## Facts

- Retail investors who bought shares in syndicated IPOs sued major underwriters and broker-dealers under federal antitrust laws.
- Plaintiffs alleged defendants agreed to restrict “flipping” (rapid resale of IPO shares) by imposing a “retail restricted period” (alleged 30–90 days) during which retail customers were prevented or discouraged from selling IPO shares in the aftermarket.
- Alleged mechanisms included refusal or discouragement of sell orders, threats or denial of future IPO allocations to customers who flipped, and pressure on syndicate members whose customers resold quickly.
- Plaintiffs characterized the conduct as a horizontal restraint that limited aftermarket supply and supported IPO aftermarket prices.
- Defendants contended the practices were part of securities-offering distribution and price stabilization subject to SEC and self-regulatory organization oversight, making antitrust liability incompatible with the securities regime.

## Issues

1. Whether alleged IPO aftermarket flipping restrictions and allocation penalties are impliedly immune from federal antitrust laws because they fall within SEC-regulated stabilization and distribution practices.
2. Whether applying antitrust law to these practices would create a clear conflict with, or interfere with, the operation of the securities regulatory framework.

## Decision

- The district court granted defendants’ Rule 12(b)(6) motion and dismissed the complaint with prejudice.
- The court held the challenged practices were within the scope of SEC and self-regulatory oversight of IPO distribution and stabilization.
- The court concluded antitrust enforcement against the alleged conduct would conflict with the securities regulatory scheme, warranting implied antitrust immunity.

## Legal Principles

- Federal antitrust laws may be impliedly displaced when their application would be clearly incompatible with a comprehensive federal regulatory scheme governing the same conduct.
- Implied antitrust immunity is appropriate where the conduct is subject to active securities regulation and antitrust adjudication risks inconsistent commands with SEC-supervised practices.
- Implied immunity in securities cases is conduct-specific; it does not exempt securities markets generally, but can bar antitrust claims targeting regulated underwriting and stabilization activity.

## Conclusion

The court dismissed retail investors’ antitrust challenge to IPO flipping restrictions because the alleged aftermarket restraints were treated as part of SEC-supervised stabilization and distribution practices, and antitrust scrutiny would conflict with the securities regulatory regime.


Friedman v. Salomon/Smith Barney, Inc., No. 99 Civ. 5704 (NRB), 2000 WL 1804719 (S.D.N.Y. Dec. 8, 2000)