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U.S. Supreme Court

United States v. Philadelphia Nat'l Bank, 374 U.S. 321 (1963)

United States v. Philadelphia National Bank

No. 83

Argued February 20-21, 1963

Decided June 17, 1963

374 U.S. 321


Appellees, a national bank and a state bank, are the second and third largest of the 42 commercial banks in the metropolitan area consisting of Philadelphia and its three contiguous counties, and they have branches throughout that area. Appellees' boards of directors approved an agreement for their consolidation, under which the national bank's stockholders would retain their stock certificates, which would represent shares in the consolidated bank, while the state bank's stockholders would surrender their shares in exchange for shares in the consolidated bank. After obtaining reports, as required by the Bank Merger Act of 1960, from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Attorney General, all of whom advised that the proposed merger would substantially lessen competition in the area, the Comptroller of the Currency approved it. The United States sued to enjoin consummation of the proposed consolidation on the ground, inter alia, that it would violate § 7 of the Clayton Act.

Held: the proposed consolidation of appellee banks is forbidden by § 7 of the Clayton Act, and it must be enjoined. Pp. 323-372.

1. By the amendments to § 7 of the Clayton Act enacted in 1950, Congress intended to close a loophole in the original section by broadening its scope so as to cover the entire range of corporate amalgamations, from pure stock acquisitions to pure acquisitions of assets, and it did not intend to exclude bank mergers. Pp. 374 U. S. 335-349.

2. The Bank Merger Act of 1960, by directing the banking agencies to consider competitive factors before approving mergers, did not immunize mergers approved by them from operation of the federal antitrust laws; and the doctrine of primary jurisdiction is not applicable here. California v. Federal Power Commission, 369 U. S. 482. Pp. 374 U. S. 350-355.

3. The proposed consolidation of appellee banks would violate § 7 of the Clayton Act, and it must be enjoined. Pp. 374 U. S. 355-372.

Page 374 U. S. 322

(a) The "line of commerce" here involved is commercial banking. Pp. 374 U. S. 355-357.

(b) The "section of the country" which is relevant here is the metropolitan area consisting of Philadelphia and its three contiguous counties. Pp. 374 U. S. 357-362.

(c) The consolidated bank would control such an undue percentage share of the relevant market (at least 30%) and the consolidation would result in such a significant increase in the concentration of commercial banking facilities in the area (33%) that the result would be inherently likely to lessen competition substantially, and there is no evidence in the record to show that it would not do so. Pp. 374 U. S. 362-367.

(d) The facts that commercial banking is subject to a high degree of governmental regulation and that it deals with the intangibles of credit and services, rather than in the manufacture or sale of tangible commodities, do not immunize it from the anticompetitive effects of undue concentration. Pp. 374 U. S. 368-370.

(e) This proposed consolidation cannot be justified on the theory that only through mergers can banks follow their customers to be suburbs and retain their business, since this can be accomplished by establishing new branches in the suburbs. P. 374 U. S. 370.

(f) This proposed consolidation cannot be justified on the ground that the increased lending limit would enable the consolidated bank to compete with the large out-of-state banks, particularly the New York banks, for very large loans. Pp. 374 U. S. 370-371.

(g) This proposed consolidation cannot be justified on the ground that Philadelphia needs a bank larger than it now has in order to bring business to the area and stimulate its economic development. P. 374 U. S. 371.

(h) This Court rejects appellees' pervasive suggestion that application of the procompetitive policy of § 7 to the banking industry will have dire, although unspecified, consequences for the national economy. Pp. 374 U. S. 371-372.

201 F.Supp. 348, reversed.

Page 374 U. S. 323

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