United States v. First City National Bank of Houston United States v. Provident National Bank, s. 914

• Decision Date: 27 March 1967
• Docket Number: 972,Nos. 914,s. 914
• Citation: 386 U.S. 361,18 L.Ed.2d 151,87 S.Ct. 1088
• Parties: UNITED STATES, Appellant, v. FIRST CITY NATIONAL BANK OF HOUSTON et al. UNITED STATES, Appellant, v. PROVIDENT NATIONAL BANK et al
• Court: U.S. Supreme Court

386 U.S. 361

87 S.Ct. 1088

18 L.Ed.2d 151

UNITED STATES, Appellant,

v FIRST CITY NATIONAL BANK OF HOUSTON et al.

UNITED STATES, Appellant,

v. PROVIDENT NATIONAL BANK et al.

Nos. 914, 972.

Argued Feb. 20 and 21, 1967.

Decided March 27, 1967.

Donald F.Turner, Washington, D.C., for appellant.

David T. Searls, Houston, Tex., and Eugene J. Metzger, Washington, D.C., for appellees.

Frederic L. Ballard, Philadelphia, Pa., and Joseph J. O'Malley, Washington, D.C., for appellees.

Mr. Justice DOUGLAS delivered the opinion of the Court.

These civil suits were filed by the United States under § 7 of the Clayton Act, 38 Stat. 731, as amended, 64 Stat. 1125, 15 U.S.C. § 18, to prevent two bank mergers—one in Texas between the First City National Bank of Houston and the Southern National Bank of Houston, and one in Pennsylvania between the Provident National Bank and the Central Penn National Bank, both in Philadelphia.

The Comptroller of the Currency approved the mergers under the Bank Merger Act of 1966, 80 Stat. 7, 12 U.S.C. s 1828(c) (1964 ed., Supp. II). The United States thereupon brought these suits in the respective District Courts and the Comptroller intervened in them. The District Courts dismissed the complaints. No. 914 (unreported); No. 972, 262 F.Supp. 397. The United States appealed, 32 Stat. 823, as amended, 15 U.S.C. § 29, and we noted probable jurisdiction, 385 U.S. 1023, 1034, 87 S.Ct. 754, 778, 17 L.Ed.2d 672, 682.

I.

It is suggested that the complaints are defective in that they fail to state that the actions are brought under the Bank Merger Act of 1966, do not even mention the Act, and that, therefore, these cases should be remanded to allow the Government to amend the complaints.

The Bank Merger Act of 1966 provides that '(a)ny action brought under the antitrust laws' shall be brought within a specified time (12 U.S.C. § 1828(c) (7)(A)); it also specifies the standards to be applied by a court in a judicial proceeding challenging a bank merger 'on the ground that the merger * * * constituted a violation of any antitrust laws other than section 2 of (the Sherman Act)' (12 U.S.C. § 1828(c)(7)(B); and it provides immunity from such an attack if those standards are met. Section 1828(c)(8) provides that, '(f)or the purposes of (§ 1828(c)), the term 'antitrust laws' means * * * (the Sherman Act, the Clayton Act), and any other Acts in pari materia.' (Emphasis added.) Thus, an action challenging a bank merger on the ground of its anticompetitive effects is brought under the antitrust laws. Once an action is brought under the antitrust laws, the Bank Merger Act provides a new defense or justification to the merger's proponents '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.' 12 U.S.C. § 1828(c)(5)(B). There is no indication that an action challenging a merger on the ground of its anticompetitive effects is bottomed on the Bank Merger Act rather than on the antitrust laws. What is apparent is that Congress intended that a defense or justification be available once it had been determined that a transaction would have anticompetitive effects, as judged by the standards normally applied in antitrust actions. Thus, the Government's failure to base the actions on the Bank Merger Act of 1966 does not constitute a defect in its pleadings. Nor is the Government's failure to mention the Bank Merger Act fatal, for, as we shall see, the offsetting community 'convenience and needs,' as specified in 12 U.S.C. § 1828(c)(5)(B), must be pleaded and proved by the defenders of the merger.

II.

An application for approval of the Texas merger was made to the Comptroller of the Currency pursuant to 12 U.S.C. § 1828(c)(5)(B), which provides that he shall not approve the merger 'whose effect in any section of the country may by substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless (he) 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.' Requests were made of the Attorney General and the Federal Reserve Board pursuant to 12 U.S.C. § 1828(c)(4) for their views and both submitted reports to the Comptroller that the merger would have serious anticompetitive effects. The Comptroller nonetheless approved it.

The same procedure was followed in the Pennsylvania case, and the Attorney General and Federal Reserve sub- mitted adverse reports. Nonetheless the Comptroller approved this merger also. And, as we have said, these civil suits were instituted to enjoin the mergers under § 7 of the Clayton Act.

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 or the machinery for obtaining the prior approval of the Comptroller and a preliminary expression of views by the Attorney General and the Federal Reserve but it added an additional standard for the Comptroller. Section 1828(c)(5)(B) says, as already noted, that no merger shall be approved where the effect 'may be substantially to lessen competition' unless the responsible agency, in this case the Comptroller, 'finds that the anti-competitive 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.' And that subsection goes on to say: '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.'

Section 1828(c)(7)(B) provides that in a judicial proceeding attacking a merger on the ground that it violates the antitrust laws 'the standards applied by the court shall be identical with' those the banking agencies must apply. And 12 U.S.C. § 1828(c)(7)(A) states that 'In any such action, the court shall review de novo the issues presented.' (Emphasis added.)

Section 1828(c)(7)(A) also provides that the commencement of an antitrust action in the courts 'shall stay the effectiveness of the agency's approval unless the court shall otherwise specifically order.'

It is around these new provisions of the 1966 Act and their interplay with § 7 of the Clayton Act that the present controversy turns.

First is the question whether the burden of proof is on the defendant banks to establish that an anticompetitive merger is within the exception of 12 U.S.C. § 1828(c)(5)(B) or whether it is on the Government. We think it plain that the banks carry the burden. That is the general rule where one claims the benefits of an exception to the prohibition of a statute. Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 44—45, 68 S.Ct. 822, 827—828, 92 L.Ed. 1196. The House Report (No. 1221, 89th Cong., 2d Sess. U.S. Code Congressional and Administrative News, p. 1862) makes clear that antitrust standards were the norm and anticompetitive bank mergers, the exception: '* * * the bill acknowledges that the general principle of the antitrust laws—that substantially anticompetitive mergers are prohibited—applies to banks, but permits an exception in cases where it is clearly shown that a given merger is so beneficial to the convenience and needs of the community to be served * * * that it would be in the public interest to permit it.' (Emphasis added.) Id., at 3—4.

The sponsor of the bill that was finally enacted, Congressman Patman, flatly stated: 'It should be clearly noted that the burden of establishing such 'convenience and needs' is on the banks seeking to merge; and when we say clearly outweighed we mean outweighed by the preponderance of the evidence.' 112 Cong.Rec. 2333—2334 (Feb. 8, 1966).

We therefore disagree with the views of the lower courts to the contrary.

This problem is, of course, subtly merged with the question whether judicial review of the Comptroller's decision is in the category of other administrative rulings which are sustained unless a court is persuaded that the agency's action is clearly unsupported or not supported by substantial evidence.

The 1966 Act was the product of powerful contending forces, each of which in the aftermath claimed more of a victory than it deserved, leaving the controversy that finally abated in Congress to be finally resolved in the courts. So far as review of administrative agency action is concerned, we have only this to say. Prior to the 1966 Act administrative approval of bank mergers was necessary. Yet in an antitrust action later brought to enjoin them we never stopped to consider what weight, if any, the agency's determination should have in the antitrust case. See United States v. Philadelphia National Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915; United States v. First Nat. Bank & Trust Co. 376 U.S. 665, 84 S.Ct. 1033, 12 L.Ed.2d 1. Traditionally in antitrust actions involving regulated industries, the courts have never given presumptive weight to a prior agency decision, for the simple reason that Congress put such suits on a different axis than was familiar in administrative procedure. United States v. Radio Corporation of America, 358 U.S. 334, 79 S.Ct. 457, 3 L.Ed.2d 354; United States v. El Paso Natural Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12 L.Ed.2d 12; United States v. Philadelphia National Bank, supra; United States v. First Nat. Bank & Trust Co., supra. We have found no indication that Congress designed judicial review differently under the 1966 Act than had earlier obtained.

In fact, as already noted, 'the standards applied by the court shall be identical with those...