# United States v. Third National Bank in Nashville

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United States Supreme Court
390 U.S. 171
United States v. Third National Bank in Nashville et al.
Appeal from the United States District Court for the Middle District of Tennessee
No. 86. Argued: December 11, 1967 --- Decided: March 4, 1968
Third National Bank in Nashville and Nashville Bank and Trust Co., the second and fourth largest banks in Davidson County, Tennessee, merged on August 18, 1964. After the merger the three largest banks had 97.9% of the total bank assets in the county, and the two largest banks had 76.7%. The Government's suit challenging the merger had not come to trial when the Bank Merger Act of 1966 took effect, on February 21, 1966. The Act did not provide antitrust immunity for the merger but did state that courts "shall apply the substantive rule of law set forth" in the Act to pending cases. Section 5 of the Act prohibits approval of a merger whose effect "may be substantially to lessen competition" unless the anticompetitive effects "are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community be served." The District Court asserted that the Act altered the standards used in determining whether a merger violated § 7 of the Clayton Act and § 1 of the Sherman Act and mandated a return to United States v. Columbia Steel Co., 334 U.S. 495 (1948). The court found that Nashville Bank and Trust was a "stagnant and floundering bank," suffering from lack of young and aggressive officers. It held that the merger would not tend substantially to lessen competition and also that any anticompetitive effect would be outweighed by benefits to the "convenience and needs of the community."
Held:
    1. The Bank Merger Act of 1966 requires de novo inquiry by the district courts into the validity of bank mergers to determine whether the merger offends the antitrust laws, and, if it does, whether the banks have established that the merger is justified by benefits to the "convenience and needs of the community." United States v. First City National Bank of Houston, 386 U.S. 361 (1967). P. 178.
    2. The Act, which adopted the language of § 7 of the Clayton Act, "substantially to lessen competition," did not provide a different antitrust standard for bank cases, and therefore the District Court applied an erroneous Clayton Act standard to the merger. Pp. 181-182.
    3. On the facts of this case, the merger did tend substantially to lessen competition in the Nashville commercial banking market. P. 183.
    4. The lower court misapprehended the meaning of the phrase "convenience and needs of the community," and misunderstood the weight to be given the relevant factors in determining whether the anticompetitive effects are "clearly outweighed in the public interest" by the effects on the convenience and needs of the community.
       (a) While the District Court noted the increased loan capacity of the merged bank, it was not specific in describing the beneficial consequences thereof to the Nashville community, or in defining the value of such increase, especially as compared with less desirable results of the merger. P. 186.
       (b) The District Court's analysis did not explore possible ways of satisfying the community's convenience and needs without merger. It was incumbent on the banks to demonstrate that they made reasonable efforts to solve Nashville Bank and Trust's management dilemma short of merger without a major competitor. P. 189.
       (c) The findings of the District Court do not sufficiently establish the unavailability of alternative solutions to Nashville Bank and Trust's problems. Pp. 190-192.
    5. The case is remanded so that the lower court can consider again the Act's application to the facts of this merger; and since the District Court heard this case before Houston Bank, supra, was decided, it may wish to consider reopening the record to permit the presentation of new evidence in light of the intervening interpretations of the act. P. 192.
260 F. Supp. 869, reversed and remanded.
Daniel M. Friedman argued the cause for the United States. On the brief were Solicitor General Griswold, Assistant Attorney General Turner, Richard A. Posner and Barry Grossman.
E. William Henry argued the cause for appellees Third National Bank in Nashville et al. With him on the brief were Paul A. Porter, Dennis G. Lyons, Frank M. Farris, Jr., Edwin F. Hunt and John J. Hooker, Jr. Joseph J. O'Malley argued the cause for appellee Camp, Comptroller of the Currency. With him on the brief were Robert Bloom and Charles H. McEnerney, Jr.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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