United States v. Phillipsburg Nat. Bank, 399 U.S. 350 (1970)
U.S. Supreme CourtUnited States v. Phillipsburg Nat. Bank, 399 U.S. 350 (1970)
United States v. Phillipsburg National Bank & Trust Co.
Argued April 28, 1970
Decided June 29, 1970
399 U.S. 350
Phillipsburg National Bank (PNB) and Second National Bank (SNB) are the two largest of the three commercial banks in Phillipsburg, New Jersey, whose 1960 population (including suburbs) was 28,500. Easton, Pennsylvania, across the river, whose 1960 population (including suburbs) was 60,000, has four commercial banks. The proposed merger of PNB and SNB, direct competitors, would produce a bank with assets of more than $41,100,000, placing it second among the six banks remaining in the Phillipsburg-Easton area, and would give the two largest banks in the area 54.8% of the banking assets, 64.8% of total deposits, 63% of total loans, and 10 of the 16 banking offices. PNB and SNB are oriented toward the needs of small depositors and small borrowers in the Phillipsburg-Easton area, as over 90% of their depositors and about 80% of their borrowers reside there, with the vast majority residing in Phillipsburg. Despite the views of the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Attorney General that the proposed merger involved commercial banking in Phillipsburg-Easton and that the merger would significantly harm competition in that area, the Comptroller of the Currency, pursuant to the Bank Merger Act, approved the merger, treating most of the Lehigh Valley as the geographic area, and evaluating competition from finance companies, savings and loan institutions, and the more than 30 commercial banks in that area. The District Court rejected Phillipsburg-Easton as the geographic area and selected an area about four times as large, with a 1960 population of 216,000 and 18 banks. Although, in its actual analysis of competitive effect, that court looked to commercial banking as the relevant product market, it emphasized competition between PNB-SNB and other types of financial institutions, and stated that PNB-SNB's activities "really make them much more . . . like savings institutions than like so many of the larger commercial banks." The District Court held that the United States had not established that the merger would have any anticompetitive effect, and that, even if
there were de minimis anticompetitive effect in the Government's narrowly drawn market, such effect would be clearly outweighed by the convenience and needs of the community.
1. Commercial banking is the relevant product market. Pp. 399 U. S. 359-362.
(a) It is the cluster of products and services offered by full-service banks that makes commercial banking a distinct line of commerce. United States v. Philadelphia National Bank, 374 U. S. 321. Pp. 399 U. S. 359-360.
(b) While submarkets such as the District Court defined would be relevant in analyzing the effect on competition between a commercial bank and another type of financial institution, they cannot be the basis for disregarding the broader line of commerce that has economic significance, with respect to small as well as large banks. Pp. 399 U. S. 360-362.
2. The Phillipsburg-Easton area is the relevant geographic market. Pp. 399 U. S. 362-365.
(a) Commercial realities in the banking industry make clear that banks generally have a very localized business, and such localization is particularly pronounced when small customers are involved. Pp. 399 U. S. 362-364.
(b) The area is a geographic market in which the merger's effect would be "direct and immediate," and where the merging banks' customers must, or will, do their banking. Pp. 399 U. S. 364-365.
(c) The area, with a 1960 population of nearly 90,000, and with seven competing banks, is a market that is clearly an economically significant section of the country for the purposes of § 7 of the Clayton Act. P. 399 U. S. 365.
3. On the record in this case the proposed merger would be "inherently likely to lessen competition substantially." Pp. 399 U. S. 365-369.
4. The District Court's errors require reexamination of its conclusion under the Bank Merger Act that any anticompetitive effects of the merger would be outweighed by the merger's contribution to the community's convenience and needs. Such reexamination must be in terms of the Phillipsburg-Easton area as a whole, and should specifically explore alternative methods of serving the convenience and needs of the area, and consider whether the merger will benefit all banking customers, small and large, in the community. Pp. 399 U. S. 369-372.
306 F. Supp. 645, reversed and remanded.