Federal Trade Commission v. Travelers Health Ass'n

Background

The dispute involved a Nebraska health insurance company that sold policies by direct mail from an Omaha office to residents in many States. The company was licensed only in Nebraska and Virginia and mailed circular letters to prospects. Nebraska law forbids unfair or deceptive insurance practices “there or in any other state,” and the company argued that that law meant the Federal Trade Commission could not police its interstate advertising. A federal appeals court agreed and set aside an FTC cease-and-desist order.

Reasoning

The Court asked whether one State’s attempt to regulate its domiciliary insurer’s conduct outside its borders counts as regulation “by State law” under the McCarran-Ferguson Act so as to displace the FTC Act. Relying on the Act’s text and legislative history and distinguishing an earlier case about local-agent advertising, the majority held that displacement occurs only when the State law regulates where the deception is practiced and has its impact. A single State’s extraterritorial reach does not strip the FTC of authority. The Court vacated the appeals court judgment and remanded for further proceedings.

Real world impact

The decision means federal consumer-protection officials can challenge deceptive interstate mail solicitations even when the insurer’s home State claims to regulate those out-of-state mailings. The Court did not decide constitutional limits on a State’s extra-territorial regulation and left those questions for later consideration by lower courts.

Dissents or concurrances

Justice Harlan (joined by Justices Frankfurter and Whittaker) dissented, arguing Nebraska’s law should have barred FTC action, criticizing the majority’s reading of legislative history, and warning against weakening state regulation of insurance.