Opinion ID: 109098
Heading Depth: 1
Heading Rank: 2

Heading: the relevant markets

Text: Determination of the relevant product and geographic markets is a necessary predicate to deciding whether a merger contravenes the Clayton Act. United States v. Du Pont & Co., 353 U. S. 586, 593 (1957); Brown Shoe Co. v. United States, 370 U. S. 294, 324 (1962). The District Court found that the relevant product market within which the competitive effect of the merger is to be judged is the business of commercial banking (and the cluster of products and services denoted thereby). . . . 1973-1 Trade Cas. ถ 74,496, p. 94,243. The parties do not dispute this finding, and in any event it is in full accord with our precedents. [16] The District Court found that the relevant geographic market is the Spokane metropolitan area, consisting of the City of Spokane and the populated areas immediately adjacent thereto, including the area extending easterly through the suburb of Opportunity toward the Idaho border . . . . Id., at 94,244. This area extends approximately five miles to the west and south and 10 miles to the north and east of the center of the city. It is wholly within and considerably smaller than Spokane County and is surrounded by a sparsely populated region, with no nearby major metropolitan centers. It contains all eight of the target bank's offices. On the basis of the record, we have no reason to doubt that it constitutes a reasonable approximation of the localized banking market in which Spokane banks offer the major part of their services and to which local consumers can practicably turn for alternatives. E. g., United States v. Phillipsburg National Bank, 399 U. S. 350, 362-365 (1970). It is also the area where the effect of the merger on competition will be direct and immediate . . . , which as this Court has held is the appropriate section of the country for purposes of ง 7. United States v. Philadelphia National Bank, 374 U. S. 321, 357 (1963). Accordingly, we affirm the District Court's holding that the Spokane metropolitan area is the appropriate geographic market for determining the legality of the merger. Prior to trial the Government stipulated that the Spokane area is a relevant geographic market in the instant case, and there is no dispute that it is the only banking market in which WTB is a significant participant. Nevertheless, the Government contends that the entire State is also an appropriate section of the country in this case. It is conceded that the State is not a banking market. But the Government asserts that the State is an economically differentiated region, because its boundaries delineate an area within which Washington banks are insulated from most forms of competition by out-of-state banking organizations. The Government further argues that this merger, and others it allegedly will trigger, may lead eventually to the domination of all banking in the State by a few large banks, facing each other in a network of local, oligopolistic banking markets. This assumed eventual statewide linkage of local markets, it is argued, will enhance statewide the possibility of parallel, standardized, anticompetitive behavior. This concern for the possible statewide consequences of geographic market extension mergers by commercial banks appears to be an important reason for the Government's recent efforts to block such mergers through an application of the potential-competition doctrine under ง 7. [17] The Government's proposed reading of the any section of the country phrase of ง 7 is at variance with this Court's ง 7 cases, and we reject it. Without exception the Court has treated section of the country and relevant geographic market as identical, [18] and it has defined the latter concept as the area in which the goods or services at issue are marketed to a significant degree by the acquired firm. E. g., Philadelphia National Bank, supra, at 357-362. [19] In cases in which the acquired firm markets its products or services on a local, regional, and national basis, the Court has acknowledged the existence of more than one relevant geographic market. [20] But in no previous ง 7 case has the Court determined the legality of a merger by measuring its effects on areas where the acquired firm is not a direct competitor. In urging that the legality of this merger be gauged on a statewide basis, the Government is suggesting that we take precisely that step, because, as it concedes, the section of the country in which WTB markets by far the greatest portion of its services, due to the predominantly localized character of commercial banking, is the Spokane metropolitan area. [21] Under the precedents, we decline the Government's invitation. We hold that in a potential-competition case like this one, the relevant geographic market or appropriate section of the country is the area in which the acquired firm is an actual, direct competitor. Apart from the fact that the Government's statewide approach is not supported by the precedents, it is simply too speculative on this record. There has been no persuasive showing that the effect of the merger on a statewide basis may be substantially to lessen competition within the meaning of ง 7. To be sure, ง 7 was designed to arrest mergers at a time when the trend to a lessening of competition in a line of commerce [is] still in its incipiency. Brown Shoe Co., 370 U. S., at 317. See, e. g., United States v. Von's Grocery Co., 384 U. S. 270, 277 (1966). Moreover, the proscription expressed in ง 7 against mergers when a `tendency' toward monopoly or [a] `reasonable likelihood' of a substantial lessening of competition in the relevant market is shown, United States v. Penn-Olin Chemical Co., 378 U. S. 158, 171 (1964), applies alike to actual-and potential-competition cases. Ibid. But it is to be remembered that ง 7 deals in probabilities, not ephemeral possibilities. Brown Shoe Co., supra, at 323. [22] The Government's underlying concern for a linkage or network of statewide oligopolistic banking markets is, on this record at least, considerably closer to ephemeral possibilities than to probabilities. To assume, on the basis of essentially no evidence, that the challenged merger will tend to produce a statewide linkage of oligopolies is to espouse a per se rule against geographic market extension mergers like the one at issue here. No ง 7 case from this Court has gone that far, [23] and we do not do so today. For the purpose of this case, the appropriate section of the country and the relevant geographic market are the sameโthe Spokane metropolitan area.