Opinion ID: 109098
Heading Depth: 2
Heading Rank: 2

Heading: Structure of the Spokane Market.

Text: Since the legality of the challenged merger must be judged by its effects on the relevant product and geographic markets, commercial banking in the Spokane metropolitan area, it is imperative to determine the competitive characteristics of commercial banking in that section of the country. The potential-competition doctrine has meaning only as applied to concentrated markets. That is, the doctrine comes into play only where there are dominant participants in the target market engaging in interdependent or parallel behavior and with the capacity effectively to determine price and total output of goods or services. If the target market performs as a competitive market in traditional antitrust terms, the participants in the market will have no occasion to fashion their behavior to take into account the presence of a potential entrant. The present procompetitive effects that a perceived potential entrant may produce in an oligopolistic market will already have been accomplished if the target market is performing competitively. Likewise, there would be no need for concern about the prospects of long-term deconcentration of a market which is in fact genuinely competitive. In an effort to establish that the Spokane commercial banking market is oligopolistic, the Government relied primarily on concentration ratios indicating that three banking organizations (including WTB) control approximately 92% of total deposits in Spokane. The District Court held against the Government on this point, finding that a highly competitive market existed which does not suffer from parallel or other anticompetitive practices attributable to undue market power. 1973-1 Trade Cas. ถ 74,496, p. 94,246. The court apparently gave great weight to the testimony of the banks' expert witnesses concerning the number of bank organizations and banking offices operating in the Spokane metropolitan area. The record indicates that neither the Government nor the appellees undertook any significant study of the performance, as compared to the structure, of the commercial banking market in Spokane. We conclude that by introducing evidence of concentration ratios of the magnitude of those present here the Government established a prima facie case that the Spokane market was a candidate for the potential-competition doctrine. On this aspect of the case, the burden was then upon appellees to show that the concentration ratios, which can be unreliable indicators of actual market behavior, see United States v. General Dynamics Corp., 415 U. S. 486 (1974), did not accurately depict the economic characteristics of the Spokane market. In our view, appellees did not carry this burden, and the District Court erred in holding to the contrary. Appellees introduced no significant evidence of the absence of parallel behavior in the pricing or providing of commercial bank services in Spokane. [34] We note that it is hardly surprising that the Spokane commercial banking market is structurally concentrated. As the Government's expert witness conceded, all banking markets in the country are likely to be concentrated. [35] This is so because as a country we have made the policy judgment to restrict entry into commercial banking in order to promote bank safety. Thus, most banking markets in theory will be subject to the potential-competition doctrine. But the same factor that usually renders such markets concentrated and theoretical prospects for potential-competition ง 7 casesโregulatory barriers to new entryโwill also make it difficult to establish that the doctrine invalidates a particular geographic market extension merger.