## Facts

- The United States brought a civil antitrust action against seventeen major investment banking firms, alleging a long-running combination to restrain and monopolize U.S. securities underwriting and distribution.
- The challenged conduct centered on the underwriting “syndicate system,” including purchase and selling syndicates used to buy securities from issuers and distribute them to the public.
- Syndicate agreements commonly set a public offering price during the distribution period and included rules intended to stabilize the market while the issue was being sold.
- The government argued that repeated cooperation among leading firms through these syndicates functioned as coordinated control over prices, terms, and conditions for new issues and secondary distributions.
- The case proceeded as a lengthy bench trial, after which the district court issued findings of fact and conclusions of law and entered judgment for defendants.

## Issues

1. Whether the defendants’ repeated use of underwriting syndicates and cooperative relationships constituted an agreement in restraint of trade in violation of Sherman Act § 1.
2. Whether defendants monopolized or attempted to monopolize investment banking or securities underwriting in violation of Sherman Act § 2.

## Decision

- The court entered judgment for defendants and dismissed the complaint.
- The court held the government failed to prove a § 1 conspiracy or combination in unreasonable restraint of trade.
- The court held the government failed to prove monopolization or attempt to monopolize under § 2.
- The court characterized the record as showing shifting, deal-specific competition among the defendant firms rather than a stable cartel.

## Legal Principles

- Sherman Act § 1 requires proof of an agreement that unreasonably restrains trade; parallel or recurring cooperation must be tied to a proven unlawful combination, not inferred from industry structure alone.
- Joint activity incidental to legitimate, transaction-specific business operations may be lawful when supported by the nature of the business and the evidence shows active competition for customers.
- Sherman Act § 2 requires proof of monopoly power and willful acquisition or maintenance (or a dangerous probability and intent for attempt); concentrated participation in an industry and repeated collaboration, without more, do not establish monopolization.
- Deal-specific syndicate terms that constrain price competition during a distribution period are not, by themselves, sufficient to prove an overarching price-fixing cartel absent evidence of a continuing agreement to suppress competition beyond the underwriting transaction.

## Conclusion

The court rejected the government’s theory that underwriting syndicates and repeated inter-firm cooperation proved a long-term Wall Street cartel, finding instead that issuers selected among competing bankers and that syndicates were transient, transaction-based arrangements insufficient to establish Sherman Act §§ 1 or 2 liability on the trial record.


United States v. Morgan, 118 F. Supp. 621 (S.D.N.Y. 1953)