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decided: June 26, 1974.



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, post, p. 673.

Author: Powell

[ 418 U.S. Page 657]

 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

[ 418 U.S. Page 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.Supp. 240 (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 (1974).

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 towns.

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 statewide. At year-end 1972, they had 41% of the total commercial bank deposits held by Connecticut banks.

[ 418 U.S. Page 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., ante, p. 602.

The District Court rejected the Government's potential-competition arguments, relying on such factors as state-law restraints on de novo branching,*fn1 the expansion

[ 418 U.S. Page 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 that the legality of a market extension merger must be determined against the backdrop of properly defined product and geographic markets. See ante, at 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.S. 350, 359-362 (1970), and United States v. Philadelphia National Bank, 374 U.S. 321, 356-357 (1963). But in the District Court's

[ 418 U.S. Page 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 that "savings banks are in direct and substantial competition with commercial banks in providing product-services to the banking consumers in Connecticut . . . ," and that "[the] cold, hard realities of the situation are that savings and commercial banks are fierce competitors in this state." Ibid. 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 accounts. See Conn. Pub. Act No. 73-195 (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.S. 441 (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.*fn2 Finally, it distinguished

[ 418 U.S. Page 662]

     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.S. 171, 182 n. 15 (1968). See Phillipsburg National Bank, 399 U.S., at 359-362. Moreover, the absence of significant competition from savings banks in Philadelphia National Bank, supra, and Phillipsburg National Bank, supra, is not 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 357 n. 34; United States v. Phillipsburg National Bank, 306 F.Supp. 645, 649 (NJ 1969). The Court in both instances nevertheless viewed the ...

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