Federal Trade Commission v. National Casualty Co.

Background

Two insurance companies that sell health and accident policies challenged Federal Trade Commission orders that banned certain advertising as false and deceptive. National Casualty sold nationwide and through independent local agents; American Hospital and Life operated in fourteen States. The Fifth and Sixth Circuit Courts set aside the FTC cease-and-desist orders. The question reached the Court about whether a federal law, the McCarran-Ferguson Act, prevents the FTC from regulating insurers’ advertising where States have their own laws against unfair insurance advertising.

Reasoning

The Court examined the language and legislative history of the McCarran-Ferguson Act and concluded that Congress intended to leave regulation of the business of insurance to the States. The Court held that the Act’s proviso means the Federal Trade Commission cannot apply the Federal Trade Commission Act to insurance practices that States are regulating. The Government argued constitutional limits on state power and also argued that some state statutes were too general to count as regulation, but the Court found those arguments unpersuasive and concluded the States had in fact regulated the advertising practices at issue.

Real world impact

As a result, the Court affirmed the lower courts and blocked the FTC from enforcing its orders against these insurers in States that have laws against unfair insurance advertising. Many States had adopted the Model Unfair Trade Practices Bill or similar laws, so state regulators will be the primary enforcers for most advertising practices of these companies. The decision leaves room for federal regulation only where a State has not exercised its regulatory authority.