United States v. Marine Bancorporation, Inc. - 418 U.S. 602, 94 S. Ct. 2856 (1974)

Rule:

In applying the potential-competition doctrine to commercial banking, courts must take into account the extensive federal and state regulation of banks, particularly the legal restraints on entry unique to this line of commerce.

Facts:

The United States brought, in the United States District Court for the Western District of Washington, the instant civil antitrust action to challenge a proposed merger between two commercial banks. The acquiring bank was a large, nationally chartered bank with its principal office in Seattle, Washington, and the acquired or target bank was a medium-sized, state- chartered bank with headquarters in Spokane at the opposite end of the state. The United States based its case exclusively on the potential competition doctrine under 7 of the Clayton Act (15 USCS 18), which prohibited corporate mergers the effect of which "may be substantially to lessen competition." The United States contended that if the merger was prohibited, the acquiring bank will find an alternate and more competitive means for entering the Spokane area and that the acquired bank will ultimately develop by internal expansion or mergers with smaller banks into an actual competitor of the acquiring bank and other large banks in sections of the state outside Spokane. The government further submitted that the merger will terminate the alleged procompetitive influence that the acquiring bank was presently exerting over Spokane banks due to the potential for its entry into that market. The District Court rendered judgment against the government. The government appealed. 

Issue:

Did the proposed bank merger violate the Clayton Act? 

Answer:

No.

Conclusion:

The Court affirmed the judgment of the district court, holding that the challenged merger was not in violation of 7 of the Clayton Act, in view of the legal barriers to entry into the field of commercial banking, notably state-law prohibitions against de novo branching, against branching from a branch office, and against multibank holding companies. According to the Court, plaintiff’s approach failed to accord full weight to the extensive regulatory barriers to entry into commercial banking. The Court found that such omission was of great importance because ease of entry on the part of the acquiring firm was a central premise of the potential-competition doctrine. Plaintiff failed to demonstrate that the alternative means of market entry offered a reasonable prospect of long-term structural improvement or other benefits.