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The determination of whether the effect of a merger may be to substantially lessen competition in the relevant market requires not merely an appraisal of the immediate impact of the merger upon competition, but a prediction of its impact upon competitive conditions in the future. Such a prediction is sound only if it is based upon a firm understanding of the structure of the relevant market; yet the relevant economic data are both complex and elusive. Unless businessmen can assess the legal consequences of a merger with some confidence, sound business planning is retarded. The courts must be alert to the danger of subverting congressional intent by permitting a too-broad economic investigation. In any case in which it is possible, without doing violence to the congressional objective embodied in § 7 of the Clayton Act, 15 U.S.C.S. § 18, to simplify the test of illegality, the courts ought to do so in the interest of sound and practical judicial administration
Appellees, a national bank and a state bank (Banks), are the second and third largest of the 42 commercial banks in the metropolitan area consisting of Philadelphia and its three contiguous counties, and both have branches throughout that area. The Banks' boards of directors approved an agreement for their consolidation, under which the national bank's stockholders would retain their stock certificates representing shares in the consolidated bank, while the state bank's stockholders would surrender their shares in exchange for shares in the consolidated bank. After obtaining reports, as required by the Bank Merger Act of 1960, from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Attorney General, all of whom advised that the proposed merger would substantially lessen competition in the area, the Comptroller of the Currency approved it. The United States sued to enjoin consummation of the proposed consolidation, on the ground, inter alia, that it would violate § 7 of the Clayton Act.
Was the proposed merger unlawful under § 7 of the Clayton Act, 15 U.S.C.S. § 18?
The United States Supreme Court reviewed the background of commercial banking in the United States and the proposed merger. The Court held that § 7 of the Clayton Act, 15 U.S.C.S. § 18, was applicable to bank mergers and that the specific exemption for acquiring corporations that were not subject to the Federal Trade Commission's jurisdiction excluded from coverage only asset acquisitions by such corporations when not accomplished by merger. The proposed merger was unlawful because the effect of the merger was to substantially lessen competition in the line of commerce in a section of the country. The Court determined that appellees' business justifications for the merger were unwarranted.