Opinion ID: 109287
Heading Depth: 1
Heading Rank: 2

Heading: The Suit in the District Court

Text: On November 2, 1971, within the 30-day period prescribed for such suits, 12 U. S. C. §§ 1828 (c) (6) and (7), the United States filed a complaint in the District Court for the Northern District of Georgia, alleging that the five acquisitions approved by the FDIC would violate § 7 of the Clayton Act and that the ongoing correspondent associate relationships between C&S and the six 5-percent banks which it had originally sought to acquire constituted unreasonable restraints of trade, in violation of § 1 of the Sherman Act. The Government sought injunctive relief prohibiting the proposed acquisitions and terminating the alleged violations of the Sherman Act. On January 24, 1974, after an extensive trial, the District Court entered a judgment for the defendants. 372 F. Supp. 616, 643. As to the Sherman Act allegations, the District Court based its judgment upon two separate and independent grounds. First, it held that the 1968 understanding between the staff of the Federal Reserve Board and C&S insulated the correspondent associate relationship between C&S and the 5-percent banks from attack under the antitrust laws. Id., at 627. The court based this conclusion on the following statement in Whitney Bank v. New Orleans Bank, 379 U. S. 411, 419: We believe Congress intended the statutory proceedings before the [Federal Reserve] Board to be the sole means by which questions as to the organization or operation of a new bank by a bank holding company may be tested. Alternatively, assuming the Sherman Act applied, the District Court found that the United States had failed to prove that the correspondent associate relationships involved collusive price fixing or any agreements not to compete or for market division. [9] The court held that the matters complained of are subject to the `rule of reason,' [and] . . . the Government has not sustained its burden of proof as to the unreasonableness of the practices involved or with respect to any adverse impact upon competition. 372 F. Supp., at 627-628. The Government had conceded that it was no violation of the Sherman Act for a large city bank to arrange a traditional correspondent relationship with a smaller, outlying banka  `mutually beneficial arrangement whereby the smaller bank receives needed services and the larger bank obtains both the benefit of the correspondent bank balance kept with it and the income from the sale of its services to the smaller bank's customers.'  Id., at 628. Noting this concession, the District Court observed: [S]uch assistance to, or sponsorship of, a smaller bank, is desirable and necessary and not anticompetitive. The difference between a pure correspondent relationship and a correspondent associate relationship as set forth in the evidence is merely one of degree, a fine line of demarcation almost impossible for the Court to perceive. . . . . . . [T]he Court finds as a fact that the relationship between C&S National, C&S Holding, and the five percent defendant banks, and the interchange of information between them, have been reasonable under the circumstances and not in violation of Section 1 of the Sherman Act. Ibid. Turning to the claim under § 7 of the Clayton Act, the court found that the various defendant banks were each engaged in commerce and that the relevant line of commerce was commercial banking. The court declined, however, to define the appropriate geographic markets, stating that its disposition of the case is based upon factors which make a precise delineation of the market area unnecessary. 372 F. Supp., at 629. Simply assuming the correctness of the Government's position that the appropriate markets were DeKalb County, Fulton County, North Fulton County, or the Atlanta area generally, the court made detailed findings as to the effect of the proposed acquisitions on C&S's nominal market shares. Id., at 629-633. [10] But, just as had the FDIC before it, the court saw these increases in nominal shares as of no competitive significance because the 5-percent banks had always been de facto branches within the C&S system. Id., at 633-638. [11]