United States v. Idaho First National Bank, Civ. A. No. 1699.

• Decision Date: 21 April 1970
• Docket Number: Civ. A. No. 1699.
• Citation: 315 F. Supp. 261
• Parties: UNITED STATES of America, Plaintiff, v. The IDAHO FIRST NATIONAL BANK and Fidelity National Bank, Defendants, and William Camp, Comptroller of the Currency, Intervenor.
• Court: U.S. District Court — District of Idaho

315 F. Supp. 261

UNITED STATES of America, Plaintiff, v. The IDAHO FIRST NATIONAL BANK and Fidelity National Bank, Defendants and William Camp, Comptroller of the Currency, Intervenor.

Civ. A. No. 1699.

United States District Court, D. Idaho.

April 21, 1970.

Donald A. Kinkaid, Richard J. Torre, Kevin D. Brenan, James J. Falco, Richard Mezan, Antitrust Div., Dept. of Justice, Washington, D.C., for plaintiff.

Eugene J. Metzger, Carl W. Schwarz, Metzger, Schwarz & McKenna, Washington, D. C., Robert E. Smylie, Willis E. Sullivan, Langroise, Clark, Sullivan & Smylie, Boise, Idaho, Raymond P. Parry, Thomas G. Nelson, Parry, Robertson, Daly & Larson, Twin Falls, Idaho, for defendant.

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

DECISION

BOLDT, District Judge (by assignment).

In this civil action the Department of Justice (Justice) in the name of plaintiff seeks to enjoin consummation of a merger of Idaho First National Bank (Idaho First) and Fidelity National Bank (Fidelity) whereby Fidelity will become a branch of Idaho First, agreed to by the banks and approved by the Comptroller of the Currency (Comptroller), upon the ground it is violative of Section 7 of the Clayton Act, 15 U.S.C.A. § 18. Justice alleges that if consummated the merger may "substantially lessen competition" in commercial banking within the intent and meaning of the Clayton Act and the Bank Merger Act of 1966 (BMA 1966), 12 U. S.C.A. § 1828. Jurisdiction of the case is vested in this court by Section 15 of the Clayton Act. The law and fact issues in the case are stated and determined in this decision and in detailed Findings of Fact and Conclusions of Law entered by the Court.

Idaho is a state large in area but one of the smallest of the nation in population. The state has no large metropolitan area, the largest city in the state, Boise, now having an estimated population of about 72,000. The city of Twin Falls is a small town having a present population of less than 25,000. It is located in a farming and cattle raising county of the same name which presently has a population of less than 43,000. Twin Falls city and parts of the county are within the so-called "Magic Valley," a vaguely delineated area at least six times larger than Twin Falls County.

In terms of assets and deposits, Idaho First is one of the three largest commercial banks doing business in Idaho and the largest bank having its headquarters in the state. Idaho First is largely owned and managed by residents of Idaho. It has approximately 35% of the total commercial bank deposits in Idaho, its central offices are in Boise and it has 50 branch offices throughout the state.

Fidelity is the oldest commercial bank in Twin Falls County and is one of four commercial banks in Twin Falls city. Two of the banks in the city are branch offices of the two other largest banking organizations doing business in Idaho. Although seventh largest of twenty-six banks in Idaho, Fidelity ranks third in size of the four banks in Twin Falls city. Fidelity has branch offices in the small communities of Filer and Hazelton, respectively about 8 and 25 road miles distant from Twin Falls city.

With the approval of counsel, during the trial the Court drove several hundred miles in seeing every bank office and almost every town or hamlet in the "Magic Valley" having its name on a current map published by the state. Twin Falls city and its environs were given special attention as were other communities in the general vicinity.

By statute the Comptroller has sole authority to grant permission for national banks to establish branch offices either de novo or by merger. 12 U.S.C.A. §§ 36(c) and 1828(c) (2). Over a period of years, first when there were two and later when there were three banks in Twin Falls city, Idaho First made continuing attempts by formal application and informal inquiry to obtain approval of the Comptroller for a de novo branch office in Twin Falls city. All such efforts, the latest not long prior to the trial, have been unsuccessful, being denied or rebuffed primarily on the ground that Twin Falls city and its surrounding area were considered by the Comptroller and his staff as adequately served by the other banks located in the city.

On October 16, 1968 Idaho First and Fidelity entered into a merger agreement which was ratified by the directors of each bank and on October 25, 1968 formal written application for approval of the merger was submitted to the Comptroller. After full investigation and consideration, the Comptroller concluded that the merging banks were not actual or potential competitors with each other; that the merger would not substantially lessen competition; and that the merger would provide additional, improved and more adequate bank services meeting the convenience and needs of the Twin Falls community which would clearly outweigh in public interest any conceivable anticompetitive effects that might result from the merger. On these findings the Comptroller approved the merger in an opinion dated January 22, 1969. Shortly after commencement of this action, the Comptroller intervened in the case as a matter of right. 12 U.S.C.A. § 1828(c) (7) (D).

In substance, Justice alleges that if the merger goes into effect it will eliminate competition between the defendant banks, substantially lessen competition in the relevant market area, increase the concentration of commercial banks, remove Idaho First as an actual or potential competitor in the Twin Falls area, and that the elimination of Fidelity will remove a strong locally owned bank which is economically and socially oriented to the particular service of an agriculturally oriented area.

The defendants and intervenor deny all of the Justice allegations and allege: that the geographic area within which direct and immediate competitive effects of the merger will be felt is not a "section of the country" within the meaning of that term in Section 7 of the Clayton Act and BMA 1966 and therefore the Act does not authorize this action; that defendant banks do not actually or potentially compete with each other; that their merger will increase and not substantially lessen competition in the relevant market area; and that any possible anticompetitive effects of the merger will be clearly outweighed in the public interest by additional improved services meeting the convenience and needs of the community.

All issues in this case must be considered and determined in the light of two Congressional enactments, i.e., the Clayton Act and BMA 1966, the pertinent portions of which are:

Clayton Act

"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." 15 U.S.C.A. § 18.

BMA 1966

"The responsible agency 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." 12 U.S.C.A. § 1828(c) (5).

"In any action brought under the antitrust laws arising out of a merger transaction * * * the court shall review de novo the issues presented.

"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)." 12 U.S. C.A. § 1828(c) (7) (A) and (B).

Since BMA 1966 specifies trial de novo, the function of the trial court in a bank merger case is not a limited review of administrative action or ruling, but all issues of fact and law must be considered and determined anew and afresh by the finding of pertinent facts from the evidence presented in the trial and the application of controlling statute and case law to the facts as found by the Court. The parties agree and the cited cases hold plaintiff has the burden of proof to show by a preponderance of evidence that in reasonable probability the merger may substantially lessen competition and defendants have the burden of proving the merger will provide greater and better bank services meeting the needs and requirements of the community that clearly outweigh in the public interest any anticompetitive effects that may result from the merger.

All national bank merger cases decided since 1963 when Philadelphia first held bank mergers to be within the Clayton Act, are:

United States v. Third National Bank in Nashville, 390 U.S. 171, 88 S.Ct. 882, 19 L.Ed.2d 1015 (1968);

United States v. First City National Bank of Houston, 386 U.S. 361, 87 S. Ct. 1088, 18 L.Ed.2d 151 (1967);

United States v. First National Bank & Trust

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