*1 UNITED STATES v. PHILADELPHIA NATIONAL
BANK еt al. Argued February 20-21, 83. No. 1963. Decided June 1963. *2 Attorney Loevinger argued Assistant General the cause him With on the United States. the briefs were Cox, Weston, Solicitor General H. D. George Charles Lionel Reycraft, Kestenbaum Spaeth. Melvin cause for argued the Price Arthur Littleton Philip R. Ernest von were them the brief With appellees. Wetzel, R. John J. Scott, Starch, A. Carroll Donald T. III. Wright Minturn Brennan and opinion
Me. Justice delivered Brennan Court. brought this civil here, States, appellant
The United for the District Court action in the States United 4 of Sher- Pennsylvania § under Eastern District of Clayton Act, 4,§ man' Act, U. S. C. merger of The enjoin proposed 25,§ S. C. U. Girard Trust (PNB) Bank Philadelphia National here. The Exchange appellees (Girard), Bank Corn Act, 1 of charged the Sherman complaint violations *3 Clayton Act, 15 U. S. C. and 7 of the § § S. C. U. trial, after see appellees § 18.1 From judgment to Supp. appealed the States United this F. Act, § S. C. 29. Expediting .§ 15 U. Court under of S. 883. We jurisdiction Probable noted. U. judgment of the District Court. We hold reverse 7 of appellees by of is forbidden "Every pertinent part: provides 1 of the Act in Section Sherman conspiracy, contract, otherwise, form or or combination in the of trust States, among or of the several restraint trade or commerce Clayton nations, illegal.” be foreign Section 7 of declared Antimerger Act, Act, in 1950 as amended Celler-Kefauver provides pertinent part: corporation engaged in commerce “No any part of acquire, directly indirectly, whole shall or juris subject capital corporation to the and stock or other share no acquire the whole or Commission' shall diction of Federal Trade any corporation engaged part another also com assets of any country, any of the merce, where in line of commerce section may competi acquisition substantially lessen of such effect tion, monopoly.” or to tend create enjoined; Act and so must be we need and not, question alleged reach not,
therefore do the further 1 of violation of the Sherman Act. Proceedings
I. The Facts Below. Background: Banking A. The Commercial in the United
States. this is the first which required Because has case Court to consider the application of the antitrust laws commercial banking to the industry, aspects because industry degree governmental regu- throughout lation of it will recur our discussion, we appropriate begin background 'deem with a brief description.2 portion The opinion upon discussion in this draws undis
puted case, supplemented pertinent evidence record in the Govs, reference materials. See System, Board of of the Fed. Res. Financing (Comm, print 1958); Small Business The Federal Reserve System (3d .1954); Banking ed. Concentration of in the United States (Comm, print 1952); Bogen, Competitive The Position Commercial (1959); Money Credit, Money Banks Commission on and Credit (1961); Freeman, Adequate Capital The Problems (1952); Bank Hart, Money, Debt, Activity (2d 1953); Lent, and Ecоnomic ed.
Changing Banking (1960); Sayers, Structure of Commercial Modern Comm, Banking (5th 1960); ed. Staff House Select on Small Busi ness, Cong., Banking 2d Sess., 86th Concentration and Small Business .Comm, (1960); Attorney U. S. General’s Procedure, on Administrative *4 Banking (S. Federal Control of Cong., Sess., Doc. No. 76th 3d 1940); Fox, Supervisión Banking by Comptroller of the Cur rency, Policy (Redford in Public Administration and Formation ed. 1956), 117; Stokes, Advantage Applica Public Convenience and in Branches, Banking tions for New Banks (1957). and 74 L. J. 921 specifically question For materials competition which focus on the banking, industry, in the see Alhadeff, Monopoly Competi also and Banking (1954); Chapman, tion in Banking (1934); Concentration of Horvitz, . Competition Concentration England Banking and in New
325 unit country primarily in banking Commercial dif- banking is of commercial control is, That banking. independent, large number very throughout fused con- than 1960—rather 13,460 of them local banks — for exam- banks, as, of nationwide in a handful centrated sure, are, There Germany. England ple, 10,000 some branch banks, independent addition largely state is controlled branching, which banks; but altogether by some States —enables prohibited law —and often lines and only to state to extend itself a bank banks course, many the case, is also that far.3 It area. home outside their deposits and solicit place loans true that ours remains qualifications, But with these community banks-. system essentially a decentralized a definite trend however, have witnessed years, Recent ending during decade Thus, concentration. toward in the banks United of commercial the number in 1960 States Lawrence, Banking the United (1958); Concentration Laws, Rev. Banking Anti-Trust 49 Col. L. (1930); Berle, Under Bank- Monopolistic in Commercial (1949); Chandler, Elements 589 Ap- (1938); Gruis, and Their 1 Antitrust Laws ing, Pol. Econ. 46 J. (1955); Funk, Anti- Banking, 24 Geo. L. Rev. 89 plication Wash. (1957); Mergers, 12 Affecting Bus. Law. Legislation Bank trust Ind. L. J. Mergers, Bank Klebaner, Federal Commercial Control Merger Federal Bank Law Wemple Cutler, The (1962); (1961); Comment, Bank Laws, Law. 994 16 Bus. Antitrust and the 'Competi- Company Merger Holding Laws: Branching, Charter, Regulation (1962); Note, Federal Frustrated, Yale L. J. tion Banking Opposing the Federal Mergers: Views 'of The Bank (1962). Justice, 75 Harv. L. Rev. 756 Department of Agencies holding company bank amount of addition, there is a certain In Holding Company 1956, 12 S. C. Act of U. activity. The Bank stringent companies fed holding under brought 1841-1848, bank §§ holding companies registered regulation. As of the 43 eral Lent, deposits. of all officesand of all controlled 7.4% 5.7% Banking (1960), 19. See Changing of Commercial Structure J., 2, Yale L. at 516-522. Comment, supra, note also *5 by despite chartering declined the States increase in Nation’s very new banks and a substantial independent during period. 1,601 credit needs Of total disappeared, 1,503, banks which thus combined $25,000,000,000, disappeared resources of well over mergers. result of unique among are financial
Commercial banks institu- they permitted by accept tions alone are law to deposits. power gives demand This commer- distinctive key economy. cial role the national For merely in, actually of, banks do not deal arе a source but money credit; when bank makes a loan credit- by ing deposit account, augments the borrower’s demand supply.4 Furthermore, the Nation’s credit power accept deposits demand makes banks the intermediaries (since in most financial transactions transfers of substan- moneys always tial by by are almost check than rather cash) and, concomitantly, repositories very sub- stantial corporate individual and funds. The banks’ use these funds conditioned fact that their work- ing very capital largely consists deposits, of demand which liquidity guiding makes principle lending of bank investing policies; thus it is banks the chief country’s source short-term business credit.
Banking operations are varied and “commer- complex; banking” cial a congeries of describes services and credit among devices.5 But them the creation of additional not, sure, pure sleight Such creation A hand. bank may adequate make a loan without Nevertheless, reserves. money g., Samuelson, element creation is real. E. Eco (5th 1961), nomics ed. 331-343. principal banking “products” types are of course various example: credit, personal mortgage unsecured loans, and business loans, secured loans securities or receivable, accounts automobile goods installment and consumer loans, financing, installment tuition revolving cards, bank credit Banking credit funds. services include: acceptance deposits individuals, demand from corporations, gov- checking- credit, management money furnishing of short-term business system, account *6 For the important. most appear to be the loans would to a indispensable discharge of these functions proper of failures as the role bank economy, national healthy surprising It is therefore not attests. depression periods banking subject States is commercial the United that governmental controls', state and federal. variety of and our focus regulation extensive, is the more Federal national only it. It. extends not to the upon will be e., banks, i. super and under federal law banks chartered 12 C. Currency, see U. S. by Comptroller vised seq. 21 et 321, as banks, § 12 S. C. many For state see U. § - S. C. banks, all the national U. virtually well as (FRS), System Reserve are members Federal 222, § banks, more see U. S. C. and than all 95% Corpora Deposit Federal Insurance by are insured insured and nonmember (FDIC). State member tion almost federal'regulatory scheme subject are banks banks. governs the national as elaborate as which banking are of American governmental controls through its System, the Federal Reserve First, manifold. 353- §§ see S. C. operations, (c), U. open-market S. C. rate, control of the rediscount see U. C. U.’S. requirements, modifications of reserve see and savings banks; acceptance agencies, of time and ernmental and other trusteeship services; planning' lock deposits; and trust and estate services; boxes; safety-deposit account reconciliation and boxes credit); (acceptances cor- foreign department and letters services services; investment advice. It should be respondent noted supplying credit, business many are in the other institutions (see pp. competition further, with commercial banks so more or less in savings infra), example: savings banks, mutual and loan 356-357, for personal-finance companies, unions, sales-finance associations, credit (through furnishing companies, private businessmen of trade direct-lending government agencies, Office, the Post credit), factors, companies. Corporations, life insurance Business Investment Small money and credit regulates supply §§462; 462b, indirectly economy thereby regulates however; rate not, rates of loans. This is interest bank e System’s are regulation. Th activities Reserve e., i. designed prime, minimum, influence the interest rate. There is no federal control the max although imum, subject all are banks, state national, usury applicable. to state laws 12 U. S. C. where See range § 85. In the maximum between the fixed state usury practical laws minimum set federal fiscal policies (there against undercutting prime is no law rate do), price but bankers seldom bankers are free to charges their loans as for they Moreover, choose. other charges checking such services, service privileges, governmental *7 regulation, free state federal. branching, acquisitions by a
Entry, and are covered A network of state and federal for a new statutes. charter bank, national, granted state or will not be unless the capital management invested and applicant, and doing its for prospects sufficient business to at a operate reasonable profit, give adequate protection against undue competition and possible See, g., failure. e. 12 U. S. C. 26, 27, 51; (b); §§ 12 4.1 Ann., 7, § CFR Pa. Stat. Tit. § 819-306. Failure to may meet these standards cause the FDIC to refuse an application insurance, 12 1816, U. S. 1815, may FDIC, §§C. cause the Federal Reserve Board (FRB), Comptroller per refuse mission to branch to insured, member, banks, national respectively. 12 36, S. C. 321, (d). §§ U. 1828 Permis sion merge, consolidate, acquire assets, or liabil assume by agencies ities bemay refused grounds. on the same 12 (1958 ed., IV) U. S. Supp. (c), § C. 1828 note infra. Furthermore, appear national banks to be subject state geographical on limitations branching. See 12 IT. S. C. § 36(c).
329 specific provi- to a number of subject are also Banks banking For ensuring practices. at sound sions aimed System of the Federal example, member banks Reserve 12 pay deposits, interest on demand U. S. C. may not may not in common stocks or hold for heir 371a, § invest any obligor own account investment securities of one unimpaired capital and sur- excess of of the bank’s 10% Seventh, 335, may pay 12 24 plus, §§ see U. S. C. savings fixed deposits on time or above the rate interest payment 371b. The of interest FRB, § U. S. C. federally on nonmember insured banks is also deposits IV) (g); regulated. (1958 ed., Supp. § U. S. C. In CFR, Supp., Part 329. the case of national obligations single obligor of a banks, the limit 10% includes loans as well as investment securities. See Pennsylvania imposes the same limita- U. S. C. 84. upon banks chartered under its such Girard. tion laws, (1961 Pa. Ann. Tit. Supp.), Stat. 819-1006. perhaps weapon regu-
But effective of federal most is the broad federal power lation visitatorial agencies bank examiners. Whenever the deem it neces- sary, they may thorough order “a examination of all the affairs of the bank,” whether it be member the FRS .12 or a nonmember insured bank. U. S. C. §§.325, (b); §4.2.- CFR Such examinations are 483, 1820 In and intensive. the banks re- frequent addition, periodic reports opera- furnish detailed of their quired to *8 agencies. 12 S. supervisory 161, 324, §§ tions to the U. C. way agencies In (e). virtually 1820 this maintain the day-to-day banking system. surveillance of the American they banking And should discover unsound practices, they array with a formidable of equipped sanctions. If in of FRB a judgment making the member bank is of bank the Board credit,” may suspend “undue use from the use of the of 12 facilities FRS. credit C. The FDIC has an even more § U. S. 301. formidable 330 If
power: practices” it finds “unsafe or unsound may of any conduct of the business it ter- bank, insured (a). minate bank’s § insured status. S. U. C. termination mem- involuntary Such severs the bank’s bership in if it FRS, bank, state and throws it into if is a receivership S. C. national bank.. TJ. (b). Lesser, drastic, § 1818 but sanctions nevertheless publication of the include results of bank examinations. (f). S. §§ U. C. As a of the existence result of panoply sanctions, this of recommendations agencies concerning banking practices to be followed tend by bankers without of necessity compliance formal proceedings. 1 Davis, (1958), Administrative Law 4.04. supervision
Federal of has “[p]rob- been called ably the outstanding example in government the federal an regulation industry through entire methods of supervision system may Thé be one of the most ..... [systems successful of economic if regulation], not the Id., 4.04, successful.” efficacy most at To the 247. may owe, in system part, we disappearance the virtual
of bank failures from the American economic scene.6
B. The Proposed Merger PNB and Girard. Philadelphia National Bank and Girard Trust Corn Exchange Bank respectively, the second and third are, largest of commercial banks with head offices in the Philadelphia metropolitan area, which consists of the City Philadelphia and its contiguous three counties in Pennsylvania. The home county both banks is the In. example, there were suspensions three bank in the country by entire difficulties; reason of financial two; and in 1961, nine. nine, Of these four involved state banks which were members, neither nor FRS insured the FDIC. 1961 Annual Report Comptroller Currency typical year 286. In a 1920’s, roughly throughout 600 banks country, failed about 100 Rep. them national 196, Regulation banks. See No. of Bank S. Mergers, Cong., 86th 1st Sess. 17-18. *9 branching however, permits Pennsylvania law, city itself; home Pa. contiguous county, to the counties into the §819-204.1, and both Supp.), Tit. (1961 Ann. Stat. banks, four-county area. throughout offices the have $1,000,000,000, of over has assеts PNB, bank, national largest in twenty-first the (as 1959) of making a member of PRS Girard, bank, a state Nation. the. it has assets of about FDIC; and insured merger to be consum- proposed $750,000,000. Were in largest the four- resulting bank would be mated, the county (approximately) the area banks’ area, 36% of net assets, deposits, total and loans. It 34% 36% (First largest Pennsylvania and Bank and the second largest) would Company, Trust now the have between assets, deposits, them of the total 59% 58% 58% largest loans, the net while after four banks in the area would of total assets, have 78% 77% deposits, and of net loans. 78% size of PNB in present part both and Girard is mergers. Indeed,
result of the trend toward concentra- tion is Philadelphia generally, noticeable area which the number of commercial banks has declined from present 42. 1947 to Since PNB has ac- quired formerly independent six; nine banks and Girard acquisitions and these have accounted 59% 85% respective growth during banks’ period, asset of their deposit growth, 63% 91% and'12% 37% growth. During loan period, their the seven largest banks the area increased their combined share area’s total commercial bank resources from about to about 90%. 61%
In November 1960 the boards of directors of the two approved proposed agreement banks for their consoli dation under By the PNB charter. the terms of the PNB’s agreement, stockholders were to retain their share certificates, which would be deemed represent an equal number of shares in the consolidated while Girard’s bank, *10 exchange stockholders would their shares surrender bank, receiving shares the consolidated 1.2875 such shares for each Girard Such a consolidation is share. authorized, subject approval Comptroller to the of the by (1958 IV) 215.7 Currency, ed., Supp. § the 12 U. S. C. Merger 1960,12 (1963 under the Bank Act C. But U. S. IV) give § ed., Supp. (c), Comptroller may the not approval reports his he has from the other until received banking agencieslund Attorney two respect the General ing probable the effects of- on proposed the transaction All competition.8 reports pro three the advised that proposed “merger” appellees technically consolidation, is resulting the entity since bank will different be a from either of the banks, merger, constituent whereas if the transaction were a Girard disappear However, would into PNB and PNB would the survive. proposed merger very closely, transaction resembles a PNB’s present shareholders not to surrender their certificates and share resulting operate the bank is any event, to under PNB’s charter. In the statute essentially treats alike, consolidations com pare (1958 IV) ed., Supp. U. S. C. 215a, 215 with is suggested legal question that the’ of the be instant case would affected technically whether the merger is transaction or a consolidation. Therefore, throughout opinion “merger.” we use the term (c) provides pertinent Section .1828 part: .[by merge “No insured bаnk shall or' FDIC] consolidate any or, directly other insured acquire either indirectly, or the bank of, liability pay any assets or assume deposits in, anjr to made other prior (i) insured bank without the Comptroller consent of the written ,or Currency, acquiring, if the assuming, resulting bank to be a national bank or bank, (ii) a District or [of Columbia] System Board of Governors of the Federal acquiring, Reserve if the assuming, resulting or bank (except is' be a State member bank bank), (iii) Deposit a District or Cor- [Federal Insurance] poration acquiring, if assuming, resulting or non- bank to be a (except' bank). member insured granting a District In ... withholding or subsection, consent under this Comptroller, Board, Corporation, may be, as the case shall consider history the financial and condition of each of the involved, banks adequacy capital structure, earnings of its its future prospects, merger anticompetitive posed would have substantial Philadelphia metropolitan However, effects in the area. February 24, 1961, Comptroller approved (cid:127) merger. opinion No that time. But as rendered at required (c), Comptroller explained § 1828 basis for his in a approve decision state be Congress. ment to included in his As report annual upon competition, effect he reasoned that there “[s]ince will remain an adequate number of alternative sources in Philadelphia, service and in view of the bene ficial upon effects this consolidation international competition national it wás the over-all concluded that upon competition effect would not be unfavorable.” He also that the stated consolidated bank “would far better *11 ablé to community serve the convenience and of its needs by of being city material assistance to its state their industry efforts attract new existing and to retain in dustry.” day Comptroller The after the approved the general management, character of its the convenience and needs of community served; corporate powers the to be and whether or not its purposes chapter. with of consistent the this In the case of a merger, acquisition consolidation, assets, assumption or of liabil- ities, appropriate agency the also take into shall consideration the competition (including tendency effect of the any transaction on approve monopoly), unless, toward and shall not the transaction considering factors, after all such it finds the transaction to be in public standards, the In interest. the interests of uniform before acting merger,, consolidation, acquisition assump- a assets, or subsection, agency (unless tion of liabilities under the it finds immediately prevent probable that it must act in order to the failure involved) request report of one the competi- banks shall a on the Attorney tive factors involved from the General and the other two agencies Comp- referred to in this subsection .... The troller, Board, Corporation the the shall each include in its annual report Congress description the merger, consolidation, of each acquisition assets, assumption approved by of liabilities it dur- ing period report, along following the covered the with the infor- mation; Comptroller, Board, ... a statement the or the Corporation, may be, approval.” the case for its basis merge, present United States commenced áction. steps No have taken to merger consummate the been pending litigation. the outcome of this
C. Trial'and District Court’s Decision. The Government’s case in the District Court relied chiefly on statistical bearing upon evidence market struc- testimony ture and on by economists and bankers to the effect that, notwithstanding governmental the intensive regulation banking"there substantial area play competitive free" forces; that concentration of banking, commercial which proposed merger would was inimical increase, play; principal to that free that the anticompetitive effect of would be felt area in which the banks their offices, making had thus four-county metropolitan area geographical the relevant market; and that commercial banking was the relevant product market. The defendants, offering addition contrary evidence on points, these attempted to show business justifications for merger. They conceded that both economically strong banks were and had sound management, but testimony offered the of bankers’to show resulting bank, greater with its prestige lending and increased would be limit,9 better able com- pete large out-of-state York) (particularly New would attract new banks, business to Philadelphia, and. general *12 promote would the development economic metropolitan the area.10 329, supra. 84, p. See U. S. resulting C.- The bank would § lending have a .$15,000,000, limit of $1,000,000 of which not would merger
be attributable accounting the but to unrelated factors. 10 There Philadelphia, although was evidence it ranks fourth that among or fifth the general urban Nation’s areas-in terms of com activity, mercial ranks largest ninth in terms of the size of its bank, large and that some business firms which have their head Philadelphia offices in satisfy must seek banking elsewhere to their inadequate because lending needs Philadelphia’s limits of (1) the Upon this the District Court record, that:. held Merger repeal Act of 1960 did not of the Bank passage they may- antitrust by implication the laws insofar (2) Clayton Act is apply § to bank 7 of the mergers; not cor inapplicable, to bank banks are because jurisdiction of the Federal Trade porations “subject to.the applicable, is the Commission”-; (3) assuming § but that four-county Philadelphia area is not the metropolitan geographical relevant market PNB and Girard because actively compete with other banks for bank business throughout greater part of the northeastern United (4) assuming applicable-and but States; § even that four-county market, that area is the there relevant no probability reasonable com competition among that mercial banks in area will substantially ened les merger; (5) merger result of as the not since the does Clayton § 7 of the it not Act, violate a does fortiori. merger
violate Act; (6) Sherman will bene Philadelphia metropolitan economically.' fit the area The District Court ruled purposes 7,§ also that commercial is a line of commerce; appellees ruling. do not contest this Applicability op op
II. Section Mergers.
Act to Bank Original A. The Section and the 1950 Amendmen-t.
By terms, present acquisitions its 7 reaches cor porate capital by corporation stock share any engaged banks; Pennsylvania PNB, currently largest First the two banks Philadelphia, lending $8,000,000. each have limit Girard’s is $6,000,000.
Appellees testimony offered would enable certain scale, specifically, economies -of would enable formation of department more foreign presently elaborate than either bank is attempted justification, able maintain. this But which mentioned opinion Court its and has not been District developed any fullness Court, before we consider abandoned.
336 acquisitions corporate it reaches commerce, but jurisdiction “subject by corporations
assets
§
under
5
FTC,
The
Commission.”
Federal
Trade
Act,
jurisdiction
has no
Trade Commission
of the Federal
(a) (6).1 1
if the
Therefore,
45§
15 U. S. C.
banks.
over
acquisition,
an assets
is
merger be deemed
proposed
merger
vigorously
Appellant argues
that
§
within
7.12
pure
acquisition,13
from a
assets
crucially different
Clayton Act,
amended,
reject
argument
as
11 of the
11 We
§
jurisdiction
upon
That
the FTC.
21, confers
over banks
15
C.
U. S.
compliance
“Authority
section,
pertinent part:
to enforce
provides in
13,
18,
2, 3, 7,
8 of
14,
and 19 of this title
sections
[§§
subject
persons respectively
Act,
Clayton
thereto
amended]
applicable
in the Federal Reserve Board' where
...
to.
is vested
companies;
banking associations,'
and in the Federal
banks,
and trust
applicable
of com
to all other character
where
Trade Commission
authority
argument
the FRB has no
is that since
merce . . .'The
infra,
against
mergers, see note
Act
bank
to enforce
category
residual
of “all other char
mergers must fall into the
subject
However,
be
to the FTC.
there
and so
of commerce”
acter
history
legislative
of the 1950 amendment to
,jntimation in the
is-no
jurisdiction over banks
traditional lack of
11 that the FTC’s
7 and
.§§
the-language
Moreover,
from
it is clear
was to be disturbed.
banking associations,
are meant to
“banks,
companies”
and trust
part
commerce,”
so
comprise
cannot
a distinct “character
reserved to the FTC:
character of commerce”
the “other
jurisdiction appears
have
from the FTC’s
exclusion of banks
subject
alrеady
exten-
were
been motivated
the fact that banks
C. Hurst & Son v.
controls. See T.
sive
administrative
federal
1920).
(D.
Comm’n,
D. Va.
268 F.
C. E.
Federal Trade
commerce,
argument
is not
is made in this case that
No
argument
inapplicable; plainly, such an
and therefore that
§7
Corp. Board Govs.
have no merit. See
v.
would
Transamerica
(C:
1953);
United
Sys.;
2d
A. 3d Cir.
cf.
Fed. Res.
States,
F.
Assn.,
Underwriters
When it was first enacted only 7 referred corporate acquisitions of and share capital; stock as ¿cquisitions silent to assets and as to and con- eorporations their corporations surrender interests in ex- in those change very rights resulting for their corporation. different in In acquisition, however, corpo- an selling asset of the shareholders purchasing ration corporation obtain no interest in the no and retain merger, interest assets a transferred. In unlike an asset acquisition, resulting automatically acquires firm rights, all the powers, franchises, liabilities, fiduciary rights obligations merging merger, 'the firms.. In acquisition, a but not an asset there management continuity personnel. the likelihood of a and other Finally, acquisition, necessarily a a like stock merger, involves acquisition by corporation one of an immediate voice the man- agement corporation; of the business of another no deci- voice corporation acquired by purchase sions párt of another of some States, its assets.” Brief for the United 75-76. merger appellees’ may upon such be effected the affirma “[A] outstanding tive vote of the holders of two-thirds stock acquiring each bank . . . but if PNB were .of all the Girard stock each .Girard shareholder could decide for himself to transfer whether merger requires public his A shares. notice whereas stock can privately. acquired dissenting A shareholder from a has right appraised to receive the his value of . shares . . whereas no right acquisition comparable shareholder has a in-аn of stock. Fur corporate merged company thermore the existence is terminated merger, acquisition but remains unaffected an of stock.” Appellees, Brief for 30-31. c. Stat. 15, 1914, 323, § Act of October
solidations. may It that the omission is true 731-732, note infra. Congress’ principal concern oversight. an not have been specifi- companies, of holding the activities was with secretly whereby corporations practice cally with the by purchasing the competitors control their acquired Although acquisitions assets companies. stock of those corporate amalgama- mergers were known forms dangerously anticompetitive their no less time, tion at the Congress.15 may fully apparent not have been effects light of the statutory read in the over- Still, language, corporate to control congressional purpose concen- riding *15 to tending to lent itself a construction monopoly, trations mergers and at least whereby § 7 would have reached hardly to It would- have done violence consolidations. vague to term “share language interpreted so have the see, 1024, L. 1027-1028 30 Geo. Wash. Rev. capital,” adopted view “where or to have that-: (1962), exchanged purchasing com- are for the assets stock assuming companies previously that the two were pany, acquired it is the seller has competition, apparent therefore, a . . . competing company stock in [and] 7 and hence effecting section was violated selling com- the distribution of the stock received and are subsequent shareholders its dissolution pany to its proceedings by government no to aside bar set purchase.” Handler, Mergers and the Anti- Industrial Laws, 179, (1932).16 Trust 32 Col. L. Rev. 266 beyond But the courts the reach be found 7, merger technique supplanted §of when the had even 15 legislative, history The of the 1914. in Brown Act reviewed States, 294, 313-314, v. 370 Shoe Co. United U. S. and notes 22-24. acquisition one, In the case of an like the in which shares instant acquired corporation exchanged for shares in difficulty resulting corporation, no we discern fortiori conc Compare eptualizing acquisition.” as a “stock note the transaction 13, supra. corporate mode of prevalent as the acquisitions stock Amer Corp. Celanese States v. United amalgamation. 1950); see D. N. Y. (D. C. S.
ica, Supp. 14 91 F. and & Trade Comm’n Federal Mfg. Co. v. Thatcher Swift Fed Comm’n, together decided Trade Co. Federal v. Co., 554; S. Meat U. Comm’n v. Western
eral Trade Trade Elec. Co. Hegeman v. Arrow-Hart & Federal. largely 7 became
Comm’n, result, § As S. 587.17 U. g., Brown e.. may in, effect be found to the same Statements du Pont de supra, States v. E. I. Co., United 313-314, 316;. Shoe at Co., States v. Steel 592; United Nemours & 586, Columbia 353 U. S. States v. Columbia Pictures
Co., 7; United 495, 507, n. 334 U. S. 1960). Corp., (D. D. Y. See also Supp. 153, 182 C. S. N. 189 F. Hernacki, Mergerism (1922); and Sec Op. Atty. 225, 241 Gen. 659, Clayton Act, L. Rev. 676-677 20 Geo. Wash. tion 7 of Merger Wemple Cutler, Federal Bank Law and (1952); and (1961).; Note, 994, Sec Laws, Bus. Law. 999-1000 Antitrust Legislative History, 52 L. A Col. Rev. Act: tion 7 of the (1952). 768-769 Court, the-holdings
Actually,
in the three cases that reached
Arrow-Hart,
quite
generally
Thatcher, Swift,
narrow. See
were
They
(1926).
based not on a
were
Note, 26
L. Rev. 594-596
Col.
section,
power under
but on the enforcement
of substantive
lack
requiring
powers to “an order
the FTC’s remedial
which limited
2, 3, 7,
such
person
from
such
violations [of §§
desist
cease
the stock held or rid itself
Clayton Act],
divest itself of
8 of the
contrary
provisions of sections seven
to the
chosen
of the directors
*16
Congress’ evident
735. Faced with
eight
this Act.” 38 Stat.
ordinary' powers
upon
of a court
the FTC the
refusal to confer
acquired
assets were
after
unless the
equity,
this Court held that
(which
had been issued
was
of stock divestiture
FTC’s order
Co., supra,
Western Meat
Trade Comm’n v.
where
the case in Federal
a
sustained),
could
order
the Commission
was
Commission
Sys.
Fed. Res.
Board
Govs.
Compare
of assets.
divestiture
1950),
Corp.,
(C.
9th Cir.
v. Transamerica
powerless transfer of assets was even where the jurisdiction acquisi stock defeating remedial over aimed at the FTC’s powerless against the Commission was 7, tions violative § fortiori Hegeman Fed- & Elec. Co. v. See Arrow-Hart typical merger.- 340 1629-1630 1627, Yale L. J. Comment, 68
a dead letter. Merger Commission, The (1959); see Federal Trade 3-6; Hender Summary Report (1948), 1, A Movement: (1924), 40. Mean son, Federal Trade Commission The States Columbia while, this Court’s decision United v. Co., Steel Sher 495, 334 S. stirred concern whether the U. against corporate acquisitions. man Act alone was a check (1952). 52 L. Rev. 768 Note, 766, Col. background Congress 1950 against
It was assets-acquisition provision. amended 7 to include an § 29, (Celler-Kefauver Antimerger Act of December 1950 § 64 18.18 Act), 1184, 1125-1126, c. Stat. 15 U. S. C. Comm’n, supra, eral Trade part at 598-599. As of the 1950 Clayton Act, 11 amendments to the was amended to read: “an order § requiring person stock, such to . . . divest itself of the or other share capital, orig assets, or held . . . S. as an .” U. C. Whether §21. Thatcher, Arrow-Hart correctly inal matter were decided Swift longer open they explicit premise question, is no an since were the Shipyards State Bd. Ins. Todd the 1950 amendment to 7. See v. § Corp., 451, 458, p. 349, 370 U. S. infra. question powers Clay The of the remedial under FTC’s § distinguished powers ton Act is to be of its from that remedial under Act, (b). 5 of the Federal Trade Commission S. In U. C. § § Co., Federal Trade Comm’n v. Eastman Kodak 274 U. S. Swift, relying on Thatcher Court, held that the Commission had power proceedings. no But cf. Gilbertville to order divestiture in 5 § Trucking States, United Co. v. Pan American 115,129-131; S. U. Airways States, World v. United 296, 312, 371 U. S. and n. 17. supra, original See note for text of amended 7. The pertinent part: corporation engaged read in “no in commerce shall acquire, directly indirectly, any part or the whole or of the stock or capital corporation engaged commerce, other share of another also in substantially acquisition may where the effect lessen of such be. competition corporation acquired between the whose stock is' so corporation making acquisition, such or to restrain commerce any monopoly any community, section or create tend to line of commerce.” many years passage followed of un- 1950 amendment legislation assets-acquisition attempts plugging
successful
enact
*17
legislative
The
on
history is. silent
the specific ques
tions why the amendment made no explicit
reference
why
to mergers,
acquisitions by
assets
corporations not
subject
jurisdiction
to
were not included,
FTC
and'what
these omissions
signify. Nevertheless,
the basic con
gressional design clearly emerges and from
design
answers,
questions
to these
Congress
inferred.
may
primarily sought
bring
to
within
7 and thereby
close
regarded
what
in
loophole
But,
it
as
the section.19
it
addition,
sought
reach
to
transactions
such
Steel,
involved in
Columbia
simple purchase
was a
which
loophole.
Note,
766-767,
(1952):
See
Ii.
*18
Congress
merger.20
words,
a
In other
and not
of assets
7 a
give §
amendment would
the 1950
contemplated
range
bring
corporate
the entire
which would
reach
pure
pure
acquisitions
from
amalgamations,
stock-
Thus,
scope
§
within the
7.
acquisitions,
assets
read
provisions,
stock-acquisition
assets-acquisition
and
together,
category per-
neither
mergers,
reach
which fit
of the
the two ends
fectly but
lie somewhere between
supra. So
13,
pp. 336-337,
14,
See
and notes
spectrum.
corporations
specific exception
acquiring
construed,
from the
jurisdiction
to the
excludes
subject
not
FTC’s
by
corpora-
coverage
acquisitions
§of 7
assets
such
merger.
accomplished'by
tions when
purchase by
Steel
United States Steel
Columbia
involved the cash
Corporation
physical
Corpora
of the
assets of Consolidated Steel
tion;
exchange
there was no
of shares and no alteration
Consoli
identity.
Transcript
corporate
of Record, United States
dated’s
See
(No.
1947),
Co.,
Term,
v. Columbia Steel
n. Clayton Act, Judiciary Amending 7 and 11 of the on Sections on the 73; Hearings Sess.; 10, pp. 28, before a Subcom Cong., 1st ser. 81st Judiciary Corporate on the Committee Senate mittee 24; Cong. Cong., 2d Acquisitions, 81st 1st and Sess. Mergеrs and R,ec. sponsor (Senator Kefauver, of the bill to amend Senate is a vivid illustration of the neces Steel Co. case 7: “the Columbia § 16503; Act”), proposed sity amendment for the Cong. 16498-16499. cf. 96 Rec. by a supported- specific number
This construction considerations.
First. illogical and Any other construction would be congressional disrespectful plain purpose amend- a ing large loophole it would create because designed loophole. unquestioned to close a It statute stock-acquisition every that the of 7 embraces provision including corporation engaged commerce, banks. And plain Congress, 7,§ it is amending considered distinction for antitrust purposes acquisition between corporate by-purchase acquisition control of stock *19 merger sought unsupportable reason, in and to overrule decisions of this recognized the Court which had a such distinction.21 If, therefore, mergers in industries outside supra. congressional note See attitude this toward Thatcher, Swift, Court’s typified and in decisions is Arrow-Hart this remark of Court, effect, Senator O’Conor’s: “The said that quite the was power Commission free to use [Federal Trade] Congress upon it, which long had conferred so as it .confined the use power ordering of pieces paper that to the divestiture of of which happened Cong. to be worthless.” 96 Rec. 16433. Senator O’Ma- honey remarked, example, for there “no doubt of drafting fundamental an fact that innocent defect in the of section Clayton creating Act back in had great resulted in a opportunity escape by flagrant for Cong. violators of the law.” 96 sharply criticizing Rec. 16443. After decisions, this Court’s “I perfectly Senator continued: take the record is clear that what purports this bill to do is to an original correct omission Clayton Clayton Act. When authors of the Act and the Con gress passed they which thought they it enacted bill into law giving authority were the Federal Trade Commission administrative prevent monopolistic mergers to . . also, . .” So Ibid.. Senator economy Kefauver “it observed: would been much for better have country repealed' to have sections 7 and 11 of the wide-open loophole Act rather than let this to remain. Most of the large monopolistic mergers which have become to detrimental free-enterprise system way of our Nation have occurred plain original Clayton evasion of intent of Act.” Cong. Rec. 16451. deemed.beyond the reach jurisdiction were
the FTC’s in treat- precisely the result would be that difference 7, § ex- Congress hand, On the other rejected. ment which cluding acquisitions from the section assets not not create a lacuna appear in those industries does' practical importance.22 purchase A cash would seem to be another bank’s assets not fully industries, corporate effective method of In other acquisition. purchase plant, patents, seсrets, and the
a cash trade inventory, directly competitive position like the ac will often enhance desiring quiring corporation, Steel But bank as Columbia Co. itp acquisition through corporate
increase share of business ordinarily acquire deposits capital, need the other bank’s would working capital, merely deposits its assets. For more- mean more ,A capital surplus increase the cash' additions limit. lending purchase, in effect,only cash, substitutes since bank assets cash principally very liquid securities and' loans re consist cash and capital ceivable, nothing acquiring and sur and adds to the bank’s plus working capital. exchange True, or to its an of its stock for objectives. acquiring clear, assets would achieve the bank’s We however, light Congress’ overriding purpose,- in'amending that in exchange loophole original section, to close the in the if such an (or clearly transaction) in its effects other evasive were tantamount exchange acquisition merger, to a would not be an “assets” meaning within the of 7 would be as a transaction but treated . subject to that section corporations We have not the fact there are overlooked *20 subject jurisdiction. among other industries not to the FTC’s Chief subject these are air carriers to the other Civil Aeronautics Board and subject carriers to the Interstate Commerce Commission. Both agencies exempt mergers given, expressly, powers have been broad acquisitions and in form from whatever the antitrust laws. Sée 49 (11) 1378,1384; (13).- Therefore, U. S. C. 49 S. C. 5 and U. §§ § acquisitions exclusion of assets in such industries from 7 would § significance. seem to have little Clayton Act, 21, Section 11 of 15 U. S. C. vests the FRB with § authority applicable provi- to enforce 7 “where to banks.” This § passed sion has been in the Act since it was first in 1914 and was not changed by Merger 1960, the 1950 amendments. The Bank Act of assigning merger applications Comp- in roles to the FDIC and Currency FRB, plainly supplanted, troller of the as well to the we as to amend Congress which bill Second. debated important of differences between fully 7 was aware § example, For a of assets. pure purchase and Kilgore Senator remarked: talking mergers, you about you talk about
“When a stock transaction. . . .. .. . [A]ctually you merge
“. . . what do is the stock- holdings of and corporations, both instead of that— merge I am in thinking practical you terms — of corporate corporations you, entities the two and get corporation you one out of and issue in it, stock corporation the one lieu of other the stock whereupon the corporation of the corporation, stock merged which had been is canceled the new cor- poration, you corporation handling and have one operation really of So it is a stock two. transaction wind-up, regardless the final of you what call it. I purchase you But what call а of assets where purchase physical assets, things you which upon lay your hand, could either in the records ob on ground.....” Hearings before Subcommittee authority think, may acquired the FRB have under whatever § against virtue the amendment to enforce § mergers. Merger applies only Bank mergers, Since the Act con solidations, acquisitions assets, assumptions but liabilities outright acquisitions, authority stock the FRB’s under § as it existed before the 1950 amendment of 7 remains unaffected. g., Corp. Sys., e. Transamerica v. Board Govs. See, Fed. Res. (C. 1953). 2dF. A. 3d Cir. Nothing in opinion, course, power FTC, limits the amended, any-transaction, under including to reach §§7 consolidations, range including in the broad between and pure pure stock corpora- assets acquisitions, acquiring where the subject tion is (a) (6), to the FTC’s jurisdiction, see 15 U. S. C. § and to order divestiture stock, capital, acquired share or assets transaction, see U. S. C. 21.§ *21 Judiciary on Corporate on the
the Senate Committee and 2d Mergers Cong., 81st 1st Acquisitions, g.,id., 176; effect, see, same e. at Sess. to the 139, 320-325. § as used in amended
Plainly, acquisition of “assets” of simple equivalent acquisition to be a was not meant against to by but was intended ensure merger, rather by of evasive blunting antimerger thrust section in original rendered the section transactions such had stock-acquisition provision 7,§ Thus, effectual. of' amendment, though haec verba the 1950 reenacted expanded include, in its context to new must deemed be consolidation, very acquisitions by merger or least, at the parties, transactions which transfer of stock entail clearly reaches cor assets-acquisition provision while the involving-no And such transfer. see porate acquisitions Congress point of This to be the supra. note seems typical many, man that: “What remark, Patman’s mergers on the same foot put corporate does to all bill or the acquisitions stock ing, whether the result at 126. physical Hearings, supra, assets.” acquisition Report House on the bill To the same effect language present amend 7: “The bill retains of the. enough prevent which is broad evasion statute of assets only purchase It purpose. central covers .... any acquisition or stock but also other method of. but also indirect
It forbids not direct acquisitions Rep. Cong., . 81st 1st acquisitions . . .” H. R. No. Sess. 8-9. history objective that the legislative
Third. shows subject the'juris including phrase.“corporation in 7 was not diction of the Federal Trade Commission” amalgamations to limit covered the amended explicit to make the role of the FTC in admin statute but istering predominant the section. The focus the hear- of. *22 upon powers the reports committee debates, and ings, had un which of this Court The decisions of the FTC. Thatcher, Swift, original § loophole in the covered the 7— directly upon the sub Arrow-Hart —had not rested and scope limited coverage 7, upon the §of but rather stantive 17, See note § 11. powers FTC’s divestiture under power intimations the courts’ There supra. were Mfg. Co.v. might greater. Thatcher § 7 See enforce far. Fed Comm’n, 561; at & Co. v. supra, Federal Trade Swift Trade Comm’n Comm’n, supra, 563; Trade at Federal eral & 624 Arrow-Hart Co., 619, Eastman Kodak 274 U. S. v. Comm’n, at supra, Elec. Federal Hegeman Co. v. Trade the 7 of The Uncertainties Section 598-599; Irvine, loop Q. (1928). 14 28 Clayton Act, Thus, Cornell L. in the gap primarily viewed as hole was sometimes Clayton although jurisdiction.23 Furthermore, FTC’s court always provided Act has for dual enforcement W. United States T. 25;§ see 15 U. S. C. v. agency, Export Co., 629; 345 S. United Alkali Grant U. States 1950 208, prior S. States, 196, v. United 325 U. Assn. largely 7 was § amendment enforcement left Mergers (1959), 205, Act Martin, Clayton FTC. Anti-Merger An Admin Act: 219; Montague, Celler 253 Crisis, Problem in an Economic 37 A. B. A. J. istrative 23 g., Attorney Bergson: e. See, statement Assistant General “If significant future, any it essential it is to have effect for 7] [§ will" be be amended so that the Federal Trade that.it Commission today.” position problem it exists in a to deal with-the Hearing 3 Committee on before Subcommittee No. House Clayton Judiciary Amending Act, 7 11 of the 81st Sections p. Cong. "Cong.,. Sess., Rec. 16452- 1st ser. 28. See also 96 (Representative ; Cong. 11490-11491, 11499, Rec. suggested amendment Byrne:' to sections 7 and “the merely give same would Commission Act Trade] the. [Federal already possesses regard acquisitions over power asset acquisitions loophole This of stock. would close and restore meaning statute.”). to the the-impetus large
(1951). And to amend 7 came g., supra, 187-194; e. part See, Martin, from the FTC. Commission, Reports, 1928, Annual 18- pp. Federal Trade 19; pp. 12-13; 1948, pp. Merger Move 11-22; The Congress in Summary Report (1948). ment: A clearly question concerning intended to remove all power corporate remedial acquisitions, FTC’s over explicitly enlarged therefore jurisdiction. the FTC’s Congress’ choice of underscoring means the FTC’s enforcing provides role no basis for construction which would undercut congressional pur dominant pose eliminating the difference in accorded treatment *23 acquisitions stock original § 7 construed. It is settled law that “[i]mmunity from the
Fourth. antitrust laws lightly implied.” is not Fed v. California Comm’n, eral Power 369 482, U. S. 485. United Cf. Co., States 198-199; v. Borden 308 188, U. S. United Co., States v. Southern Pac. 259 214, U. S. 239-240. This canon, of construction, which reflects the felt indispen role of policy sable antitrust in the of a free maintenance economy, controlling here. For there is no indication in the legislative history to the 1950 of § amendment 7 Congress that wished to special confer a dispensation upon banking industry; if Congress had so more wished, over, surely it would exempted have industry from stock-acquisition as well as assets-acquisition provision. course,
Of our of the amended 7§ is not construction because, foreclosed after the passage of the amendment, some members Congress, and for a time the Justice Department, voiced the view that bank mergers were still beyond the reach the section.24 views of a sub- “[T]he 24See, g., e. Staff of Subcommittee No. 5 of House Committee Judiciary, Cong., 82d Sess., Mergers'and 2d Bank Concentra Bаnking (1952) tion of vii; 5948, Facilities printed R.H. inferring a hazardous basis Congress form sequent Price, one.” United States v. earlier intent of.an States, United S. U. v. 313; see U. S. Rainwater Workers, Mine States v. United 590, 593; United de E. I. du Pont States v. United cf. 258, 282; U. S. Co., This holds true
Nemours & S. 590. U. may misunderstanding scope § of 7 though even Merger Bank passage in the played part some have to which we shall question, Act of 1960.25 There is inconsistency be whether there exists such shortly turn, construe Merger Bank Act and as we now 7,§ tween repealed holding that 7 must be deemed it, require § toas from tanto; but question is a different whether pro task misunderstanding scope of 7 is relevant to our gave in 1950. Congress the section defining scope what appli Merger Act, enacted the Bank Congress When bank.mergers to be cability of 7 to was still authorita tively determined; subject speculation. Thus, was a part a case in which our “earlier decisions are this is not we rests, of the arch on which the new structure [and] change disturbing refrain from them lest we [must] fashioned.” State Board Ins. Congress design v. Shipyards Corp., Todd 451; S. 458. Cf. note U.
supra. The design Merger Bank fashioned Act predicated upon uncertainty scope 7,§ as to and we uncertainty. design,by dispelling do no violence to that Cong. (1956); Hearings Rec. before a Subcommittee 2108-2109 -Banking Currency the Financial the Senate Committee on pt. 2, p. (testi 1957, Cong., Sess., Act of 1st 1030 Institutions 85th Regu mony Attorney Brownell); Rep. 1416, General H. R. No. 196, Mergers, Cong., 9; Rep. of Bank 86th 2d Sess. S. No.
lation Regulation Mergers, Cong., 1-2, of Bank 1st Sess. 5. 86th 25 g., Clayton e. See, Representative Spence: “The remarks of Act mergers to bank because in the case of banks it covers ineffective‘as acquisitions mergers accomplished are not stock 24, supra. Cong. (1960). way.” 7257 See note 106 Rec. also 350 Merger the Bank
B.
Act
1960.
Effect of
Appellees contended below that
Bank Merger
Act,
by directing
banking agencies
competitive
consider
approving
factors before
12
mergers,
(1958 ed.,
U. S. C.
8, supra,
IV) § 1828
Supp.
note
(c),
approved
immunizes
from challenge under the federal
antitrust
laws.26
We
the District Court was correct
in rejecting
think
this contention.
express immunity
No
is conferred
Repeals
the-
Act.27
the antitrust
implication
laws
a regulatory statute
strongly
from
disfavored,28
26
appeal.
it,
This contention was abandoned on
We consider
nevertheless,
proper
judicial
because it touches the
relations of the
Co.,
spheres.
United States v. Western Pac. R.
and administrative
59,
352 U. S.
63.
27
g.,
express exemption provisions
of, e.
Contrast
this with the
Act,
1384;
the Federal Aviation
49 U. S. C.
Federal Communica
.§
Act,
(a),
(c)(1);
tions
47 U. S. C.
222
Interstate Commerce
§§221
Act,
(11),
(9), 22; Shipping
49
5
5b
Act,
U. S. C.
46 U. S. C.
§§
(1958
Supp. III) §814;
§62;
ed.
Act,
Webb-Pomerene
15
S.U.
C.
itself,
7,
and the
15
Act
U. S. C. 18.
28
Freight Assn.,
See United States v. Trans-Missouri
U. S.
Assn.,
United States v. Joint
290, 314-315;
505;
S.U.
Traffic
States,
Northern Securities Co.
v. United
(plurality
197,
S.U.
opinion),
(dissenting opinion);
United States v.
&
374-376
Pacific
Ry.
Co.,
Chicago
87, 105, 107; Keogh
Arctic
& Nav.
&
228 U. S.
v.
Co.,
N. W. R.
Central
Co. v.
156, 161-162;
260 U. S.
Transfer
Assn.,
Railroad
Terminal Ware
474-475;
Terminal
469,
288 U. S.
house,
Pennsylvania
Co.,
Co.
R.
513-515;
United
v.
297 U. S.
Co.,
Socony-
States v. Borden
States
United
188,197-206;
308 U. S.
v.
Co.,
150, 226-228; Geоrgia
Pennsylvania
Vacuum Oil
310 U. S.
v.
Co.,
Export
R.
439, 456-457;
States Alkali
324 U. S.
United
Assn.
States,
Bradley
United
Allen
205-206;
Co. Local
S. 196,
v.
325 U.
v.
Union,
No.
Northern
R.
797, 809-810;
Pac.
Co. v. United
325 U. S.
,
Corp. America,
State 356 U. S.
1;
United States v. Radio
334; Maryland
States,
& Va. Milk Producers Assn. v. United
U. S.
Comm’n,
v. Federal Power
467;
362 U. S.
California
Airways
482;
States,
Pan American World
U. S.
v. United
371 U. S.
Exchange,
Silver v. New York Stock
305;
296, 304,
In the California
not confer
did
approval of
held that the FPC’s
though, as
Clayton Act, even
from 7 of the
immunity
competitive
agency had
case,
in the instant
taken
merger applica
passing upon
factor into account in
think
484-485,
We
S.,
at
487-488.
tion. See
U.
Comptroller
Although the
is"controlling here.
California
in pass
upon competition
effect
to consider
required
not re
he was
ing upon appellees’ merger application,
he was
any particular weight;
factor
quired
give
(and
not)
hearing
did
hold a
before
not even
required
provi
specific
and there is no
approving
application;
Plainly,
of his decision.30
judicial
sion for
review
Co., supra,
Keogh
Chicago
Pan
163;
See, e.
& N. W. R.
g.,
v.
at
Airways
States, supra,
American World
309-310. Cf.
United.
v.
at
Co.,
Abilene Cotton
Texas & Pac. R. Co. v.
Oil
range scope powers of administrative under the in Merger Act bear little resemblance to those involved Pan American. did in Congress, passing Merger Act,
Nor the Bank regulation the view that is so banking embrace federal comprehensive that enforcement of the laws antitrust in unnecessary, light would be either complete- the regulatory structure, disruptive ness of or of that legislative structure. On the contrary,. history clearly any suggestion the Act seems to refute applicability of laws to be the antitrust affected. Reports Both the House and Senate Committee stated any that the Act would not in way applicability affect laws, acquisitions. Rep. to bank H. antitrust R. Cong., No. 2d 9; 86th Sess. S. No. 86th Rep. g., 1st e. Cong., Cong. Sess. 3. See also, Rec.
(remаrks of Robertson, sponsor). Senator the Act's regulation Moreover, bank respects most less com- is plete public utility than regulation, which interstate rail air carriers, among others, subject. Rate regulation in banking industry largely limited and indirect, p. 328, supra; see banks are no duty under not services; though in their location discriminate of bank officesis regulated, may banks do place business — deposits loans solicit they please. fact —where banking agencies that the maintain a close surveillance of industry with a preventing view toward unsound prac- might tices that impair liquidity insolvency lead to not make regulation does federal all-pervasive, although it does minimize the hazards of competi- intense Indeed, tion. that there are so many public direct con- trols over unsound competitive practices industry argument refutes the private controls of competition are necessary public in the ought interest and therefore to be immune from scrutiny under the antitrust laws. Cf. Kaysen Turner, Policy Antitrust (1959), 206. “primary jurisdic that the doctrine of note, finally,
We applicable judi here. requires tion” That doctrine protection integrity cial cases where abstention regulatory preliminary of a scheme dictates to the resort agency which administers the scheme. See Far East Con United, States, 570; v. S. Great Northern U. ference Co., R. Co. Merchants Elevator 285; Schwartz, v. S.U. Legal Competition Regulated Restriction of Indus tries: An Abdication of Responsibility, Judicial 67 Harv.
L. (1954).31 Rev. is not jurisdiction Court thereby ousted, but Am. postponed. See General *27 Co., Tank El Corp. Car v. Dorado Terminal S. 308 U. Co.,
433; Federal Maritime Bd. 356 S. v. Isbrandtsen U. ; 498-499 3 Davis, (1958), Administrative Law 1-55. Thus, if even- we were to the of applicability assume merger-application doctrine to proceedings before the. banking agencies,32 present action would not be barred, agency for the proceeding completed before the antitrust action was commenced. Cf. United States v. Co., Western R. Pac. 352 59, 69; U. S. Retail Clerks Int’l Schermerhorn, Assn. v. recognize 373 U. S. 756. We practical applying effect of pri- the doctrine of generally Primary See Jaffe, Jurisdiction Reconsidered. The Laws, Primary Anti-Trust of (1954); Latta, U. Pa. L. Rev. 577 Regulated Jurisdiction in the Laws, Industries and the Antitrust (1961); Regulated 30 U. Cin. L. Rev. Note, Industries and the Antitrust Laws: Coordination, Substantive and Procedural (1958). Col. L. Rev. 673 32In Comm’n, supra, v. Federal Power the Court held California stay that the proceeding merger application FPC must its on a until completion pending by of a Department; antitrust suit the Justice fortiori, entertaining the court required the suit would not be pending merger abstain application by consideration of the the FPC. question We need not and do not consider the whether the California decision Comptroller would control here had the been denied an opportunity approve before the antitrust suit was commenced. judicial to channel has sometimes been
mary jurisdiction policy appellate antitrust into review enforcement Bd. v. Federal Maritime agency’s decision, see Coast Co., D. L. Piazza West supra; cf. Isbrandtsen Co. v. Line, Inc., 1954), A. 2d even (C. 2d 947 Cir. F. entirely agency if the has the preclude such enforcement power challenged activities, see United approve Co., 474; cf. States Nav. Cunard S. S. 284 U. S. v. Co. Railway Agency, Supp. 101 F. Express United States v. Bd. (D. D. Del. but see Federal Maritime 1951); C. Co., may be no supra. v. Isbrandtsen But here there power of administrative decision judicial review any approving approval and such does not in merger, immunity pp. event from laws, confer see antitrust 350-352, supra. Furthermore, the considerations against finding repeal laws militate the antitrust implication regulatory from of a also the existence scheme argue persuasively against attenuating, postponing, jurisdiction the courts’ to enforce those laws. unnecessary holding
It should be to add that in we Merger preclude do that the Bank Act of 1960 does not application mergers, § of 7 Act to bank We deprive later statute none its intended force. Congress plainly did not intend the extinguish 1960 Act to *28 other of sources federal restraint of bank hav- acquisitions ing anticompetitive effects. For Congress cer- example, tainly mergers knew that bank subject would to continue Act, the Sherman see 352, supra, pure as well as that -p. acquisitions by stock banks would subject § continue to 7 Clayton If, of the Act. mergers bank are addition, subject 7,§to we do not how objectives of the see thereby 1960 Act thwarted. is Clayton are It not as if and Sherman approaches Acts embodied to antitrust policy inconsistent with or unrelated to each The other. Act, Sherman of forbids course, mergers effecting an g., unreasonable restraint of trade. e. See, Northern
355 States, United 197; S.U. Co. v. United Securities 61; indeed, S. there Co., R. U. Union Pac. States v. a challenge to Court before this presently pending is Act. Sherman solely merger predicated bank Lexing & Trust Bank Co. v. First Nat. United States of And the tests ton, post, p. 824. prob. juris, noted, complementary. Acts Clayton illegality under the Sherman 7 of by § announced public policy ]he “[T consideration deter Clayton is to be taken into Act . . violates the of assets . mining acquisition whether against Act unreasonable of the Sherman prohibitions Co., 334 Columbia Steel United States v. restraints.” 768, n. Col. L. Rev. 7; S. n. see 495, 507, Note, U. as' every §7, To (1952). sure, be violation necessarily would be a violation Sherman amended, Congress passed the since Act; point simply our that displacing no the enforcement 1960 Act with intention of against mergers § even of the Sherman Act bank —or ap against pure acquisitions by stock banks —continued repugnant to of 7 cannot be plication § to bank to It would be anomalous design 1960 Act. intending Act while Sherman Congress, conclude fully applicable mergers, to remain to bank pure ac fully applicable to remain stock Act to be by banks, nevertheless intended quisitions mergers. inapplicable completely Proposed Merger III. The Lawfulness Section 7. Under statutory test whether effect competition” “in “may substantially any lessen line be country.” analyzed any of commerce section We in Brown States, the test in detail Shoe Co. v. United analysis repeated need not 370 U. S. here, presents only instant case extended straightforward problem application particular facts. *29 of com- difficulty determining-the no in “line We have market) and “section (relevant product merce” services (relevant market) in which country” geographical probable appel- appraise competitive to effects merger. agree lees’ with the District Court proposed We credit) (various that products the cluster of kinds (such checking services and trust administra- as accounts tion) by banking,” denoted the term “commercial see supra, composes note distinct line commerce. banking Some products commercial or services are so they entirely distinctive that are com- free effective petition from products or financial insti- services other ; checking tutions category. account is in this Others enjoy advantages such cost within a to insulated range broad from furnished other insti- substitutes tutions. For example, compete commercial banks with small-loan in companies personal-loan market; but companies’ small-loan invariably rates are much higher than banks’, part, seems, because the companies’ working capital part consists substantial bank loans.33 Finally, there are which, facilities 33Cf. America, United States v. Aluminum Co. 148 F. 2d (C. 1945). 2dA. Co., Cir. unlike Aluminum case, In the instant virtually there is lag no time furnishing compet between the banks’ ing (small-loan financial institutions companies, example) e., i. material, raw money, selling the institutions’ the finished e.; loans; i. product, case, compared hence the instant with Aluminum Co. is respect, frankly As quite one banker testified fortiori. response in the question: .you instant case in you “Do that feel competition [personal-finance substantial with these institutions companies] you sales-finance money lend . . . such to for you loans no, definitely “Oh, want we do not. If we make?” — did, stop making we would (R. 298.) the loans to them.” The reason competitive for the disadvantage of vis-d-vis lending most institutions banks is that banks working capital obtain the bulk of their having pay comparable without charges interest or thereon, unique power accept virtue of their deposits. demand The critical *30 although price they freely in terms of and com- cost financial provided by with the other petitive facilities prefer- consumer institutions, enjoy nevertheless settled competi- from ence, insulating them, degree, to marked savings deposits.34 In tion this seems to be the cáse sum, banking it is clear that commercial is a market “suffi- ciently meaningful inclusive to be terms trade reali- Comm’n, Corp. ties.” Crown Zellerbach Federal Trade v. (C. 1961). 296 F. 2d 9th Cir. A. part company with the District Court on the deter
We appropriate country.” mination of the “section of the’ proper question The be asked in where this case parties merger do they business or even where compete, competitive within the area of over where, but effect of the on lap, competition will be direct Bock, Mergers See (1960), immediate. Market? 42. depends upon geographic This “the structure supplier-customer Kaysen relations.” Anti Turner, credit, pp. supra, appears 326-327, area of short-term commercial see competition, to be one which have little effective save banks very large companies financing in the case of which can meet their earnings issuing paper needs from retained or from securities or . 34As one witness for the defendants testified: Philadelphia years “We have had in for 50 or more the mutual savings offering per banks cent and in some instances more than ½ per higher Nevertheless, cent interest than the commercial banks. ½ savings kept rate of increase in accounts in commercial banks has pace many with and in of the banks the rate of increase of exceeded paying per the mutual banks cent. . . . 3½ inquiries. “I have made some There are four banks on the corner
of Broad and Chestnut. Three of them are commercial all banks offering per cent, savings offering one is a mutual 3½. discover, anybody As far I been as have able to there isn’t in Phil adelphia who will take the trouble to walk across Broad Street to get per you why, say cent more interest. If ask me I will I ½ Habit, custom, personal relationships, convenience, do not know. doing your banking appear superior all under one roof to be factors changes (R. 1388-1389.) in the interest rate level.” In banking, as in most service Policy (1959), trust 102. to effective industries, convenience location is essential corporations competition. typically Individuals and con patronage the bulk their banks their local fer .in they impractical find their community; conduct Corp. at a distance.35 See business Transamerica Sys., Board Govs. Fed. Res. 206 F. 2d v. 1953). A. 3d (C. Cir. factor local inconvenience s banking competition
izes effectively high a trans g., portation costs other industries. American See, e.. *31 following colloquy governmental Consider between counsel for and a witness the defendants:
“Q. you What do consider to be the area a branch office? Well,
“A. is rule hope there no We set that. have an area from to 2 miles. 1% “However, opened directly we have branches in communities other estáblished, fact, where banks are in across street from them question getting because it is business, a ques new it’s a servicing retaining tion and the accounts that we now have. . . . . . “Q. your And necessarily dependent upon business is not it [the being within mile or branch, a two of a it ?'
customer] is large “A. degree, is, To а losing because we found we were deposit regularly accounts from our in-town office's because other opening were banks offices city; had in other sections and get order to retain those accounts and to additional business we necessary felt it was (R. 1815.) to establish branches.” As far as the concerned, customer for a bank is loan “the his size of dependent upon market somewhat size, his own how .well he is known, example, arid so on. For for small concerns known business primarily locally, they may consider strictly their market one, they may local and forced be circumstances to do business nearby geographic banks in a relationship them. On the hand, other size, as scope increase in businesses of their business activities, reputation, their national they the alternatives have avail- spread again very able them will be area, over large possibly large as (R. 1372.) the entire (Defendants’ United States.” testi- mony examination.) on direct Co., Sugar 152 F. Cuban-American Sugar Co. v. Crystal F. 2d aff’d, N. Y. (D. 1957), C. S. D. 387, Supp. Therefore, recently- as we 1958). since, (C. A. 2d Cir. competition “area of effective context, said a related charted careful of commerce must be known line operates, market area in which seller selection of the sup- can turn purchaser practicably which the and to Co., 365 S. Elec. Co. Nashville Coal U. Tampa v. plies,” Standard Oil Co. v. supplied); see 320, (emphasis n. the four- States, 299 and United S.U. would offices located county appellees’ area in which Brown geographical market. Cf. seem to be the relevant Co., fact, In bulk at 338-339. vast supra, Shoe four-county area.36 originates in the appellees’ business possibility eoncérned with the Theoretically, we should be in may of the area perimeter offices on the that bank respectively-are: figures and 36 The for PNB and Girard 54% of their commercial and industrial loans of the dollar volume 63% originate four-county area; 70%, loans; and personal 75% credit; loans; 62%, lines 84%, real estate and and 41% 74% savings personal trusts; 94%, time and 72%, 81% 94% deposits; 87%, 77%, demand- deposits; demand 93% 56% figures may deposits Actually, these be too low. The of individuals. *32 of the business done outside the area evidence discloses that most appellees large large depositors; not, do and borrowers and with average individuals not large, with small businessmen and deal four-county example, appellees’ For cf in the area. located com deposits originate $10,000, total business demand under bined 94% four-county This the thesis the smaller in the area. reinforces banking geographically. customer, is his market See the smaller supra. 35, note four-county appellees sufficient concede that area has Co., supra, importance qualify, Brown under Shoe
commercial country” meaning 336-337, within the of 7. as a “section of the at States, Maryland Milk Producers Assn. v. United & Va. See Co., 469; Yellow cf. United States v. Cаb 332 U. S. U. S. Publishing Pub Farmer’s Guide Co. v. Prairie Farmer 226; Indiana . lishing Co., 268, 279 293 U. S. within; actually, with bank offices competition effective significance.37 of little to be a factor this seems in appellees -the area which have recognize that We accuracy an perfect does not delineate with their offices in country” appraise which to “section appropriate Large bor- merger competition. upon the effect may it large shows, the record find depositors, rowers out- large part banking of their business practical to do community; very their home small borrowers side practical matter, as a be depositors may, confined neighborhood; immediate offices their customers four-county skirting Appellees suggest offices not that bank provide meaningful customers within area alternatives to bank banks, provided by large from area, that such alternatives but are Philadelphia elsewhere, business in the New York and which solicit done in the is no of the amount of business area. There evidence may figures area; such with officesoutside the be that area banks any event, In it would seem from the local are unobtainable. concerned, banking insofar as smaller customers orientation competition 36, supra, the area see notes 35 and from outside depositors. only important larger If. would to the borrowers and ‘valid, geographical four-county market so, the area remains a anticompetitive proposed effect of the which to assess upon customer —a facilities to the smaller available light Congress’ perfectly good commerce,” in evident con “line of preserving enacting small cern, the 1950 amendments Co., supra, practical Shoe at 315-316. As a business. See Brown satisfy only his credit needs at local matter the small businessman can artificiality deeming sure, is still some the four- banks. To be there county country” “section of the so far as business area the relevant perimeter such fuzziness men located near the are concerned. But any attempt geo would seem inherent in delineate the relevant (1952). graphical Note, 766, 778-779, L. n. 77 market. Col. Rev. the-four-county appellees' area, business And it is notable that outside rapidly Thus, thins out. the other counties of the Val six Delaware appellees’ ley combined demand de account for individual 2% deposits partnerships corporations; 7%, posits; 4%, demand savings deposits; 4%, deposits. loans; 2%, business time *33 deal with banks size, appear, it would of intermediate these between extremes. an area intermediate within services 35-37, supra. also, banking So some See notes local in than others. But that evidently more nature are market is a function geographical relevant simply economic means separate of each customer’s scale found: fair must be some compromise that a workable the indefensible intermediate delineation which avoids drawing expansively market either so extremes of seem merger upon competition to make the effect very largest bank custo only the insignificant, because market, or defining into account in mers are taken markets, narrowly place appellees so as to different considered. We customers are only the smallest because Philadelphia metropolitan think that the four-county recognizes as a mean apparently which law area, state allowing Philadelphia banking community ingful would seem within and which it, roughly banks to branch are area which bank to delineate the customers to do practical small find it very large very nor neither “section appropriate is a more banking business, their the instant appraise country” in which area. Hale different Cf. larger or any smaller than Shape Under the Power: Size Hale, Market con to this helped 119. We (1958), Act Sherman banking agencies federal by the fact that three clusion an their offices as banks have in which the area regard only did FDIC Not competition.” “area of effective Comp to the they submitted reports in the FRB, appellees’ in connection Currency troller but hold, so merge, permission for application merger, approving the in his statement Comptroller, upon competition, effect respect to the agreed: “With of com areas and effective separate levels are three there na- national level are the These involved. petition *34 area, or regional sectional accounts, tional* immediately Philadelphia City area of local surrounding area.” come, to we market, the relevant
Having determined the effect 7: whether § under question ultimate competition” substantially to lessen “may merger kind of this is not the Clearly, market. the relevant ready precise susceptible is a question which appraisal merely an requires It most cases. answer competition, merger upon impact of the of the immediate competitive conditions impact upon a of its prediction but it' is said that what meant when this is is future; in the anticompetitive to arrest intended the amended 7 was Co., Brown Shoe “incipiency.” See téndencies in their if it is a is sound prediction 322.’ Such supra, 317, at understanding of the structure upon a firm based are both economic data ; yet relevant market the relevant generally Bok, See Section complex and elusive. Economics, 74 Law and Mérging and the
Clayton Act can (1960). L. And unless businessmen Harv. Rev. con merger a with some legal consequences assess See Crown fidence, planning is retarded. sound business Comm’n, 800, 296 F. 2d Corp. Federal Trade v. Zellerbach alert (C. 1961). we must be also, 826-827 A. 9th Cir. So by per danger subverting congressional intent mitting investigation. a too-broad economic Standard in. States, And so Co. v. 313. Oil United S.U. doing any in which is without violence' possible, сase congressional simplify in.§ embodied objective ought do in the illegality, test of the courts so administration. practical judicial interest of sound and Reg. Rep., Corp., Union Carbide Trade FTC Com See 15503, at plaints 1961-1963, 20375-20376 Orders, ¶ This such a (concurring opinion). case. Co., in Brown at supra,
We noted Shoe that “[t]he congressional pervading dominant theme consideration what was a fear of 1950 amendments 7] [to concentration rising tide of a to be considered economic congressional intense economy.” This in the American warrants, concentration toward with the trend concern of mar proof cases, with elaborate in certain dispensing, anticompeti behavior, probable structure, market ket which we think that Specifically, effects. tive share controlling percentage firm an undue produces increase significant in a and results market, the relevant in market, in that so of firms in the concentration *35 substantially that competition to lessen herently likely clearly in the absence evidence enjoined it must be anti- merger likely is not such showing have that Co., Koppers v. See United States competitive effects. 1962). (D. 437 C. D. Pa. Supp. 202 F. W. illegality lightens proving the burden of a test
Such whose size makes them only respect light Congress’ design in 7 to inherently suspect test is Furthermore, concentration. the “ prevent .-undue ompe- theory.38 with economic That fully consonant [c] many sellers, likely greatest be when there are tition is significant is com- any share,” none of which has market *and was undoubt- economists, most ground among mon reasoning about congressional edly premise antimerger statute. 133; Stigler, Policy (1959), Kaysen Turner, See Antitrust Policy, L. Rev.
Mergers Antitrust 104 U. of Pa. and Preventive Merger (1955); Bok, supra, Markham, 308-316, Cf. at 328. Appraisal, 43 Va. L. Policy 7: A Six-Year the New Section Under (1957). 489, 521-522 Rev. Competition “Substantially . .”: Cur Comment, to Lessen . 1627, 1638-1639 Mergers, Yale L. J. rent Problems of Horizontal Competition g., Machlup, see, e. (1959); of Sellers’ The Economics Competition (1956), (1952), 84-93, 333-336; to New Bain, Barriers . Business Conduct: Some Com Mason, Power and 27 Cf. Market (1956), ments, 471. 46-2 Am. Econ. Rev. single will result in a bank’s appellees
The least of the commercial busi controlling at 30% Philadelphia area.40 four-county metropolitan ness market specify the smallest share attempting Without con still considered to undue which would threaten presents are clear we threat.41 centration, 30% p. 331, supra. See We note three factors that cause to shade us given opinion, seeking percentages in this to calcu earlier (1) percentages late took no of banks market share. The account four-county which do in the area have no offices business but there; however, importance, to be factor of little at seems 37, supra. concerned, least smaller note insofar as customers see (2) percentages took of banks have officesin no .account which there; four-county however, area but not their home offices appellees there seem to be two such offices and in this Court (3) percentages make no reference to this omission. There are no ap area, amount of business of located in the other than banks pellees, originates Appellees which the area. that since contend they smaller, concentratedly most of the 40 other banks are do a more appellees, relatively larger local business than hence account for a proportion so, such business. If we doubt much correction is largest four-county needed. The five banks in the area at present Thus, control some of the area assets. if banks’ even the small 78% pattern banks have a somewhat business, different it is difficult to *36 substantially appellees’ see that would diminish the share how. local business. quantitative No significance evidence introduced to the as factors, these appellees practical three do not contend as a that matter evidence could such have been obtained. Under the cir- cumstances, think' percentages we a downward correction of the produces appellees’ a conservative estimate of market share. 30% 41Kaysen Turner, supra, 38, suggest note that should be 20% prima the line unlawfulness; Stigler facie suggests any acqui that controlling sition firma of the. merger market is after 20% presumptively unlawful; principal mentions Markham Bok’s 25%. test is increase concentration, suggests figure market and he 20, supra. And consult'.note We intimate no view on 7% 8%. validity percentages of such tests for we have no need to consider smaller than those in the bar, case at but we note such tests rigorous more required dispose, than of the instant case. Need- Further, presently whereas largest the two banks in the (First Pennsylvania area and PNB.) control between them approximately area’s commercial bank 44% ing business, largest the two merger after (PNB- Girard and First Pennsylvania) will control 59%. we Plainly, think, this increase of more than in con 33% centration must regarded significant.42
Our conclusion percentages these raise infer an ence that the effect of the contemplated merger of appel lees may be substantially to lessen competition is not an arbitrary one, although neither the terms of 7 nor the legislative history suggests particular that any percentage share was deemed Report critical. The House states that the tests of illegality under amended 7§ “are intended to be similar to those which applied the courts have interpreting language the same as used other sections Rep. Act.” H. R. 1191, Cong., No. 81st 1st Sess. 8. Accordingly, upon we have relied decisions under these other in applying sections § 7. See Brown Co., supra, passim,; Shoe cf. United States v. E. I. du Co., Pont de Nemours & 586, 595, S.U. and n. 15. In Standard Oil Co. v. States, United 337 U. S. cited Rep. in S. No. 81st 2d Cong., Sess. this Court held 3§ violative of the Clayton Aсt exclusive contracts say, merger less to the fact that a results in market a.less-than-30% share, or in a less substantial increase in than in the concentration case, is not instant does raise an inference that vio- g., Co., supra. e. Brown Shoe See, lative of 7. 41, supra. that, among See note It is no answer' three presently largest (First Pennsylvania, firms PNB, Girard), there valid, will be no increase in argument If concentration. were unduly then once market concentrated,.further had become con legally privileged. centration would be contrary, On the if concen already great, importance preventing slight tration is even preserving possibility increases in concentration and so of eventual 39, supra, correspondingly great. Comment, deconcentration note at 1644. *37 for which accounted company,
whereby the defendant together and, market relevant in the sales 23% main sales, for of such accounted firms, with six other 65% through approximately which outlets tained control over Trade Comm’n In Federal made. sales were 7% we held- Co., 392, S. Adv. Serv. U. Motion Picture v. the, Act' and 5 of § 1 of the Sherman unlawful, under § 3 rather than under Act, Federal Trade Commission whereby the arrangements Clayton Act, exclusive industry in had foreclosed firms major four 75% share, market respondent’s market; the relevant . Stern, Competition, Kessler and evidently, 20% 531, Yale L. J. Integration, and Vertical Contract, by way comparison, In (1959). case, the instant n. largest banks after the will foreclose the four 78% supra. market. P. And Standard the relevant Co., 346, the Magrane-Houston Co. 258 U. S. Fashion v. contracts Court held violative of 3 series exclusive whereby single controlled manufacturer 40% industry’s these cases retail outlets. Doubtless turned upon “by to some extent whether the nature of the market Trade Comm’n v. there is room for newcomers.” Federal Co., they supra, Motion Picture at 395. But Adv. Serv. highly suggestive present remain context, Co., integra we Brown at n. supra, noted in Shoe integration by merger suspect by tion is more than con tract, greater permanence because of of the former. figures share and'market in the market concentration contract-integration together scholarly cases, taken opinion, 42, supra, support, believe, *38 vigorous Philadelphia was continue to vig would be merger. think, however, orous after We District Court’s reliance on such evidence was misplaced. lay'evidence This complex economic-legal so an prob substantiality lem as the of merger upon effect competition was entitled to little weight, in of view the. give
witnesses’ failure to concrete reasons for their conclusions.43 equally
Of little we value, think, are the assurances offered .appellees’ that customers witnesses dissatis fied with of resulting the services bank may readily turn to the 40 other Philadelphia banks in the area. In every case short of outright monopoly, disgruntled alternatives; customer has tightly in oligopolistic even markеts, may there operating. be small firms A funda g mental purpose of 7 was to arrest the trend amendin toward concentration, tendency to monopoly, before the consumer’s disappeared through alternatives merger, and that purpose would be if ill-served the law stayed its hand until or 20, or 30 Philadelphia more banks were absorbed. This is not fanciful in eventuality, view of strong trend toward evident area, see p. 331, supra; and might we note also that entry of new competitors into the far field is from easy.44
43The fact that some of the represented bank officers who testified competition small banks appellees substantially does not probative enhance the testimony. value of their The test of a com petitive only market competitors not whether small flourish but also whether consumers are well served. See United States v. Bethle hem Corp., Steel Supp. 576, 588, (D. 1958). 168 F. C. S. Y. D.N. “[Congressional competition, protection concern with the of [was] competitors.” Co., Brown supra,, Shoe oligopo at 320. In an market, listic companies may small perfectly be content to follow high prices yet set firms, dominant may the market profoundly anticompetitive. 44Entry is, course, wholly governmental matter of grace. supra. p. 328, See 10-year period In the ending in 1961, one . position that commercial bank also, reject So we governmental ing, high degree it is to a subject because intangibles credit it deals regulation, because than the manufacture or rather sale services tangible from anti- commodities, somehow immune competitive Competition effects undue concentration. among banks variety e credit >ery price, exists level — arrangements, location, convenience attractiveness physical surroundings, credit ad information, investment *39 vice, charges, personal service accommodations, advertis ing, special miscellaneous and extra it is services —and keen; on this own appellees! witnesses emphatic.45 were opened Philadelphia four-county new in the area’. That was years, in 1951. At the end of 10 new bank one- the controlled . deposits third of the of area’s 1% following colloquy representative: is “Q. Jennings, competition among Mr. is the of com- what nature mercial banks? highly Keen, competitive.- think,
“A. . my observation, I own from I competition among that have never known to be keener banks - todpv. than it is ... “Q. competition In what area does exist? . . . “A. I stillest, competition think the sternest all is in the field of deposits to obtain demand ... loans. “Q. What, competition form does the take? “A. It many takes dealing the.deposits forms. If we are with
large corporations, wealthy individuals, say most, I if would that all, major country competing banks of the are for such deposits. regards The same hold would true as to those cor- loans porations wealthy individuals. go
“If we loans, deposits, into the field of smaller smallеr the com- petition regional regional is more but nevertheless there —wide —-and large banks- as well as1 small banks are that business after everything they have. “Q. competition form does competition take? Is it What price? No, say “A. competition I wouldn’t that it price. is toas After all, regulated top. interest rates are at the level the laws of the is reason to think that concentration is less There no than, play competition inimical to the free contrary, in other service industries. On .is example; all more For banks com probability inimical.
pete to fill the credit businessmen. Small busi needs practical as a especially are, matter, nessmen confined locality to their for the satisfaction their crfedit needs. If supra.
See noté of banks in locality the number reduced,, vigor competition mar filling the ginal small likely business borrower’s to diminish. needs legal states. Interest rates at the bottom level have no limita tion, practical purposes prime very but for rate . . . furnishes a say I competition effective floor. would area for interest range between, prime would us say, rates let rate of and 6 4% per loans, cent for higher normal loans exclusive' consumer where are permitted. rates . . . . . charges, say area of I “In service .would banks are com- petitive They charges primarily in that field. base their service costs, they éye their but have maintain a weather to windward as competitors charging charge what in the service field. The *40 they get charges they minute line out of in connection with service find their protest, something customers will start and if to isn’t done some of the will them for in customers leave a differential service charges any significance. competition really
“I do not believe by.the price that is affected largely by quality I is area. think it affected the and the caliber of give they being that they service banks whether or not feel right way, they whether are welcome in bank. received.in very heavily, Personalities it price enter into but I do.not think major banking competition. as such is a in there, factor It is it is major.” factor, (R. 1940-1942.) a but not competition noted that rates,
It should be besides in interest there price great competition is banking industry. a deal indirect in the example, compensating bank-requires For the amount of a balance (i. e., a borrower the amount the always borrower must retain in deposit bank) his demand with account affects the real cost of loan, considerably varies in the bank’s discretion. in difficulty concomitantly greater- his time, At same disadvantage at him a likely put is to obtaining credit In competes. with which he larger businesses vis-á-vis con in accélerates fashion, this concentration generally. centration which justifications affirmative
We turn three now The first merger. is appellees proposed offer for the follow their customers only-through mergers can banks justifica- This and retain' their business. to the suburbs related to the instant particularly tion not does seem an no merit. There is any but event it has merger, in' new opening to the alternative route: the customers have in the areas to which branches branching. do not Appellees de novo moved—so-called thus, by they expand opening are unable to contend existing surely acquiring ones, new officesrather than premise such as 7 is that antimerger one an statute socially corporate growth by expansion prefer- internal growth by acquisition. able to limit suggested lending it is that the increased
Second, resulting compete bank will enable it with of. banks, York
large particularly the New banks, out-of-state loans; large very reject application We “countervailing power.” Cf. concept Kiefer-Stewart Seagram Sons, Co. E. & 211. If anti- Joseph v. U. S. competitive in market be justified pro- effects one could logical in competitive consequences another, upshot industry every could, firm an without would be that that would violating embark on series if large industry make in the as leader. For. it end Philadelphia merged all area the commercial banks largest one, into would be smaller than the bank New case, York City. plainly, This two small where merge in a to be. propose firms market order able compete successfully leading more in that firms *41 in adequate is it a lack market. Nor case which bank- qf to ing causing hardships facilities is or individuals busi- in largest -The community.' present nesses two banks lending limits of Philadelphia $8,000,000 have each. The only businesses located in the area Philadelphia large enough which find are inadequate readily such limits bank credit in other cities. obtain This us brings appellees’ final that Phila- contention, delphia larger needs than it now has order to bring business the area and stimulate its economic de- velopment. p. Í0, 334 and supra. clear, See note We are however, merger that a of which “may effect be sub- stantially to lessen competition” not because, saved some reckoning ultimate social or economic debits and may credits, it be deemed A beneficial. value choice of magnitude such is beyond ordinary of judicial limits any and in competence, event has been made for us n already, by Congress when it enacted 7.§ the amended Congress preserve determined our traditionally com- petitive economy. It proscribed anticompeti- therefore mergers, benign tive malignant fully alike, aware., we assume, price might must that some have to be paid.
In holding as we do that the of appellees would violate 7 arid must therefore enjoined, reject bé we appellees’ pervasive suggestion application procompetitive policy banking §of 7 to industry will although dire, have unspecified, consequences for the economy. national PNB Concededly, Girard healthy and strong; they are undercаpitalized not they no overloaded; have management problems; Philadelphia area overbanked; is not competition ruinous is not offing. Section 7 does riot mandate cut throat competition industry, and does dangers exclude defenses based on to liquidity or *42 solvency, necessary.46 if to avert them a is It does of allowed however, competition that the forces be require, governmental within the broad framework operate banking The fact is a regulation industry. highly regulated industry critical to Nation’s welfare play competition not less but more important makes so. At the if the price repetition, some we note that banking businessman is denied his credit because alter natives have been the whole mergers, eliminated of an entrepreneurial system threatened; edifice if the is costs banking services and credit are to become allowed competitive excessive vir pressures, absence all tually costs, affected; in our will credit economy, competition an unless is allowed to fulfill its role regulator banking economic in the result industry, regulation. may governmental well be even more Sub ject qualifications, surely to narrow it is the case that competition is our fundamental national economic policy, offering as it alternative to the does cartelization regimentation or governmental large portions States, R. Cf. Northern Pac. Co. United economy. v. warrant, S. 4. There no for declining U. enforce it in the instant case. judgment of the District Court is reversed and the
case remanded with enjoin- direction enter judgment ing proposed merger. {s R s0 ordere±
Mr. part Justice took no White in the consideration or decision of this case.
46Thus, arguably, failing-company defense, see Inter so-called national Shoe Federal Comm’n, Trade 299-303, Co. v. 280 U. S. might larger have somewhat applied contours as to bank greater public impact because failure'compared of a bank ordinary question business failures. But what defenses actions must be order allowed to avert unsound conditions us, before upon and we no view intimate it. whom Mr. Harlan,
Mr. Justice Justice Stewart dissenting. joins,
I suspect surprised that no one will be more than the to find that Act Government has carried the day for case in this its Court. apparently accelerating to an toward response trend
In banking system concentration the commercial *43 existing country, evidently trend which laws were ill- suited control, numerous bills were introduced in Congress from During 1955 to 1960.1 this period, the Department agencies2 banking Justice the federal .of of divergent dealing advocated methods with the com petitive aspects urging of bank mergers, the former the of § extension 7 of the Clayton mergers Act to cover such supporting the latter a regulatory scheme under which the of a merger effect on competition would be one of determining the factors to be considered in whether the in public would the interest. The Justice Department’s prоposals repeatedly rejected by were Con gress, regulatory and the of approach banking agencies the in infra, adopted Merger Bank of the Act See 1960. pp. 379-383.
Sweeping “design aside the fashioned in the Bank Merger Act” “predicated upon uncertainty toas the scope 7”§of (ante, p. of Clayton Act the Court 349), today holds applicable § 7 to be to bank concludes that it has been violated this I respect- case. fully holding, submit that this which remedy sanctions a 1 Wemple See Cutler, Merger The Federal Bank Law and the Laws, Antitrust (1961). Many 16 Bus. Law. of the bills are Funk, Legislation summarized in Affecting Mergers, Antitrust Bank Banking (1958). L. J. 369 agencies These primary and the supervisory respon areas of their sibility (1) Comptroller are: Currency banks; —national (2) System the Federal Reserve banks; Reserve-member —state (3) the FDIC —insured nonmember banks. (cid:127)374
regarded by Congress as inimical the best interests of banking industry public, and the and which will of large objectives measure serve frustrate Merger Bank finds no terms Act, justification either the of history amendment Act or the of the statute.
I. key position The case is special found occupied economy commercial in the of this banking country. respect With to both the nature operations performed degree governmental and the supervision, involved, it is from fundamentally different ordinary manufacturing and mercantile businesses. unique powers accept commercial banks to
demand deposits, provide checking services, account against and lend fractional permit reserves system as.a whole to create a func- supply “money,” tion which is indispensable to the maintenance structure our national And economy. the amount indeed; funds held very commercial banks is large *44 deposits demand represent alone approximately three- of fourths the money supply in the United States.3 Since a bank’s liquid assets must sufficiently accommodate demand withdrawals, short-term commercial and indus- trial major loans are the element in bank portfolios,, thus making banks commercial source of short- principal term business Many credit. pro- other services are also vided but in banks, these more less by collateral areas they receive more active competition from other financial institutions.4
3 Samuelson, 4 (5th p. Economics 1961), ed. 311. example, savings For and loan associations, unions, credit and compete other institutions lending with banks in installment - individuals, competition are banks with individuals in the personal trust field. banking only not
Deposit operations affect volume credit,- but also the value of the dollar money of stability currency system. field, In this and the simply preservation considerations other than of com- relevant; petition are commercial banks áre Moreover, large safekeeping entrusted with amounts funds belonging corporations. to individuals and Unlike ordinary investor, depositors regard do these not their and, funds as to a subject risk loss at least the case depositors, they demand do not receive a return taking community such risk. A bank failure is a disaster; impact its depositors first strikes the bank's spreads throughout most heavily, then economic community.5 Safety life and soundness bank- ing practices banking in any thus critical factors system. regulation extensive blanket state and federal
of commercial much banking, of which is aimed at limit- ing competition, reflects these factors. Since Court's opinion describes, at length, aspects some super- agencies {ante, vision banking exercised the federal pp. I do 327-330), point my no more here that, than out opinion, regulation plain design grounded, such evidences on solid economic considerations deal with specialized as a field.
This view is Merger confirmed Bank Act of history. its legislation Federal dealing mergers6 with bank dates Congress provided from when subject to that, destroy credit, Since insolvencies sources borrowers rely ability b ut also others who the borrowers’ secure *45 may adversely Banking loans Berle, affected. See Under Laws, (1949). Anti-Trust 49 Col. L. Rev. 589/592 6 “merger” generally throughout opinion The term used designate any corporate amalgamation. form of note 7 in See 376
approval of Comptroller of the Currency, two or more national banks could consolidate to form a new bank;7 national similar provision was made in 1927 for the consolidation of a state and a resulting national bank in a national bank.8 In 1952 of national and state banks into national banks authorized, were also conditioned approval by the Comptroller of the Cur- rency.9 In Congress 1950 authorized the theretofore prohibited10 merger or consolidation of a national bank awith state bank when the assuming resulting would be a bank.11 In addition, state the Federal De- posit Insurance Act was amended to require approval for all mergers FDIC and consolidations between insured and' noninsured banks, specified and of federal banking agencies for conversions of insured banks into insured if state banks the conversion would result in the capital or surplus stock newly being formed bank less than that of converting bank.12 The Act further required insured merging banks with insured state banks to secure approval Comptroller Currency if assuming bank would be a national bank, and the opinion, ante, p. Court’s Occasionally, 332. however, as in the above paragraph, “merger” the terms and “consolidation” are used in their technical sense. 7 1043, 40 Stat. amended, as 12 (Supp. IV, 1963) U. S. C. §215. 8 1225, 44 amended, Stat. as 12 (Supp. 1963) U. S. IV, C. §215. 66 Stat. amended, as (Supp. IV, 1963) U. S. C. 215a. 10See Paton, Conversion, Merger Legislation— and Consolidation “Two-Way Street” For National Banks, Banking and State L. J. (1954). 11 64 Stat. amended, 12 U. S. C. 214a. 457; (now Stat. see 64 Stat. 892 Stat. 12 U. S. C. (Supp. 1963) IV, (c)) §1828 *46 of the Federal Re- Board Governors approval assuming if the FDIC, respectively, and the System serve member bank or a state would be resulting or bank.13 nonmember insured which by standards legislation prescribed
None of this agencies were to be federal appropriate be attributed to significance to determining in guided merger. proposed of a As effects anticompetitive Congress increas 373), became (supra, p. noted previously problem the 1950’s. ingly concerned with . no apparently provided laws solution;
antitrust v. Firstamerica United prior 1960, case one States 30,1959, N. D. March settled Cal., No. Corp., Civil Clayton or had either the Sherman by decree, consent merger. a commercial bank to attack Act been invoked , mergers of 7 of to bank inapplicability Indeed the in 1950, was, after it was amended Clayton Act, even Department on which the explicit premise time, for a .an In passing antitrust duties. performed of Justice its. of a bank for informal clearance upon application an stated: Department complete matter, of this we “After consideration would Department concluded that this not have have Clayton 7 of proceed under section jurisdiction Department does not For this reason this Act. action on this plan any to take presently matter.” Hearings before the Antitrust Subcommittee Judiciary, Cong., on the 84th House Committee 1st (1955). pt. 3, p. Sess., Ser. Ibid. However, Act, merging insured under banks approval did not
insured state banks have obtain unless the resulting assuming capital surplus stock or bank would be aggregate capital surplus, merging, stock or of all the less than the banks. on Bank- Senate Committee testifying
And in before the Brownell, General ing Currency Attorney noted: mergers, of bank speaking Department provisions
“On the basis these apparently agree, has and all concluded, Justice sec- acquisitions asset banks are covered amended in 1950.” tion [of Act] *47 Hearings on of 1957 the Financial Institutions Act on before Subcommittee the Senate Committee Banking Sess., pt. 2, 85th Currency, Cong., and 1st p. (1957). 1030 Congress by made were-repeatedly
Similar to statements Department representatives prior to years Justice Merger the enactment of the Bank Acjt.14 inapplicability mergers 7 to also bank explicit Congress passing an basis on which acted Merger Bank Report 1062, Act of 1960. The on S. Senate finally the bill that enacted, was' stated: mergers bank “Since are if not customarily, invari- out ably, acquisitions, carried asset they are exempt Clayton section (Stock from 7 Act. acquisitions by bank holding companies, as distin- guished mergers from are consolidations, subject Holding to both the Bank Company Act 1956 and Clayton Act.)” sec. 7 Rep. S. No. 86th n Cong., 1st 1-2 (1959). Sess. 1950”(64 “In 1125) Stat. 7 Clayton, section of the Act was amended to correct these Ac- deficiencies. quisitions of assets were included within the section, 14 Hearings See before the .Antitrust Subcommittee of the House on Judiciary, Cong., Committee Sess., 3, pt. pp. 84th 1st Ser. (1955); Hearings 243-244 on 3911 S. before Subcommittee of the Banking Senate Committee Currency, on 84th Cong., 2d Sess. 60-61, (1956); Hearings on S. before the Senate Committee Banking on Currency, (1959). Cong., 86th 1st Sess. 9 only the case acquisitions, to stock but addition of the jurisdiction to subject
of corporations being subject (banks, Trade Commission Federal Board for Federal Reserve of the jurisdiction byAct of section Clayton virtue purposes Id., affected).” were not at 5.15 act, of that Representative Spence, floor debates During the Banking Cur Chairman House Committee difficulty: “The Act rency, recognized same mergers because in the case of bank is ineffective and bank acquisitions stock banks it covers Cong. accomplished way.” Rec. 7257 are not (1960).16 extending scope of 7 to cover bank
But instead amendments mergers, proposed as numerous designed accomplish,17 Congress made the section were Rep. (1960). Cong., (“The 2d See also H. R. No. 86th Sess. inadequate regulating Federal antitrust laws also to the task of Attorney may against mergers; while the General move bank *48 Clayton mergers Act, the to a limited extent under the Sherman Act id., help.”); (“Because Clayton offers section 7 little at [of limited, concerned, insofar banks are to cases where a is Act] accomplished through acquisition stock, is and because mergers acquisitions accomplished bank asset rather than are help,’ acquisitions, stock ‘little in the words of Hon. act offers acting Division, controlling Bicks, Robert the Antitrust A. head of mergers.”). bank Senate, sponsor- Fulbright, 1062, a of S. Senator re In Clayton Act, ported to of the that the “1950 amendment section 7 mergers by imposed which first time controls means for the over mergers apply acquisitions, other did not which than stock .bank to. practically invariably accomplished other than stock means mergers acquisition. Accordingly purposes practical bank have for all exempt Clayton been still are from section of the Act.” and . Cong. (1960) Rec. 9711 Cong. (1955); 198, g., 1st S. 85th E. H. R. 84th Sess. (1957); (1957); Cong., see 1st Sess. 1st Sess. S. 85th Cong., 1, supra. note “it to sub- policyjudgment impossible
deliberaté ject simple to the rule section 7 of the bank barred, act, merger Act. would be Clayton Under might substantially competition, if it to lessen .tend regardless public on the interest.” effects (remarks of Cong. (1959) Robertson, Rec. 8076 Senator a-sponsor 1062). peculiar S. Because of the nature banking the commercial role in industry, its crucial connection, the economy, and its intimate the fiscal monetary and operations Government, Congress rejected the general notion that economic and busi- premises ness Act should be the con- applicable siderations field. Unrestricted competition thought major to have been a cause of panic of 1907 and of the bank 1930’s,18 failures was regarded and as a highly undesirable condition to impose on banks in the future:
“Banking is too important to depositors, borrowers, to the Government, the public generally, per- unregulated mit competition unrestricted in that field. 18 Rep. S. Cong., No. 86th (1959): 1st Sess. 17 “Time and
again the Nation has unregulated suffered from the results of competition uncontrolled in the field of banking, and from insuffi ciently regulated competition. rapid . . . The in the num increase ber banks, of small large weak such Comptroller number that effectively could not supervise any them or control but the worst abuses, was one panic led factors which to the of 1907. banking “The collapse early again large part 1930’s was in regulation result of insufficient and control of banks, effect competition.” result of too much Cong. See also 105 Rec. 8076 (1959): competition “But unlimited and banking unrestricted just possible. many panics We have had too *49 crises failures, and bank largely as competition the result of excessive banking, to consider going for a days moment back to the of free banking unregulated banking.”
381 an awareness antitrust laws reflected “The have regulated banking other difference between and ordinary unregu- and hand, on the one industries on the enterprises industries and commercial lated (remarks (I960) 9711 Cong. 106 Rec. other hand.” 1062). sponsor Fulbright, S. Senator banking and other distinction between “It is this bank, for justifies which different treatment businesses other It this distinction mergers mergers. prohibition the flat reject to led Senate mergers.-” applies Act which other Clayton test to Id., at 9712.19 Currency recom- Banking
Thus the Committee existing from exemption of the mended “continuance sec- Cong. (1959). 8076 tion Act.” 105 Rec. Congress recommendation; it decided to accepted this handle commercial bank- problem concentration in ing to fit banking specially framed “through laws, No. particular Rep. needs of . . . .” the field S. finally (1959);
86th 1st Sess. Cong., As enacted Merger regulatory Bank Act embodies approach banking agencies, vesting advocated responsibility placing them for administration and its existing scheme within the framework of laws an (c) Deposit amendment to Insur- Federal (c).20 ance Act, (Supp. IV, 1963), U. S. C. It requirement ap- maintains the latter Act’s of advance appropriate- proval by agency federal be- tween banks and between insured and insured noninsured Rep. Cong., (1959): See also S. No. 86th 1st “But Sess. 16 impossible require competition unrestricted in the field banking, impossible subject and it would banks to the rules applicable ordinary concerns, industrial commercial not sub vested with ject regulation public, interest.” pertinent statute, For the text of the see note 8 in the Court’s opinion, ante, pp. 332-333. *50 375-377), ap- that {supra, pp.
banks but establishes such necessary every merger proval type. 'To aid in determining respective agencies approve the whether to and in “the interests of uniform merger, standards” 1963) (12 (Supp. IV, § S. Act re- (c)), U. C. the agencies making quires particular the two not the deci- Attorney sion and the imme- General submit to the agency diately responsible reports .competitive the factors provides involved. It further addition to considering banking the factors examined by the FDIC applications in connection with an to become insured bank, primarily safety which focus on matters of soundness,21 approving agency the “shall also into take consideration effect of the the on competition transaction (including any. tendency toward monopoly), and shall approve unless, transaction after considering all of factors, such public transaction to be in the .finds interest.” S. (Supp. IV, 1963) U. C. (c). § 1828 congressional clearly purpose emerges from the terms statute and from the committee reports, hearings, and floor debates on the again bills. Timé and repeated it was on competition effect was not to controlling determining approve whether to factor a bank merger, that a could be' approved being public in the interest though even it would cause substantial lessening competition. The following typical: statement
“The committee wants crystal to make clear its intention that the various any par- factors in history These factors are: “the financial and condition of each involved, adequacy banks capital structure, of its its future earnings prospects, general character of its management, convenience and community needs of the served, to be and whether corporate powers or not its are purposes consistent of this chapter.” (Supp. 12 U. IV, 1963) S. C. (c). Compare §6 Deposit Federal Act, Insurance 12 U. S. C. 1816. may outweigh competitive be held to
ticular case competitive factors, and that factors, however unfavorable, in and of them- not, favorable controlling on the selves, And, course, decision. banking agencies are not bound their consid- competitive eration of the factors report *51 Attorney Rep. 196,86th Cong., the General.” S. No. id., (1959); 1st 24 at 21.22 Sess. foregoing statement also shows that it was the
congressional place responsibility intention to the for approval squarely on the banking agencies-; report the Attorney the General competitive on the aspects of merger was advisory only.23 to be And there was delib- erately any attempt omitted to specify or restrict the in agencies might kinds circumstances which the properly proposed merger determine that a in would be public the notwithstanding interest its on adverse effect competition.24 -Cong. (1960): See also 106 language Rec. “The S. Banking
as amended the Currency House and Committee and as appears it bill pass the we are now about to in the House makes competitive monopolistic clear that the and factors are to be con along banking sidered with considering the factors and that after all involved, resulting factors if public institution will be in the interest, application. approved then the should be and otherwise disapproved.” Cong. (1960): puts responsibility Rec. 7257 “This for acting proposed merger belongs agency on a charged where it the—in supervising with examining the bank which will result from the mergеr. years experience Out of their supervising banks, our Federal-banking agencies developed specialized knowledge have banking people engage . They experts judg who in it. at ing the condition of involved, prospects, manage the banks their their ment, and the community banking They needs of the for services. primary responsibility should have deciding proposed whether a merger public (Emphasis added.) would be in the interest.” 24 H, Rep. Cong., R. (1960): No. 86th 2d Sess. 11-12 “We are convinced, also, approval depend posi- of a should on a chosen to about Congress has do
What highly specialized in the field competition on their effect more clear.” banking “crystal could not of commercial overwhelming p. 382.) evi- But {Supra, face perfect contrary, Court, equanimity, dence to the Bank in the foundations of “uncertainty” finds {ante, 349) premise and on it aside Merger p. puts Act construing scope to the task of as irrelevant Clayton Act. inappropriate I am unable to conceive of a more case opinion con- in which overturn considered of all prior years to the legislation.25 cerned as reach of For-10 everyone department responsible law antitrust —the enforcement, industry, and the Congress, assumption proceeded that the 1950 amend- bar — Act mergers. ment of the did not affect bank assumption provided major impetus This enact- remedial legislation, Congress, finally ment of when it thought settled on what it problem the solution to the *52 hand, emphatically rejected remedy brought at the now by to life the Court. is, course, of result that the Bank Merger Act is completely nullified;
almost
its enactment
turns out to
an
congressional
have been
exorbitant
of
waste
time and
As
energy.
present
the
case illustrates,
Attorney
the
report
designated
to
banking
General’s
the
agency is no
longer truly
for if
advisory,
agency’s
decision is not
showing
tive
of some benefit
to be
previously
derived from it. As
your
indicated,
prepared
is
say
committee
not
to
the cases
hearings
only
are the
merger
instances in
enumerated
which a
public interest,
is in
prepared
nor are we
specific
to devise a
exclusive list of
merger
situations in which a
approved.”
should-be
25Compare
Shipyards
State Board
Ins. v.
Corp.,
Todd
370 U. S.
of
in which this Court refused
prior
to reconsider certain
deci
Congress
“posited
regime
sions because
regulation”
had
of
a
state
of
the insurance
continuing validity.
business oni their
Cf. Toolson v.
Yankees, Inc.,
New York
385 satisfactory may immediately.26 7§ suit be commenced .a merger’s legality judged solely The bank will then be from competitive aspects, by any its unencumbered consid- banking.27 to if erations And such a suit were peculiar deemed to after a bank merger lie been consummated, has there would then into field, be introduced this for the any to significant first time the threat of extent, divesti- ture of assets and all complеxities and disruption upon attendant the use of only that sanction.28 The vestige of the Bank Merger Act which remains is that the banking agencies will have an initial veto.29 merger category If bank a such this falls within the a acquisition, enjoin may brought “stock” suit to it § by Attorney General, but the Federal Reserve Board as well. Clayton Act, (vesting authority
See 11 U. S. C. § § banks”). applicable Board enforce 7 “where In an § attempt to retain some semblance of the structure erected Con gress Merger Act, “supplanted the Bank the Court states that ... authority may acquired 11, by whatever the FRB under have virtue § against mergers.” Ante) amendment to enforce bank § p. 344, Attorney note 22. Since both the General and the Federal purely advisory Reserve Board have roles where a bank will bank, reasoning respect result in a national the Court’s with Merger upon authority effect of the Bank Act enforcement should apply equal force to both. simple yardstick Indeed the Court has erected a in order to agony analyzing alleviate economic data —control 30-% banking commercial prohibited. Ante, pp. market is 363-364. 28Although outright 7 of applicable an Act purchase amalgamation stock, infrequently form of problems used in field does not involve divestiture magnitude acquisition. the same as does an asset true, points (ante, p. 354), It is as the Congress, Court out enacting Merger Act, agreed applicability Bank that the *53 banking See, Sherman Act g., to should be disturbed. e. ,this Cong. -(1959). surely provides Rec. 8076 But -alone no con-' justification applying Clayton Apart ceivable Act as well. many from fact that the Sherman Act covers kinds of restraints mergers, sponsors (Sen besides Merger one of the Bank Act Fulbright) expressed expectation ator his in that Act Sherman design is, congressional a manifest This frustration legis- upon intrusion unwarranted my view, in a most whatever been may have I domain. submit lative now Congress has 1950, in purpose congressional that bank judgment current its plainly pronounced so Court 7 that-this mergers are not within the reach choice. to effectuate its duty is bound as will proposition, for, I not rest this But need in amendment nothing shown, now be there is the. the conclusion history support to legislative §to 7 or its subject then Congress even intended Clayton Act. provision this II. Clayton read, pertinent Act. 1950, "§
Prior 7 of part, as follows: engaged in shall corporation
“That no commerce any part acquire, directly indirectly, the whole or capital corpora- other of the stock or share another effect of engaged commerce,’where.the tion also subjected case a bank would not be to strict antitrust stand ards to the exclusion of all other considerations: “And even if the apply mergers, Sherman Act held to and to bank seems spelled clear that under rule of reason out the Standard Oil case, applicable) regulated different considerations will be found in a unduly banking, detеrmining field like whether activities would Supreme competition,’ diminish in the words of the in that Court Cong. (1960). Moreover, case.” rec Rec. 9711 Court has ognized may necessary in other areas that it to accommodate the Trucking regulatory policy. Sherman Act to McLean Co. v. United States, 83; Federal 67, 321 U. S. Communications Comm’n v. RCA Communications, Inc., United States v. 346 U. S. 91-92. See also Co., Columbia Steel S. 527. And of course the Sherman 334 U. g anticompetitive with effects than Act concerned more existin incipient probabilities, and thus would not reach restraints future Act. See Brown Shoe to the same extent would 7 States, 32,33. S. 317-318 and notes Co. v. United 370 U. *54 may substantially lessen com-
such be acquisition corporation whose stock is so petition between the making corporation acquisition, the the acquired and any in section or com- or to restrain such commerce any of line of munity, monopoly or tend create commerce.” (the
In read major 1950 this section was amended to in being italics): amendments indicated in corporation engaged “That no commerce shall directly or acquire, any part whole or indirectly, the of corporation or other share no capital stock jurisdiction subject to the Com- the Federal Trade of acquire whole, any mission part shall in corporation engaged assets another also com- any merce, any where line commerce section country, acquisition the effect may of such substantially competition, lessen or to tend to monopoly.” create a
If Congress did intend the 1950 amendment to reach bank mergers, certainly it went at the matter very peculiar way. asset prohibiting acquisitions While having anticompetive lim- 7,§ effects described in ited the applicability provision that to corporations subject to jurisdiction of the Federal Trade Commis- sion, which does not include banks. And it reenacted provision stock-acquisition very language in the same fully which —as it was interpreted aware —had been not to reach type customarily used the bank- ing industry. infra, pp. See In past 389-393. this Court has drawn the normal inference such a reenact- ment congressional indicates adpption prior judi- cial statutory g., Dixon, construction. E. States United v. 381; U. S. Overstreet v. North Corp., Shore 318 U. S. 125, 131-132.
In instance, however, Court.holds stock-acquisition provision expansive underwent an meta- morphosis, mergers so that it now embraces all or con- involving exchange an of stock. solidations Since exchanges if do usually, always, involve *55 stock, is to the effect this construction rob the Federal provision relating acquisitions Trade Commission to asset of all a upon scope force as limitation the substantive 7; according .purpose provision the Court the of that merely to ensure the Commission’s role the enforce- in Ante, ment of pp. § 7. In short, 346-348. under this reasoning bank to all purposes intents and fully within reach of 7.§ the circumspect
A morе look at the Í950 amendment of background § 7 and its will show this that construction is not tenable. language
The stock-acquisition provision the itself hardly congenial is interpretation. the Court’s The PNB-Girard merger technically is a consolidation, gov- by erned § 20 of the national banking laws, U. S. C. (Supp. 1963). IV, § 215. that section, corpo- Under rate existence of both PNB and all Girard, of their rights, franchises, assets, liabilities, automatically would be vested the resulting bank, operate which would under the PNB charter. PNB acquire nothing. itself would two Rather, banks creating would be a entity new amalgamation of their properties, and the sub- sequent (which conversion of Girard stock would then represent ownership a nonfunctioning entity) into stock of resulting simply would part mechanics which ownership in the entity new would be reflected. Clearly a case of a corporation acquiring the stock of another functioning corporation, which is situation where “the of ... [a effect acquisition may be substantially to stock] lessen competi- (Emphasis tion.” added.) a merger further crucial differences between
There are merger requires acquisition. normally and a A stock of the holders of two-thirds public approval notice and dissent- outstanding corporation, shares of each right have the to receive cash ing shareholders purchase A stock appraised their shares.30 value may privately, only approval and the involved be done parties individual to the transaction. Unlike a a merged company, corporation acquired whose stock is usually subsidiary acquiring remains business as corporation.31 Government, however, contends
more resembles a closely acquisition stock an than asset acquisition similarity impor- because of one of central acquisition by corporation tance: immedi- one of an management of ate voice in another business of obviously corporation. But this is true of asset a fortiori magnitude acquisitions sufficient to fall within the *56 prohibition 7; of if a corporation buys § plants, equip- the etc., of ment, inventory, corporation, acquires another merely a over, manage- absolute control not voice the of, ment another business. legislative history of the 1950 amendment also negates
unquestionably any Congress in- inference that respects merger precisely contrary In a is of these the what 7§ designed originally proscribe acquisition to secret of cor was —the porate ante, opinion, p. See control. the Court’s 338. stock-acquisition provision That the was not to cover intended strongly suggested by paragraph is second the of 7: “No § corporation acquire any part shall . the . . of stock ... of one or corporations more the . . . where . . effect of the use of such . ... by voting granting"'of proxies may substantially stock the .' . . be competition, monopoly.” to lessen or to create tend to a 15 U. S. C. ) (Emphasis merger consummated, 18. After a has been added. corporation resulting any party merger; the holds stock in the no thing thus there be in such can situation no as a restraint of trade this voting power acquired of “the use” the stock. mergers. tended reach bank true purpose the It plug a loophole” (95 Cong. was “to Rec. 11485 Celler)). (1949) (remarks Representative simply But precise to state this broad does not answer proposition the questions .presented here: what was the nature sought loophole closed; were chosen the means what it? to close
The answer to latter question unmistakably between, relationship indicated amend- the 1950 previous judicial ment decisions. In Arrow-Hart & Hegeman Comm’n, Elec. Co. Federal Trade 291 U. S. v. Court, by scope a divided ruled on vote, powers Federal Trade Commission’s remedial under original Clayton Act. After Commission had complaint against holding §a 7 a company issued which had been formed by the stockholders two manufactur- ing corporations, steps were taken to avoid the Commis- sion’s jurisdiction. holding Two new companies were all formed, acquired each common stock one manufacturing companies, each issued its stock directly original holding to the stockholders of the com- pany. This company then dissolved new two holding companies respective manufacturing and their merged subsidiaries into one corporation. This Court held that the Commission authority, no after the had to order resulting corporation merger, divest itself part An holding assets. essential of this was that technically which was question, consolidation similar planned by to that here PNB Girard, acquisition prohibitions stock within the “If § 7: *57 merger manufacturing corporations two and the any combination of respect their assets was in a violation any express antitrust as to which law, no opinion, we necessarily of'statutory prohibitions a violation other Clayton than found in Act.” 291 599; those U. atS., id., see at 595.32 along decision,
This with two others earlier handed (Thatcher Mfg. Co. v. Federal Trade by this down Court Comm’n, Comm’n & Co. v. Federal Trade Swift with Federal Trade Comm’n v. Western together decided Co., Meat 554), perhaps provided S. U. more of a “assets”, spur to. enactment amendment than §to 7 any single other factor. universally These decisions were regarded opening loophole whereby the unfortunate through 7 could be of an evaded use asset ac quisition. Representative expressed Celler the view of Congress in this fashion:
“The result of these decisions sec- has so weakened and 11 give tions 7 ... as to to the Federal Trade Department merely Commission of Justice paper prevent improper mergers.” sword (1949.).33 Cong. Rec. 11485 point, agreed: Clayton On this the dissenters “It is true that the corporate mergers S.,
Act not forbid . . . .” 291 does U. at 600. See Corp. America, States v. also United Celanese Supp. 91 F. 14. Hearings also on H. H. See R. R-. H. R. R.H. 2734 before Subcommittee No. 3 of the Committee on the House Judiciary, Cong., (1949); Hearings 81st 1st Sess. 38-39 on H. R. Subcommittee of the Senate Committee on the Judi before a. .(1950): ciary, Cong., loophole 81st 1st & 2d Sess. 109-110 “The . sought Supreme be filled resulted from a series of decisions Court (Swift Mfg. & v. Thatcher Co. FTC (272 554); Co. FTC S. v. U. Hegeman 587).) Arrow-Hart & Co. v. FTC (291 In these U. S. Act, Supreme decisions the' Court held that section 7 of the prohibiting acquisition gave competitor, of stock of a while authority no under Federal Trade Commission section to order acquired of assets which had been before divestiture a cease-and- resulted, though acquisition issued, even desist order was from voting illegally held stock.” *58 Since Court’s were cast in decisions terms scope of the Federal Trade jurisdiction, Commission’s amending Congress, § 7 so as close that gap, empha- expectation sized its plain the committee re- —made ports, hearings, and debates —that Commission would principal enforcing assume the role in Im- the section.34 plicit change here is that no powers the enforcement agencies the other named 11 was contemplated.35 Of more importance, legislative history demonstrates that it was the asset-acquisition provision designed that was plug the loophole Swift, created Thatcher, and Arrow.' Although Arrow, unlike Thatcher and Swift, involved consolidation of the type same as the PNB-Girard merger, of Congress the members among drew no distinction these cases, invariably discussing all three of them in the same examples breath as acquisitions.36 Indeed, asset report the House stated that Supreme
“the Court . . . held if [in Arrow] an acquiring corporation secured title to physical of a corporation assets whose stock it had acquired before the Federal Trade Commission its final issues order, power the Commission lacks to direct divesti- ture of physical assets . . . .” H. Rep. R. No. 81st Cong., (1949). 1st Sess.' 5 (Emphasis added.)
And on the floor pointed' Senate it was out that “the method which . . . merger in had [the been Arrow] 34The Federal Trade primary Commission had assumed enforce responsibility ment before the Martin, Mergers 1950 amendment. See (1959), p. and the Act 197. 35 Compare 26, supra. note supra; Hearings See note 33 on H. R. 2734 before a Subcommittee of the Senate Judiciary, Committee on the Cong., 81st 1st & 2d Sess. (1950). And this Court has, after amendment, de scribed Arrow involving acquisition. as a case Brown Shoe an asset States, Co. v. United 370 U. S. 313 and note 20. Cong. . . .” 96 Rec. an innocent one . accomplished was Clearly the under- added.) (1950). (Emphasis cor- of two Congress consolidation standing of assets.37 acquisition was an porations purpose inadvertently without Congress act did Nor *59 corporations provision limiting asset-acquisition the Trade Commis- of Federal jurisdiction to the the subject mergers. reports, The excluding bank thereby sion, amendment reveal and debates on the 1950 hearings, rising with tide concerned the Congress was then that expan- “the external e., concentration —i. of industrial mergers, and consolida- through acquisitions, . . . sion 38 manufacturing, engaged corporations tions” of commercial and of other kindred mining, merchandising, economy as such Specialized areas endeavors. the Federal considered. Thus banking were even the on recounted report Trade 1948 Commission’s of industries— on concentration in a multitude statistics dairy food and g., steel, equipment, e. electrical cement, rubber —but products, tobacco, textiles, paper, chemicals, This figure one on included not concentration.39 heavily relied on report repeatedly was cited mag- Congress members of others to demonstrate the 37 (ante, p. 345) single excerpt quoted by no the casts The Court Kilgore’s proposition, remark occurred doubt on for Senator trying to make in the course of a discussion in which he was practical effect, .opposed point there is no difference acquisition. legal distinction, merger Thus and a stock between.a paragraph quoted stated: at the end of the the Court the Senator I cannot you get pur how on earth can the idea that see carry corporation, it, chase of the stock all of does not of physical corporation.” of all it transfer of assets Hearings on H. R. 2734 before a of the Senate Com Subcommittee Judiciary, Cong-., (1950). 1st & 2d mittee 81st Sess. 176 38 Rep. (1949). Cong., 81st 1st 2 H. R. No. Sess. Summary Commission, Merger Movement: A Federal Trade (1948), passim. Report movement and the dangers
nitude economic In hearings presented.40 the focus .committee exclusively amalgamation upon ordinary in the commer- fields,41 similarly reports cial the Senate and House solely spoke concentration as industrial the evil to Representative remedied.42 the floor of the House, On Celler indicated the extent of concentration industrial power: companies
“Four percent now have 64 steel percent business, business, copper four have percent two business, have 90 aluminum three percent have 85 of the automobile have business, two percent lamp the electric four have business, percent refrigerator the electric business, two percent glass business, have foun have percent of the cigarette business, and so forth.
“The complete antitrust laws bust unless we are-ta pass this bill.” 95 Cong. *60 (1949). Rec. 11485 , The legislatory history any is singularly thus devoid of .Congress evidence that sought to deal with the special problem of banking concentration.
I suggest, do mean to of 7 of § course, Clayton Act thereby applicable only rendered to ordi nary corporations commercial and industrial and not to any “regulated” firms in economy. sector of the g., Hearings E. 988, H, 1240, on R. 2006, H. R. H. R. H. R. 2734 before of Subcommittee No. 3 the House Committee on the Judiciary, Cong., (1949); Cong. 81st 1st Sess. 39-40 Rec. 11503 (1949); Cong. (1950). Rec. 16505 41Hearings on H. R. 2734 before a Subcommittee of the Senate Judiсiary, 1st & 2d Sess. Cong., 17, Committee 5-6, 81st (1950); Hearings 57-59 988, 1240, 2006, on H. R. H. R. R.H. H. R. 2734 before Subcommittee No. 3 of the House Committee on Judiciary, Cong., 40, 113 (1949). 81st 1st Sess. 42 Rep. Cong., (1950); S. No. Rep. 81st 2d Sess. 3 H. No. R. Cong., (1949). 81st 1st 2-3 Sess. acqui § included in 7 asset Congress when is that point Trade Com subject Federal by corporations sitions same time continued and at the jurisdiction, mission’s banks, jurisdiction Board’s over 11 the Federal Reserve any' acting irrationally. Rather, absence was not history of the legislátive of banks in mention thé prior congressional light of the amendment, viewed with.special a distinctive area banking as treatment compels conclusion needs, characteristics regarded part of the were not then simply plugged.43 to be loophole by a of additional number
This conclusion confirmed of the passage, It not until considerations. after Celler, its Representative 7 that 1950 amendment requested of the Subcom- co-sponsor, the staff Antitrust Judiciary on the “to pre- of the House mittee Committee existing in our report indicating the concentration pare House banking system.” of Subcommittee No. Staff Report Sess., on the 82d 2d Judiciary, Cong., Committee Mergers Banking Bank Facilities 6n Concentration (1952). hi to the that: report The introduction reveals March- 21, 1945,
“On the Board of Governors System the Federal wrote the chairman Reserve Judiciary that the requesting the Committee on the Congress, provisions 2357, Seventy-ninth H. R. session, early predecessors first one of the to include Antimerger Act, Celler be extended so as corporations of the Federal subject jurisdiction Act. Reserve Board under section in subsequent made revisions versions Because *61 antimerger however, impracticable bills, became interesting year It is in the same which 7 was noté that § facilitating Congress passed amended kinds of bank an act certain sufra, mergers prohibited. which had theretofore been note See accompanying text. 39.6 scope corporations within the aht include subject regulation by those
other than the Fed Banks, placed eral Trade Commission. which are authority Reserve squarely within Federal t, Clayton by Board re section therefore Ac mergers only insofar as circumscribed are concerned provisions the old section and certain addi which do not presently tional statutes concern them substantively with the question competition selves banking.” Id., field of . at vii. noting It is also worth Representative that'in 1956 Celler himself introduced another to 7, explaining § amendment that “all the bill plug R. does is a loophole [H. 5948] dealing with present mergers law This .... loophole because exists section Clayton pro Act mergers . hibits bank . . if such are accom plished acquisition.” stock Cong. Rec.
(1956). The bill read in pertinent part: bank . . . “[N]o . acquire shall . . the or any part whole assets another corporation engaged also in . . .” commerce . Ibid. The passed amendment the House but was defeated in the Senate.
For all I reasons, think the thеse conclusion ines- capable that 7 of the Act does apply to the merger. PNB-Girard contrary Court’s conclusion seems me little better than de tour force.44 Goldberg.
Memorandum of Mr. Justice agree I fully with- my Brother Harlan 7 of the Clayton Act has application no to bank mergers of .the type involved here, and I join therefore in the conclusions expressed in opinion, his point. However, while I 44Since the Court does not reach the aspect Sherman Act of .this case, it would purpose serve no useful for me to do so.
thus holding respect dissent Court’s to the from I applicability Act to this wish to merger, I necessarily make clear do judg not dissent from its invalidating merger. ment To do require so would me to conclude in addition that on the record as it stands prove Government has failed violation of the Act, Sherman which fully applicable to the commercial In my opinion business. there a substantial Sherman Act issue case, but since the does Court my reach and since views relative thereto would be superfluous light of today’s disposition of I case, express no ultimate concerning Compare conclusion it. Army Rescue Angeles, v. Municipal Court Los U. S. 549, Ullman, 585 (Murphy, J., dissenting); Poe v. 367 U. S. 555 (Stewart, J., dissenting). Col. Rev. notes and 4 sure, To be the 1950' enlarge amendment was intended not to change the number of transactions covered 7 but also to the test by § illegality. legislative history pertinent point to latter Co., supra, is reviewed Brown Shoe 315-323, directly at and is not present relevant to the discussion. purpose proposed legislation of the 1950 amendments “The [the prevent corporations acquiring is to corpora from §7] another" acquisition assets, tion whereunder its means [sic] present prohibited -acquiring is corpora law it from said stock of acquisition chiefly significant tion. of stock is Since becausé is result, likely underlying assets, control of to prohibit failure purchase, direct paradoxi the same has assets been inconsistent and existing as to the Rep. 1775, 81st cal over-all effect of law.” S. No. Cong.; pervaded congressional 2d 2: This Sess. theme consideration proposed See, g., Rep; H. 1191, amendments. e. R. No. 81st Cong., Sess., passim; Hearing 1st before No. 3 of Subcommittee Judiciary Amending House Committee on-the on 7 and 11 Sections Clayton Act, Cong., Sess., 39,. &lst 1st 11-13,’28-29, ser. pp. 117; Hearings before a Subcommittee of the Senate on the Committee Judiciary Corporate Mergers Cong., Acquisitions, on 81st 1st and 321; 4-5, 20, 62-63, 126-129', Cong. 2d Sess. Rec. 11485 Celler, sponsor [Congressman of the bill to amend 7 in the House: plug loophole present, bill “this seeks in the antitrust laws. . ... stop, look, merger. It time to and listen and call a halt to. going country”), 11493-11494, 11497, movement that ; Cong. 16433,' 11502 96 Rec. 16443.
Notes
notes we see figures inference we draw in the from instant case record. by disclosed nothing There is the record of this case to rebut the inherently anticompetitive tendency manifested these percentages. was, There to be sure;-testimony the effect that competition among officers to banks