United States v. First National Bank of Maryland, Civ. No. 19801.

• Decision Date: 13 January 1970
• Docket Number: Civ. No. 19801.
• Citation: 310 F. Supp. 157
• Parties: UNITED STATES of America v. The FIRST NATIONAL BANK OF MARYLAND and First National Bank of Harford County and William B. Camp, Comptroller of the Currency, Intervenor.
• Court: U.S. District Court — District of Maryland

310 F. Supp. 157

UNITED STATES of America v. The FIRST NATIONAL BANK OF MARYLAND and First National Bank of Harford County and William B. Camp, Comptroller of the Currency, Intervenor.

Civ. No. 19801.

United States District Court D. Maryland.

January 13, 1970.

William P. McManus, Thomas P. Ruane and Eugene V. Lipkowitz, U. S. Dept. of Justice, Washington, D. C., and Stephen H. Sachs, U. S. Atty. for Dist. of Maryland, Baltimore, Md., for plaintiff.

William L. Marbury, Franklin G. Allen and E. Stephen Derby, Baltimore, Md., for defendant, The First Nat. Bank of Md.

Edward C. Wilson, Bel Air., Md., for defendant, First Nat. Bank of Harford County.

Philip L. Roache, Jr. and Charles H. McEnerney, Jr., Office of Comptroller of Currency, Washington, D. C., for intervenor.

FRANK A. KAUFMAN, District Judge.

If one could say, with apologies to Miss Gertrude Stein, that a bank is a bank is a bank, or even that a branch is a branch is a branch, perhaps this civil antitrust case involving a proposed bank merger could be said to pose issues basically legal rather than factual. Congress and the Supreme Court, it is true, have established broad legal guidelines for the separation of permitted and proscribed bank mergers. But in most antitrust cases, it is the facts which govern the determination of whether or not there is a reasonable probability that the merger will cause a substantial lessening of competition in the foreseeable future in any section of the United States. This bank merger case is no exception to that general rule.¹ The facts about the banks and the area involved provide the governing indicators.

On October 11, 1967, The First National Bank of Maryland (First of Maryland) and First National Bank of Harford County (First of Harford) signed an agreement providing for the merger of First of Harford into First of Maryland. Application for approval by the Comptroller of the Currency (the Comptroller) under 12 U.S.C. § 1828(c) was filed on November 28, 1967. The Comptroller, acting in accordance with that statute, requested reports on competitive factors from the Board of Governors of the Federal Reserve System, the Attorney General, and the Federal Deposit Insurance Corporation (FDIC). The Board of Governors concluded that "some competition exists between * * * the two banks and there is a potential for increased competition between them. The over-all effect of the proposal would be adverse." The Antitrust Division of the Department of Justice stated the conclusion that "the merger would have a significantly adverse effect on competition in Harford County." The FDIC did not respond. The Comptroller, on July 19, 1968, approved the merger. The Government, on August 16, 1968, acting through the Department of Justice, instituted this proceeding to enjoin the merger, thereby causing the merger to be stayed during this proceeding; and the Comptroller thereafter became a party intervenor herein as a matter of right.

The relevant statutes are Section 7 of the Clayton Act, 15 U.S.C. § 18, and the Bank Merger Act of 1966. Section 7 provides in pertinent part:

No corporation engaged in commerce shall acquire directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly. Emphasis added.

The applicable parts of the Bank Merger Act, as set forth in 12 U.S.C. § 1828(c) state:

(5) The responsible agency in this case, the Comptroller shall not approve —

(A) any proposed merger transaction which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States, or

(B) any other proposed merger transaction whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

In every case, the responsible agency shall take into consideration the financial and managerial resources and future prospects of the existing and proposed institutions, and the convenience and needs of the community to be served.

* * * * * *

(7) (A) Any action brought under the antitrust laws arising out of a merger transaction shall be commenced prior to the earliest time under paragraph (6) at which a merger transaction approved under paragraph (5) might be consummated. The commencement of such an action shall stay the effectiveness of the agency's approval unless the court shall otherwise specifically order. In any such action, the court shall review de novo the issues presented.

(B) In any judicial proceeding attacking a merger transaction approved under paragraph (5) on the ground that the merger transaction alone and of itself constituted a violation of any antitrust laws other than section 2 of Title 15, the standards applied by the court shall be identical with those that the banking agencies are directed to apply under paragraph (5).

* * * * * *

Plaintiff contends that the merger violates Section 7 of the Clayton Act and that the affirmative offsetting factors stated in the Bank Merger Act are either not present or could be satisfied in a manner which would be less anticompetitive than the proposed merger. Defendants and intervenor disagree on both grounds.

Banking as an industry is subject to the same antitrust standards as other industries. Thus, a bank merger may not pass antitrust muster without surviving an analysis of its anticompetitive effects, if any, on the structure of the market involved. United States v. Third National Bank in Nashville, 390 U.S. 171, 181-182, 88 S.Ct. 882, 19 L.Ed.2d 1015 (1968); United States v. First City National Bank of Houston, 386 U.S. 361, 365, 87 S.Ct. 1088, 18 L.Ed.2d 151 (1967); United States v. First National Bank and Trust Company of Lexington, 376 U.S. 665, 84 S.Ct. 1033, 12 L.Ed.2d 1 (1964); United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (1963).

In Philadelphia, supra, the second and third largest of forty-two commercial banks with head offices in the Philadelphia metropolitan area sought to merge and thereby to become the largest bank, controlling at least 30% of the commercial banking business, in that area. Noting the trend toward concentration in the area, Mr. Justice Brennan, for the majority, held in what he described as a case of "first impression" (at 337, 83 S.Ct. 1715) that bank mergers are subject to Section 7 of the Clayton Act and that the proposed merger violated Section 7 of the Clayton Act. Mr. Justice Harlan, dissenting from the application of the Clayton Act to the banking industry, noted (at 373, 83 S.Ct. at 1746) that the Bank Merger Act of 1960 resulted from congressional concern with "an apparently accelerating trend toward concentration in the commercial banking system in this country." The recognition of that general trend in commerce and industry as a whole had earlier supplied the "dominant theme" underlying the 1950 amendments to section 7 of the Clayton Act. Brown Shoe Company v. United States, 370 U.S. 294, 315, 82 S. Ct. 1502, 8 L.Ed.2d 510 (1962).

In United States v. First City National Bank of Houston,² supra, 386 U.S. at 365, 87 S.Ct. at 1091 Mr. Justice Douglas wrote:

Section 7 of the Clayton Act condemns mergers where "the effect of such acquisition may be substantially to lessen competition." The Bank Merger Act of 1966 did not change that standard * * *.

And in United States v. Third National Bank in Nashville, supra, Mr. Justice White, for the majority, stated:

The legislative history of the Bank Merger Act of 1966 leaves no doubt that the Act was passed to make substantial changes in the law applicable to bank mergers. Congress was evidently dissatisfied with the 1960 Bank Merger Act as that Act was interpreted in United States v. Philadelphia National Bank * * * and in United States v. First National Bank & Trust Co. of Lexington * * * and wished to alter both the procedures by which the Justice Department challenges bank mergers and the legal standard which courts apply in judging those mergers. The resulting statute, however, as some members of Congress recognized, was more clear and more specific in prescribing new procedures for testing mergers than in expounding the new standard by which they should be judged. Footnotes omitted. 390 U.S. at 177-178, 88 S.Ct. at 887.

* * * * * *

We find in the 1966 Act, which adopted precisely that § 7 Clayton Act phrase, as well as the "restraint of trade" language of Sherman Act § 1, no intention to adopt an "antitrust standard" for bank cases different from that used generally in the law. Only one conclusion can be drawn from the exhaustive legislative deliberations that preceded passage of the Act: Congress intended bank mergers first to be subject to the usual antitrust analysis; if a merger failed that scrutiny, it was to be permissible only if the merging banks could establish that the merger's benefits to the community would outweigh its anticompetitive disadvantages. See Houston Bank, supra. Footnote omitted. At 181-182, 88 S.Ct. at 887-889.

The burden of proving the reasonable probability of a substantial lessening of competition is upon the Government as plaintiff. See Philadelphia, 374 U.S. at 363, 83 S.Ct. 1715. In Houston, the Court held that the defendant banks had the burden of proving "an anticompetitive merger is within the...