United States v. Philadelphia National Bank

• Decision Date: 15 January 1962
• Docket Number: Civ. A. No. 29287.
• Citation: 201 F. Supp. 348
• Parties: UNITED STATES of America, Plaintiff, v. The PHILADELPHIA NATIONAL BANK and Girard Trust Corn Exchange Bank, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

201 F. Supp. 348

UNITED STATES of America, Plaintiff, v. The PHILADELPHIA NATIONAL BANK and Girard Trust Corn Exchange Bank, Defendants.

Civ. A. No. 29287.

United States District Court E. D. Pennsylvania.

January 15, 1962.

COPYRIGHT MATERIAL OMITTED

George D. Reycraft, James A. Reed, John M. O'Donnell, P. Jay Flocken, Charles A. Degnan, Dept. of Justice, Washington, D. C., Drew J. T. O'Keefe, U. S. Atty., Philadelphia, Pa., for plaintiff.

Arthur Littleton, Philadelphia, Pa., Ernest R. Von Starck, Don B. Blenko, Donald A. Scott, Morgan, Lewis & Bockius, Philadelphia, Pa., of counsel, for defendant, the Philadelphia Nat. Bank.

Philip Price, Philadelphia Pa., Carroll R. Wetzel, Minturn T. Wright, III, John J. Brennan, Barnes, Dechert, Price, Myers & Rhoads, Philadelphia, Pa., of counsel, for defendant, Girard Trust Corn Exchange Bank.

CLARY, Chief Judge.

This is a civil action instituted under Section 4 of the Act of Congress of July 2, 1890, as amended, 15 U.S.C.A. § 4, (commonly known and hereinafter referred to as the "Sherman Antitrust Act"), and Section 15 of the Act of Congress of October 15, 1914, as amended, 15 U.S.C.A. § 25, (commonly referred to and hereinafter designated as the "Clayton Antitrust Act"), in which the United States (hereinafter referred to as "government" or "plaintiff") seeks an injunction to restrain the defendants, The Philadelphia National Bank (hereinafter referred to as "PNB") and Girard Trust Corn Exchange Bank (hereinafter referred to as "Girard"), from carrying out an agreement of consolidation. This agreement of consolidation was drawn up after the passage of Public Law 86-463, (commonly referred to as "The Bank Merger Act of 1960"), amending 74 Stat. 129, approved May 13, 1960, found at 12 U.S.C.A. § 1828(c), and is subject to the provisions thereof. Plaintiff herein alleges that the proposed consolidation violates Section 1 of the Sherman Antitrust Act, as amended, 15 U.S.C.A. § 1, and Section 7 of the Clayton Antitrust Act, as further amended by the Act of Congress of December 29, 1950, 15 U.S.C.A. § 18, (commonly known as "The Celler-Kefauver Anti-Merger Act").

The proposed merger sought to be enjoined was approved by the Directors of the banks involved on November 15, 1960, and by the Comptroller of the Currency on February 24, 1961. This action was instituted on February 25, 1961.

Generally, the complaint alleges that commercial banking and several of its integral parts comprise interstate commerce; that commercial banking with its integral parts fills an essential and unique role in the nation's economy with a combination of services unduplicated by other financial institutions; that existing and potential competition in commercial banking in the Philadelphia area would be substantially and unreasonably lessened; that the merger would substantially and unreasonably increase concentration in banking in the Philadelphia area and that existing and potential competition in the commerce and industry served by commercial banks in the Philadelphia area would be substantially and unreasonably lessened. Parenthetically it may be noted at the outset that the last of these averments has not been seriously presented by the plaintiff and, for all practical purposes, has been abandoned.

The net effect of the above, the plaintiff contends is a violation of both Section 1 of the Sherman Act and Section 7 of the Clayton Act. The plaintiff contends further that competition in commercial banking is absolutely vital and necessary to the preservation of the financial structure and security of the nation; that undue concentration of banking powers would have the effect of increasing costs and interests rates both to depositors and borrowers; would result in a decrease in the credit facilities available to the general public and, in effect, would destroy the very foundation of the banking system of the United States which, according to the Government's witnesses, rests entirely upon a number of independently-owned banks serving the community, which system they felt strengthened competition, and a merger such as this would tend to destroy it.

Initially, it would help to review, in extremely brief outline, what Congress has done in this field. The Sherman Act, supra, enacted in 1890, was designed to prevent combinations in restraint of trade or commerce among the several states or with foreign nations. That this was an exposition of the common law doctrine is revealed by the decision in United States v. American Tobacco Company, 221 U.S. 106, at pages 179-180, 31 S.Ct. 632, at page 648, (1911) where the Supreme Court of the United States declared:

"Applying the rule of reason to the construction of the statute, it was held in the Standard Oil Case that, as the words `restraint of trade' at common law and in the law of this country at the time of the adoption of the anti-trust act only embraced acts or contracts or agreements or combinations which operated to the prejudice of the public interests by unduly restricting competition, or unduly obstructing the due course of trade, or which, either because of their inherent nature or effect, or because of the evident purpose of the acts, etc., injuriously restrained trade, that the words as used in the statute were designed to have and did have but a like significance. * * * the words `restraint of trade' should be given a meaning which would not destroy the individual right to contract, and render difficult, if not impossible, any movement of trade in the channels of interstate commerce, — the free movement of which it was the purpose of the statute to protect." Citing Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911).

It will therefore be seen that the Supreme Court judged the key factor and purpose of the Sherman Antitrust law to be the perpetuation of and protection of free competition. An examination of both the Clayton Act and the Federal Trade Commission Act, both passed in the year 1914, and the case law decided thereunder, again stresses the principle of law that competition should be encouraged as a national policy, and it is the destruction of this free competition which is proscribed.

The Miller-Tydings Amendment to the Clayton Act and the Robinson-Patman Amendment were both designed to insure free and fair competition. The Celler-Kefauver Amendment of 1950 was designed to prevent asset acquisitions thereby plugging a loophole in the Clayton Act which previously prevented stock acquisition only, and did not cover the area in which asset acquisitions might tend to destroy competition. The legislative history of this latter Act clearly indicates the intent of the Congress to preserve competition as defined by the Supreme Court.

Since competition and the preservation of competition permeates each of the aforementioned Acts and is the common bond between each of them, it would appear that 71 years after the passage of the first Antitrust law, the Court should have (but does not) a clear legal definition of competition as used in each of the Acts. Congress has given the Court at least one idea of what it means in the use of the word when it refers to "vigorous" competition. What then is the real definition of competition and what are the standards of competition required by these Acts? The Webster definition reads as follows:

"Com. & Econ. The effort of two or more parties, acting independently, to secure the custom of a third party by the offer of the most favorable terms; also, the relations between different buyers or different sellers which result from this effort."

In United States v. Aluminum Company of America, 91 F.Supp. 333, at 355 (S.D.N.Y.1950), Chief Judge Knox defined competition as follows:

"Commercial competition, theoretically, is the independent endeavor of two or more persons or organizations within the realm of a chosen market place, to obtain the business patronage of others by means of various appeals, including the offer of more attractive terms or superior merchandise."

It seems to the Court that the Congress, by the use of the word "competition", intended to preserve free and open markets wherein the rivalry of the commercial firms, in the same line of endeavor, for the patronage of the common customer, would be demonstrated by a business atmosphere where free purchasers and free sellers, under no obligation to buy, and under no obligation to sell, would enter into contracts of purchase and sales (or service contracts) because of the actual inducements offered, such as quality of product, terms, delivery and the many other factors which make for good business relations, having in mind the peculiar situations, facts and circumstances which govern the particular transactions between individuals or organizations.

It is also apparent that in any antitrust action, including the instant one, a Judge called upon to decide the case must, of necessity, take the facts that are presented to him and determine on those peculiar facts whether the particular circumstances involved will, or will not, destroy the free competition which the Congress intended to preserve, and with particular scrutiny of the industry or part thereof charged with violations.

The Government here has brought an action — the first of its kind — to prevent the merger of two strong Philadelphia banks, and on the ground that this merger will (1) violate the Sherman Act by restraining trade, and (2) violate the Clayton Act by lessening and/or destroying competition and tending toward a monopoly. The Court believes that the Government's general theory of the case should be set out in brief, broad outline before coming to the specifics.

The Government's case was predicated upon the premise that the banks involved were legally restricted to having offices in geographic limits. Starting with that assumption, the Government introduced a wealth of statistical data, the accuracy of which has not been...