Opinion ID: 108196
Heading Depth: 1
Heading Rank: 5

Heading: meeting the convenience and needs of the community

Text: The District Court's errors necessarily require re-examination of its conclusion that any anticompetitive effects caused by the proposed merger would be outweighed by the merger's contribution to the community's convenience and needs. The District Court's conclusion, moreover, is undermined by the court's erroneous application of the convenience-and-needs standard. In the balancing of competitive effect against benefit to community convenience and needs, [t]o weigh adequately one of these factors against the other requires a proper conclusion as to each. Nashville Bank, supra, at 183. The District Court misapplied the convenience-and-needs standard by assessing the competitive effect of the proposed merger in the broad, multi-community area that it adopted as the relevant geographic market, while assessing the merger's contribution to community convenience and needs in Phillipsburg alone. Appellees argue that [n]owhere does the district court equate `community' with Phillipsburg. We disagree. In determining convenience and needs, the court stated that [t]here are two banking services which must be improved in the area to satisfy present and rapidly increasing need. Lending limits of the small banks are not sufficient to satisfy loan requirements for substantial industrial and commercial enterprise. . . . There is a definite lack of competent trust service and . . . servicing of substantial trust accounts must be obtained outside the community . . . . If the merger is approved, the merged bank can establish [loan and trust] departments and staff them with personnel capable of the kind of loan and trust service that patrons must, in large part, now seek outside the community. 306 F. Supp., at 661. The court then cited examples of persons in Phillipsburg who found the existing loan and trust services in that city inadequate. Id., at 662-666. Since several Easton banks already provide appreciable trust services and have legal lending limits greater than those of PNB-SNB combined, it is obvious that the court was primarily concerned with loan and trust possibilities in Phillipsburg. We hold, however, that evaluation must be in terms of the convenience and needs of Phillipsburg-Easton as a whole. Section 1828 (c) (5) (B) provides that any . . . proposed merger transaction whose effect in any section of the country may be substantially to lessen competition. . . [shall not be approved by the responsible banking agency] unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. Representative Reuss explained during debate on the Bank Merger Act that [w]hat is meant by [§ (c) (5) (B)] and what counts is the effect of the transaction in meeting the needs and conveniences of the community which that particular sought-to-be merged bank serves. 112 Cong. Rec. 2457. He indicated that in a community having say, 10 banks of relatively equal size, and where one of the banks was in difficultysay with regard to a problem of management successionthe `convenience and needs of the community' would be best served if that bank were permitted to merge with one of the other 9 banks despite some resulting anticompetitive effects. Id., at 2445. These comments support our conclusion that the geographic marketthe community which that particular sought-to-be merged bank servesis the area in which convenience and needs must be evaluated. Commercial realities, moreover, make clear that the community to be served is virtually always as large, or larger, than the geographic market. Although the area in which merging banks compete while they are still separate entities is often smaller than the area in which the resultant bank will compete, it is rare that the community served by a merged bank is smaller than that served by its constituent firms prior to their merger. Further, evaluation of convenience and needs in an area smaller than the geographic market could result in the approval of a merger that, though it has anticompetitive effects throughout the market, has countervailing beneficial impact in only part of the market. Under the approach taken by the District court, anticompetitive effects in some parts of a relevant geographic market could be justified by community benefits in other parts of it. Such a result would subvert the clear congressional purpose in the Bank Merger Act that convenience and needs not be assessed in only a part of the community to be served, and such a result would unfairly deny the benefits of the merger to some of those who sustain its direct and immediate anticompetitive effects. [6] Cf. Philadelphia Bank, supra, at 370. Accordingly, we hold that the District Court erred in failing to assess the proposed merger's effect in terms of the convenience and needs of the relevant geographic market. We held in Nashville Bank, supra, at 190, that before a merger injurious to the public interest is approved, a showing [must] be made that the gain expected from the merger cannot reasonably be expected through other means. Thus, before approving such a merger, a district court must reliably establish the unavailability of alternative solutions to the woes faced by the merging banks. Ibid. Accordingly, on remand, the District Court should consider in concrete detail the adequacy of attempts by PNB and SNB to overcome their loan, trust, and personnel difficulties by methods short of their own merger. Beyond careful consideration of alternative methods of serving the convenience and needs of Phillipsburg-Easton, the court should deal specifically with whether the proposed merger is likely to benefit all seekers of banking services in the community, rather than simply those interested in large loan and trust services. The judgment of the District Court is reversed and the case is remanded for further proceedings consistent with this opinion. No costs shall be assessed against appellee banks. It is so ordered. MR. JUSTICE STEWART took no part in the decision of this case, and MR. JUSTICE BLACKMUN took no part in its consideration or decision.