Paul v. Virginia.

1. A State statute which enacts that no insurance company not incorporated under the laws of the State passing the statute, shall carry on its business within the State without previously obtaining a license for that purpose; and that it shall not receive such license until it has deposited with the treasurer of the State bonds of a specified character to an amount varying from thirty to fifty thousand dollars, according to the extent of the capital employed, is not in conflict with that clause of the Constitution of the United States which declares that “the citizens of each State shall be entitled to all the privileges and immunities of citizens .in the several States,” nor with the clause which declares that Congress shall have power “ to regulate com'fnerce with foreign nations and among the several States.”

2. Corporations are not citizens within the meaning of the first of these clauses. They are creatures of local law, and have not even an absolute right of recognition in other States, but depend for that and for the enforcement of their contracts upon the assent of those States, which may be given accordingly on such terms as they please.

3. The privileges and immunities secured to citizens of each State in the several States, by this clause, are those privileges and immunities which are common to the citizens in the latter States under their constitution and laws by virtue of their being citizens. Special privileges enjoyed by citizens in their own States are not secured by it in other States.

4. The issuing of a policy of insurance is not a transaction of commerce within the meaning of the latter of the two clauses, even though the parties be domiciled in different States, but is a simple contract of indemnity against loss.

Error to the Supreme Court of Appeals of the State of Virginia. The case was thus:

An act of the legislature of Virginia, passed on the 8d of February, 1866, provided that no insurance company, not incorporated under the laws of the State, should carry on its business within 'the State without 'previously obtaining a license for that purpose; and that it should not receive such license until it had deposited with the treasurer of the State bonds of a specified character, to an amount varying from thirty to fifty thousand dollars, according to the extent of the capital employed. The bonds to be deposited wore to consist of six-.p$r;cent. bonds of the State, or oth§&\bonds of public éorporátloüs guaranteed by - the State, ¡qf bonds oí *169individuals, residents of the State, executed for money lent or debts contracted after the passage of the act, bearing not less than six per cent, per annum interest.

A subsequent act_passed during the same month declared' that no person should, “ without a license authorized by law, act as agent for 'any..foreign insurance company ” under a penalty of not less than $50 nor exceeding $500 for each offence; and that every person offering to issue, or making any contract or policy of insurance for any company created or incorporated elsewhere than in the State, should be regarded as an agent of a foreign insurance company.

In May, 1866,.Samuel Paul, a resident of the State of Virginia, was appointed the agent of several insurance companies, incorporated in the State of New York, to carry oin the general' business of insurance against fire; and in pursu-. anee of the law of Virginia, he filed with the auditor of' public accounts of the State his authority from the companies to act .as their agent. He then applied to-the proper officer of the district for a license to act as such agent within the State, offering at the time to comply with all the requirements of the statute respecting foreign insurance companies, including a tender of the license tax, excepting the provisions requiring a deposit of bonds with the treasurer of the State, and the production tq the officer of the treasurer’s receipt. With these provisions neither he nor the companies represented by him complied, and on that ground alone the license was refused. Notwithstanding this refusal he undertook to aet in the State as agent for the New' York companies without any license, and offered to issue policies of insurance in their behalf, and in one instance did issue a policy in their name to a citizen of Virginia. For this violation. of the statute he was indicted, and. convicted in the Circuit Court of the city of Petersburg, and was sentenced to pay a fine of fifty dollars. On error to the Supreme Court of Appeals of the State, this, judgment was affirmed, and the case w'as brought to this court under the 25th section of the Judiciary Act, the ground of thé writ of error being/that the judgment below was against a right set up under that clause *170of the Constitution of the United States,* which provides that “the citizens of each State shall be entitled to all the privileges and-immunities of citizens in the several States;” and that clause† giving to Congress power “-to regulate commerce with foreign nations, and among the several States.”

The corporators o'f the several insurance companies were at the time, and still.are, citizens of New York, or of some one of the States' of the Union other than Virginia. And the business of insurance was then, and still is, a lawful business in Virginia, and-might then, and still may, be carried on by all resident citizens of the.State* and by insurance .companies incorporated by the State, without a deposit of bonds, or a deposit of any kind with any'officer of the commonwealth.

Messrs. B. R. Curtis and J. M. Carlisle, for the plaintiff in error:

The single question is, whether under both or either of the clauses/ of the Constitution relied on by the insurance agent, the act of the legislature of Virginia in the particulars complained of, is unconstitutional.

I. A corporation created by the laws of one of the States, .and composed of citizens of that State, is a citizen of that State within the meaning of the Constitution.‡

Legislation imposing special and discriminating' restrictions upon the carrying on of lawful business in one State by citizens of other States was expressly forbidden by an article of the Confederation,§ by whieh.it is provided, that “the better to secure and perpetuate mutual friendship and intercourse among the people of; the different States in this Union, the free inhabitants, &c.,'shall be entitled to all the privileges and immunities of free citizens in -the several States, . . . and the people of each State shall have free ingress and egress to and from any other State, and shall enjoy therein all the privileges of trade and commerce, subject to the same *171duties, impositions', and restrictions as the inhabitants thereof respectively,

It cannot be supposed that the Constitution — one of whose objects was to secure a more perfect Union — was intended to be less efficient in these respects than the Articles of Confederation had been. The defect in the article of the Confederation was not that it imposed too great restrictions upon the powers of the States, but that it was wholly without the protection and support of a supreme Federal power.

But insisting less upon this first head, we come to one which we deem conclusive.

II. The power conferred, on Congress “ to regulate commerce," does not exclude the commerce carried on by corporations.

(a.) The terms are broad enough-to include it.

(b.) The state of facts existing at the time of the formation of the Constitution forbids the supposition that the commerce of corporations was excluded. From the time whep commerce began to revive in the middle ages, corporations had been a great and important instrument of commerce. This fact is too conspicuous to be overlooked. ' The East India Company, founded 1599, and made perpetual in 1610, had, in its pursuit of commerce, conquered and held vast possessions. Every commercial people, from Wisby round to Venice, had employed these associations as the instruments of commerce. Morellet, a French writer on commercial subjects, whose book was published in 1770, gives a list of a large number of these companies. Postlethwaite, whose Dictionary of Trade appeared in 1774, does the same. We need hut refer to The Merchant Adventurers’. Company, in the time of Edward IV, to The Russian Merchants’ Company, to The.. Levant Company, The Virginia Company, The Turkey Company, The Greenland Company, The Hudson Bay Company, The Hamburg Company, The Great Dutch Ea^t India Company. And when the Constitution was proposed, some of the States to bo united under it, as ex. gr. Massachusetts and ■Plymouth, had their origin, and settlement, and growth under the charters of trading corporations. In 1776 Adam Smith, *172whose Wealth of Nations was extensively read and admired, speaks of them largely.

Even if it was not then known that corporations had been extensively employed as instruments of commerce, still if the terms of the Constitution were broad enough to include all instruments, all would be included. How much more, when the use of this instrumentality was then known, conspicuous, and of vast importance. The truth is, that the Constitution' has no.reference to the particular instruments to be employed. These instruments may be greatly varied, according to the views of interest and expediency of those who carry on commerce.

Single persons, general partnerships, special partnerships, associations not incorporated, but having some of the incidents, corporations technically, all these alike are agencies of commerce. The Constitution has no reference to the modes of association by which the commerce should be carried on. This was of no more importance. tharT whether sails or steam were used in the matter.

Indeed, it seems absolutely necessary to hold commerce carried on by corporations to be included. No systematic and uniform plan would be otherwise secured, and we should have- worse confusion than before the' Constitution was adopted.

2. The business of insurance is commerce. . It is intercourse for the purpose-.of exchanging sums of money for promises of indemnity against losses. The terra “commerce,” as used •in the Constitution, has been authoritatively construed to have a signification wide enough to include this subject. In. Gibbons v. Ogden,* Chief Justice Marshall said, “Commerce undoubtedly is trafile, but it is something more; it is intercourse. It- describes the commercial intercourse between nations, and parts of nations in all its branches.”

. The contract of insurance is inseparable from commerce in modern times. It has become its indispensable handmaid. Indeed the right to sellmérchandisé, and the right to.insure *173it, would seem iu the nature of things to be inseparable. And so necessary an incident to commerce^in its narrowest sense as the contract of insurance, must fall within the principles directly applicable to that commerce itself.

In Almy v. California,* Chief Justice Taney speaking of a tax on a bill of lading, uses this language:

“ A tax or duty on a bill of lading, though differing in form from a tax on the article shipped, is in substance the same thing.”

Suppose the statute required a license to sell bills of exr change; in other words to exchange an absolute promise to pay a sum of money in New York for money paid therefor.. Is there any difference as respects this matter, between an absolute promise and a conditional one? Both alike are known and indispensable instruments of commerce; both, traffic for pecuniary values.

3. It is commerce, between the States. A corporation in New York sends its agents to Virginia, we may suppose to sell goods or exchange. Is not that commerce of this’ kind? This is obvious.

4. The statute of Virginia amounts to a regulation of commerce. It prescribes the terms and conditions on which-this branch of commerce may be carried on, and makes it penal to prosecute it without a compliance with those terms.'

III. Is it within the power of a State to make such a regulation of commerce? The scope of the statute is not to secure uniform rights, but to destroy them. It is discrimination all through; and discrimination by States in favor of their own citizens and against the citizens of sister States. It is easy to see where such assumptions lead. In Crandall v. Nevada, the court declared unconstitutional a tax of one dollar laid by a State on passengers passing through it, as was'evident, because it involved a power to lay a tax of thousands,.and to prohibit travel wholly. They acted on what was said by Marshall, C..J., in Brown v. Maryland, that-the power to tax involves the power to destroy. It is *174easy to see where such Assumptions as are here pretended to be rightful would lead. Each State can-prevent every other from trading by their agencies, which are the great instruments of modern commerce, and we are back to the evils of the Confederation.

IV. In no view can such a statute be regarded as a police regulation, or as otherwise falling within the scope of the reserved powers of the States. It concerns only the exercise of a business not only lawful and permitted, but encouraged, and by. this statute attempted to be protected for its own citizens. It does not at all - concern the manner or the circumstances of the exercise of that business, but only the persons who shall exercise it, and discriminates betweén them only in respect of their being citizens of the State of Virginia, or of other States in thq Union.

If it be -suggested that the State' has the right in this manner to protect its citizens against unsubstantial or irresponsible corporations created by other States, it may be answered that the same power and the same policy must exist'in respect of partnerships of natural persons, citizens of other States, having their chief establishments there, in any other trade or commerce, and attempting to establish agencies in the State of Virginia. If, as we maintain, the statute in question is a regulation of commerce between Virginia and other States of the Union, it is upon a subject which must, in its. nature, be exclusively Federal. It is plainly not one of those subjects upon which the States 'may legislate in the absence of legislation by Congress. It concerns nothing less than the equal right of the citizens of all the States to carry on a lawful trade or commerce in each State upon etpial terms with the citizens thereof. Nothing can be more purely Fet eral in its nature, or more obviously beyond the reach of invidious State legislation.

Messrs. Conway Robinson and R. Bowden, for the State of Virginia, contra:

1. A corporation is a] mere legal entity and can have no legal existence outside 'of the dominion of the State by which *175it is created. This was decided in Bank of Augusta v. Earle,* and the case was referred to with approval by Taney, C. J., in delivering the judgment of the court in Covington Drawbridge Company v. Shepherd.† In this last case, the Chief Justice, in referring to a preceding case, says, that the declaration stated that the corporation itself was a citizen of Indiana. Now, no one, we presume, ever supposed that the artificial being created by an act of incorporation could be a citizen of a State in the sense in which that word is used in the Constitution of the United States, and the averment was rejected because the matter averred was simply impossible. Yet that is one precise position of the appellant here. He insists that a corporation is a citizen of a State within the scope and meaning of the provision of the Constitution: “That the citizens of each State shall be entitled to all. privileges and immunities, of citizens in the several States.” This court has several times decided that a corporation is not a citizen within the meaning of the Constitution.

In Lafayette Insurance Co. v. French,‡ this court says:

“ The averment, that the company is a citizen of the State of Indiana, can have no sensible meaning attached to it.”

This court would not hold that either a voluntary association of persons, or an association into a body politic, created by law, was a citizen of a State within the meaning of the Constitution. And, therefore, if the defective avermentln the declaration had not been otherwise supplied, the suit must have been dismissed. In Covington Drawbridge Company v. Shepherd, referring to the case just mentioned, the court uses the following language:

“ Now, no one, we presume, ever supposed that the artificial being created by an act of incorporation could be a citizen of a State in the sense in which that word is used in the Constitution of the United States, and the averment was rejected because the matter averred was simply impossible.”

*176So in Ohio and Mississippi Railroad Company v. Wheeler,* Taney, C. J., for the court, says, that it had been.decided in the case of The .Bank v. Denning long before the case of the Bank of Augusta v. Earle came before the court, that a corporation was not a citizen in the meaning of thg Constitution of the United States, and cannot maintain .a suit in a court of the United States against the citizen of a different State from that by which it was chartered, unless- the persons who compose the corporate body are all citizens of that State. Many more cases might be cited upon the same point.

If the assumption that a corporation was a citizen in the contemplation of the Constitution of the United States were correct, yet' it would not follow, that a citizen of a State residing in one State, would be entitled to the privileges and immunities of citizéns of each of the other States. Politically, it is very certain he would not, and it is not seen very clearly how he could in all other things. There is no qüesjñon, that a citizen of"any particular State, who removes into any other State of the Union and resides there long enough to become a citizen, is entitled to all the -privileges and immunities of the latter State, without being required to be naturalized. He would become a citizen by the mere operation of the Constitution of the United States. By such removal he might lose some of his privileges, whilst he gained others; after he became a citizen of a State he could not" sue a citizen of the same State in the courts of the United States. To illustrate, — a citizen of New York may sue a citizen of Virginia in the United States courts.

It is the. duty of all governments to pass all laws which may be necessary to shield and protect its citizens. The companies of which the appellant claims to be the agent, are presumed to have their residence in New York, and all of their effects are there. The deposit required by the law of Virginia is for two'purposes: first, to insure the payment of the taxes, and second, as an indemnity to the insured. No foreign insurance company has a right to come into Virginia *177by her agents, to do the business of insurance, without the consent of Virginia, and, in giving her consent, she has the perfect right to impose suc.h reasonable conditions as she may deem necessary and proper to secure the payment of her revenue and the security of her citizens from impositions and frauds.*

II. The second position taken has no foundation in a true conception of the word commerce. Insuring a house from fire, or plate-glass from breakage — this last, a sort of' insurance now common in large cities — is not commerce in the sense of the Constitution, however convenient and even necessary such insurance may be to enable men to protect their houses from the ravages of one of the elements, or their shop windows from accident or hrischief.

*

Art. IV, § 2.

†

Art. I, § 8.

‡

Louisville Railroad Co. v. Leston, 2 Howard, 497.

§

Article IV, § 1; 1 Stat. at Large, 4.

*

9 Wheaton, 189.

*

24 Howard, 169-174.

*

13 Peters, 51.9.

†

20 Howard, 227.

‡

18 Howard, 404.

*

1 Black, 295.

*

Slaughter v. The Commonwealth, 13 Grattan’s Reports, 767.

Mr. Justice FIELD,

after stating the case, delivered the opinion of the court, as follows:

On the trial in the court below the. validity of the discriminating provisions of the statute of Virginia between her own corporations and corporations of other States was assailed. It was contended that the statute in this particular was in conflict with that clause of the Constitution which declares that ‘.‘the citizens of each State shall be entitled to all the privileges and immunities of citizens in the several States,” and the clause which declares that Congress shall have power “to regulate commerce with foreign nations and among the several States.” The same grounds are urged in this court for the reversal of the judgment.

The answer which readily occurs to the objection founded upon the first clause consists in the fact that corporations are' not citizens within its meaning. ' The term citizens as there used applies only to natural persons, members of the body politic, owing allegiance to the State, not to artificial persons created by the legislature, and possessing only the attributes which the legislature has prescribed. It is true that it has been held that where contracts or rights of property are to be enforced by or against corporations, the courts of *178the United States will, for the purpose of maintaining jurisdiction, consider the corporation as representing citizens of the State under the laws of which it is created, and to this extent will treat a corporation as a citizen within the clause of the Constitution extending the judicial power of the United States to controversies between citizens of different States. In the early cases when this question of the right of corporations to litigate in the courts of the United States was considered, it was held that the right depended upon the citizenship of the members of the corporation, and its proper averment in the pleadings. Thus, in the case of The Hope Insurance Company v. Boardman,* where the company was described in the declaration as “a company legally incorporated by the legislature of the State of Rhode Island and Providence Plantations, and established at Providence,” the judgment was reversed because there was.no averment that the members of the corporation were citizens of Rhode Islánd, the court holding that an aggregate corporation as such was not a citizen within the meaning of the Constitution.

In later cases this ruling was modified, and it was held that the members of a corporation would be presumed to be citizens of the State in which the corporation was created, and where alone it had any legal existence, without any special averment of such citizenship, the averment of the place of creation and business of the corporation being sufficient; and that such presumption could not be controverted for the purpose of defeating the'jurisdiction of the court.f

But in no case which has come under our observation, either in the State or Federal courts, has a corporation been considered a citizen within the meaning of that provision of the Constitution, which declares that'the citizens of each State shall be entitled to all the privileges and immunities of citizens of the several States. In Bank of Augusta v. *179Earle,* the question arose whether a bank, incorporated by the laws of Georgia, with a power, among other things, to purchase bills of exchange, could lawfully exercise that power in the State of Alabama; and it was contended, as in the case a$ bar, that a corporation, composed of citizens of other States, was entitled to the benefit of that provision, and that the court should look beyond the act of incorporation and see who were its members, for the purpóse of affording them its protection, if found to be citizens of other States, reference being made to an early decision upon the right of corporations to litigate in the Federal courts in support of the position. But the court, after expressing; approval of the decision referred to,† observed that the decision was confined in express terms to a question of jurisdiction; that the principle had never been carried further, and that it had never been supposed to extend to contracts made by a corporation, especially in another sovereignty from that of its creation; that if the principle were held to embrace contracts, and the members of a corporation were to be regarded as individuals carrying on business in the corporate name, and therefore entitled to the privileges of citizens, they must at the same time take upon themselves the liabilities of citizens, and be bound by their contracts in like manner; that the result would be to make the corporation a mere partnership in business with the individual liability of each stockholder for all the debts of the corporation; that the clause of the Constitution could never have intended to give citizens of each State the privileges of citizens in the several States, and at the same time to exempt them from the liabilities attendant upon the exercise of such privileges in those States; that this would be to give the citizens of other States higher and greater privileges than are enjoyed by citizens of tlie State itself, and would deprive each State of all control over the extent of corporate franchises proper to be granted therein. “It is impossible,” continued, the court, “upon any sound principle, to give such a construction to the article in ques*180tion. Whenever a corporation makes a contract it is the contract of the legal entity, the artificial being created by the charter, and not the contract of the individual members. The only rights it can claim are the rights which are given to it in that chai’acter, and not the rights which belong to its members as citizens of a State.”

It was undoubtedly the object of the clause in question to place the citizens of each State upon the same footing with citizens of other States, so far as the advantages resulting from citizenship in those States are concerned. It relieves them from the disabilities of alienage in other States; it inhibits discriminating-legislation against them by other States; it gives them the right of free ingress into other States, and egress from them; it insures to them in other States the same freedom possessed by the citizens of those States in the acquisition and enjoyment of property and in the pursuit of happiness; and it séeures to them in other States the equal protection of their laws. It has been justly said that no provision in the Constitution has tended so strongly to constitute the citizens of the United States one people as this.* Indeed, without some provision of the kind removing from the citizens of each State the disabilities of alienage in the other States, and giving them equality of privilege with citizens of those States, the Republic would have constituted little more than a league of States; it would not have constituted the Union which now exists.

But the privileges and immunities secured to citizens of each State in the several States, by the provision in question, are those privileges and immunities which are common to the citizens in the latter States under their constitution and laws by virtue of their being citizens. Special privileges enjoyed by citizens in their own States sere not secured in other States by this provision. It was not intended by the provision to give to the laws'of one State any operation in other States. They can have no such operation, except by the permission, express or implied, of those States., The *181special privileges which they confer must, therefore, be enjoyed at home, unless the assent of other States to their enjoyment therein be given.

Now a grant of corporate existence is a grant of special privileges to the corporators, enabling them to act for certain designated purposes as a single individual, and exempting them (unless otherwise specially provided) from individual liability. The corporation being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created. As said by this court in Bank of Augusta v. Earle, “ It must dwell in the place of its crea-. tion, and cannot migrate to another sovereignty.” The recognition of its. existence even by other States, and the enforcement of its contracts made therein, depend purely upon the comity of those States — a comity which is never extended where the existence of. the corporation or the exercise .of its powers are prejudicial to their interests or repugnant to • their policy. Having no absolute right of recognition in other States, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course, that such assent may be granted upon such terms and conditions as those States may think proper to impose. They may exclude the foreign corporation eutirely; they may restrict its business to particular localities, or they may exact such security for the performance of its contracts with their citizens as in their judgment will best promote the public interest. The whole matter rests in their discretion.

If, on the other hand, the provision of the Constitution could be construed to secure to citizens of each State in other States the peculiar privileges conferred by their, laws, an extra-territorial operation would be given to local legislation utterly destructive of the independence and the harmony of the States. At the present day corporations are multiplied to an almost indefinite extent. There is scarcely a business pursued requiring the expenditure of large capital,, or the union of large numbers, that is not carried on by corporations It is not- too much to say that the wealth and *182business of the country are to a great extent controlled by them.' And if, when composed of citizens of one State, their corporate powers and franchises could be exercised in other States without restriction, it is easy to see that, with the advantages thus possessed, the most important business of those States would soou pass into their hands. The principal business of every State would, in fact, be controlled by corporations created by other States.

If the right asserted of the foreign corporation, when composed of citizens of one State, to transact business in other States were even restricted to such business as corporations of those States were authorized to transact,- it would still follow that those States would be unable to limit the number of corporations doing business therein. They could not charter a company for any purpose, however restricted, without at once opening the door to a flood of corporations from other States to engage in the same pursuits. They could not repel an intruding corporation, except on the condition of refusing incorporation, for a similar purpose to their own citizens; and yet it might be of the highest public interest that the number of corporations in the State should be limited; that they should be required to give publicity to their transactions; to submit their affairs to proper examination; to be subject to forfeiture of their corporate rights in case of mismanagement, and that their officers should be held to a strict accountability for the manner in which the business of the corporations is managed, and be liable to summary removal.

“ It is impossible,” to repeat the language of this court in Bank of Augusta v. Earle, “ upon any sound principle, to give such a construction to the article in question,” — a construction which would lead to results, like these.

Ve proceed to the second objection urged to the validity of the Virginia statute, which is founded upon the commercial clause of the Constitution. It is undoubtedly true, as stated by counsel, that the power conferred upon Congress to regulate commerce Includes as well commerce carried on by corporations as commerce carried on by individuals. At *183the time of the formation of the Constitution a large part of the commerce of the world was carried on by corporations. The East India Company, the Hudson’s Bay Company,'the Hamburgh Company, the Levant Company, and the Virginia Company, may be named among the many .corporations then in existence which acquired,-from the extent of their operations, celebrity throughout the commercial world. This state of facts forbids the supposition that it was intended in the grant of power to Congress to exclude from its control the commerce of corporations. The language of the grant makes no reference to the instrumentalities by which commerce may be carried on; it is general, and includes alike commerce by individuals, partnerships, associations, and corporations.

There is, therefore, nothing in the fact that the insurance companies of New .York are corporations to impair the force of the argument of counsel. The defect of the argument lies in the character of their business. Issuing a policy of insurance is riot a transaction of commerce. The policies are simple contracts of idemnity against loss by fire, entered' into between the corporations and the assured, for a consideration paid by the latter. These contracts áre not articles of commerce in - any proper meaning of the word. They are not subjects of trade and barter offered in the market as something having an existence and value independent of the parties to them. They are not commodities to be shipped or forwarded from one State to another, and then put up for sale. They are like other personal contracts between parties which are completed by their signature and the transfer of the consideration. Such contracts are not inter-state transactions, though the parties may be domiciled in different States. The policies do not take effect — are not executed contracts — until delivered by the agent' in Virginia. They are, then, local transactions, and are governed by the local law. They do not constitute a part of the commerce between the States any more than a contract for the purchase and sale of goods in Virgiuia by a citizen of New York whilst in Virginia would constitute a portion of such commerce.

*184la. leathern v. Louisiana,* this court held that a law of that Státe imposing a tax on money and exchange brokers, who dealt entirely in the purchase and sale of foreign- bills of exchange, was not in conflict with the constitutional power of Congress to regulate commerce. The individual thus using his money and credit, said the court, “is not engaged in commerce, but in supplying an instrument of-commerce. He is less connected with it than the shipbuilder, without whose labor foreign commerce could not be carried on.” And the opinion shows that, although instruments of commerce, they are the subjects of State regulation, and, inferentially, that they may be subjects of direct State taxation.

-“In'determining,” said the court, “on the nature and effect of a contract, we look to the lex loci where it was made, or where it was to be performed. -And bills of. exchange, foreign or domestic, bonstitute, it would seem, no exception to this rule. Some of the States have adopted the law merchant, others have not.' The time within which a demand must be made on a bill, a protest entered, and notice given, and the damáges to be recovered, vary with the usages and legal enactments of. the different States. These. laws, in various forms and iu numerous cases, have been sanctioned by this court.” ' And again : “For the purposes of revenue the Federal government has taxed bills of exchange, foreign and domestic, and promissory notes, whether issued by individuals or banks. Now, the Federal government can no more regulate the commerce of a State than a State can regulate-the commerce of the Federal government; and domestic bills or promissory notes are as necessary to the commerce of a State as foreign bills to the commerce of the Union. And if a tax on an exchange broker who deals in foreign bills be a regulation of foreign commerce, or commerce among the States, much more would a tax upon State-paper, by Congress, be a tax on the.commerce of a State.”

If foreign bills of exchange may thus be the subject of *185State .regulation, much more so may contracts of insurance against-loss by. fire.

We perceive nothing in the statute of «Virginia which conflicts with the Constitution of the United States; and the judgment of the Supreme Court of Appeals of that State must, therefore, be Affirmed.

*

5 Cranch, 57.

†

Louisville Railroad Co. v. Letson, 2 Howard, 497; Marshall v. Baltimore and Ohio Railroad Co., 16 Id. 314; Covington Drawbridge Co. v. Shepherd, 20 Id. 233; and Ohio and Mississippi Railroad Co. v. Wheeler, 1 Black 297.

*

13 Peters, 586.

†

Bank of the United States v. Deveaux, 5 Cranch, 61.

*

Lemmon v. The People, 20 New York, 607.

*

8 Howard, 73.

PRUDENTIAL INSURANCE CO. v. BENJAMIN, INSURANCE COMMISSIONER.

No. 707.

Argued March 8, 11, 1946.

Decided June 3, 1946.

*409Joseph W. Henderson argued the cause for appellant. With him on the brief was Douglas McKay.

*410T. C. Callison, Assistant Attorney General of South Carolina, and David W. Robinson argued the cause for respondent. With them on the brief was John M. Daniel, Attorney General.

By special leave of Court, C. H. Foust argued the cause for the State of Indiana and other States, in support of appellee. The Attorneys General of Alabama, Indiana, Kansas, Massachusetts, Michigan, Nebraska, New York, Ohio, Oklahoma and Texas filed a brief on behalf of those States, as amici curiae, in support of appellee.

Mr. Justice Rutledge

delivered the opinion of the Court.

This case and Robertson v. California, post, p. 440, bring not unexpected sequels to United States v. South-Eastern Underwriters Assn., 322 U. S. 533. In cycle reminiscent conversely of views advanced there and in Paul v. Virginia, 8 Wall. 168, claims are put forward on the basis of the South-Eastern decision to sustain immunity from state taxation and, in the Robertson case, from state regulation of the business of insurance.

The specific effect asserted in this case is that South Carolina no longer can collect taxes from Prudential, a New Jersey corporation, which for years prior to 1945 the state had levied and the company had paid. The tax is laid on foreign insurance companies and must be paid annually as a condition of receiving a certificate of authority to carry on the business of insurance within the state. The exaction amounts to three per cent of the aggregate of premiums received from business dene in South Carolina, without reference to its interstate or local char*411acter.1 No similar tax is required of South Carolina corporations.2

Prudential insists that the tax discriminates against interstate commerce and in favor of local business, since it is laid only on foreign corporations and is measured by their gross receipts from premiums derived from business done in the state, regardless of its interstate or local character. Accordingly it says the tax cannot stand consistently with many decisions of this Court outlawing state taxes which discriminate against interstate commerce.3 South Carolina denies that the tax is discriminatory4 or *412has been affected by the South-Eastern decision. But in any event it maintains that the tax is valid, more particularly in view of the McCarran Act,5 by which it is claimed Congress has consented to continuance of this form of taxation and thus has removed any possible constitutional objection which otherwise might exist. This Prudential asserts Congress has not done and could not do.

The State Supreme Court has held the continued exaction of the tax not to be in violation of the commerce clause or affected by the ruling made in the South-Eastern case. 207 S. C. 324, 35 S. E. 2d 586. That holding presents the principal basis for this appeal.

1.

The versatility with which argument inverts state and national power, each in alternation to ward off the other’s incidence,6 is not simply a product of protective self-interest. It is a recurring manifestation of the continuing necessity in our federal system for accommodating the two great basic powers it comprehends. For this Court’s *413part, from Gibbons v. Ogden, 9 Wheat. 1, no phase of that process has been more continuous or at times perplexing than reconciling the paramount national authority over commerce, created by Article I, § 8 of the Constitution, with appropriate exercise of the states’ reserved powers touching the same or related subject matter.7

The continuing adjustment has filled many of the great constitutional gaps of Marshall’s time and later.8 But not all of the filling has been lasting. Great emphases of national policy swinging between nation and states in historic conflicts have been reflected, variously and from time to time, in premise and therefore in conclusion of particular dispositions.9 In turn, their sum has shifted and reshifted the general balance of authority, inevitably producing some anomaly of logic and of result in the decisions.

No phase has had a more atypical history than regulation of the business of insurance. This fact is important for the problems now presented. They have origin in that history. Their solution cannot escape its influence. Moreover, in law as in other phases of living, reconcilia*414tion of anomalous behavior, long continued, with more normal attitudes is not always easy, when the time for that adjustment comes.

Essentially the problems these cases tender are of that character. It is not necessary to renew the controversy presented in South-Eastern. Whether or not that decision properly has been characterized as “precedent-smashing,” 10 there was a reorientation of attitudes toward federal power in its relation to the business of insurance conducted across state lines. Necessarily this worked in two directions. As the opinion was at pains to note, 322 U. S. 533,545 if., no decision previously had held invalid an Act of Congress on the ground that such business was beyond reach of its power, because previously no attempted exercise of that authority had been brought here in litigation. But from Paul v. Virginia to New York Life Ins. Co. v. Deer Lodge County, 231 U. S. 495, negative implication from the commerce clause was held not to place any limitation upon state power over the business, however conducted with reference to state lines. And correlatively this was taken widely, although not universally, to nullify federal authority until the question was squarely presented and answered otherwise in the SouthEastern case.

Whether Paul v. Virginia represented in its day an accommodation with or a departure from the preexisting evolution of commerce clause law and whether its ruling, together with later ones adhering to it, remained consonant with the subsequent general development of that law, may still be debated. But all may concede that the Paul case created for the business of insurance a special, if not a wholly unique, way of thinking and acting in the regulation of business done across state lines. See Ribble, State and National Power over Commerce (1937) 89, 186-187. *415The aegis of federal commerce power continued to spread over and enfold other business so conducted, in both general and specific legislative exertions. Usually this was with judicial approval; and, despite notable instances of initial hostility, the history of judicial limitation of congressional power over commerce, when exercised affirmatively, has been more largely one of retreat than of ultimate victory.11 The plain words of the grant have made courts cautious, except possibly in some of the instances noted, about nullifying positive exertions of Congress’ power over this broad and hard to define field. At the same time, physical and economic change in the way commerce is carried on has called forth a constantly increasing volume of legislation exercising that power.12

Concurrently with this general expansion, however, from Paul to South-Eastern the states took over exclusively the function of regulating the insurance business in its specific legislative manifestations. Congress legislated only in terms applicable to commerce generally, without particularized reference to insurance. At the same time, on the rationalization that insurance was not commerce, yet was business affected with a vast public *416interest,13 the states developed comprehensive regulatory and taxing systems. And litigation of their validity came to be freed of commerce clause objections, at any rate from Deer Lodge on to South-Eastern. Due process in its jurisdictional aspects remained to confine the reach of state power in relation to business affecting other states.14 But the negative implications of the commerce clause became irrelevant, as such, for the valid exercise of state regulatory and taxing authority.

Meanwhile the business of insurance experienced a nation-wide expansion graphically depicted not only in the facts of the situation presented in the South-Eastern case but also in the operations of Prudential as described by its advocates in this cause.15 These divergent facts, *417legal and economic, necessarily were reflected in state legislation. States grappling with nation-wide, but nationally unregulated, business inevitably exerted their powers to limits and in ways not sought generally to be applied to other business held to be within the reach of the commerce clause’s implied prohibition. Obvious and widespread examples are furnished in broad and detailed licensing provisions, for the doing of business within the states, and in connected or distinct taxing measures drawn in apparent reliance upon freedom from commerce clause limitations.16

Now we are told many of these statutes no longer can stand. The process of readjustment began affirmatively with South-Eastern. Since the commerce clause is a two-edged instrument, the indicated next step, indeed the constitutionally required one, as the argument runs, is to apply its negatively cutting edge. Conceptions so developed with reference to other commerce must now be extended to the commerce of insurance in completion of the readjustment. This, it is confidently asserted, will require striking down much of the state legislation enacted *418and effective prior to the South-Eastern decision. Particularly will this be true of all discriminatory state taxes, of which it is said South Carolina’s is one. Moreover, those results must follow regardless of the McCarran Act’s provisions. For by that Act, in Prudential’s assessment, Congress neither intended to, nor could, validate such taxes.

It is not surprising that the attack is thus broad. When a decision is conceived as precedent-smashing, rightly or wrongly, the conception’s invitation may be to greater backtracking than is justified, in spite of warning to proceed with care. 322 U. S. 533, 547 ff.

Prudential’s misconception relates not to the necessity for applying, but to the nature and scope of the negative function of the commerce clause. It is not the simple, clean-cutting tool supposed. Nor is its swath always correlative with that cut by the affirmative edge, as seems to be assumed. For cleanly as the commerce clause has worked affirmatively on the whole, its implied negative operation on state power has been uneven, at times highly variable. More often than not, in matters more governable by logic and less by experience, the business of negative implication is slippery. Into what is thus left open for inference to fill, divergent ideas of meaning may be read much more readily than into what has been made explicit by affirmation. That possibility is broadened immeasurably when not logic alone, but large choices of policy, affected in this instance by evolving experience of federalism, control in giving content to the implied negation. In all our constitutional history this has become no more apparent than in commerce clause dispositions.

That the clause imposes some restraint upon state power has never been doubted. For otherwise the .grant of power to Congress would be wholly ineffective. But the limitation not only is implied. It is open to different implications of meaning. And this accounts largely for *419variations in this field continuing almost from the beginning until now.17 They started with Marshall and Taney, *420went forward from Waite to Fuller, and have been projected in later differences perhaps less broad, but hardly less controversial.18 Consequently in its prohibitive, as in its affirmative or enabling, effects the history of the commerce clause has been one of very considerable judicial oscillation.

Moreover, the parallel encompasses the latest turn in the long-run trend. For, concurrently with the broadening of the scope for permissible application of federal authority,19 the tendency also has run toward sustaining state regulatory and taxing measures formerly regarded as inconsonant with Congress’ unexercised power over commerce,20 and to doing so by a new, or renewed, emphasis on facts and practical considerations rather than dogmatic logistic.21 These facts are of great importance for dispos*421ing of such controversies. For in effect they have transferred the general problem of adjustment to a level more tolerant of both state and federal legislative action.

II.

We are not required however to consider whether, on that level, the authorities on which Prudential chiefly relies would require invalidation of South Carolina’s tax. For they are not in point.

As has been stated, they are the cases which from Welton v. Missouri, 91 U. S. 275, until now have outlawed state taxes found to discriminate against interstate commerce.22 No one of them involved a situation like that now here. In each the question of validity of the state taxing statute arose when Congress’ power lay dormant. In none had Congress acted or purported to act, either by way of consenting to the state’s tax or otherwise. Those cases therefore presented no question of the validity of such a tax where Congress had taken affirmative action consenting to it or purporting to give it validity. Nor, consequently, could they stand as controlling precedents for such a case.

This would seem so obvious as hardly to require further comment, except for the fact that Prudential has argued *422so earnestly to the contrary. Its position puts the McCarran Act to one side, either as not intended to have effect toward validating this sort of tax or, if construed otherwise, as constitutionally ineffective to do so. Those questions present the controlling issues in this case. But before we turn to them it will be helpful to note the exact effects of Prudential’s argument.

Fundamentally it maintains that the commerce clause “of its own force” and without reference to any action by Congress, whether through its silence23 or otherwise, forbids discriminatory state taxation of interstate commerce. This is to say, in effect, that neither Congress acting affirmatively nor Congress and the states thus acting coordinately can validly impose any regulation which the Court has found or would find to be forbidden by the commerce clause, if laid only by state action taken while Congress’ power lies dormant. In this view the limits of state power to regulate commerce in the absence of affirmative action by Congress are also the limits of Congress’ permissible action in this respect, whether taken alone or in coordination with state legislation.

Merely to state the position in this way compels its rejection. So conceived, Congress’ power over commerce would be nullified to a very large extent.24 For in all the variations of commerce clause theory it has never been the law that what the states may do in the regulation of commerce, Congress being silent, is the full measure of its power. Much less has this boundary been thought to *423confine what Congress and the states- acting together may accomplish. So to regard the matter would invert the constitutional grant into a limitation upon the very power it confers.

The commerce clause is in no sense a limitation upon the power of Congress over interstate and foreign commerce. On the contrary, it is, as Marshall declared in Gibbons v. Ogden, a grant to Congress of plenary and supreme authority over those subjects. The only limitation it places upon Congress’ power is in respect to what constitutes commerce, including whatever rightly may be found to affect it sufficiently to make congressional regulation necessary or appropriate.25 This limitation, of course, is entirely distinct from the implied prohibition of the commerce clause. The one is concerned with defining commerce, with fixing the outer boundary of the field over which the authority granted shall govern. The other relates only to matters within the field of commerce, once this is defined, including whatever may fall within the “affectation” doctrine. The one limitation bounds the power of Congress. The other confines only the powers of the states. And the two areas are not coextensive. The distinction is not always clearly observed, for both questions may and indeed at times do arise in the same case and in close relationship.26 But to blur them and thereby equate the implied prohibition with the affirmative endowment is altogether fallacious. There is no such equivalence.

This appears most obviously perhaps in the cases most important for the decision in this cause. They are the ones involving situations where the silence of Congress or the dormancy of its power has been taken judicially, *424on one view or another of its constitutional effects,27 as forbidding state action, only to have Congress later disclaim the prohibition or undertake to nullify it.28 Not yet has this Court held such a disclaimer invalid or that state action supported by it could not stand. On the contrary, in each instance it has given effect to the congressional judgment contradicting its own previous one.29

It is true that rationalizations have differed concerning those decisions,30 indeed also that the judges participating in them differed in this respect.31 But the results have been lasting and are at least as important, for the direction given to the process of accommodating federal and state authority, as the reasons stated for reaching them. None *425of the decisions conceded, because none involved any question of, the power of Congress to make conclusive its own mandate concerning what is commerce. But apart from that function of defining the outer boundary of its power, whenever Congress’ judgment has been uttered affirmatively to contradict the Court’s previously expressed view that specific action taken by the states in Congress’ silence was forbidden by the commerce clause, this body has accommodated its previous judgment to Congress’ expressed approval.

Some part of this readjustment may be explained in ways acceptable on any theory of the commerce clause and the relations of Congress and the courts toward its functioning.32 Such explanations, however, hardly go to the root of the matter. For the fact remains that, in these instances, the sustaining of Congress’ overriding action has involved something beyond correction of erroneous factual judgment in deference to Congress’ presumably better-informed view of the facts,33 and also beyond giving due *426deference to its conception of the scope of its powers, when it repudiates, just as when its silence is thought to support, the inference that it has forbidden state action.34

Prudential has not squarely met this fact. Fixed with the sense of applicability of the Welton or Shelby County line of cases, it rather has posed an enigma for the bearing of the bridge and liquor cases upon the decision to be made. It is, if the commerce clause “by its own force” forbids discriminatory state taxation, or other measures, how is it that Congress by expressly consenting can give that action validity?

The answer need not be labored. Prudential in this case makes no contention that commerce is not involved. Its argument is exactly the opposite. Its contention *427founded on the commerce clause is one wholly of implied prohibition within the field of commerce.

This it regards as operative not only in Congress’ silence, but in the face of its positive expression by the McCarran Act that the continued regulation and taxation by the states of the business of insurance is in accord with Congress’ policy. That expression raises questions concerning its own validity and also concerning whether the policy stated extends to the kind of state legislation which is immediately in issue. But those questions are not answered, as Prudential seeks to have them answered, by any conception that Congress’ declaration of policy adds nothing to the validity of what the states have done within the area covered by the declaration or, in other words, that it is mere brutum fulmén. For to do this not only would produce intolerable consequences for restricting Congress’ power. It would ignore the very basis on which the second Wheeling Bridge case and indeed the Clark Distilling case have set the pattern of the law for governing situations like that now presented.35 Accordingly we turn to the issues which are more alive and significant for the future.

III.

In considering the issues raised by the McCarran Act and the question of its applicability, ground may be cleared by putting aside some matters strenuously argued in the State Supreme Court and here. First, it follows from what has been said that we are not required to determine whether South Carolina’s tax would be valid in the dormancy of Congress’ power. For Congress has expressly stated its intent and policy in the Act. And, for reasons to be stated, we think that the declaration’s effect is clearly to sustain the exaction and that this can be done without violating any constitutional provision.

*428By the same token, we need not consider whether the tax, if operative in Congress’ unilluminated silence, would be discriminatory in the sense of an exaction forbidden by the commerce clause, as Prudential categorically asserts, or not so, as South Carolina maintains with equal certitude. Much attention has been given both here and in the state court to these questions. But in the view we take of the case the controlling issues undercut them. Nor do we determine, as Prudential’s argument seems to subsume, whether all of its business done in South Carolina and affected by the tax should be regarded as constituting interstate commerce so as to fall within the “in commerce” classification or, on the other hand, some of it may properly be considered as being only local or intrastate business.36 These questions we put to one side. *429And for present purposes we assume that the tax would be discriminatory in the sense of Prudential’s contention and that all of its business done in South Carolina and affected by the tax is done “in” or as a part of interstate commerce.

It is not necessary to spend much time with interpreting the McCarran Act. Pertinently it is as follows:

“. . . the Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.

“Sec. 2. (a) The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

“(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance . . . .” 59 Stat. 33, 34; 15 U.S.CJi 1011-1015.37

Obviously Congress’ purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance. This was done in two ways. One was by removing obstructions which might be thought to flow from its own power, whether dormant or exercised, except as otherwise expressly pro*430vided in the Act itself or in future legislation.38 The other was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest and that the business and all who engage in it “shall be subject to” the laws of the several states in these respects.

Moreover, in taking this action Congress must have had full knowledge of the nation-wide existence of state systems of regulation and taxation; of the fact that they differ greatly in the scope and character of the regulations imposed and of the taxes exacted; and of the further fact that many, if not all, include features which, to some extent, have not been applied generally to other interstate business. Congress could not have been unacquainted with these facts and its purpose was evidently to throw the whole weight of its power behind the state systems, notwithstanding these variations.

It would serve no useful purpose now to inquire whether or how far this effort was necessary, in view of the explicit reservations made in the majority opinion in the SouthEastern case. Nor is it necessary to conclude that Congress, by enacting the McCarran Act, sought to validate every existing state regulation or tax. For in all that mass of legislation must have lain some provisions which may have been subject to serious question on the score of other constitutional limitations in addition to commerce clause objections arising in the dormancy of Congress’ power. And we agree with Prudential that there can be no inference that Congress intended to circumvent constitutional limitations upon its own power.

But, though Congress had no purpose to validate unconstitutional provisions of state laws, except in so far as the Constitution itself gives Congress the power to do this by removing obstacles to state action arising from its own *431action or by consenting to such laws, H. Rep. No. 143, 79th Cong., 1st Sess., p. 3, it clearly put the full weight of its power behind existing and future state legislation to sustain it from any attack under the commerce clause to whatever extent this may be done with the force of that power behind it, subject only to the exceptions expressly provided for.

Two conclusions, corollary in character and important for this case, must be drawn from Congress’ action and the circumstances in which it was taken. One is that Congress intended to declare, and in effect declared, that uniformity of regulation, and of state taxation,39 are not required in reference to the business of insurance by the national public interest, except in the specific respects otherwise expressly provided for. This necessarily was a determination by Congress that state taxes, which in its silence might be held invalid as discriminatory, do not place on interstate insurance business a burden which it is unable generally to bear or should not bear in the competition with local business. Such taxes were not uncommon among the states,40 and the statute clearly included South Carolina’s tax now in issue.

*432That judgment was one of policy and reflected long and clear experience. For, notwithstanding the long incidence of the tax and its payment by Prudential without question prior to the South-Eastern decision, the record of Prudential’s continuous success in South Carolina over decades41 refutes any idea that payment of the tax handicapped it in any way tending to exclude it from competition with local business or with domestic insurance companies. Indeed Prudential makes no'contrary contention on any factual basis, nor could it well do so. For the South-Eastern decision did not, and could not, wipe out all this experience or its weight for bearing, as a matter of the practical consequences resulting from operation of the tax, upon that question. Robertson v. California, post, p. 440.

Consequently Prudential’s case for discrimination must rest upon the idea either that the commerce clause forbids the state to exact more from it in taxes than from purely local business; or that the tax is somehow technically of an inherently discriminatory character or possibly of a type which would exclude or seriously handicap new en*433trants seeking to establish themselves in South Carolina. As to each of these grounds, moreover, the argument subsumes that Congress’ contrary judgment, as a matter of policy relating to the regulation of interstate commerce, cannot be effective, either “of its own force” alone or as operative in conjunction with and to sustain the state’s policy.

IV.

In view of all these considerations, we would be going very far to rule that South Carolina no longer may collect her tax. To do so would flout the expressly declared policies of both Congress and the state. Moreover it would establish a ruling never heretofore made and in doing this would depart from the whole trend of decision in a great variety of situations most analogous to the one now presented. For, as we have already emphasized, the authorities most closely in point upon the problem are not, as appellant insists, those relating to discriminatory state taxes laid in the dormancy of Congress’ power. They are rather the decisions which, in every instance thus far not later overturned,42 have sustained coordinated action taken by Congress and the states in the regulation of commerce.43

*434The power of Congress over commerce exercised entirely without reference to coordinated action of the states is not restricted, except as the Constitution expressly provides44 by any limitation which forbids it to discriminate against interstate commerce and in favor of local trade. Its plenary scope enables Congress not only to promote but also to prohibit interstate commerce, as it has done frequently and for a great variety of reasons.45 That power does not run down a one-way street or one of narrowly fixed dimensions. Congress may keep the way open, confine it broadly or closely, or close it entirely, subject only to the restrictions placed upon its authority by other constitutional provisions and the requirement that it shall not invade the domains of action reserved exclusively for the states.

This broad authority Congress may exercise alone, subject to those limitations, or in conjunction with coordinated action by the states46 in which case limitations imposed for the preservation of their powers become inoperative and only those designed to forbid action altogether by any power or combination of powers in our govern*435mental system remain effective.47 Here both Congress and South Carolina have acted, and in complete coordination, to sustain the tax. It is therefore reinforced by *436the exercise of all the power of government residing in our scheme.48 Clear and gross must be the evil which would nullify such an exertion, one which could arise only by exceeding beyond cavil some explicit and compelling limitation imposed by a constitutional provision or provisions designed and intended to outlaw the action taken entirely from our constitutional framework.

In this light the argument that the degree of discrimination which South Carolina’s tax has involved, if any, puts it beyond the power of government to continue must fall of its own weight. No conceivable violation of the commerce clause, in letter or spirit, is presented. Nor is contravention of any other limitation.

*437A word should be added in the latter respect. Prudential has not urged grounds founded upon other constitutional provisions than the commerce clause, except in relation to the McCarran Act and then only in the event it should be construed as having effect to validate continued exaction of the tax. As has been said, it regards the statute as neither intended nor effective to “validate, authorize, or sanction state statutes which discriminate against interstate commerce.” But, against the event that the Act should be taken as intended to have such an effect, it puts forward the somewhat novel contentions that the statute would be in violation of the due process clause of the Fifth Amendment; of the first clause of Article I, § 8, requiring that “all Duties, Imposts and Excises shall be uniform throughout the United States”; of Article I, § 1, “which requires legislation to be enacted by Congress”; and, apparently, of the Tenth Amendment, “as a violation of the states’ power to tax for purposes of raising revenue for their own use, which power is vested exclusively in the states.” 49

These arguments may be summarily disposed of. As for the due process contention, it was settled by a long line of authorities prior to the South-Eastern decision, that the similar provision of the Fourteenth Amendment, *438as well as that requiring equal protection of the laws, does not forbid the states to lay and collect such a tax as South Carolina’s.50 Certainly the Fifth Amendment does not more narrowly confine the power of Congress; nor do it and the Fourteenth taken together accomplish such a restriction upon the coordinated exercise of power by the Congress and the states.

The argument grounded upon the first clause of Article I, § 8, requiring that excises shall be uniform throughout the United States, identifies the state exaction with the laying of an excise by Congress, to which alone the limitation applies. This is done oh the theory that no more has occurred than that Congress has “adopted” the tax as its own, a conception which obviously ignores the state’s, exertion of its own power and, furthermore, seeks to restrict the coordinated exercise of federal and state authority by a limitation applicable only to the federal taxing power when it is exerted without reference to any state action.51 The same observation applies also to the contention based on Article I, § 1.

The final contention that to sustain the Act, and thus the tax, would be an invasion of the state’s own power of *439taxation is so clearly lacking in merit as to call for no comment other than to point out that, by juxtaposition with the contentions discussed in the preceding paragraph, the effect would be at one stroke to bring the Act into collision with limitations operative only upon the federal power and at the same time to nullify state authority.

No such anomalous consequence follows from the division of legislative power into the respective spheres of federal and state authority. There are limitations applicable to each of these separately and some to their coordinated exercise. But neither the former nor the latter are to be found merely in the fact that the authority is thus divided. Such a conception would reduce the joint exercise of power by Congress and the states to achieve common ends in the regulation of our society below the effective range of either power separately exerted, without basis in specific constitutional limitation or otherwise than in the division itself.52 We know of no grounding, in either constitutional experience or spirit, for such a restriction. For great reasons of policy and history not now necessary to restate, these great powers were separated. They were not forbidden to cooperate or by doing so to achieve legislative consequences, particularly in the great fields of regulating commerce and taxation, which, to some extent at least, neither could accomplish in isolated exertion.53

We have considered appellant’s other contentions, including the suggestion that the McCarran Act, construed as we have interpreted it and thus given effect, would involve an unconstitutional delegation by Congress of its *440power to the states. For reasons already set forth and others, including the fact that no instance of delegation is involved on the facts, we find them without merit.

The judgment accordingly is

Affirmed.

Mr. Justice Black concurs in the result.

Mr. Justice Jackson took no part in the consideration or decision of this case.

1

The statutes imposing the tax are §§ 7948 and 7949, South Carolina Code of 1942. Each section in fact imposes a separate tax, the former of two per cent, the latter of one per cent, on gross premium returns “from the State,” with provisions under § 7948 for reduction in the amount of the tax scaled to specified investments in South Carolina securities or property. Both taxes are laid “in addition to the annual license fees now provided by law,” and are stated in terms to be required “as an additional and graded license fee” (§ 7948) or as “a graduated license fee.” § 7949. The two taxes have been treated in combination, for purposes of this litigation, as being in effect a single tax of three per cent.

2

Sections 7948 and 7949 expressly exempt South Carolina corporations from payment of the tax. They however are subject to other taxes, which Prudential maintains have no bearing upon the issues, other than possibly to demonstrate the discriminatory character and effects of the exaction in issue. See note 36. These are chiefly taxes on real and personal property, incidence of which Prudential largely escapes by the location of its property in other states.

3

Extending from Welton v. Missouri, 91 U. S. 275, to Nippert v. Richmond, 327 U. S. 416. See the collection of authorities in McGoldrick v. Berwind-White Co., 309 U. S. 33, 56, n. 11.

4

In apparent reliance not only upon decisions rendered prior to the South-Eastern decision or made without reference to its ruling, e. g., Lincoln National Ins. Co. v. Read, 325 U. S. 673; Bethlehem *412Motors Corp. v. Flynt, 256 U. S. 421; but indeed also Paul v. Virginia, 8 Wall. 168; Hooper v. California, 155 U. S. 648; and like authorities.

The state also maintains that Prudential’s South Carolina business is not altogether interstate commerce but consists, in substantial part, of local transactions, the aggregate of which measures the tax, for which view it relies upon such diverse decisions as McGoldrick v. Berwind-White Co., 309 U. S. 33; International Shoe Co. v. Shartel, 279 U. S. 429; Western Live Stock v. Bureau of Revenue, 303 U. S. 250; and Polish National Alliance v. Labor Board, 322 U. S. 643. See note 36 and text.

5

The pertinent portions of the Act are set forth in the text, Part III at note 37.

6

Cf. United States v. South-Eastern Underwriters Assn., 322 U. S. 533, at notes 9 and 23; but see also note 33 for an early and highly authoritative but less mutually exclusive view of the possible alternatives.

7

Among the volumes which have been written, special reference may be made to Frankfurter, The Commerce Clause (1937); Ribble, State and National Power over Commerce (1937); Gavit, The Commerce Clause (1932); and see Dowling, Interstate Commerce and State Power (1940) 27 Ya. L. Rev. 1. For thoughtful comment since the South-Eastern decision, see Patterson, The Future of State Supervision of Insurance (1944) 23 Tex. L. Rev. 18; Note, Congressional Consent to Discriminatory State Legislation (1945) 45 Col. L. Rev. 927.

8

“Judges legislate interstitially and the interstices were great in Marshall’s time.” Ribble, State and National Power over Commerce (1937) 47.

9

“Lines of demarcation are drawn largely according to the pull of the Court at one period towards the interests of local self-government, and at another in the direction of a nation-wide rule.” Frankfurter, The Commerce Clause (1937) 97.

10

S. Rep. No. 1112,78th Cong., 2d Sess. 2.

11

E. g., Hammer v. Dagenhart, 247 U. S. 251, overruled by United States v. Darby, 312 U. S. 100; compare United States v. E. C. Knight Co., 156 U. S. 1, with United States v. American Tobacco Co., 221 U. S. 106; Schechter Corp. v. United States, 295 U. S. 495, with Labor Board v. Jones & Laughlin Steel Corp., 301 U. S. 1. See also discussion in Wickard v. Filburn, 317 U. S. 111, 118 ff.

See Ribble, State and National Power over Commerce (1937) 63, n. 39, for listing of the decisions invalidating Acts of Congress prior to 1879, noting that Mr. Justice Miller was “but slightly in error” in the statement, in Trade-Mark Cases, 100 U. S. 82, 96, that one then might count “on his fingers” those decisions.

12

Beginning in modern phase with enactment of Interstate Commerce Commission and Anti-Trust legislation near the beginning of the present century. The catalogue is now too long to repeat here.

13

See German Alliance Ins. Co. v. Kansas, 233 U. S. 389, 414, 415; La Tourette v. McMaster, 248 U. S. 465, 467; National Union Fire Ins. Co. v. Wanberg, 260 U. S. 71, 74; cf. Osborn v. Ozlin, 310 U. S. 53, 65: “Government has always had a special relation to insurance.” See also United States v. South-Eastern Underwriters Assn., 322 U. S. 533, dissenting opinion at 585.

14

See Allgeyer v. Louisiana, 165 U. S. 578; New York Life Ins. Co. v. Head, 234 U. S. 149; Fidelity & Deposit Co. v. Tafoya, 270 U. S. 426; St. Louis Compress Co. v. Arkansas, 260 U. S. 346; Hoopeston Co. v. Cullen, 318 U. S. 313; Powell, The Supreme Court and State Police Power, 1922-1930 (1932) 18 Va. L. Rev. 1, 140 et seq.; also St. Louis Southwestern R. Co. v. Alexander, 227 U. S. 218, with which compare Henderson, The Position of Foreign Corporations in American Constitutional Law (1918) c. V. Cf. Harvester Co. v. Dept. of Treasury, 322 U. S. 340, concurring opinion, 349, at 353 ff.; and see International Shoe Co. v. Washington, 326 U. S. 310.

15

According to Prudential’s brief, it transacts business in all forty-eight states and on December 31, 1944, “had in force 33,933,077 policies, insuring approximately 22,900,000 persons, for a total amount of $22,741,134,075; and 36,733 annuity contracts operative during the lives of approximately 300,000 persons and providing for an annual income of approximately $63,200,000 on such lives. During the year 1944 the Appellant issued 2,412,150 policies, insuring the lives of approximately 2,170,000 persons, in the total amount of $2,668,714,022; and entered into 451 annuity contracts operative during the lives of *417approximately 600 persons and providing for an annual income of approximately $150,000 on such lives. During the year 1944 the Appellant collected as premiums on insurance policies $681,052,095.07, and paid out as claims on policies $246,776,197.45; and it paid out $13,690,781.93 on annuity contracts.”

For South Carolina, the company “had in force 26,373 policies insuring the lives of approximately 20,000 persons resident in said State for a total amount of $30,827,184.00. During the year ending December 31, 1944, 1,439 policies insuring the lives of approximately 1,000 persons resident in said State for a total amount of $1,475,062.00 were issued, and $457,602.28 in claims were paid on policies covering the lives of residents.” The South Carolina premium tax for 1943 amounted to $18,496.87; for 1944, $19,676.94. All other state or local taxes paid in 1944 amounted to $3,103.92, making a total for the year for all taxes of $22,780.86.

16

322 U. S. 533, dissenting opinion at 590; see note 40, infra; cf. Robertson v. California, post, p. 440.

17

That the question was discussed but not settled in the Constitutional Convention itself, appears from debate on September 15, 1787, two days before submission of the proposed Constitution to Congress, a portion of which bears quotation:

“Mr. Me .Henry & Mr. Carrol moved that 'no State shall be restrained from laying duties of tonnage for the purpose of clearing harbours and erecting light-houses.’

“Col. Mason in support of this explained and urged the situation of the Chesapeak which peculiarly required expences of this sort.

“Mr. Govr. Morris. The States are not restrained from laying tonnage as the Constitution now Stands. The exception proposed will imply the Contrary, and will put the States in a worse condition than the gentleman (Col Mason) wishes.

“Mr. Madison. Whether the States are now restrained from laying tonnage duties depends on the extent of the power ‘to regulate commerce.’ These terms are vague but seem to exclude this power of the States— They may certainly be restrained by Treaty. He observed that there were other objects for tonnage Duties as the support of Seamen &c. He was more & more convinced that the regulation of Commerce was in its nature indivisible and ought to be wholly under one authority.

“Mr. Sherman. The power of the U. States to regulate trade being supreme can controul interferences of the State regulations [when] such interferences happen; so that there is no danger to be apprehended from a concurrent jurisdiction.

“Mr. Langdon insisted that the regulation of tonnage was an essential part of the regulation of trade, and that the States ought to have nothing to do with it., On motion ‘that no State shall lay any duty on tonnage without the Consent of Congress’

“N. H— ay — Mas. ay. Ct. divd. N. J. ay. Pa. no. Del. ay. Md. ay. Va. no. N— C. no S— C. ay. Geo. no. [Ayes — 6; noes — 4; divided— 1.]” Farrand, Records of the Federal Constitutional Convention of 1787 (1937), Vol. II, 625-626.

See Note, Congressional Consent to Discriminatory State Legislation (1945) 45 Col. L. Rev. 927, 946 if., for a short summary of views expressed in the debates and later by members of the Convention. See also Abel, The Commerce Clause in the Constitutional Convention and in Contemporary Comment (1941) 25 Minn. L. Rev. 432; Hamilton and Adair, The Power to Govern (1937).

18

“The categories of ‘burdens’ on interstate commerce, of state laws ‘directly affecting’ interstate commerce, etc., are natural concomitants of Marshall’s doctrine. The theories as to the silence of Congress are the outgrowth of Taney’s. When diverse theories cohabit, the miscegenation may produce strange progeny.” Kibble, 204. For tracings of all but the latest of the various trends, see the summaries cited in note 7; see also Biklé, The Silence of Congress (1927) 41 Harv. L. Rev. 200. More recent diversities are discussed in Dowling, Interstate Commerce and State Power, 27 Va. L. Rev. 1, 8 ff. See also e. g., the different views expressed in Nippert v. Richmond, 327 U. S. 416; Southern Pacific Co. v. Arizona, 325 U. S. 761; McLeod v. Dilworth Co., 322 U. S. 327; Northwest Airlines v. Minnesota, 322 U. S. 292; and the opinions in Hooven & Allison Co. v. Evatt, 324 U. S. 652. And compare American Mfg. Co. v. St. Louis, 250 U. S. 459, with Adams Mfg. Co. v. Storen, 304 U. S. 307.

19

See note 11 and text.

20

Cf., e. g., South Carolina Highway Dept. v. Barnwell Bros., 303 U. S. 177; Western Live Stock v. Bureau of Revenue, 303 U. S. 250; McGoldrick v. Berwind-White Co., 309 U. S. 33; Nelson v. Sears, Roebuck & Co., 312 U. S. 359; California v. Thompson, 313 U. S. 109; Duckworth v. Arkansas, 314 U. S. 390; Union Brokerage Co. v. Jensen, 322 U. S. 202, 209 ff.

21

Cf. Nippert v. Richmond, 327 U. S. 416, 424, 431, notes 9 and 23,, and authorities cited.

22

See note 3, and compare: “. . . state laws are not invalid under the Commerce Clause unless they actually discriminate against interstate commerce or conflict with a regulation enacted by Congress.” Gwin, White & Prince v. Henneford, 305 U. S. 434, dissenting opinion at 446.

“. . . except for state acts designed to impose discriminatory burdens on interstate commerce because it is interstate — Congress alone must 'determine how far [interstate commerce] . . . shall be free and untrammelled, how far it shall be burdened by duties and imposts, and how far it shall be prohibited.’ ” Id. at 455.

See also, for essentially the same position, Adams Mfg. Co. v. Storen, 304 U. S. 307, dissenting opinion; Southern Pacific Co. v. Arizona, 325 U. S. 761, dissenting opinion at 795.

23

See note 18.

24

Thus, for instance, the limitations upon the length of trains imposed by the Arizona Train Limit Law, and held to be in violation of the commerce clause in Southern Pacific Co. v. Arizona, 325 U. S. 761, would be beyond the power of Congress, perhaps also of Congress and the states acting together, to impose; and on commerce clause grounds, thus nullifying the very power conferred in order to regulate such matters. The argument is reminiscent of that of Mr. Justice McLean in the second Wheeling Bridge case, cf. note 34.

25

Cf. note 11 and text.

26

See the argument for the plaintiff in error in Paul v. Virginia, 8 Wall. 168, 172, 173, as a classic instance.

27

Cf. note 18. See also the discussions cited in note 7.

28

Legislation which, typically, has presented the problem is found in a variety of measures, of which the Wilson Act, 26 Stat. 313, is the prototype. Earlier legislation presenting the difficulty was that involved in the second of the Wheeling Bridge cases, Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421. See note 43 for further citations.

29

Pennsylvania v. Wheeling & Belmont Bridge Co., 13 How. 518, with which compare Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, and The Clinton Bridge, 10 Wall. 454; Leisy v. Hardin, 135 U. S. 100, with which compare In re Rahrer, 140 U. S. 545; Bowman v. Chicago & Northwestern R. Co., 125 U. S. 465, with which compare Clark Distilling Co. v. Western Maryland R. Co., 242 U. S. 311.

30

See, e. g., Ribble, at 62, 106, and other materials cited above in note 7.

31

For the modern record it is interesting to note that in the first Bridge case Justice McLean spoke for the Court, Chief Justice Taney and Justice Daniel dissenting in separate opinions, and the same division prevailed in the further opinions filed upon consideration of the master’s report and entry of the decree. In the second Bridge case Justice Nelson spoke for the Court, with Justices McLean, Grier, Wayne and Daniel each filing separate opinions dissenting on one or more of the issues presented.

32

Thus, in some instances conceivably the reversal might be rationalized as only one of factual judgment, made in deference to the contrary finding of like character made by a body better able to make such a determination. Moreover, Congress’ supporting action deprives the Court’s adverse view concerning state legislation of any strength which may have been derived from the inference that Congress, by its silence, had impliedly forbidden it. Hence insofar as its judgment may be taken, not as conclusive, but as being entitled to deference here on questions relating to its power (and historically the scope of that deference has been great, cf. note 11), Congress’ explicit repudiation of the attitude inferentially attributed to it from its silence, compels reversal of the Court’s earlier pronounced view.

33

In the first Wheeling Bridge case the Court itself made the finding, upon evidence taken by a master, that the bridge in fact obstructed navigation, to which it added the legal conclusion that it was a public nuisance, and went on to specify the height to which it must be raised to avoid this effect. Not only this finding of fact, therefore, but also the legal conclusion drawn from it was, in effect, overturned by the Act *426of Congress. See note 34. The finding of obstruction in fact depended in no sense upon previous determination by Congress. But the Court found in Congress’ prior legislation a policy of freedom for navigation which it applied to outlaw the bridge.

34

See note 33. “So far, therefore, as this bridge created an obstruction to the free navigation of the river, in view of the previous acts of congress, they are to be regarded as modified by this subsequent legislation; and, although it still may be an obstruction in fact, is not so in the contemplation of law. . . . The regulation of commerce includes intercourse and navigation, and, of course, the power to determine what shall or shall not be deemed in judgment of law an obstruction to navigation . . . .” Mr. Justice Nelson, speaking for the Court, in the second Wheeling Bridge case, 18 How. 421, 430, 431.

Compare the dissenting opinion of Mr. Justice McLean, who wrote for the majority in the first Wheeling Bridge case, going not only on the ground, among others, that the Act of Congress invaded the judicial function, but also that the Act, apart from this effect, was unconstitutional: “It [Congress] may, under this power, declare that no bridge shall be built which shall be an obstruction to the use of a navigable water. And this, it would seem, is as far as the commercial power by congress can be exercised.” 18 How. at 442. Thus was the grant of authority to Congress upon which he relied in the first decision, in part, to outlaw the bridge, converted into a limitation. Cf. text Part II, at note 24 ff.

35

Cf. note 29 and text. And see Part IV.

36

Whether within or without the “affectation” doctrine. Cf. United States v. South-Eastern Underwriters Assn., 322 U. S. 533, 548, and authorities cited.

In making these assumptions, however, it is not improper to note that the record, as made in the state court, does not purport to deal factually with the latter question as a matter of proof. It is simply alleged that all of Prudential’s South Carolina business is done interstate, an allegation which is denied; and there are supporting allegations concerning the extent of the business and manner of conducting it.

Nor is the case in much better shape factually on the question of discrimination. While the briefs include tables of figures designed to show that Prudential pays more proportionately under the tax than South Carolina corporations pay under other taxes levied against them, cf. note 2, these figures were not made part of the record in the state court until the petition for rehearing was filed, and Prudential has insisted both there and here that they have no proper place in consideration of the questions presented. Its position is that the tax is discriminatory on the face of the statute and without reference to other taxes South Carolina corporations may pay. Cf. note 4.

We express no opinion concerning whether such a showing, in either respect, would be sufficient to require determination of the issues to which it is directed, tendered in the absence of action by Congress.

37

The remainder of the statute, including a proviso to § 2 (b), relates to applicability of the Sherman Act and other related federal statutes to the business of insurance before and after January 1,1948; provides that the McCarran Act shall not affect in any manner the application to that business of the National Labor Relations Act, the Fair Labor Standards Act or the Merchant Marine Act of 1920; extends the term “State” as used in the Act to include specified territories and the District of Columbia; and provides for severability.

38

See note 37.

39

There is, of course, no constitutional requirement that state taxes must be uniform, in the sense of that requirement as laid upon the federal taxing power by the first clause of Article I, § 8. Nor has it ever been held that such a requirement is made by the commerce clause or any other constitutional provision. This is a different thing entirely from the strictures against discrimination within or by a state laid under the equal protection and commerce clauses.

The MeCarran Act is, in effect, a determination by Congress that the business of insurance, though done in interstate commerce, is not of such a character as to require uniformity of treatment within the distinction taken in the doctrine of Cooley v. Board of Wardens, 12 How. 299, except as otherwise expressly declared.

40

As of the effective date of the MeCarran Act, sixteen states had imposed on “foreign” life insurance companies taxes substantially similar to the South Carolina tax in issue. Ala. Code (1940) tit. 51, *432§§ 816, 819; Fla. Stat. (1941) § 205.43 (1), (6); 111. Rev. Stat. (1943) c. 73, §1021; Ind. Stat. Ann. (Burns, 1940) §39-4802; Kan. Gen. Stat. Ann. (Corrick, 1935) § 40-252; Ky. Rev. Stat. (1944) § 136.330; La. Gen. Stat. (Dart, 1939) §8369; Mich. Comp. Laws (1929) § 12387; Mo. Rev. Stat. (1939) §6094; Neb. Rev. Stat. (1943) §77-902; N. M. Stat. Ann. (1941) §60-401; N. D. Comp. Laws (1913) § 4924; Ohio Code Ann. (Throckmorton, 1940) § 5433; Pa. Stat. Ann. (Purdon, 1930) tit. 72, §2261; S. C. Code (1942) §§7948, 7949; Tex. Civ. Stat. (Vernon, 1925) Art. 4769.

We express no opinion concerning the validity of any feature of these statutes not substantially identical with those of the South Carolina tax dealt with herein.

41

Prudential was first authorized to do business in South Carolina in 1897 and since that time it has received annual renewals of its license. As to the present scope of its business in South Carolina and in all the states, see note 15.

42

Cf. Ashton v. Cameron County District, 298 U. S. 513, which may be said in effect to have been overruled by United States v. Bekins, 304 U. S. 27. See Jackson, The Struggle for Judicial Supremacy (1941) 240-241.

43

See Carmichael v. Southern Coal Co., 301 U. S. 495; Steward Machine Co. v. Davis, 301 U. S. 548; Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S. 334; Clark Distilling Co. v. Western Maryland R. Co., 242 U. S. 311; Whitfield v. Ohio, 297 U. S. 431; In re Rahrer, 140 U. S. 545; Perkins v. Pennsylvania, 314 U. S. 586; Standard Dredging Co. v. Murphy, 319 U. S. 306, 308; International Shoe Co. v. Washington, 326 U. S. 310, 315; cf. Parker v. Richard, 250 U. S. 235, 238-239. See generally Koenig, Federal and State Cooperation under the Constitution (1938) 36 Mich. L. Rev. 752.

44

North American Co. v. Securities & Exchange Commission, 327 U. S. 686, 704-705; United States v. Darby, 312 U. S. 100, 114-115; Gibbons v. Ogden, 9 Wheat. 1, 196. For example, the provisions of Article I, § 9, forbidding the giving of preferences “by any Regulation of Commerce or Revenue to the Ports of one State over those of another”; and commanding that “No Tax or Duty shall be laid on Articles exported from any State,” held applicable only to foreign commerce in Dooley v. United States, 183 U. S. 151.

But compare the further provision of Article I, § 10, empowering Congress to consent to laying of duties or imposts on exports by the states. See also note 47.

45

E. g., Reid v. Colorado, 187 U. S. 137; Champion v. Ames, 188 U. S. 321; Hipolite Egg Co. v. United States, 220 U. S. 45; Hoke v. United States, 227 U. S. 308; United States v. Darby, 312 U. S. 100, overruling Hammer v. Dagenhart, 247 U. S. 251.

46

See cases cited in notes 29 and 43.

47

It is perhaps impossible to point with certainty to any such explicit limitation among the various commerce clauses of the Constitution, for decision in the application of such provisions to such a combined exercise of powers is sparse. See, however, the discussion in Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, 433 et seq., relating to the clause of Article I, § 9, providing: “No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear or pay Duties in another.”

There can be no doubt that the combined exercise of state and federal authority is limited, to some but largely undefined extent, by other constitutional prohibitions or the combined effects of more than one. Cf. text herein at note 49 et seq. But apart from the provision of Article I, § 9, above quoted as a possible exception, the specific limitations placed upon the commerce power or state power in relation to commerce expressly provide for joint action to be effective. Thus, this is true with reference to laying of duties on exports by the states with the consent of Congress, Art. I, § 10, notwithstanding the prohibition of such action by congressional action alone, Art. I, § 9, and of course by state action alone. Art. I, § 10. And note the further provision that: “No State shall, without the Consent of Congress, lay any Duty of Tonnage,” as to which see also note 17 above.

It was thus expressly contemplated, in some instances, that the combined exercise of the powers of Congress and the states should be free from restrictions expressly applicable to each when exerted in isolation. It is true that some of these provisions have been held applicable only to foreign commerce, e. g., the prohibition of Article I, § 10, against levy of duties on imports or exports without Congress’ consent. Woodruff v. Parham, 8 Wall. 123; American Steel & Wire Co. v. Speed, 192 U. S. 500, 519, et seq.; but see Brown v. Maryland, 12 Wheat. 419. But others apply to coastwise trade, indeed to trade between towns in the same state, in other words to intrastate commerce. State Tonnage Tax Cases, 12 Wall. 204, 219; and see Pennsylvania v. Wheeling & Belmont Bridge Co., supra; Louisiana Public Service Comm’n v. Texas & N. O. R. Co., 284 U. S. 125; cf. Williams *436v. United States, 255 U. S. 336; and see also United States v. The William, 28 Fed. Cas. No. 16,700.

All these provisions are intimately and expressly related to the commerce power. Notwithstanding their diversities, in application to interstate and foreign commerce or both, and also to federal and state power or their combined operation, no conclusion can be drawn from them that our constitutional policy was, or is, to give Congress and the states acting together broad powers, in some instances denied to each acting alone, in relation to foreign commerce, but to deny such authority altogether in reference to interstate commerce. Indeed the opposite conclusion is clearly indicated, both by virtue of express provision where applicable and by strong inference where not expressly forbidden.

48

The ruling is not new or only recent. “We have already said, and the principle is undoubted, that the act of the legislature of Virginia conferred full authority to erect and maintain the bridge, subject to the exercise of the power of congress to regulate the navigation of the river. That body having in the exercise of this power, regulated the navigation consistent with its preservation and continuation, the authority to maintain it would seem to be complete. That authority combines the concurrent powers of both governments, state and federal, which, if not sufficient, certainly none can be found in our system of government.” Pennsylvania v. Wheeling & Belmont Bridge Co., 18 How. 421, 430. Compare this with Mr. Justice McLean’s dissenting view, note 34 above.

49

The contentions are stated in appellant’s brief as follows: “If it be assumed that the McCarran-Ferguson Act is an adoption by Congress of legislation of the states, then the Act is unconstitutional (1) as a violation of the due process clause of Fifth Amendment to the Constitution, (2) as a violation of Article I, Section 8, Clause 1 of the Constitution which requires that excises shall be uniform throughout the United States in the exercise by Congress of its taxing power, (3) as a violation of Article I, Section 1 of the Constitution which requires legislation to be enacted by Congress, and (4) as a violation of the states’ power to tax for purposes of raising revenue for their own use, which power is vested exclusively in the states.”

50

. . It has never been held that a State may not exact from a foreign corporation as a condition to admission to do business the payment of a tax measured by the business done within its borders.” Lincoln National Life Ins. Co. v. Read, 325 U. S. 673, 677. See Ducat v. Chicago, 10 Wall. 410; Philadelphia Fire Assn. v. New York, 119 U. S. 110; Hanover Fire Ins. Co. v. Harding, 272 U. S. 494; Continental Assurance Co. v. Tennessee, 311 U. S. 5. See discussion in Henderson, The Position of Foreign Corporations in American Constitutional Law (1918) 101 if.

51

The related contention that Congress’ “adoption” of South Carolina’s statute amounts to an unconstitutional delegation of Congress’ legislative power to the states obviously confuses Congress’ power to legislate with its power to consent to state legislation. They are not identical, though exercised in the same formal manner. See Clark Distilling Co. v. Western Maryland R. Co., 242 U. S. 311, 327.

52

“It would be a shocking thing, if state and federal governments acting together were prevented from achieving the end desired by both, simply because of the division of power between them.” Ribble, 211. And see note 48.

53

. Cf. note 47.

UNION LABOR LIFE INSURANCE CO. v. PIRENO

No. 81-389.

Argued April 27, 1982

Decided June 28, 1982*

*120Brennan, J., delivered the opinion of the Court, in which White, Marshall, Blackmun, Powell, and Stevens, JJ., joined. Rehnquist, J., filed a dissenting opinion, in which Burger, C. J., and O’Connor, J., joined, post, p. 134.

T. Richard Kennedy argued the cause for petitioners in both cases. With him on the briefs for petitioner in No. 81-389 were Edward Thompson and Philip R. Kastellec. Robert P. Borsody filed a brief for petitioner in No. 81-390.

Susan M. Jenkins argued the cause for respondent in both cases. With her on the brief was Ralph C. Wiegandt.

*121Barry Grossman argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General Lee, Assistant Attorney General Baxter, Deputy Solicitor General Shapiro, Jerrold J. Ganzfried, and Nancy C. Garrison †

*

Together with No. 81-390, New York State Chiropractic Assn. v. Pireno, also on certiorari to the same court.

†

Briefs of amici curiae urging reversal were filed by Richard A. Whiting for the American Insurance Association et al.; by Sidney S. Rosdeitcher and Richard D. Friedman for the Health Insurance Association of America et al.; and by David Crump for the Legal Foundation of America.

Briefs of amici curiae urging affirmance were filed for the State of Arizona et al. by Robert K. Corbin, Attorney General of Arizona, and Kenneth R. Reed, Special Assistant Attorney General, Steve Clark, Attorney General of Arkansas, and David L. Williams, Deputy Attorney General, J. D. MacFarlane, Attorney General of Colorado, and Thomas P. McMahon, Carl R. Ajello, Attorney General of Connecticut, and Robert M. Danger and John R. Lacey, Assistant Attorneys General, Richard S. Gebelein, Attorney General of Delaware, and Vincent M. Amberly, Deputy Attorney General, Tany S. Hong, Attorney General of Hawaii, and Sonia Faust, Deputy Attorney General, Tyrone C. Fahner, Attorney General of Illinois, and Thomas M. Genovese, Assistant Attorney General, Thomas J. Miller, Attorney General of Iowa, and John R. Perkins, Assistant Attorney General, William J. Guste, Jr., Attorney General of Louisiana, and John R. Flowers, Jr., Assistant Attorney General, Stephen H. Sachs, Attorney General of Maryland, and Charles O. Monk II, Assistant Attorney General, Frank J. Kelley, Attorney General of Michigan, and Edwin M. Bladen, Assistant Attorney General, Bill Allain, Attorney General of Mississippi, and Robert E. Sanders, Special Assistant Attorney General, John Ashcroft, Attorney General of Missouri, and William L. Newcomb, Jr., and Robert E. Dolan, Jr., Assistant Attorneys General, Michael T. Greely, Attorney General of Montana, and Jerome J. Cate, Assistant Attorney General, Paul L. Douglas, Attorney General of Nebraska, and Dale A. Comer, Assistant Attorney General, Jeff Bingaman, Attorney General of New Mexico, and James J. Wechsler and Richard H. Levin, Assistant Attorneys General, Rufus L. Edmisten, Attorney General of North Carolina, H. A. Cole, Jr., Special Deputy Attorney General, and John R. Come, Associate Attorney General, William J. Brown, Attorney General of Ohio, and Eugene F. McShane, Dennis J. Roberts II, Attorney General of Rhode Island, and Patrick J. Quinlan, Assistant Attorney General, Mark White, Attorney General of Texas, and James V. Sylvester, Assistant Attorney General, David L. Wilkinson, Attorney *122General of Utah, John J. Easton, Jr., Attorney General of Vermont, and Glenn A. Jarrett, Assistant Attorney General, and Bronson C. La Follette, Attorney General of Wisconsin, and Michael L. Zaleski, Assistant Attorney General; for the Association of American Physicians & Surgeons, Inc., by Kent Masterson Brown; and for Automotive Service Councils, Inc., by Donald A. Randall and Jonathan T. Howe.

David J. Brummond filed a brief for the National Association of Insurance Commissioners as amicus curiae.

*122Justice Brennan

delivered the opinion of the Court.

In these eases we consider an alleged conspiracy to eliminate price competition among chiropractors, by means of a “peer review committee” that advised an insurance company whether particular chiropractors’ treatments and fees were “necessary” and “reasonable.” The question presented is whether the alleged conspiracy is exempt from federal antitrust laws as part of the “business of insurance” within the meaning of the McCarran-Ferguson Act.1

I

Petitioners are the New York State Chiropractic Association (NYSCA), a professional association of chiropractors, and the Union Labor Life Insurance Co. (ULL), a Maryland insurer doing business in New York. As required by New York law, ULL’s health insurance policies cover certain policyholder claims for chiropractic treatments. But certain ULL policies limit the company’s liability to “the reasonable charges” for “necessary medical care and services.” *123App. 19a, 22a (emphasis added). Accordingly, when presented with a policyholder claim for reimbursement for chiropractic treatments, ULL must determine whether the treatments were necessary and whether the charges for them were reasonable. In making some of these determinations, ULL has arranged with NYSCA to use the advice of NYSCA’s Peer Review Committee.

The Committee was established by NYSCA in 1971, primarily to aid insurers in evaluating claims for chiropractic treatments.2 It is composed of 10 practicing New York chiropractors, who serve on a voluntary basis. At the request of an insurer, the Committee will examine a chiropractor’s treatments and charges in a particular case, and will render an opinion on the necessity for the treatments and the reasonableness of the charges made for them. The opinion will be based upon such considerations as the treating chiropractor’s experience and specialty degrees; the location of his office; the number of visits and time spent with the patient; the patient’s age, occupation, general physical condition, and history of previous treatment; and X-ray findings.

Respondent is a chiropractor licensed and practicing in the State of New York. On a number of occasions his treatments of ULL policyholders, and his charges for those treatments, have been referred by ULL to the Committee, which has sometimes concluded that his treatments were unnecessary or his charges unreasonable. Petitioners assert that respondent has treated his patients “in a manner calculated to maximize the number of treatments for a particular condition, and that his fees for these treatments are unusually high.” 650 F. 2d 387, 389 (CA2 1981). Respondent, for his part, contends that the members of the Committee “practice ‘antiquated’ techniques that they seek to impose on their more innovative competitors.” Ibid.

*124This dispute resulted in the present suit, brought by respondent in the United States District Court for the Southern District of New York. Respondent alleged that the peer review practices of petitioners violated § 1 of the Sherman Act.3 In particular, he claimed that petitioners and others had used the Committee as the vehicle for a conspiracy to fix the prices that chiropractors, including respondent, would be permitted to charge for their services. He concluded that he had been restrained from providing his chiropractic services to the public freely and fully, and that would-be recipients of chiropractic services had been deprived of the benefits of competition. Respondent requested, inter alia, declaratory and injunctive relief against ULL’s continued use of NYSCA’s Peer Review Committee in evaluating policyholders’ claims.

After extensive discovery, the District Court granted petitioners’ motion for summary judgment dismissing respondent’s complaint, concluding that ULL’s use of NYSCA’s Peer Review Committee was exempted from antitrust scrutiny by the McCarran-Ferguson Act. App. to Pet. for Cert, in No. 81-389, pp. 20a-37a. The court noted that three requirements must be met in order to obtain the McCarranFerguson exemption: The challenged practices (1) must constitute the “business of insurance,” (2) must be regulated by state law, and (3) must not amount to a “boycott, coercion, or intimidation.” Id., at 27a-28a. In the court’s view, all three of these requirements were satisfied in the present case. In particular, the court held that petitioners’ peer review practices constituted the “business of insurance” because they served “to define the precise extent of ULL’s *125contractual obligations . . . under [its] policies.” Id., at 29a-30a. Moreover, the court determined that the peer review practices “involve[d] the spreading of risk, an indispensable element of the ‘business of insurance.’” Id., at 30a.4 Respondents’ Sherman Act claim was accordingly dismissed with prejudice.

The Court of Appeals for the Second Circuit reversed. 650 F. 2d 387 (1981). Relying upon this Court’s recent opinion in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205 (1979), the Court of Appeals concluded that the District Court had erred in holding that ULL’s use of NYSCA’s Peer Review Committee constituted the “business of insurance.”5 Accordingly, the Court of Appeals remanded the action for further proceedings. We granted certiorari to resolve a conflict among the Courts of Appeals on the question presented.6 454 U. S. 1052 (1981).

*126II

The only issue before us is whether petitioners’ peer review practices are exempt from antitrust scrutiny as part of the “business of insurance.” “It is axiomatic that conduct which is not exempt from the antitrust laws may nevertheless be perfectly legal.” Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 210, n. 5. Thus in deciding these cases we have no occasion to address the merits of respondent’s Sherman Act claims. However, the Sherman Act does express a “longstanding congressional commitment to the policy of free markets and open competition.” Community Communications Co. v. Boulder, 455 U. S. 40, 56 (1982); see also United States v. Topco Associates, Inc., 405 U. S. 596, 610 (1972). Accordingly, our precedents consistently hold that exemptions from the antitrust laws must be construed narrowly. FMC v. Seatrain Lines, Inc., 411 U. S. 726, 733 (1973). This principle applies not only to implicit exemptions, see Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 231, but also to express statutory exemptions, see United States v. McKesson & Robbins, Inc., 351 U. S. 305, 316 (1956). In Royal Drug, supra, this Court had occasion to reexamine the scope of the express antitrust exemption provided for the “business of insurance” by § 2(b) of the McCarran-Ferguson Act. • We hold that decision of the question before us is controlled by Royal Drug.

The principal petitioner in Royal Drug was a Texas insurance company, Blue Shield, that offered policies entitling insured persons to purchase prescription drugs for $2 each from any pharmacy participating in a “Pharmacy Agreement” with Blue Shield; policyholders were also allowed to purchase prescription drugs from a nonparticipating pharmacy, but in that event they would have to pay full price for the drugs and would be reimbursed by Blue Shield for only a part of that price. Blue Shield offered Pharmacy Agreements to all licensed pharmacies in Texas, but participating pharmacies were required to sell prescription drugs to Blue *127Shield’s policyholders for $2 each, and were reimbursed only for their cost in acquiring the drugs thus sold. “Thus, only pharmacies that [could] afford to distribute prescription drugs for less than this $2 markup [could] profitably participate in the plan.” 440 U. S., at 209 (footnote omitted).

Respondents in Royal Drug were the owners of nonparticipating pharmacies. They sued Blue Shield and several participating pharmacies under § 1 of the Sherman Act, alleging that the Pharmacy Agreements were the instrument by which Blue Shield had conspired with participating pharmacies to fix the retail prices of prescription drugs. Respondents also alleged that the Agreements encouraged Blue Shield’s policyholders to avoid nonparticipating pharmacies, thus constituting an unlawful group boycott. The District Court granted summary judgment to Blue Shield and the other petitioners, holding that the challenged Agreements were exempt under §2(b) of the McCarran-Ferguson Act. But the Court of Appeals disagreed, holding that the Agreements were not the “business of insurance” within the meaning of that Act, and reversed. 440 U. S., at 210. This Court affirmed. Looking to “the structure of the Act and its legislative history,” id., at 211, the Court discussed three characteristics of the business of insurance that Congress had intended to exempt through § 2(b).

First, after noting that one “indispensable characteristic of insurance” is the “spreading and underwriting of a policyholder’s risk,” id., at 211-212,7 the Court observed that parts *128of the legislative history of the McCarran-Ferguson Act “strongly suggest that Congress understood the business of insurance to be the underwriting and spreading of risk,” id., at 220-221. The Court then dismissed Blue Shield’s contention that its Pharmacy Agreements involved such activities.

“The Pharmacy Agreements . . . are merely arrangements for the purchase of goods and services by Blue Shield. By agreeing with pharmacies on the maximum prices it will pay for drugs, Blue Shield effectively reduces the total amount it must pay to its policyholders. The Agreements thus enable Blue Shield to minimize costs and maximize profits. Such cost-savings arrangements may well be sound business practice, and may well inure ultimately to the benefit of policyholders in the form of lower premiums, but they are not the ‘business of insurance.’” Id., at 214 (footnote omitted).

Second, the Court identified “the contract between the insurer and the insured” as “[a]nother commonly understood aspect of the business of insurance.” Id., at 215. The Court noted that, in enacting the McCarran-Ferguson Act, Congress had been concerned with the “ ‘relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement — these were the core of the “business of insurance.”’” Id., at 215-216, quoting SEC v. National Securities, Inc., 393 U. S. 453, 460 (1969). The Court then rejected Blue Shield’s argument that its Pharmacy Agreements were so closely related to the “reliability, interpretation, and enforcement” of its policies as to fall within the intended scope of §2(b): “This argument . . . proves too much.” 440 U. S., at 216.

“At the most, the petitioners have demonstrated that the Pharmacy Agreements result in cost savings to Blue Shield which may be reflected in lower premiums if the cost savings are passed on to policyholders. But, in that sense, every business decision made by an insurance company has some impact on its reliability, its rate-*129making, and its status as a reliable insurer . . . [and thus] could be included in the ‘business of insurance.’ Such a result would be plainly contrary to the statutory language, which exempts the ‘business of insurance’ and not the ‘business of insurance companies.’” Id., at 216-217.

Finally, the Court noted that in enacting the McCarranFerguson Act, “the primary concern of both representatives of the insurance industry and the Congress was that cooperative ratemaking efforts be exempt from the antitrust laws.” Id., at 221. This was so because of “the widespread view that it [was] very difficult to underwrite risks in an informed and responsible way without intra-industry cooperation.” Ibid. The Court was thus reluctant to extend the § 2(b) exemption to the case before it, “because the Pharmacy Agreements involve parties wholly outside the insurance industry.” Id., at 231.

“There is not the slightest suggestion in the legislative history that Congress in any way contemplated that arrangements such as the Pharmacy Agreements in this case, which involve the mass purchase of goods and services from entities outside the insurance industry, are the ‘business of insurance.’” Id., at 224 (footnote omitted).

In sum, Royal Drug identified three criteria relevant in determining whether a particular practice is part of the “business of insurance” exempted from the antitrust laws by § 2(b): first, whether the practice has the effect of transferring or spreading a policyholder’s risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry. None of these criteria is necessarily determinative in itself, but examining the arrangement between petitioners NYSCA and ULL with respect to all three criteria, we do not hesitate to conclude that it is not a part of the “business of insurance.”

*130Plainly, ULL’s use of NYSCA’s Peer Review Committee plays no part in the “spreading and underwriting of a policyholder’s risk.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S., at 211. Both the “spreading” and the “underwriting” of risk refer in this context to the transfer of risk characteristic of insurance. See n. 7, supra. And as the Court of Appeals below observed:

“The risk that an insured will require chiropractic treatment has been transferred from the insured to [ULL] by the very purchase of insurance. Peer review takes place only after the risk has been transferred by means of the policy, and then it functions only to determine whether the risk of the entire loss (the insured’s cost of treatment) has been transferred to [ULL] — that is, whether the insured’s loss falls within the policy limits.” 650 F. 2d, at 393.

Petitioner ULL argues that the Court of Appeals’ analysis is “semantic and unrealistic.” Brief for Petitioner ULL 17. Petitioner reasons that “[i]t is inconceivable that Congress would have included risk transfer within the ‘business of insurance’ but excluded a device that helps ‘determine whether the risk. . . has been transferred’ and acts as ‘an aid in determining the scope of the transfer.’” Ibid. We find no merit in this argument, because the challenged peer review arrangement is logically and temporally unconnected to the transfer of risk accomplished by ULL’s insurance policies. The transfer of risk from insured to insurer is effected by means of the contract between the parties — the insurance policy — and that transfer is complete at the time that the contract is entered. See 9 G. Couch, Cyclopedia of Insurance Law §§39:53, 39:63 (2d ed. 1962). If the policy limits coverage to “necessary” treatments and “reasonable” charges for them, then that limitation is the measure of the risk that has actually been transferred to the insurer: To the extent that *131the insured pays unreasonable charges for unnecessary treatments, he will not be reimbursed, because the risk of incurring such treatments and charges was never transferred to the insurer, but was instead always retained by the insured. Petitioner’s argument contains the unspoken premise that the transfer of risk from an insured to his insurer actually takes place not when the contract between those parties is completed, but rather only when the insured’s claim is settled. This premise is contrary to the fundamental principle of insurance that the insurance policy defines the scope of risk assumed by the insurer from the insured. See id., §39:3; R. Keeton, Insurance Law § 5.1(a) (1971).

Turning to the second Royal Drug criterion, it is clear that ULL’s use of NYSCA’s Peer Review Committee is not an integral part of the policy relationship between insurer and insured. In the first place, the challenged arrangement between ULL and NYSCA is obviously distinct from ULL’s contracts with its policyholders. In this sense the challenged arrangement resembles the Pharmacy Agreements in Royal Drug. There the Court rejected the proposition that the Agreements were “‘between insurer and insured.’” Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 215, quoting SEC v. National Securities, Inc., 393 U. S., at 460. Rather, it recognized those Agreements as “separate contractual arrangements between Blue Shield and pharmacies engaged in the sale and distribution of goods and services other than insurance.” 440 U. S., at 216. Similarly, ULL’s use of NYSCA’s Peer Review Committee is a separate arrangement between the insurer and third parties not engaged in the business of insurance.

Petitioner ULL argues that the challenged peer review practices satisfy this criterion because peer review “directly involves the ‘interpretation’ and ‘enforcement’ of the insurance contract.” Brief for Petitioner ULL 16. But this argument is essentially identical to one made and rejected in *132Royal Drug. Blue Shield there contended that its Pharmacy Agreements “so closely affectfed] the ‘reliability, interpretation, and enforcement’ of the insurance contract... as to fall within the exempted area.” 440 U. S., at 216 (footnote omitted). This Court noted, however:

“The benefit promised to Blue Shield policyholders is that their premiums will cover the cost of prescription drugs except for a $2 charge for each prescription. So long as that promise is kept, policyholders are basically unconcerned with arrangements made between Blue Shield and participating pharmacies.” Id., at 213-214 (footnotes omitted).

Similarly, when presented with policyholder claims for reimbursement, ULL must decide whether the claims are covered by its policies. But these decisions are entirely ULL’s, and its use of NYSCA’s Peer Review Committee as an aid in its decisionmaking process is a matter of indifference to the policyholder, whose only concern is whether his claim is paid, not why it is paid. As in Royal Drug, petitioners have shown, at the most, that the challenged peer review practices result in “cost savings to [ULL] which may be reflected in lower premiums if the cost savings are passed on to policyholders.” Id., at 216. To grant the practices a §2(b) exemption on such a showing “would be plainly contrary to the statutory language, which exempts the ‘business of insurance’ and not the ‘business of insurance companies.’” ■ Id., at 217.

Finally, as respects the third Royal Drug criterion, it is plain that the challenged peer review practices are not limited to entities within the insurance industry. On the contrary, ULL’s use of NYSCA’s Peer Review Committee inevitably involves third parties wholly outside the insurance industry — namely, practicing chiropractors. Petitioners do not dispute this fact, but instead deprecate its importance. They argue that we should not conclude “that ULL’s use of the peer review process is outside the scope of the ‘business *133of insurance’ simply because NYSCA is not an insurance company.” Brief for Petitioner ULL 25. In petitioners’ view:

“There is nothing in the McCarran-Ferguson Act that limits the ‘business of insurance’ to the business of insurance companies. As this Court has stated, ‘[the Act’s] language refers not to the persons or companies who are subject to state regulation, but to laws “regulating the business of insurance.”’ National Securities, 393 U. S. at 459.” Ibid, (emphasis in original of quoted opinion).

Asserting that “the [New York] Superintendent of Insurance effectively can regulate the peer review process through his authority over the claims adjustment procedures of ULL,” id., at 26, petitioners conclude that the process is part of the “business of insurance” despite the necessary involvement of third parties outside the insurance industry.

We may assume that the challenged peer review practices need not be denied the § 2(b) exemption solely because they involve parties outside the insurance industry. But the involvement of such parties, even if not dispositive, constitutes part of the inquiry mandated by the Royal Drug analysis. As the Court noted there, § 2(b) was intended primarily to protect “mira-industry cooperation” in the underwriting of risks. 440 U. S., at 221 (emphasis added). Arrangements between insurance companies and parties outside the insurance industry can hardly be said to lie at the center of that legislative concern. More importantly, such arrangements may prove contrary to the spirit as well as the letter of § 2(b), because they have the potential to restrain competition in noninsurance markets. Indeed, the peer review practices challenged in the present cases assertedly realize precisely this potential: Respondent’s claim is that the practices restrain competition in a provider market — the market for chiropractic services — rather than in an insurance market. App. 8a. Thus we cannot join petitioners in depreciating the *134fact that parties outside the insurance industry are intimately involved in the peer review practices at issue in these cases.8

III

In sum, we conclude that ULL’s use of NYSCA s Peer Review Committee does not constitute the “business of insurance” within the meaning of § 2(b) of the McCarran-Ferguson Act.9 The judgment of the Court of Appeals is accordingly

Affirmed.

1

59 Stat. 33, as amended, 15 U. S. C. §§ 1011-1015. The Act provides in relevant part:

“(a) The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

“(b) No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, . . . unless such Act specifically relates to the business of insurance . . . .” §2, 15 U. S. C. §§ 1012(a), (b).

“(b) Nothing contained in this Act shall render the . . . Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation.” § 3, 15 U. S. C. § 1013(b).

2

The Committee’s advice is also available to patients, governmental agencies, and chiropractors themselves, but insurers are the principal users. 650 F. 2d 387, 388 (CA2 1981).

3

15 U. S. C. § 1, which provides in pertinent part that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. ...”

4

The court then turned to the Act’s second requirement, that the challenged practices be “regulated by state law.” The court held that that requirement had been met, as well, observing that New York had “enacted a pervasive scheme of regulation and supervision of insurance,” had prohibited “the unfair settlement of claims,” and had proscribed “the conduct alleged in the complaint” in its state antitrust law, the Donnelly Act, which by its terms applied to insurers. App. to Pet. for Cert, in No. 81-389, pp. 31a-32a. Finally, the court determined that respondent had neither alleged a “boycott” on petitioners’ part, nor offered evidentiary support for such a claim. Id., at 33a-35a. The court thus concluded that the Act’s third requirement was satisfied in the present case, and that petitioners’ actions were consequently “exempt from application of the antitrust laws.” Id., at 36a.

5

Since it reached this conclusion, the Court of Appeals did not definitively address the other holdings of the District Court. See n. 4, swpra. The court did note, however, that petitioner NYSCA did not itself “appear to be regulated by state law in the manner § 2(b) requires.” 650 F. 2d, at 390, n. 5.

6

As noted by the Court of Appeals, id., at 395, n. 13, the decision below is contrary to that of the Court of Appeals for the Fourth Circuit “in a factually identical ease.” See Bartholomew v. Virginia Chiropractors Assn., 612 F. 2d 812 (1979).

7

As the Court explained:

“ ‘It is characteristic of insurance that a number of risks are accepted, some of which involve losses, and that such losses are spread over all the risks so as to enable the insurer to accept each risk at a slight fraction of the possible liability upon it.’ 1 G. Couch, Cyclopedia of Insurance Law § 1:3 (2d ed. 1959). See also R. Keeton, Insurance Law § 1.2(a) (1971) (‘Insurance is an arrangement for transferring and distributing risk’); 1 G. Richards, The Law of Insurance § 2 (W. Freedman 5th ed. 1952).” 440 U. S., at 211 (footnote omitted).

8

The premise of the dissent is that NYSCA’s Peer Review Committee actually constitutes “the claims adjustor” in these cases. See post, at 137. From this premise the dissent reasons that since “claims adjustment is part and parcel of the ‘business of insurance’ protected by the McCarranFerguson Act,” post, at 138, it necessarily follows that the peer review practices at issue in these cases must enjoy the Act’s exemption. The fatal flaw in this syllogism is that NYSCA’s Peer Review Committee is not the claims adjustor. As the Court of Appeals noted: “Opinions of the committee are not binding unless the parties agree beforehand that they will be.” 650 F. 2d, at 388. Thus in a case such as the present ones, ULL is perfectly free to disregard the Committee’s evaluation. Even if ULL were to act upon the Committee’s opinion, the nonbinding nature of the Committee’s evaluation means that, at most, peer review is merely ancillary to the claims adjustment process. We see no reason that such ancillary activities must necessarily enjoy the McCarran-Ferguson exemption from the antitrust laws. Unlike activities that occur wholly within the insurance industry — such as the claims adjustment process itself — the ancillary peer review practices at issue in these eases “involve parties wholly outside the insurance industry.” See Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S., at 231. Thus peer review falls afoul of the third Royal Drug criterion in a way in which pure claims adjustment activities cannot.

9

This conclusion renders it unnecessary for us to address the questions whether the conduct challenged in respondent’s complaint was “regulated by state law” or constituted a “boycott, coercion, or intimidation.” See n. 5, supra.

Justice Rehnquist,

with whom The Chief Justice and Justice O’Connor join,

dissenting.

Purporting to rely upon our recent decision in Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205 (1979), *135the Court today exposes to antitrust liability an aspect of the business of insurance designed to promote fair and efficient claims settlement. The Court reaches this conclusion by determining that the peer review process does not spread risk, is not an integral part of the insurance relationship, and is not limited to entities within the insurance industry. Because I find the claims adjustment function of the Peer Review Committee to be at the heart of the relationship between insurance companies and their policyholders, I conclude that such committees are clearly within the sphere of insurance activity which the McCarran-Ferguson Act intended to protect from the effect of the antitrust laws.1 This conclusion finds support in the legislative history of the Act and in Royal Drug and its predecessors.

For many years statutes such as the Sherman Act were thought not applicable to the business of insurance, this Court having held in Paul v. Virginia, 8 Wall. 168, 183 (1869), that “[ijssuing a policy of insurance is not a transaction of commerce.” When this Court held in United States v. South-Eastern Underwriters Assn., 322 U. S. 533 (1944), that the business of insurance was a part of interstate commerce subject to the Sherman Act, Congress responded quickly to reestablish the preeminence of States in regulating such business. Congress’ response — the McCarranFerguson Act — sought primarily to protect the contractual relationship between the insurer and the insured:

“Under the regime of Paul v. Virginia, supra, States had a free hand in regulating the dealings between insurers and their policyholders. Their negotiations, and the contract which resulted, were not considered commerce and were, therefore, left to state regulation. The *136South-Eastern Underwriters decision threatened the continued supremacy of the States in this area. The McCarran-Ferguson Act was an attempt to turn back the clock, to assure that the activities of insurance companies in dealing with their policyholders would remain subject to state regulation.” SEC v. National Securities, Inc., 393 U. S. 453, 459 (1969).

We recognized this congressional purpose in Royal Drug:

“ ‘The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement — these were the core of the “business of insurance.” Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was — it was on the relationship between the insurance company and the policyholder.’” Group Life & Health Ins. Co. v. Royal Drug Co., supra, at 215-216 (quoting SEC v. National Securities, Inc., supra, at 460).

Thus, whatever else was said in Royal Drug about the indispensable characteristic of risk-spreading, the Court found the contractual relationship between the insurer and the insured to be the essence of the “business of insurance.”

Central to this contractual relationship is the process of claims adjustment — the determination of the actual payments to be made to the insured for losses covered by the insurance contract. The key representation of the insurance company and the principal expectation of the policyholder is that prompt payment will be made when the event insured against actually occurs. As one commentator has stated:

“Up until the time there is a claim and a payment is made, the only tangible evidence of insurance is a piece of paper. In other words, the real product of insurance *137is the claims proceeds. Selection of the prospect, qualifying him for coverage that suits his needs, delivery of a policy, collecting premiums for perhaps years, making changes in coverage to meet changing situations, all of these are but preambles to the one purpose for which the insurance was secured, namely to collect dollars if and when an unforeseen event takes place.” J. Wickman, Evaluating the Health Insurance Risk 57 (1965).2

It is the claims adjustor — in this case petitioners’ Peer Review Committee — which determines whether and to what extent an insured’s losses will be covered. The Court thus plainly errs when it concludes that the role of petitioners’ Peer Review Committee “is not an integral part of the policy relationship between insurer and insured,” ante, at 131, and “is a matter of indifference to the policyholder.” Ante, at 132. New insurance matters could be of greater importance to policyholders than whether their claims will be paid, and it is the Peer Review Committee which in effect makes that determination. Being a critical component of the relation*138ship between an insurer and an insured, claims adjustment is part and parcel of the “business of insurance” protected by the McCarran-Ferguson Act.3

This conclusion finds support in a source of guidance completely disregarded by the Court — the legislative history of McCarran-Ferguson. The passage of the Act was preceded by the introduction in the Senate Committee of a report and a bill prepared by the National Association of Insurance Commissioners. “The views of the NAIC are particularly significant, because the Act ultimately passed was based in large part on the NAIC bill.” Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S., at 221 (footnote omitted). Included in that bill were seven specific insurance practices to which the Sherman Act was not to apply, and to which the Court in Royal Drug looked for guidance as to the meaning of the phrase “business of insurance.” See id., at 222. Among those seven protected practices was the process of claims adjustment: “the said Sherman Act shall not apply ... to any cooperative or joint service, adjustment, investigation, or inspection agreement relating to insurance.” 90 Cong. Rec. A4406 (1944) (emphasis added). Other statements in the legislative history support the conclusion that claims adjustment was to be protected:

*139“[W]e come squarely to the question of whether State regulation is adequate to handle insurance, or whether that business should be subject to the provisions of the antitrust laws. ... A great number of fire-insurance companies have cooperated in mutual agreement — and of necessity — through the Southeastern Underwriters Association and rating bureaus, adjusting policy rates to risks, classifying insurable property either in co-insurance or in re-insurance, making appraisals of losses, and working out systems of inspection to improve protection against fires. All of this has been done with splendid success. It would be a pity indeed, after all these years, to have the government intervene. The business of insurance involves long contracts. The fidelity of performance of those contracts will not brook intervention.” Id., at 6530 (remarks of Rep. Satterfield) (emphasis added).

See also id., at 6543 (remarks of Rep. Jennings); id., at 6550-6551 (remarks of Rep. Ploeser).

The role of claims adjustment in the insurance relationship and the legislative history of the Act thus unmistakably demonstrate that claims settlement procedures such as petitioners’ Peer Review Committee were to be accorded protection from the antitrust laws as the “business of insurance.” New practices followed by insurance companies today present a fairer or more efficient means of claims resolution than professional peer review committees. Insurance claimants seek reimbursement for virtually every form of medical treatment and care, and determining the reasonableness and necessity of such expenses requires the expertise of a practicing physician. Because the entire spectrum of human ailments are involved, the views of one physician are seldom sufficient; specialists from many fields of medicine must be consulted. New if any insurance companies can afford to staff their claims settlement departments with such a broad range of physicians. The companies thus must either make less than *140satisfactory claims determinations, or must turn to an outside group of experts such as petitioners’ Committee.

Although the Court protests that its decision says nothing about petitioners’ antitrust liability, there can be little doubt that today’s decision will vastly curtail the peer review process. New professionals or companies will be willing to expose themselves to possible antitrust liability through such activity. The Court thus not only misreads the McCarranFerguson Act and our prior precedents, but also eliminates an aspect of the American insurance industry which has long redounded to the benefit of insurance companies and policyholders alike.

1

Since the Court declines to reach the question of whether petitioners’ Committee is regulated by state law as required by the McCarran-Ferguson Act, I likewise do not discuss it. I note, however, that the District Court found petitioners’ Committee to be so regulated. App. to Pet. for Cert, in No. 81-389, pp. 31a-32a.

2

Other commentators agree with this assessment of the importance of claims settlement:

“The adjustment (including payment) of claims represents the final act in the insurance process. The payment of a claim by an insurance company brings the insurance contract ‘to life’ in a fashion far more vivid than does any other single act in connection with the purchase, issuance, and maintenance of the contract.” Butler, Loss Adjustment in Fire Insurance, in Property and Liability Insurance Handbook 219 (J. Long & D. Gregg eds. 1965).

“Claim administration is the last link in the process of insurance — a process that begins with actuarial analysis and continues through sales, underwriting, investment, and policy service. . . . [Tjhe expectation of the policyowner that an insurer is willing to meet its obligations, through claims administration, is an important part in the decision to purchase insurance. Indeed, it is the claim administration function that delivers on the product sold to the policyowner.” C. Cissley, Claim Administration: Principles and Practices iii (1980).

3

Apparently unable to discern the difference between a mere method of paying a claim and the more fundamental process of determining whether a claim is covered by the insurance agreement, the Court finds that petitioners’ peer review procedure “resembles the Pharmacy Agreements in Royal Drug." Ante, at 131. But the Pharmacy Agreement at issue in Royal Drug was simply a method of reimbursing policyowners for medication expenses. The policyowners could obtain medication from participating pharmacies simply by paying the amount that otherwise would not be covered by the insurance plan. The pharmacies thus constituted nothing more than in-kind dispensers of insurance payments; they played no role whatsoever in the more fundamental process of assessing the validity of a claim and determining the amount to be paid. Peer review committees, which fulfill such a fundamental role, are thus quite unlike the arrangements considered by the Court in Royal Drug.

(a) Notwithstanding any other provision of this section, only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title.

(b) A person may be a debtor under chapter 7 of this title only if such person is not—

(1) a railroad;

(2) a domestic insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, a New Markets Venture Capital company as defined in section 351 of the Small Business Investment Act of 1958, a small business investment company licensed by the Small Business Administration under section 301 of the Small Business Investment Act of 1958, credit union, or industrial bank or similar institution which is an insured bank as defined in section 3(h) of the Federal Deposit Insurance Act, except that an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 ¹ of the Federal Deposit Insurance Corporation Improvement Act of 1991 may be a debtor if a petition is filed at the direction of the Board of Governors of the Federal Reserve System; or

(3)(A) a foreign insurance company, engaged in such business in the United States; or

(B) a foreign bank, savings bank, cooperative bank, savings and loan association, building and loan association, or credit union, that has a branch or agency (as defined in section 1(b) of the International Banking Act of 1978) in the United States.

(c) An entity may be a debtor under chapter 9 of this title if and only if such entity—

(1) is a municipality;

(2) is specifically authorized, in its capacity as a municipality or by name, to be a debtor under such chapter by State law, or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under such chapter;

(3) is insolvent;

(4) desires to effect a plan to adjust such debts; and

(5)(A) has obtained the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter;

(B) has negotiated in good faith with creditors and has failed to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under such chapter;

(C) is unable to negotiate with creditors because such negotiation is impracticable; or

(D) reasonably believes that a creditor may attempt to obtain a transfer that is avoidable under section 547 of this title.

(d) Only a railroad, a person that may be a debtor under chapter 7 of this title (except a stockbroker or a commodity broker), and an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 ¹ of the Federal Deposit Insurance Corporation Improvement Act of 1991 may be a debtor under chapter 11 of this title.

(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $250,000 ² and noncontingent, liquidated, secured debts of less than $750,000,² or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $250,000 ² and noncontingent, liquidated, secured debts of less than $750,000 ² may be a debtor under chapter 13 of this title.

(f) Only a family farmer or family fisherman with regular annual income may be a debtor under chapter 12 of this title.

(g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if—

(1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or

(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.

(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section other than paragraph (4) of this subsection, an individual may not be a debtor under this title unless such individual has, during the 180-day period ending on the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

(2)(A) Paragraph (1) shall not apply with respect to a debtor who resides in a district for which the United States trustee (or the bankruptcy administrator, if any) determines that the approved nonprofit budget and credit counseling agencies for such district are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from such agencies by reason of the requirements of paragraph (1).

(B) The United States trustee (or the bankruptcy administrator, if any) who makes a determination described in subparagraph (A) shall review such determination not later than 1 year after the date of such determination, and not less frequently than annually thereafter. Notwithstanding the preceding sentence, a nonprofit budget and credit counseling agency may be disapproved by the United States trustee (or the bankruptcy administrator, if any) at any time.

(3)(A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that—

(i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);

(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 7-day period beginning on the date on which the debtor made that request; and

(iii) is satisfactory to the court.

(B) With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which the debtor meets the requirements of paragraph (1), but in no case may the exemption apply to that debtor after the date that is 30 days after the debtor files a petition, except that the court, for cause, may order an additional 15 days.

(4) The requirements of paragraph (1) shall not apply with respect to a debtor whom the court determines, after notice and hearing, is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone. For the purposes of this paragraph, incapacity means that the debtor is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities; and "disability" means that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing required under paragraph (1).

Notes

Historical and Revision Notes

legislative statements

Section 109(b) of the House amendment adopts a provision contained in H.R. 8200 as passed by the House. Railroad liquidations will occur under chapter 11, not chapter 7.

Section 109(c) contains a provision which tracks the Senate amendment as to when a municipality may be a debtor under chapter 11 of title 11. As under the Bankruptcy Act [former title 11], State law authorization and prepetition negotiation efforts are required.

Section 109(e) represents a compromise between H.R. 8200 as passed by the House and the Senate amendment relating to the dollar amounts restricting eligibility to be a debtor under chapter 13 of title 11. The House amendment adheres to the limit of $100,000 placed on unsecured debts in H.R. 8200 as passed by the House. It adopts a midpoint of $350,000 as a limit on secured claims, a compromise between the level of $500,000 in H.R. 8200 as passed by the House and $200,000 as contained in the Senate amendment.

senate report no. 95–989

This section specifies eligibility to be a debtor under the bankruptcy laws. The first criterion, found in the current Bankruptcy Act section 2a(1) [section 11(a)(1) of former title 11] requires that the debtor reside or have a domicile, a place of business, or property in the United States.

Subsection (b) defines eligibility for liquidation under chapter 7. All persons are eligible except insurance companies, and certain banking institutions. These exclusions are contained in current law. However, the banking institution exception is expanded in light of changes in various banking laws since the current law was last amended on this point. A change is also made to clarify that the bankruptcy laws cover foreign banks and insurance companies not engaged in the banking or insurance business in the United States but having assets in the United States. Banking institutions and insurance companies engaged in business in this country are excluded from liquidation under the bankruptcy laws because they are bodies for which alternate provision is made for their liquidation under various State or Federal regulatory laws. Conversely, when a foreign bank or insurance company is not engaged in the banking or insurance business in the United States, then those regulatory laws do not apply, and the bankruptcy laws are the only ones available for administration of any assets found in United States.

The first clause of subsection (b) provides that a railroad is not a debtor except where the requirements of section 1174 are met.

Subsection (c) [enacted as (d)] provides that only a person who may be a debtor under chapter 7 and a railroad may also be a debtor under chapter 11, but a stockbroker or commodity broker is eligible for relief only under chapter 7. Subsection (d) [enacted as (e)] establishes dollar limitations on the amount of indebtedness that an individual with regular income can incur and yet file under chapter 13.

house report no. 95–595

Subsection (c) defines eligibility for chapter 9. Only a municipality that is unable to pay its debts as they mature, and that is not prohibited by State law from proceeding under chapter 9, is permitted to be a chapter 9 debtor. The subsection is derived from Bankruptcy Act §84 [section 404 of former title 11], with two changes. First, section 84 requires that the municipality be "generally authorized to file a petition under this chapter by the legislature, or by a governmental officer or organization empowered by State law to authorize the filing of a petition." The "generally authorized" language is unclear, and has generated a problem for a Colorado Metropolitan District that attempted to use chapter IX [chapter 9 of former title 11] in 1976. The "not prohibited" language provides flexibility for both the States and the municipalities involved, while protecting State sovereignty as required by Ashton v. Cameron County Water District No. 1, 298 U.S. 513 (1936) [56 S.Ct. 892, 80 L.Ed. 1309, 31 Am.Bankr.Rep.N.S. 96, rehearing denied 57 S.Ct. 5, 299 U.S. 619, 81 L.Ed. 457] and Bekins v. United States, 304 U.S. 27 (1938) [58 S.Ct. 811, 82 L.Ed. 1137, 36 Am.Bankr.Rep.N.S. 187, rehearing denied 58 S.Ct. 1043, 1044, 304 U.S. 589, 82 L.Ed. 1549].

The second change deletes the four prerequisites to filing found in section 84 [section 404 of former title 11]. The prerequisites require the municipality to have worked out a plan in advance, to have attempted to work out a plan without success, to fear that a creditor will attempt to obtain a preference, or to allege that prior negotiation is impracticable. The loopholes in those prerequisites are larger than the requirement itself. It was a compromise from pre-1976 chapter IX [chapter 9 of former title 11] under which a municipality could file only if it had worked out an adjustment plan in advance. In the meantime, chapter IX protection was unavailable. There was some controversy at the time of the enactment of current chapter IX concerning deletion of the pre-negotiation requirement. It was argued that deletion would lead to a rash of municipal bankruptcies. The prerequisites now contained in section 84 were inserted to assuage that fear. They are largely cosmetic and precatory, however, and do not offer any significant deterrent to use of chapter IX. Instead, other factors, such as a general reluctance on the part of any debtor, especially a municipality, to use the bankruptcy laws, operates as a much more effective deterrent against capricious use.

Subsection (d) permits a person that may proceed under chapter 7 to be a debtor under chapter 11, Reorganization, with two exceptions. Railroads, which are excluded from chapter 7, are permitted to proceed under chapter 11. Stockbrokers and commodity brokers, which are permitted to be debtors under chapter 7, are excluded from chapter 11. The special rules for treatment of customer accounts that are the essence of stockbroker and commodity broker liquidations are available only in chapter 7. Customers would be unprotected under chapter 11. The special protective rules are unavailable in chapter 11 because their complexity would make reorganization very difficult at best, and unintelligible at worst. The variety of options available in reorganization cases make it extremely difficult to reorganize and continue to provide the special customer protection necessary in these cases.

Subsection (e) specifies eligibility for chapter 13, Adjustment of Debts of an Individual with Regular Income. An individual with regular income, or an individual with regular income and the individual's spouse, may proceed under chapter 13. As noted in connection with the definition of the term "individual with regular income", this represents a significant departure from current law. The change might have been too great, however, without some limitation. Thus, the debtor (or the debtor and spouse) must have unsecured debts that aggregate less than $100,000, and secured debts that aggregate less than $500,000. These figures will permit the small sole proprietor, for whom a chapter 11 reorganization is too cumbersome a procedure, to proceed under chapter 13. It does not create a presumption that any sole proprietor within that range is better off in chapter 13 than chapter 11. The conversion rules found in section 1307 will govern the appropriateness of the two chapters for any particular individual. The figures merely set maximum limits.

Whether a small business operated by a husband and wife, the so-called "mom and pop grocery store," will be a partnership and thus excluded from chapter 13, or a business owned by an individual, will have to be determined on the facts of each case. Even if partnership papers have not been filed, for example, the issue will be whether the assets of the grocery store are for the benefit of all creditors of the debtor or only for business creditors, and whether such assets may be the subject of a chapter 13 proceeding. The intent of the section is to follow current law that a partnership by estoppel may be adjudicated in bankruptcy and therefore would not prevent a chapter 13 debtor from subjecting assets in such a partnership to the reach of all creditors in a chapter 13 case. However, if the partnership is found to be a partnership by agreement, even informal agreement, than a separate entity exists and the assets of that entity would be exempt from a case under chapter 13.

References in Text

Section 351 of the Small Business Investment Act of 1958, referred to in subsec. (b)(2), is classified to section 689 of Title 15, Commerce and Trade.

Section 301 of the Small Business Investment Act of 1958, referred to in subsec. (b)(2), is classified to section 681 of Title 15, Commerce and Trade.

Section 3(h) of the Federal Deposit Insurance Act, referred to in subsec. (b)(2), is classified to section 1813(h) of Title 12, Banks and Banking.

Section 25A of the Federal Reserve Act, referred to in subsecs. (b)(2) and (d), popularly known as the Edge Act, is classified to subchapter II (§611 et seq.) of chapter 6 of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 611 of Title 12 and Tables.

Section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991, referred to in subsecs. (b)(2) and (d), was classified to section 4422 of Title 12, Banks and Banking, prior to repeal by Pub. L. 111–203, title VII, §740, July 21, 2010, 124 Stat. 1729.

Section 1(b) of the International Banking Act of 1978, referred to in subsec. (b)(3)(B), is classified to section 3101 of Title 12, Banks and Banking.

Amendments

2010—Subsec. (b)(3)(B). Pub. L. 111–327, §2(a)(6)(A), inserted closing parenthesis after "1978".

Subsec. (h)(1). Pub. L. 111–327, §2(a)(6)(B), inserted "other than paragraph (4) of this subsection" after "this section" and substituted "ending on" for "preceding".

2009—Subsec. (h)(3)(A)(ii). Pub. L. 111–16 substituted "7-day" for "5-day".

2005—Subsec. (b)(2). Pub. L. 109–8, §1204(1), struck out "subsection (c) or (d) of" before "section 301".

Subsec. (b)(3). Pub. L. 109–8, §802(d)(1), added par. (3) and struck out former par. (3) which read as follows: "a foreign insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan association, homestead association, or credit union, engaged in such business in the United States."

Subsec. (f). Pub. L. 109–8, §1007(b), inserted "or family fisherman" after "family farmer".

Subsec. (h). Pub. L. 109–8, §106(a), added subsec. (h).

2000—Subsec. (b)(2). Pub. L. 106–554, §1(a)(8) [§1(e)], inserted "a New Markets Venture Capital company as defined in section 351 of the Small Business Investment Act of 1958," after "homestead association,".

Pub. L. 106–554, §1(a)(5) [title I, §112(c)(1)], substituted ", except that an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 may be a debtor if a petition is filed at the direction of the Board of Governors of the Federal Reserve System; or" for "; or".

Subsec. (d). Pub. L. 106–554, §1(a)(5) [title I, §112(c)(2)], amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: "Only a person that may be a debtor under chapter 7 of this title, except a stockbroker or a commodity broker, and a railroad may be a debtor under chapter 11 of this title."

1994—Subsec. (b)(2). Pub. L. 103–394, §§220, 501(d)(2), inserted "a small business investment company licensed by the Small Business Administration under subsection (c) or (d) of section 301 of the Small Business Investment Act of 1958," after "homestead association," and struck out "(12 U.S.C. 1813(h))" after "Insurance Act".

Subsec. (c)(2). Pub. L. 103–394, §402, substituted "specifically authorized, in its capacity as a municipality or by name," for "generally authorized".

Subsec. (e). Pub. L. 103–394, §108(a), substituted "$250,000" and "$750,000" for "$100,000" and "$350,000", respectively, in two places.

1988—Subsec. (c)(3). Pub. L. 100–597 struck out "or unable to meet such entity's debts as such debts mature" after "insolvent".

1986—Subsec. (f). Pub. L. 99–554, §253(1)(B), (2), added subsec. (f) and redesignated former subsec. (f) as (g).

Subsec. (g). Pub. L. 99–554, §253(1), redesignated former subsec. (f) as (g) and inserted reference to family farmer.

1984—Subsec. (a). Pub. L. 98–353, §425(a), struck out "in the United States," after "only a person that resides".

Subsec. (c)(5)(D). Pub. L. 98–353, §425(b), substituted "transfer that is avoidable under section 547 of this title" for "preference".

Subsec. (d). Pub. L. 98–353, §425(c), substituted "stockbroker" for "stockholder".

Subsec. (f). Pub. L. 98–353, §301, added subsec. (f).

1982—Subsec. (b)(2). Pub. L. 97–320 inserted reference to industrial banks or similar institutions which are insured banks as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)).

Effective Date of 2009 Amendment

Pub. L. 111–16, §7, May 7, 2009, 123 Stat. 1609, provided that: "The amendments made by this Act [amending this section, sections 322, 332, 342, 521, 704, 749, and 764 of this title, sections 983, 1514, 1963, 2252A, 2339B, 3060, 3432, 3509, and 3771 of Title 18, Crimes and Criminal Procedure, section 7 of the Classified Information Procedures Act set out in the Appendix to Title 18, section 853 of Title 21, Food and Drugs, and sections 636, 1453, and 2107 of Title 28, Judiciary and Judicial Procedure] shall take effect on December 1, 2009."

Effective Date of 2005 Amendment

Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.

Effective Date of 1994 Amendment

Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–597 effective Nov. 3, 1988, but not applicable to any case commenced under this title before that date, see section 12 of Pub. L. 100–597, set out as a note under section 101 of this title.

Effective Date of 1986 Amendment

Amendment by Pub. L. 99–554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Adjustment of Dollar Amounts

The dollar amounts specified in this section were adjusted by notices of the Judicial Conference of the United States pursuant to section 104 of this title as follows:

By notice dated Feb. 5, 2019, 84 F.R. 3488, effective Apr. 1, 2019, in subsec. (e), dollar amounts "394,725" and "1,184,200" were adjusted to "419,275" and "1,257,850", respectively, each time they appeared. See notice of the Judicial Conference of the United States set out as a note under section 104 of this title.

By notice dated Feb. 16, 2016, 81 F.R. 8748, effective Apr. 1, 2016, in subsec. (e), dollar amounts "383,175" and "1,149,525" were adjusted to "394,725" and "1,184,200", respectively, each time they appeared.

By notice dated Feb. 12, 2013, 78 F.R. 12089, effective Apr. 1, 2013, in subsec. (e), dollar amounts "360,475" and "1,081,400" were adjusted to "383,175" and "1,149,525", respectively, each time they appeared.

By notice dated Feb. 19, 2010, 75 F.R. 8747, effective Apr. 1, 2010, in subsec. (e), dollar amounts "336,900" and "1,010,650" were adjusted to "360,475" and "1,081,400", respectively, each time they appeared.

By notice dated Feb. 7, 2007, 72 F.R. 7082, effective Apr. 1, 2007, in subsec. (e), dollar amounts "307,675" and "922,975" were adjusted to "336,900" and "1,010,650", respectively, each time they appeared.

By notice dated Feb. 18, 2004, 69 F.R. 8482, effective Apr. 1, 2004, in subsec. (e), dollar amounts "290,525" and "871,550" were adjusted to "307,675" and "922,975", respectively, each time they appeared.

By notice dated Feb. 13, 2001, 66 F.R. 10910, effective Apr. 1, 2001, in subsec. (e), dollar amounts "269,250" and "807,750" were adjusted to "290,525" and "871,550", respectively, each time they appeared.

By notice dated Feb. 3, 1998, 63 F.R. 7179, effective Apr. 1, 1998, in subsec. (e), dollar amounts "250,000" and "750,000" were adjusted to "269,250" and "807,750", respectively, each time they appeared.

(a) Until June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act [15 U.S.C. 41 et seq.], and the Act of June 19, 1936, known as the Robinson-Patman Anti-Discrimination Act, shall not apply to the business of insurance or to acts in the conduct thereof.

(b) Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation.

Notes

References in Text

Act of July 2, 1890, as amended, known as the Sherman Act, referred to in subsecs. (a) and (b), is classified to sections 1 to 7 of this title.

Act of October 15, 1914, as amended, known as the Clayton Act, referred to in subsec. (a), is act Oct. 15, 1914, ch. 323, 38 Stat. 730, as amended, which is classified generally to sections 12, 13, 14 to 19, 21, and 22 to 27 of this title and to sections 52 and 53 of Title 29, Labor. For further details and complete classification of this Act to the Code, see References in Text note set out under section 12 of this title and Tables.

Act of September 26, 1914, known as the Federal Trade Commission Act, referred to in subsec. (a), is generally classified to subchapter I (§41 et seq.) of chapter 2 of this title. For complete classification of this Act to the Code, see section 58 of this title and Tables.

Act of June 19, 1936, known as the Robinson-Patman Anti-Discrimination Act, referred to in subsec. (a), is act June 19, 1936, ch. 592, 49 Stat. 1526, known as the Robinson-Patman Antidiscrimination Act and also as the Robinson-Patman Price Discrimination Act, which enacted sections 13a, 13b, and 21a of this title and amended section 13 of this title. For complete classification of this Act to the Code, see Short Title note set out under section 13 of this title and Tables.

Amendments

1947—Act July 25, 1947, substituted "June 30, 1948" for "January 1, 1948".