Legal Document

390 U.S. 171 88 Supreme Court Reporter 882 19 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 1015 UNITED STATES, Appellant,v.THIRD NATIONAL BANK IN NASHVILLE et al. Number 86. Argued Dec. 11, 1967. Decided March 4, 1968. [Syllabus from pages 171-172 intentionally omitted] Daniel M. Friedman, Washington, D.C., for appellant. E. William Henry, Memphis, Tenn., and Joseph Judge O'Malley, appellees. Mr. Justice WHITE delivered the opinion of Court. 1 In this case appeals a District decision1 upholding merger Third National Bank in Nashville Trust Company against challenge under § 7 Clayton Act. The court below concluded that merger, which joined second largest fourth banks Davidson County, Tennessee, into bank immediately after was county's but since has become largest, would not tend substantially to lessen competition also any anticompetitive effect be outweighed by 'convenience needs community served.' We disagree with on both issues. hold established competition, did point benefits terms needs' sufficient outweigh impact. I. 2 Like other urban centers Southeast, grown steadily World War II population economic activity. Commercial banks, as 'the intermediaries most financial transactions,'2 grew along their city. From 1955 1964, example, total assets all located County increased $548,300,000 $1,053,700,000, an increase 92.2%. number hardly changed. Indeed, 1927 there been only one new county, Capital City Bank, at time it had achieved .9% assets. percentage were First American National, 38.3%; 33.6%; Commerce Union, 21.2%; 4.8%; three small two them towns outside Nashville, .6%, .3%, .3%.3 before us thus very large middle-sized bank. Its result 93.1% 97.9% held 71.9% 76.7% institutions. 3 merging played significantly different roles banking. characterized Comptroller Currency strongest best managed Nation 'strong, dynamic aggressive.'4 It 'a history innovating services or promptly providing services,'5 recruitment program local universities, continuous audit program, legal lending limit $2,000,000. 14 branches served correspondent smaller throughout central south. 4 Approached more checkered less present. Until 1956 largely trust institution. year, direction W. S. Hackworth, changed its name embarked drive full-service commercial This enjoyed considerable success. Between Bank's deposits $20,800,000 $45,500,000, loans discounts $8,100,000 $22,800,000. categories faster than county average National. growth, however, occurred rate 1960 year. Before growing rapidly year slowly. share banking business declined high 5.72% June 30, 1960, 4.83% 1964. 5 made elaborate findings why 'reached plateau remained until date merger' period 'it stagnant floundering bank.'6 those findings, broad picture operations emerges testimony exhibits case, appears principal reason key members management, men who responsible bank's progress late 1950's, advanced age either retired slowed activities. officials nonetheless scant efforts recruit advance young talent. paid lower salaries no funded pension plan, conducted systematic recruiting program. On January 1, board directors 13 members, whom four 75 over, nine 65 older, 11 63 older. Of six department heads older 59. 15 officers working over 60. painted somber hues policies results seemed flow failure hire Essentially, aggressive efficient, stopped growing, so could open (it one) embark nevertheless institution substantial size, $50,900,000 $45,500,000. profitable, offered somewhat services, occasionally rates, competitors. 6 individuals owned controlling shares decided sell 10,845 shares, interest, group prominent citizens headed Weaver. price $350 per share. February Weaver opened negotiations looking Union Nashville's third largest. unsuccessful, because demanded $460 while $360. then negotiated sale about $420 approved boards 12, and, approval Currency, consummated August 18, II. legislative Merger Act 19667 leaves doubt passed make changes law applicable mergers. Congress evidently dissatisfied interpreted versus Philadelphia 374 321, 83 1715 (1963), & company Lexington, 376 665, 84 1033, 12 (1964), wished alter procedures Department challenges mergers standard courts apply judging resulting statute, some recognized,8 clear specific prescribing testing expounding they should judged. 8 Updated: Term, Houston, 386 361, 87 1088, 18 151 (1967), procedural provisions 1966 Act, holding provided continued scrutiny Sherman created defense, having burden proving defense. task district inquire de novo validity relevant regulatory agency determine, first, whether offended antitrust laws second, if did, justified convenience Houston reserved 'all questions' concerning substantive meaning See U.S., 369, 1094, n. 1. III. 9 proceedings have now regarding here scrambled confused, became just prior trial receive first interpretation Court, decision rendered. 10 agreed merge April 27, applied approval, required. Pursuant Federal Reserve Board, Deposit Insurance Corporation, reported competitive factors involved.' Board 'would clearly adverse effects competition' 'eliminat(ing) direct exists between participants * increas(ing) already heavy concentration *' Corporation proposed unfavorable.' severe upon Metropolitan Nashville.' 'improve charter ability service public.' he merger. 10, States, Court's authorized, sued federal charging violation Act9 Act.10 refused Government's request preliminary injunction staying consummation, day merged. suit come when, 21, 1966, took effect. devoted much attention impact still process litigation. 80 Statutes-at-Large excluded liability11 17, 1963, decision, Attorney General begun litigation 1966. However, although considered amendments immunity mergers12 subject litigation, leave liability, apparently13 parties known, consummation risk eventual order dissolve. provide, 2(c) hearing such cases 'shall rule set forth' Since effect, witnesses, directed counsel, addressed themselves statutory language contained saw need remand light ordered Crocker-Anglo 263 F.Supp. 125 (D.C.N.D.Cal.1966). Proceeding decide standards 'primarily issue (on make) independent determination,' is, opinion, 'plainly unquestionably administrative determination' which) Comptroller's disturbed unless are unsupported evidence.'14 offend conclusion benefit supported evidence. relief sought denied. IV. asserted used determining is mandated return Columbia Steel Co., 334 495, 68 1107, 92 L.Ed. 1533 (1948), 'confined special facts.' Lexington 672, S.Ct., 1037. later cases, especially supra; Aluminum America, 377 271, 1283, 314 (1964); Continential Can 378 441, 1738, 953 rejected approach will 'substantially competition.' find adopted precisely phrase, well 'restraint trade' intention adopt 'antitrust standard' generally law.15 Only can drawn exhaustive deliberations preceded passage Act: intended usual analysis; failed scrutiny, permissible establish merger's anti-competitive disadvantages. supra. Congressman Minish spoke tune statement his colleagues when said: 'It paragraph (5)(b) bill, establishes single standard, factor directly section Thus, principles developed last years regard these statutes, definition market failing doctrine carried forward unchanged legislation.'16 16 therefore employed erroneous applying addition we that, appraised test enunciated recent tendency apparent. middle size. size absorbed big banks. By rose 93% 98%; merged alone almost 40% business. addition, record replete evidence fact important element certain, though all, facets customers found desirable. Although absolute 1956, entered seriously market, Throughout profitable. permits way 'failing' company. International Shoe FTC, 280 291, 50 89, 74 431 (1930). facts, inescapable tended market. V. 17 Because erroneously weighing suspect. To weigh adequately requires proper each. Having erred assessing impact, remand, perform again balancing Act.17 There additional remand. our view, misapprehended phrase community'; misunderstood weight given seeking determine 'clearly public interest probable transaction meeting purpose permit certain even felt role community's life sometimes lessened competition. ultimate imposed. statements consideration: 20 'Mr. ASHLEY. words, must shown sufficiently beneficial balance, may properly regarded interest. 21 MULTER. N Immigration Nationality Decisions believe originally enacted paramount making determination reference words 'in interest' written bill remain question agencies take account. 22 Is gentleman saying, consensus committee, drafting combining consideration particular hand, other, derive which, say, diminution competition; got involve rather factors? 23 STEPHENS. That correct. 112 Cong.Rec. 2446, 2449, 2450. 24 plain satisfaction community' judged overall If posed choice preserving satisfying requirements need, injury weighed rest alternative better 25 necessity choosing where create capabilities serving possessed institutions potential realized through might claimed, combined greater capacity hence equipped serve community. 370—371, 1745, acting relevance otherwise obtained New York. authorization considering appraising legality Expressions during suggest give factor, previously mergers, suitable validity.18 bank, 20% had, able larger loans, area companies go Chicago stated operated higher loans-to-deposits ratio Trust, available $2,800,000. But describing consequences community, defining value additions, compared desirable, Absent weighs little balance. 26 concerned danger collapse deeply trouble call forth traditional 'failing company' becoming long financially unsound institutions.19 seems catastrophe industrial retail enterprise, required justify radical preventive step Findings Fact included information unsatisfactory investigating credit risks, 'rating' 1962 'satisfactory' 'fair.' drew extent conditions Trust's future, feasibility curative measures short healthy aspects condition—for instance steady profitability, including after-tax earnings $368,000 196320 removed foreseeable future. conclusions nature,21 simply render services. 27 appears, branch, banking, computerized, emphasized real estate management old unable sound advice borrowers, talent, salary scale low. Hence solve problems produce House Report, capable 28 'furnishing reduction competing units, lines commerce, general criteria lessening H.R.Rep. 1221, 89th Cong., Sess., 3, Code Congressional Administrative News, Page 1862. (Emphasis original.) 29 Undeniably, significant kind outlined primarily rooted backward management. Just surely, securing loss Nor probably end managerial secure use Thus gains detriment essential net gain approved. 30 analysis puts aside possible ways requirement without resort flowing avoided benefited within competence reasonably businessmen, situation radically different. circumstances, authorized courts. If, experienced banker competent associates active another businessman willingness tackle buy out interests acceptable price, obvious group, seeks producing rendering service, permitted ignore alternative. Otherwise, acknowledged Congress, sacrificed needlessly. For same reasons, think incumbent demonstrate reasonable dilemma major competitor attempts, unlikely succeed. 31 rational reading compromise satisfied none protagonists extended controversy. directs consider resources 'future prospects existing institutions' appraised. Part appraisal, deficiencies exist do obtaining own improved does demand impossible unreasonable. merely insists injurious approved, showing expected cannot means. 32 face reliably unavailability solutions woes Company. not. described nature shortcomings. noted discussed matters extensively persons, bankers, learned 'extremely difficult' Bank. And procurement difficult 'almost insoluble' problem Trust. 33 how insoluable clear. ask concrete chief executive officer, needed most. proposals individual save casual letter acquaintance York, neither nor cared seek help firms specializing finding furnishing management.22 possibility owners taken charge None banker, successful predecessor Hackworth president Bank.23 assess others willing up difficulties period. nothing indicating $50,000,000 too attract management24 owners, intransigently insisting unreasonably conservative policies. desirability improving situation. Rather serious would, preferred bank—a produced profit $750,000 two-month investment $3,800,000. 34 bring rests A lively efficient absent means present unusually difficulties, satisfy burden. 35 conclude error cited remanded application facts heard decided, wish reopening record, opportunity intervening interpretations judgment reversed consistent opinion. ordered. 36 Reversed remanded. 37 FORTAS MARSHALL part case. 38 HARLAN, STEWART joins, concurring dissenting part. 39 My understanding structure 1966,1 based Term 364, 1091, 151, engage two-step process. First, solely viewpoint, violate embodied not, inquiry over. violation, served.'2 latter evaluate polar way. comparatively minor like obviously readily relating relatively infraction. 40 Turning matter, continue disagree, particularly field, 'numbers game' violations 1715, 915. myself bound dictates concur 41 second-step supra, omitted indicated steps concluded, incorrectly, Act.3 event, caused misconceive 'threshold' play. This, turn, led 'anti-competitive effect' balance framers Hence, reweigh correct threshold. 42 With side am accord ruling finds conferred ways. Unlike adequate issue. reveals many witnesses testified magnitude, greatest being replacements executives. Weaver, leader purchased control initially operate themselves, talks bankers convinced him problems. head executive-placement firm executives situation.4 rebuttal, recruiter executives, unsolvable, committed 43 'While conflict, preponderance practically obtain outside, product provide itself facilities, equipment maintain posture.' 260 869, 881. 44 sum, what scope this. out, further first-step foreclosed. Believing, contrary alternatives adequate, my view respecting whether, character forth, yield bearing needs.' 869 (D.C.M.D.Tenn.1966). unreported. Probable jurisdiction 388 905, 2111, 1345 (1967). 326, 915 (1963). cite percentages convenience, valid indication eight varied insignificantly Finding 66. F.Supp., 91. 134. 7, KF62 1828(c) (1964 ed., Supp. II). provides, part: '(5) shall approve— '(A) monopoly, furtherance combination conspiracy monopolize attempt '(B) whose country manner restraint trade, served. 'In every future institutions, '(7) judicial proceeding attacking (5) ground constituted (§ Act), identical (5).' See, e.g., 2447 (remarks Fino). 731, amended, 64 1125, 18. 209, appealed dismissal charge. count us. Liability monopolization excluded. Three category: here; California see (D.C.N.D.Cal.1966); St. Louis 4. 2465 Ashley). 874. review issues novo, quotation suggests, error. Other reached Our disposition makes unnecessary undue deference judgment. methods markets appraise agree 2451. 2441—2442 Patman); 2455 Annunzio); 2452 Reuss); 2655 (statement Senator Robertson). determined unlawful resulted it. Some argument pursued, misapplid Act's convenience-and-needs provision. 2663 2459—2460 Multer). 181 'apparently good record' diminished, expenditures maintenance bank.' Among salaries, automation, establishment branch offices. accrued profits rewarded fair form profits. conclude, 184, necessity' conclusion, supporting failure. An official testify trial. extremely difficult. contains revealing C. Jr., leading member merger: 'We finally agreement us, down devote full affairs—I say right experience, problem. 'But affairs employees stockholders Bank.' ownership furnish satisfactory leadership founded one-fourth apparently flourishing. regard, study compete successfully bank—if so.' Kohn, Competitive Capabilities Small Banks, 60 Banking, 1968, 64, reporting York State Banking Department's research study, Future Banks. amending 18(c)(5)(B) 1828(c)(5)(B) unclear necessary discrete account ante, 886.

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