day to facilitate the BBA's calculation of an interest rate index."
SIFMA qualified its argument by saying that it did not believe that benchmark and standard setting policies and practices "should be categorically immune from legal challenge." However, in the absence of a restraint of trade or demonstrated antitrust injury, SIFMA argued, antitrust liability should not be applied. SIFMA concluded by maintaining that "expanding the parameters of potential antitrust liability will chill benign and procompetitive conduct."
See: SIFMA's Amicus Curiae Brief.
Commentary
Although there is a conceptual link between the law and the economics of manipulation with antitrust (see, e.g., Craig Pirrong, Commodity Market Manipulation Law: A (Very) Critical Analysis and a Proposed Alternative, 51 Wash. Lee Law Rev. 945, 951 (1994) (noting the "equation" between manipulation and market power)), not all manipulative conduct raises antitrust concerns. The SIFMA brief attempts to explain why such conduct, to the extent that it involves the setting of LIBOR rates, does not merit antitrust scrutiny – a position with which the District Court agreed.
It is true, as SIFMA argues, that LIBOR and other similar benchmarks "are not a price and not the product of any competitive process," and that benchmark setting requires the cooperation of firms that otherwise compete with each other, as well as the cooperation of an organization that is willing and able to organize and manage the benchmarking process. However, it is also true that trade associations and other voluntary cooperative activities do not shield joint activities from antitrust scrutiny where such activities are conducted in a collusive manner. See Federal Trade Commission, "Spotlight on Trade Associations."