The United States brought this civil antitrust action under § 7
of the Clayton Act challenging a proposed consolidation between the
Connecticut National Bank (CNB) and the First New Haven National
Bank (FNH), which are, respectively, the fourth and eighth largest
commercial banks in Connecticut. The banks operate in contiguous
areas of the State, CNB having headquarters in Bridgeport, with 51
offices there and in nearby towns; FNH having headquarters in New
Haven, with 22 offices there and in nearby towns. The Government
contended that the merger would eliminate significant potential
competition in commercial banking in the New Haven and Bridgeport
metropolitan areas and in other areas in Connecticut. The District
Court rejected the Government's arguments in support of that
position, relying on state law restraints on de novo
branching, the two banks' expansion plans and capabilities, the
posture of national and state regulatory officials regarding the
issuance of new bank charters, and the existence and economic
feasibility of possible foothold acquisitions. The court concluded
that, under § 7, commercial banking is not a distinct line of
commerce in Connecticut, and that the relevant geographic market or
"section of the country" under that provision is the State as a
1. The District Court erred in holding that the appropriate
"line of commerce" within the meaning of § 7 included both
commercial banks and savings banks. Pp. 418 U. S.
2. The District Court further erred in ruling that the relevant
geographic market is the State of Connecticut as a whole. In a
potential competition case like this, the relevant geographic
market must be defined as the localized area in which the acquired
bank is in significant, direct competition with other banks, albeit
not the acquiring bank. United States v. Marine Bancorporation,
p. 602. Pp. 418 U. S.
3. On remand, the District Court must make a determination as to
the geographic market in which each of the banks operates
Page 418 U. S. 657
and to which the bulk of it customers may turn for alternative
commercial bank services, and, in making that determination, it
will be aided by the following considerations: (i) the Government
has the burden of producing evidence to define localized banking
markets; (ii) in satisfying that burden (as the District Court
correctly held), the Government cannot rely only on Standard
Metropolitan Statistical Areas; and (iii) town boundaries, although
significant, are not controlling. Pp. 418 U. S.
4. The Government's contention that the State as a whole, though
not a banking market, is a "section of the country" within the
meaning of § 7 is without merit, Marine Bancorporation,
Pp. 418 U. S.
, vacated and remanded.
POWELL, J., delivered the opinion of the Court, in which BURGER,
C.J., and STEWART, BLACKMUN, and REHNQUIST, JJ., joined, and in
Part I of which DOUGLAS, BRENNAN, WHITE, and MARSHALL, JJ., joined.
WHITE, J., filed an opinion concurring in part and dissenting in
part, in which DOUGLAS, BRENNAN, and MARSHALL, JJ., joined,
p. 418 U. S.
MR. JUSTICE POWELL delivered the opinion of the Court.
This case concerns the legality of a proposed consolidation of
two nationally chartered commercial banks operating in adjoining
regions of Connecticut. The United States brought a civil antitrust
action challenging the
Page 418 U. S. 658
consolidation under § 7 of the Clayton Act, 38 Stat. 731, as
amended, 15 U.S.C. § 18. Following a lengthy trial and on the basis
of extensive findings and conclusions, the United States District
Court for the District of Connecticut dismissed the Government's
complaint. 362 F.
(1973). The Government brought a direct appeal
pursuant to the Expediting Act, 32 Stat. 823, as amended, 15 U.S.C.
§ 29, and the Court noted probable jurisdiction, 414 U.S. 1127
The banks desiring to consolidate, Connecticut National Bank
(CNB) and First New Haven National Bank (FNH), have offices in
contiguous areas in the southwestern portion of Connecticut. CNB
maintains its headquarters in the town of Bridgeport, which is
situated on the Long Island Sound approximately 60 miles from New
York City. CNB is the fourth largest commercial bank in the State.
At year-end 1972, it held 6.2% of the deposits in commercial banks
in Connecticut. CNB operates 51 offices located in Bridgeport and
nearby towns in the extreme southwest section of Connecticut.
FNH has its headquarters in the town of New Haven, approximately
19 miles to the northeast of Bridgeport along the Long Island
Sound. FNH is the eighth largest commercial bank in Connecticut. At
the end of 1972, it held 4.1% of commercial bank deposits in the
State. FNH operates 22 bank offices in New Haven and surrounding
In Connecticut as a whole at the end of 1971, the five largest
commercial banks held 61% and the 10 largest commercial banks held
83% of the deposits in such banks in the State. Two large
commercial banks based in Hartford, Connecticut Bank & Trust
Co. of Hartford and Hartford National Bank, operate essentially
state-wide. At year-end 1972, they had 41% of the total commercial
bank deposits held by Connecticut banks.
Page 418 U. S. 659
CNB and FNH both have offices and are in direct competition in a
so-called "four-town area" located between Bridgeport and New
Haven. The banks assured the District Court, however, that, in
implementing the consolidation, they would divest themselves of a
sufficient number of offices in the four-town area to render
insignificant the degree of overlap of their areas of actual
operation. The District Court held that this divestiture plan
eliminated any antitrust difficulties presented by the merger of
direct competitors. 362 F. Supp. at 268-270, 286. The United States
has not pursued the point on appeal. Accordingly, the case has been
presented to us strictly as a geographic market extension merger on
the part of both banks. The proposed consolidation would join the
banks under FNH's national charter (with headquarters in
Bridgeport). It would have no effect on the number of banks
operating in either the Bridgeport or New Haven area. In that
posture, the case presents potential competition issues similar to
those raised in United States v. Marine Bancorporation, Inc.,
p. 418 U. S. 602
The District Court rejected the Government's potential
competition arguments, relying on such factors as state law
restraints on de novo
branching, [Footnote 1
] the expansion
Page 418 U. S. 660
plans and capabilities of the two banks, the posture of national
and state regulatory officials regarding the issuance of new bank
charters, and the existence and economic feasibility of possible
foothold acquisitions. 362 F. Supp. at 286-288. As we have held
today in the Marine Bancorporation
case, these and
analogous factors are the appropriate considerations to take into
account in determining the legality under § 7 of the Clayton Act of
geographic market extension mergers by commercial banks. We are
unable, however, to reach the question of whether the District
Court correctly assessed the import of those factors in the instant
case. We have also held in Marine Bancorporation
legality of a market extension merger must be determined against
the backdrop of properly defined product and geographic markets.
at 418 U. S. 618
In our view, the District Court erred in its definition of both
concepts, and it is not possible to ascertain the degree, if any,
to which those errors may have influenced its conclusions with
regard to the Government's potential competition arguments.
Accordingly, the District Court's judgment must be vacated and the
case remanded for reconsideration.
The District Court concluded that the appropriate "line of
commerce" within the meaning of § 7 included both commercial banks
and savings banks. 362 F. Supp. at 281. The court recognized that
its conclusion departed from this Court's holdings in, e.g.,
United States v. Phillipsburg National Bank, 399 U.
, 399 U. S.
-362 (1970), and United States v. Philadelphia
National Bank, 374 U. S. 321
374 U. S.
-357 (1963). But in the District Court's
Page 418 U. S. 661
view the pronouncements in Phillipsburg National Bank
and Philadelphia National Bank
"were not intended to be ironclad, hard and fast rules which
require a court to don blinders to block out the true competitive
situation existing in every set of circumstances."
362 F. Supp. at 280.
Several factors led the District Court to the conclusions
"savings banks are in direct and substantial competition with
commercial banks in providing product-services to the banking
consumers in Connecticut . . . ,"
and that "[t]he cold, hard realities of the situation are that
savings and commercial banks are fierce competitors in this state."
The court noted that, under state law, savings banks
in the near future will be permitted to offer one of the
traditional indicia of commercial banks, personal checking
Conn.Pub.Act No. 7 195 (May 14, 1973). It
pointed out that savings banks in Connecticut compete with
commercial banks for real estate mortgages, personal loans, IPC
(individual, partnership, and corporate) deposits, and, the court
found, commercial loans. 362 F. Supp. at 280. It cited United
States v. Continental Can Co., 378 U.
(1964), for the proposition that "complete
industry overlap" is not required to establish a relevant line of
commerce under § 7. 362 F. Supp. at 281. It also relied on the
omission of the "in any line of commerce" phrase from the Bank
Merger Act of 1966, 12 U.S.C. § 1828(c)(5)(B), an Act which in
other essential respects tracks the language of § 7 of the Clayton
Act. [Footnote 2
] Finally, it
Page 418 U. S. 662
Philadelphia National Bank, supra,
National Bank, supra,
by pointing to the absence of
significant competition by savings banks in the relevant geographic
markets in those cases. 362 F. Supp. at 281. The District Court's
conclusion on the appropriate line of commerce caused it to "shade"
to reduce) the Government's concentration ratios to
take into account the presence of savings banks. Id.
We are in complete agreement with the District Court that
Phillipsburg National Bank
and Philadelphia National
do not require a court to blind itself to economic
realities. Similarly, we have no doubt on this record that savings
banks and commercial banks in Connecticut are "fierce competitors,"
362 F. Supp. at 280, to the degree that they offer
identical or essentially fungible services. The District Court was
also correct that "complete inter-industry competitive overlap need
not be shown." Continental Can Co., supra,
at 378 U. S. 457
As the Court declared in Continental Can,
recognize meaningful competition where it is found to exist." 378
U.S. at 378 U. S. 449
Nonetheless, we hold for several reasons that the District Court
was mistaken in including both savings and commercial banks in the
same product market for purposes of this case.
Page 418 U. S. 663
Two of the District Court's reasons may be dealt with briefly.
The court erred as a matter of law in concluding that the absence
of a "line of commerce" phrase in the Bank Merger Act of 1966
alters traditional standards under § 7 of the Clayton Act for
defining the relevant product market in a bank merger case.
United States v. Third National Bank, 390 U.
, 390 U. S. 182
n. 15 (1968). See Phillipsburg National Bank,
399 U.S. at
399 U. S.
-362. Moreover, the absence of significant
competition from savings banks in Philadelphia National Bank,
and Phillipsburg National Bank, supra,
determinative. The commercial banks in both of those cases faced
significant competition from savings and loan associations and
other credit institutions. See, e.g.,
374 U.S. at
374 U. S. 357
n. 34; United States v. Phillipsburg National
Bank, 306 F.
, 649 (NJ 1969). The Court in both instances
nevertheless viewed the business of commercial banking as
sufficiently distinct from other credit institutions to merit
treatment as a separate "line of commerce" under § 7. Analogous
distinctions, although perhaps not as sharply defined, are
We believe that the District Court overestimated the degree of
competitive overlap that in fact exists between savings banks and
commercial banks in Connecticut. To be sure, there is a large
measure of similarity between the services marketed by the two
categories of banks. [Footnote
Page 418 U. S. 664
our view, however, the overlap is not sufficient at this stage
in the development of savings banks in Connecticut to treat them
together with commercial banks in the instant case. Despite the
strides that savings banks in that State have made toward parity
with commercial banks, the latter continue to be able to provide a
cluster of services that the former cannot, particularly with
regard to commercial customers, and this Court has repeatedly held
that it is the unique cluster of services provided by commercial
banks that sets them apart for purposes of § 7.
The Court declared in Phillipsburg National Bank,
at 399 U. S.
emphasized that it is the cluster of
products and services that full service banks offer that as a
matter of trade reality makes commercial banking a distinct line of
commerce. Commercial banks are the only financial institutions in
which a wide variety of financial products and services -- some
unique to commercial banking and others not -- are gathered
together in one place. The clustering of financial products and
services in banks facilitates convenient access to them for all
banking customers. . . ."
(Emphasis in original.) From the vantage point of at least one
significant consumer of bank services -- the commercial enterprise
-- commercial banks in Connecticut offer a "cluster of products and
services" that their savings bank counterparts do not. The facts of
this case indicate that the differences in what commercial banks in
the State can offer to that important category of bank customers
are sufficient to establish commercial banking as a distinct line
The District Court concluded that "meaningful competition"
existed between commercial and savings banks
Page 418 U. S. 665
for commercial loans. 362 F. Supp. at 280. This conclusion is
not supported by the record. Commercial loans, generally speaking,
are relatively short-term loans to business enterprises of all
sizes, usually for purposes of inventory or working capital. At the
end of 1971, commercial banks in Connecticut had outstanding $1.03
billion in commercial loans. [Footnote 4
] Savings banks, by comparison, had $26 million
in such loans at that time. [Footnote 5
] The disparity in these figures demonstrates
that the commercial bank loan business in Connecticut is controlled
almost exclusively by commercial banks. Moreover, commercial banks
in the State offer credit card plans, loans for securities
purchases, trust services, investment services, computer and
account services, and letters of credit. Savings banks do not.
It is true that, under state law, savings banks soon will be
able to provide some checking account services. Conn.Pub.Act No.
73-195 (May 14, 1973). [Footnote
] This will increase the degree of direct competition between
savings banks and commercial banks, because demand deposits have
traditionally been a unique attribute of the latter institutions.
But even this new authority for savings banks will not allow them
to serve commercial customers, who constitute a significant
percentage of the clientele of commercial banks. The state statute
empowering savings banks to offer demand deposits forbids those
banks from marketing the service to anyone "for the purpose of, or
in connection with, the carrying on of any business, trade,
occupation or profession." Id.
§§ 1(a), 5. Thus,
Page 418 U. S. 666
under the new Act, savings banks will be restricted to offering
personal checking accounts. Id.,
We do not say, and Phillipsburg National Bank, supra,
and Philadelphia National Bank, supra,
do not say, that,
in a case involving a merger of commercial banks, a court may never
consider savings banks and commercial banks as operating in the
same line of commerce, no matter how similar their services and
economic behavior. At some stage in the development of savings
banks, it will be unrealistic to distinguish them from commercial
bank for purposes of the Clayton Act. In Connecticut, that point
may well be reached when and if savings banks become significant
participants in the marketing of bank services to commercial
enterprises. But, in adherence to the tests set forth in our
earlier bank merger case, which we are constrained to follow, we
hold that such a point has not yet been reached. Accordingly, on
remand, the District Court should treat commercial banking a the
relevant product market.
The District Court ruled that the relevant geographic market, or
"section of the country," under § 7, is the State as a whole. 362
F. Supp. at 283. We think the District Court erred on this point
for several reasons. If the State were the relevant geographic
market, it would then be appropriate to analyze this not as a
potential competition case, but as a direct competition case
involving the consolidation of two firms holding an aggregate
market share of approximately 10%. Even if this figure is "shaded"
by a factor of 10% to account for the influence of banks in New
York, see id.
at 260; Philadelphia National Bank,
374 U.S. at 374 U. S. 364
n. 40, the consolidation of CNB and FNH would create a firm holding
a 9% share of state-wide commercial-bank deposits. Mergers between
direct competitors producing smaller shares
Page 418 U. S. 667
of less concentrated markets have been held illegal under § 7.
E.g., United States v. Von's Grocery Co., 384 U.
The State cannot be the relevant geographic market, however,
because CNB and FNH are not direct competitors on that basis (or,
for that matter, on any other basis pertinent to this appeal). The
two banks do not operate state-wide, nor do their customers, as a
general rule, utilize commercial banks on that basis. The offices
of the two banks are restricted to adjoining sections of the
southwest segment of Connecticut. Although the two banks presumably
market a small percentage of their loans to large customers on a
state-wide or broader basis, it is undoubtedly true that almost all
of their business originates locally. For example, "about 88% of
CNB's total deposit business derive[s] from the towns in which CNB
has offices." 362 F. Supp. at 250. As the District Court noted in a
finding that is inconsistent with its conclusion on the appropriate
section of the country,
"[c]ommon sense . . . would indicate that the relevant market
areas of CNB and FNH generally coincide with where each has
established branch offices."
As indicated by our opinion today in Marine
p. 418 U. S. 602
relevant geographic market of the acquired bank is the localized
area in which that bank is in significant, direct competition with
other banks, albeit not the acquiring bank. This area must be
defined in accordance with this Court's precedents in prior bank
merger cases. Yet the District Court's conclusion on this issue
conflicts with Philadelphia National Bank, supra.
Court emphasized in that case:
"In banking, as in most service industries, convenience of
location is essential to effective competition. Individuals and
corporations typically confer the bulk of their patronage on banks
Page 418 U. S. 668
local community; they find it impractical to conduct their
banking business at a distance. . . . The factor of inconvenience
localizes banking competition as effectively as high transportation
costs in other industries."
374 U.S. at 374 U. S. 358
(footnote and citations omitted). In recognition of the local
character of the great majority of commercial bank activities,
Philadelphia National Bank
indicated that the relevant
geographic market in bank merger cases must be drawn narrowly to
encompass the area where "the effect of the merger on competition
will be direct and immediate." Id.
at 374 U. S. 357
Moreover, the geographic market must be delineated in a way that
takes into account the local nature of the demand for most bank
"must be charted by careful selection of the market area in
which the seller operates, and to which the purchaser can
practicably turn for [alternatives]. . . ."
at 374 U. S. 359
(citations, internal quotations, and italics omitted). Because the
economic scale of separate categories of consumers of bank services
will vary, a workable compromise must be struck "to delineate the
area in which bank customers that are neither very large nor very
small find it practical to do their banking business. . . ."
at 374 U. S. 361
On remand, the District Court must determine pursuant to the
localized approach denoted above the geographic market in which CNB
operates and to which the bulk of its customers may turn for
alternative commercial bank services. It must do the same with
regard to FNH, for this case presents the unusual fact situation of
a consolidation of two banks, each with a history of de
geographic expansion, rather than the acquisition of
Page 418 U. S. 669
a geographically stable bank as in Marine Bancorporation,
p. 418 U. S. 602
task is important, because the definition of the respective
geographic markets determines the number of alternative avenues of
entry theoretically open to CNB in piercing FNH's area of
significant competitive influence and vice versa.
We are not unaware of the difficulty of the assignment
confronting the District Court. An element of "fuzziness would seem
inherent in any attempt to delineate the relevant geographical
market." Philadelphia National Bank, supra,
374 U. S. 360
n. 37. The task is made especially taxing here by the fragmented
character of the distribution of the banking offices of the two
banks, especially CNB. Apparently because the Connecticut branching
statute has created a checkerboard of "open" and "closed" towns,
CNB and FNH have not expanded in the past in a
manner that produced readily definable, completely covered areas
around the towns where they have their home offices. There is, for
example, a gap consisting of four towns in the extreme southwest
section of Connecticut in which CNB has no offices, although it has
established offices in almost all of the surrounding towns in that
part of the State. That gap presumably will have to be excluded
from consideration on remand.
The difficulty of the responsibility imposed on the District
Court with regard to defining the geographic markets of the two
banks is ameliorated by several considerations. First, the burden
of producing evidence on this subject is on the Government. The
Government repeatedly notes that it is not required to define
geographic markets by "metes and bounds," citing United States
v. Pabst Brewing Co., 384 U. S. 546
384 U. S. 549
(1966). To the extent that this means that such markets need not --
indeed cannot -- be defined with scientific precision, it is
accurate. But it is nevertheless the Government's role to come
forward with evidence delineating the rough approximation
Page 418 U. S. 670
of localized banking markets mandated by Philadelphia
National Bank, supra,
and Phillipsburg National Bank,
Second, we affirm that portion of the District Court's judgment
holding that the Government cannot rely, without more, on Standard
Metropolitan Statistical Areas (SMSA's) as defining the geographic
markets of the two banks. See
362 F. Supp. at 249-250,
281-282. SMSA's are prepared by the Office of Management and Budget
to determine areas of economic and social integration, principally
on the basis of the commuting patterns of residents. [Footnote 8
] They are not defined in terms of
banking criteria, and they were not developed as a tool for
analyzing banking markets. Id.
at 249. Exclusive reliance
on SMSA's here may lead to inaccuracies. For example, as the
District Court noted, only 57% of CNB's deposits originate from the
Bridgeport SMSA. Id.
at 250, 282. This is because CNB's
offices extend to several areas outside the Bridgeport SMSA. The
Bridgeport SMSA is relevant, if at all, only to the CNB offices
located in Bridgeport, and even then it is, at best, a crude
indicator. The same is true of the New Haven SMSA and the FNH
offices located in the town of New Haven. In sum, although the
Bridgeport and New Haven SMSA's may be helpful in defining the
general metropolitan characteristics of southwest Connecticut, they
are not sufficiently refined in terms of realistic commercial
banking markets to satisfy the Government's burden. The Government
must demonstrate more accurately than is possible solely with
SMSA's the localized banking markets, or areas of significant
competitive influence, surrounding the sites where CNB and FNH
maintain their banking offices. [Footnote 9
Page 418 U. S. 671
Third, the District Court may not, as the banks would have it,
rely solely on towns as the relevant geographic markets. The towns
served by the two banks are highly significant geographic units,
because state law restraints on de novo
defined in terms of towns. See n
But not all towns are closed to
branching by one or the other bank, and it seems
fair to assume that the area of significant competitive influence
of some bank offices may extend beyond town boundaries.
On remand, the District Court must delineate the localized
banking markets surrounding the sites where CNB and FNH maintain
their bank offices. It must then evaluate the economically and
legally feasible alternative methods of entry, if any, into those
areas available to one bank or the other. In so doing, it should
keep in mind the considerations outlined today in Marine
p. 418 U. S. 602
Page 418 U. S. 672
In conformity with its approach in Marine Bancorporation, the
Government argues that the State as a whole, although not a banking
market, is nonetheless a "section of the country" within the
meaning of § 7 of the Clayton Act. The Government repeats the
concern expressed in Marine Bancorporation, see ante
418 U. S. 620
that a state-wide linkage of oligopolies "may" arise, and that
large banks across the state "may engage" in more standardized
behavior as a result. [Footnote
] Moreover, the Government contends that a state-wide
approach is appropriate because the challenged consolidation would
eliminate one of eight banks in Connecticut with the potential for
"Thus, the effect of a merger which eliminates even one of these
banks will be felt state-wide, for it will have an impact in every
local market in the state where that bank does not currently
operate but which it might
otherwise enter. [Footnote 12
We reject the Government's state-wide approach here, as we did
in Marine Bancorporation, ante
at 418 U. S. 620
The Government's argument that "a geographic area need not be a
banking market to be a section of the country . . . " [Footnote 13
] is foreclosed by the
at 418 U. S.
-622. Its theory of linked oligopolies appears to be
as devoid of evidentiary support here as it was in Marine
Finally, its concern for any area of the State
in which CNB or FNH "might" enter independently of the
Page 418 U. S. 673
is too speculative to establish a case under the Clayton Act. In
advancing the latter argument, the Government borders on espousing
a per se
rule against geographic market extension mergers
by Connecticut commercial banks so long as any town in the State
remains open to de novo
branching. On remand, the District
Court will address itself to the geographic markets in which CNB
and FNH presently operate. [Footnote 14
The judgment is vacated, and the case is remanded for further
consideration consistent with this opinion.
It is so ordered.
Under state law in Connecticut, commercial banks may not branch
into a town containing the main office of another bank (the
so-called "home office protection" provision). Conn.Gen.Stat.Rev. §
36-59 (1972). Towns that contain the main office of a bank are
referred to as "closed" towns. The remaining towns are "open
towns." The term "town" in Connecticut refers to a political
subdivision of the State, somewhat analogous to counties in other
States. It does not denote a metropolitan area, although some
cities are more or less congruent with the towns in which they are
There are 169 towns in Connecticut. The effect of the "home
office protection" provision is to create a checkerboard of "open"
and "closed" towns reflecting the location of the main offices of
the banks operating in the State. State law forbids any bank that
does not have its headquarters in Connecticut from operating
banking offices within the State. Conn.Gen.Stat.Rev. § 359(4).
362 F. Supp. at 281. The relevant provision of the
Bank Merger Act of 1966, 80 Stat. 8, 12 U.S.C. § 1828(c)(5)(b),
proscribes any bank consolidation:
"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 . . . 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."
Section 7 of the Clayton Act, 38 Stat. 731, as amended, 64 Stat.
1125, 15 U.S.C. § 18, by comparison 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."
As we have noted, the District Court identified some of the
services offered by both savings and commercial banks, including
real estate mortgages, personal loans, and time deposits. As the
District Court put it in another context, it would be
"ostrich-like," 362 F. Supp. at 254, to assume that the two types
of banks are not in direct and vigorous competition with regard to
the services they share or are not viewed by many bank customers as
more or less fungible for purposes of those services. Cf.
United States v. Phillipsburg National Bank, 399 U.
, 399 U. S. 360
(1970). That savings and commercial banks are direct competitors in
some submarkets, however, is not the end of the inquiry, as
makes clear. Ibid.
The pertinent provisions of Conn.Pub.Act No. 73-195 will take
effect no later than December 31, 1975, although the enactment of
certain federal legislation or other specified events not relevant
here may trigger those provisions at an earlier date. See
The Court's approach in Philadelphia National Bank
defining geographic markets for commercial banks was reaffirmed in
Phillipsburg National Bank,
399 U.S. at 399 U. S.
The federal bank regulatory agencies define a bank's service
area as the geographic area from which the bank derives 75% of its
362 F. Supp. at 250. The service area
concept may be considerably more useful in this case than SMSA's,
although this is a matter we leave to the District Court on
In Marine Bancorporation, ante
at 418 U. S. 619
we affirmed the District Court's determination of the Spokane
metropolitan area as the relevant geographic market. That holding
was not an affirmation of SMSA's as banking markets; SMSA's were
not at issue in that case. The Spokane metropolitan area was
defined as the relevant geographic market in Marine
because it is an insulated banking market, is
comparatively small by geographic standards in the Western States,
contains all the banking offices of the target bank, and is the
area from which that bank draws some 90% of its deposit
We note that it is not at all clear that the District Court's
holdings as to potential competition were based on a state-wide
appraisal of the consolidation at issue, despite its conclusion
that the State was the relevant section of the country. For
example, the court's findings with regard to "toehold" acquisitions
refer to SMSA's, towns, and service areas, 362 F. Supp. at 265, and
its conclusions under the heading of "potential competition" speak
of service area, service market, and towns. Id.
286-287. Because the District Court did not clarify what local
area, if any, it considered controlling for purposes of the
potential competition doctrine, we are unable to hold that its
error in denoting the State as the relevant section of the country,
at 283, may be ignored.
Brief for United States 34
at 33 (emphasis added).
The District Court also concluded that, assuming,
that the consolidation violated the Clayton Act,
it nonetheless met the standards of the "convenience and needs"
test of the Bank Merger Act of 1966, 12 U.S.C. § 1828(c)(5)(B). 362
F. Supp. at 288. Its findings on the "convenience and needs"
defense are not controlling, however, if it erred in the standards
applied in judging the status of the consolidation under the
Clayton Act. United States v. Third National Bank,
390 U. S. 171
390 U. S.
-184 (1968). See also Phillipsburg National
399 U.S. at 399 U. S.
MR. JUSTICE WHITE, with whom MR. JUSTICE DOUGLAS, MR. JUSTICE
BRENNAN, and MR. JUSTICE MARSHALL join, concurring in part and
dissenting in part.
Although I agree with Part I of the majority opinion, as to the
relevant line of commerce, I dissent from that part of the opinion
dealing with the determination of a relevant geographic market.
The Court holds that
"the relevant geographic market of the acquired bank is the
localized area in which that bank is in significant, direct
competition with other banks, albeit not the acquiring bank,"
relying on a statement to similar effect in United States v.
Marine Bancorporation, Inc., ante,
p. 418 U. S. 602
Accordingly, the Court rejects the proposition, which the appellee
Page 418 U. S. 674
that the merger
of FNH and CNB should be analyzed in terms of its effect on
possible potential competition in areas not in or adjacent to the
New Haven and Bridgeport markets, however those markets are to be
There is certainly nothing in this Court's past cases on mergers
under Clayton § 7 which requires this result. Even if Bridgeport
and New Haven are relevant geographic markets, there can be more
than one relevant geographic market in which to test the possible
effects of a merger. Section 7 of the Clayton Act speaks to
lessening competition "in any
section of the country"
(emphasis added), and as the majority acknowledges in Marine
at 418 U. S. 621
n. 20, in United States v. Pabst Brewing Co., 384 U.
(1966), the Court
"held that the Government had established three relevant markets
in which the acquired firm actually marketed its products -- single
State, a multi-state area, and the Nation as a whole."
To be sure, the selection of any relevant geographic market in a
banking case must be chosen in terms of the needs of the customers
and the area in which sellers operate, United States v.
Philadelphia National Bank, 374 U. S. 321
374 U. S.
-359 (1963), but this may result in several possible
markets, especially in a potential competition case where a merger
might affect the economic behavior of existing firms in various
As I read the majority opinion, if one assumed that FNH and CNB
were the two largest banks in Connecticut, and, although located in
southwest Connecticut, both had the capability and interest to
enter a concentrated banking market in northeast Connecticut, it
would be improper for the Government to oppose their merger,
Page 418 U. S. 675
neither bank had as yet entered the northeast Connecticut
banking market. The majority describes the possibility of such dual
entry as "too speculative." Ante
at 418 U. S. 673
What is a relevant geographic market is an issue entirely distinct
from who is a potential competitor. It is obvious, for example,
that, while New Haven and/or its environs is a relevant market of
banking competition, it may nonetheless be true that CNB may not
prove to be a potential competitor with respect to that market. It,
therefore, follows that whether the banking market in northeast
Connecticut is a relevant banking market is a question entirely
separate from whether FNH and/or CNB should be considered potential
competitors in that market, and whether the elimination of one of
those competitors lessens either the possibility of deconcentration
in that market or, under the "wings theory," affects present
competition in that market. Since the majority professes to leave
issues of potential competition to the District Court on remand, it
should not preclude a finding that this merger will affect banking
competition in areas of the State other than Bridgeport or New
Haven. The possibility of finding many banking markets in
Connecticut is an entirely separate matter from finding one banking
market in the State under a theory of state-wide linkage of
oligopolies. The latter assumes that a section of the country need
not be a banking market; the former does not.
I agree that the case should be remanded. As I understand the
task of the District Court, once it has decided what the relevant
geographic markets are, the case is to be analyzed in terms of the
"wings theory" of potential competition enunciated in United
States v. Falstaff Brewing Corp., 410 U.
(1973), and the deconcentration theory now
accepted by this Court in Marine Bancorporation.
these matters, I adhere to my views as stated in Marine
* One of the principal witnesses presented by the appellee
banks, Dr. Peck, analyzed the effect of this merger, and the
removal of FNH as a potential competitor, along with CNB, on the
various banking markets in the State.