Opinion ID: 109287
Heading Depth: 3
Heading Rank: 1

Heading: The Question of Immunity

Text: The District Court thought the correspondent associate programs immune from Sherman Act scrutiny because they were subject to the exclusive primary jurisdiction of the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended. We do not so understand the law. The court relied on Whitney Bank v. New Orleans Bank, 379 U. S. 411, but the question in that case was the wholly different one of whether it is the Comptroller of the Currency or the Federal Reserve Board that has jurisdiction to determine whether transactions by a bank holding company conform with applicable state banking law. For guidance as to antitrust immunities, recourse must be had directly to the provisions of the Bank Holding Company Act, 12 U. S. C. § 1841 et seq. The statutory scheme requires the prior approval of the Federal Reserve Board for certain transactions by bank holding companiesincluding transactions tending to create or enlarge holding company control of independent banks. 12 U. S. C. § 1842 (a). [14] The types of transactions requiring Board approval were expanded by amendments to the Act in 1966 and 1970. [15] Prior to 1966, it appeared that Board approval of a transaction provided no immunity from antitrust action, for a note then set out under 12 U. S. C. § 1841 stated that nothing in the Act was to be construed as a defense to an antitrust suit. The 1966 amendments to the Act formalized this provision, but also blunted its force by establishing an intricate procedure for accommodating the jurisdictions of the Board and the Justice Department. [16] Under the Act as amended, the Board shall not approve an otherwise forbidden transaction unless it meets certain antitrust standards derived from, but not everywhere identical to, the standards of the Sherman Act and of § 7 of the Clayton Act. 12 U. S. C. § 1842 (c). The Board's order granting or denying an application for prior approval is subject to review in the courts of appeals. 12 U. S. C. § 1848. Furthermore, an approved transaction is stayed automatically for 30 days, during which time an antitrust suit challenging the transaction may be brought in the district court. 12 U. S. C. § 1849 (b). Such a suit is governed by the modified antitrust standards set out in § 1842 (c). If the antitrust suit is not brought within 30 days, and the transaction is consummated, the transaction may not thereafter be attacked in any judicial proceeding on the ground that it alone and of itself constituted a violation of any antitrust laws other than section 2 of Title 15 [§ 2 of the Sherman Act], but nothing in this chapter shall exempt any bank holding company involved in such a transaction from complying with the antitrust laws after the consummation of such transaction. 12 U. S. C. § 1849 (b). C&S can draw no consolation from these provisions. It is true that the staff of the Federal Reserve Board, in 1968, came to an understanding with C&S that the correspondent associate programs then in effect did not offend § 3 of the Bank Holding Company Act, 12 U. S. C. § 1842 (a), and thus did not require formal Board approval. [17] But this did not give rise to any antitrust immunity. A consummated transaction acquires immunity under § 1849 (b) only when no antitrust action has been commenced within 30 days after the transaction has received the approval of the Board, in an order which is subject to judicial review and which reflects application by the Board of the special antitrust standards of § 1842 (c). The immunity applies only to an acquisition, merger, or consolidation transaction approved under section 1842 of this title in compliance with this chapter. § 1849 (b). The obvious purpose of the complex machinery in § 1849 (b) is to accord finality to formal actions of the Board not subjected to timely challenge under the antitrust laws. There is no indication that Congress wished to accord a similar finality to the informal views of the Board's staff. We note, however, that the 1966 amendments also added a grandfather provision to the Bank Holding Company Act, 12 U. S. C. § 1849 (d): Any acquisition, merger, or consolidation of the kind described in section 1842 (a) of this title which was consummated at any time prior or subsequent to May 9, 1956, and as to which no litigation was initiated by the Attorney General prior to July 1, 1966, shall be conclusively presumed not to have been in violation of any antitrust laws other than section 2 of Title 15 [§ 2 of the Sherman Act]. Unlike § 1849 (b), this provision does not state or imply that the covered transactions must have received the formal approval of the Federal Reserve Board. This grandfather provision is not, like § 1849 (b), an attempt to accommodate the competing jurisdictions of the Federal Reserve Board under § 1842 and the Justice Department under the antitrust laws. Rather, the grandfather provision is a simple conferral of legislative amnesty for theretofore unchallenged transactions completed before Congress had clarified the nature of that accommodation. The transactions by which C&S created a correspondent associate relationship with three of the 5-percent banksthe Sandy Springs, Chamblee, and Tucker bankswere consummated prior to July 1966, and the Attorney General had taken no action against those transactions by that date. Those transactions thus fall within the terms of the grandfather provision, and the correspondent associate programs in force at those three banks are, therefore, immune from attack under § 1 of the Sherman Act. While the formation by C&S of a de facto branch was a unique type of transaction, it may fairly be characterized as an acquisition, merger, or consolidation of the kind described in § 1842 (a). Forming a de facto branch was a multifaceted operationinvolving a multiplicity of purchases of stock by a number of parties, the adoption of the C&S logogram by the de facto branch, the connection of the de facto branch with C&S personnel and information programs, the structuring of the bank to receive and administer all C&S banking services, and the establishment of formal C&S influence over the board of directors at the de facto branch. But even before its scope was expanded in 1970, § 1842 (a) was concerned with more than the literal acquisition of stock: It took broad account of the indirect control of stock, and the control of boards of directors in any manner, by bank holding companies. [18] The grandfather provision creates immunity under § 1 of the Sherman Act, not simply under § 7 of the Clayton Act, an indication that its protection extends not merely to literal acquisitions, mergers, and consolidations, but also to restraints of trade simultaneous with and functionally integral to such transactions. Though multifaceted, the formation by C&S of a de facto branch was a unitary and cohesive undertaking in the sense that all the facets were closely coordinated, simultaneously instituted, and designed to serve the single purpose of fitting the new bank into the C&S system. There is virtually nothing about the present correspondent associate programs that was not fully evident and in place from the moment the programs were launched. There has been no increase in C&S control, nor any change in the way it has been exercised. Whether these programs violated § 1842 (a)as it applies today or as it applied when the programs began is not relevant to our inquiry. [19] By its terms, the grandfather provision applies to transactions of the kind described in § 1842 (a). We cannot believe that Congress wished to grant the benefits of the provision only to transactions that plainly transgressed § 1842 (a). Such a construction would make application of the grandfather provision not only cumbersome and time consuming, [20] but also flagrantly inequitable. The formation of a de facto C&S branch involved the direct and indirect acquisition of bank stock, and the direct and indirect assertion of control over the governance and operations of a bank, by a bank holding company. Though unusual in form, such a transaction quite clearly falls within the class of dealings by bank holding companies which Congress intended, in § 1849 (d), to shield from retroactive challenge under the antitrust laws.