41 L.Ed.

2d 1016
94 S.Ct. 2788
418 U.S. 656

UNITED STATES, Appellant,

v.
The CONNECTICUT NATIONAL BANK et al.
No. 73767.
Argued April 23, 1974.
Decided June 26, 1974.

Syllabus
The United States brought this civil antitrust action under 7 of the
Clayton Act challenging a proposed consolidation between the
Connecticut National Bank (CNB) and the First New Haven National
Bank (FNH), which are, respectively, the fourth and eighth largest
commercial banks in Connecticut. The banks operate in contiguous areas
of the State, CNB having headquarters in Bridgeport, with 51 offices there
and in nearby towns; FNH having headquarters in New Haven, with 22
offices there and in nearby towns. The Government contended that the
merger would eliminate significant potential competition in commercial
banking in the New Haven and Bridgeport metropolitan areas and in other
areas in Connecticut. The District Court rejected the Government's
arguments in support of that position, relying on state law restraints on de
novo branching, the two banks' expansion plans and capabilities, the
posture of national and state regulatory officials regarding the issuance of
new bank charters, and the existence and economic feasibility of possible
foothold acquisitions. The court concluded that under 7 commercial
banking is not a distinct line of commerce in Connecticut and that the
relevant geographic market, or 'section of the country' under that
provision, is the State as a whole. Held:
FNH has its headquarters in the town of New Haven, approximately 19
miles to the northeast of Bridgeport along the Long Island Sound. FNH is
the eighth largest commercial bank in Connecticut. At the end of 1972, it
held 4.1% of commercial bank deposits in the State. FNH operates 22
bank offices in New Haven and surrounding towns.

1. The District Court erred in holding that the appropriate 'line of

commerce' within the meaning of 7 included both commercial banks and
savings banks. Pp. 660666.
2. The District Court further erred in ruling that the relevant geographic
market is the State of Connecticut as a whole. In a potential-competition
case like this, the relevant geographic market must be defined as the
localized area in which the acquired bank is insignificant, direct
competition with other banks, albeit not the acquiring bank. United States
v. Marine Bancorporation, 418 U.S. 602, 94 S.Ct. 2856, 41 L.Ed.2d 978.
Pp. 666668.
3. On remand, the District Court must make a determination as to the
geographic market in which each of the banks operates and to which the
bulk of its customers may turn for alternative commercial bank services,
and in making that determination it will be aided by the following
considerations: (i) the Government has the burden of producing evidence
to define localized banking markets; (ii) in satisfying that burden (as the
District Court correctly held) the Government cannot rely only on
Standard Metropolitan Statistical Areas; and (iii) town boundaries,
although significant, are not controlling. Pp. 673673.
4. The Government's contention that the State as a whole, though not a
banking market, is a 'section of the country' within the meaning of 7 is
without merit, Marine Bancorporation, supra. P. 672673.
362 F.Supp. 240, vacated and remanded.
Howard E. Shapiro, Washington, D.C., for appellant.
George D. Reycraft, Washington, D.C., for appellees The Connecticut
National Bank and others.
Lee Loevinger, Washington, D.C., for appellee Comptroller of the
Currency.
Mr. Justice POWELL delivered the opinion of the Court.

This case concerns the legality of a proposed consolidation of two nationally

chartered commercial banks operating in adjoining regions of Connecticut. The
United States brought a civil antitrust action challenging the consolidation
under 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. 18.
Following a lengthy trial and on the basis of extensive findings and

conclusions, the United States District Court for the District of Connecticut
dismissed the Government's complaint. 362 F.Supp. 240 (1973). The
Government brought a direct appeal pursuant to the Expediting Act, 32 Stat.
823, as amended, 15 U.S.C.A. 29, and the Court noted probable jurisdiction,
414 U.S. 1127, 94 S.Ct. 863, 38 L.Ed.2d 751 (1974).
2

The banks desiring to consolidate, Connecticut National Bank (CNB) and First
New Haven National Bank (FNH), have offices in contiguous areas in the
southwestern portion of Connecticut, CNB maintains its headquarters in the
town of Bridgeport, which is situated on the Long Island Sound approximately
60 miles from New York City. CNB is the fourth largest commercial bank in
the State. At year-end 1972, it held 6.2% of the deposits in commercial banks in
Connecticut. CNB operates 51 offices located in Bridgeport and nearby towns
in the extreme southwest section of Connecticut.

FNH has its headquarters in the town of New Haven, approximately 19 miles to
the northeast of Bridgeport along the Long Island Sound. FNH is the eighth
largest commercial bank in Connecticut. At the end of 1972, it held 4.1% of
commercial bank deposits in the State. FNH operates 22 bank offices in New
Haven and surrounding towns.

In Connecticut as a whole at the end of 1971, the five largest commercial banks
held 61% and the 10 largest commercial banks held 83% of the deposits in such
banks in the State. Two large commercial banks based in Hartford, Connecticut
Bank & Trust Co. of Hartford and Hartford National Bank, operate essentially
statewide. At year-end 1972, they had 41% of the total commercial bank
deposits held by Connecticut banks.

CNB and FNH both have offices and are in direct competition in a so-called
'four-town area' located between Bridgeport and New Haven. The banks
assured the District Court, however, that in implementing the consolidation
they would divest themselves of a sufficient number of offices in the fourtown
area to render insignificant the degree of overlap of their areas of actual
operation. The District Court held that this divestiture plan eliminated any
antitrust difficulties presented by the merger of direct competitors. 362 F.Supp.,
at 268270, 286. The United States has not pursued the point on appeal.
Accordingly, the case has been presented to us strictly as a geographic market
extension merger on the part of both banks. The proposed consolidation would
join the banks under FNH's national charter (with headquarters in Bridgeport).
It would have no effect on the number of banks operating in either the
Bridgeport or New Haven area. In that posture, the case presents potentialcompetition issues similar to those raised in United States v. Marine

Bancorporation, Inc., 418 U.S. 602, 94 S.Ct. 2856, 41 L.Ed.2d 978.

6

The District Court rejected the Government's potential-competition arguments,

relying on such factors as state-law restraints on de novo branching,1 the
expansion plans and capabilities of the two banks, the posture of national and
state regulatory officials regarding the issuance of new bank charters, and the
existence and economic feasibility of possible foothold acquisitions. 362
F.Supp., at 286288. As we have held today in the Marine Bancorporation
case, these and analogous factors are the appropriate considerations to take into
account in determining the legality under 7 of the Clayton Act of geographic
market extension mergers by commercial banks. We are unable, however, to
reach the question of whether the District Court correctly assessed the import
of those factors in the instant case. We have also held in Marine
Bancorporation that the legality of a market extension merger must be
determined against the backdrop of properly defined product and geographic
markets. See 418 U.S., at 618, 94 S.Ct., at 2868. In our view, the District Court
erred in its definition of both concepts, and it is not possible to ascertain the
degree, if any, to which those errors may have influenced its conclusions with
regard to the Government's potential-competition arguments. Accordingly, the
District Court's judgment must be vacated and the case remanded for
reconsideration.

* The District Court concluded that the appropriate 'line of commerce' within
the meaning of 7 included both commercial banks and savings banks. 362
F.Supp., at 281. The court recognized that its conclusion departed from this
Court's holdings in, e.g., United States v. Phillipsburg National Bank, 399 U.S.
350, 359 362, 90 S.Ct. 2035, 2041, 26 L.Ed.2d 658 (1970), and United States v.
Philadelphia National Bank, 374 U.S. 321, 356357, 83 S.Ct. 1715, 1737, 10
L.Ed.2d 915 (1963). But in the District Court's view the pronouncements in
Phillipsburg National Bank and Philadelphia National Bank 'were not intended
to be ironclad, hard and fast rules which require a court to don blinders to block
out the true competitive situation existing in every set of circumstances.' 362
F.Supp., at 280.

Several factors led the District Court to the conclusions that 'savings banks are
in direct and substantial competition with commercial banks in providing
product-services to the banking consumers in Connecticut . . .,' and that '(t) he
cold, hard realities of the situation are that savings and commercial banks are
fierce competitors in this state.' Ibid. The court noted that under state law
savings banks in the near future will be permitted to offer one of the traditional
indicia of commercial banks, personal checking accounts. See Conn.Pub.Act
No. 73195 (May 14, 1973). It pointed out that savings banks in Connecticut

compete with commercial banks for real estate mortgages, personal loans, IPC
(individual, partnership, and corporate) deposits, and, the court found,
commercial loans. 362 F.Supp., at 280. If cited United States v. Continental
Can Co., 378 U.S. 441, 84 S.Ct. 1738, 12 L.Ed.2d 953 (1964), for the
proposition that 'complete industry overlap' is not required to establish a
relevant line of commerce under 7. 362 F.Supp., at 281. It also relied on the
omission of the 'in any line of commerce' phrase from the Bank Merger Act of
1966, 12 U.S.C. 1828(c)(5)(B), an Act which in other essential respects tracks
the language of 7 of the Clayton Act.2 Finally, it distinguished Philadelphia
National Bank, supra, and Phillipsburg National Bank, supra, by pointing to the
absence of significant competition by savings banks in the relevant geographic
markets in those cases. 362 F.Supp., at 281. The District Court's conclusion on
the appropriate line of commerce caused it to 'shade' (i.e., to reduce) the
Government's concentration ratios to take into account the presence of savings
banks. Id., at 285.
9

We are in complete agreement with the District Court that Phillipsburg

National Bank and Philadelphia National Bank do not require a court to blind
itself to economic realities. Similarly, we have no doubt on this record that
savings banks and commercial banks in Connecticut are 'fierce competitors,' see
362 F.Supp., at 280, to the degree that they offer identical or essentially
fungible services. The District Court was also correct that 'complete
interindustry competitive overlap need not be shown.' Continental Can Co.,
supra, 378 U.S., at 457, 84 S.Ct., at 1747. As the Court declared in Continental
Can, 'we must recognize meaningful competition where it is found to exist.' 378
U.S., at 449, 84 S.Ct., at 1743. Nonetheless, we hold for several reasons that
the District Court was mistaken in including both savings and commercial
banks in the same product market for purposes of this case.

10

Two of the District Court's reasons may be dealt with briefly. The court erred
as a matter of law in concluding that the absence of a 'line of commerce' phrase
in the Bank Merger Act of 1966 alters traditional standards under 7 of the
Clayton Act for defining the relevant product market in a bank merger case.
United States v. Third National Bank, 390 U.S. 171, 182 n. 15, 88 S.Ct. 882,
889, 19 L.Ed.2d 1015 (1968). See Phillipsburg National Bank, 399 U.S., at 359
362, 90 S.Ct., at 2041. Moreover, the absence of significant competition
from savings banks in Philadelphia National Bank, supra, and Phillipsburg
National Bank, supra, is not determinative. The commercial banks in both of
those cases faced significant competition from savings and loan associations
and other credit institutions. See, e.g., 374 U.S., at 357 n. 34, 83 S.Ct., at 1738;
United States v. Phillipsburg National Bank, 306 F.Supp. 645, 649 (NJ 1969).
The Court in both instances nevertheless viewed the business of commercial

banking as sufficiently distinct from other credit institutions to merit treatment

as a separate 'line of commerce' under 7. Analogous distinctions, although
perhaps not as sharply defined, are controlling here.
11

We believe that the District Court overestimated the degree of competitive

overlap that in fact exists between savings banks and commercial banks in
Connecticut. To be sure, there is a large measure of similarity between the
services marketed by the two categories of banks.3 In our view, however, the
overlap is not sufficient at this stage in the development of savings banks in
Connecticut to treat them together with commercial banks in the instant case.
Despite the strides that savings banks in that State have made toward parity
with commercial banks, the latter continue to be able to provide a cluster of
services that the former cannot, particulatly with regard to commercial
customers, and this Court has repeatedly held services that the former cannot,
particularly provided by commercial banks that sets them apart for purposes of
7.

12

The Court declared in Phillipsburg National Bank, supra, 399 U.S. at 360, 90
S.Ct., at 2041:

13

'Philadelphia Bank emphasized that it is the cluster of products and services

that full-service banks offer that as a matter of trade reality makes commercial
banking a distinct line of commerce. Commercial banks are the only financial
institutions in which a wide variety of financial products and servicessome
unique to commercial banking and others not are gathered together in one
place. The clustering of financial products and services in banks facilitates
convenient access to them for all banking customers. . . .' (Emphasis in
original.)

14

From the vantage point of at least one significant consumer of bank services
the commercial enterprisecommercial banks in Connecticut offer a 'cluster of
products and services' that their savings bank counterparts do not. The facts of
this case indicate that the differences in what commercial banks in the State can
offer to that important category of bank customers are sufficient to establish
commercial banking as a distinct line of commerce.

15

The District Court concluded that 'meaningful competition' existed between

commercial and savings banks for commercial loans. 362 F.Supp., at 280. This
conclusion is not supported by the record. Commercial loans, generally
speaking, are relatively short-term loans to business enterprises of all sizes,
usually for purposes of inventory or working capital. At the end of 1971

commercial banks in Connecticut had outstanding $1.03 billion in commercial

loans.4 Savings banks, by comparison, had $26 million in such loans at that
time.5 The disparity in these figures demonstrates that the commercial bankloan
business in Connecticut is controlled almost exclusively by commercial banks.
Moreover, commercial banks in the State offer credit-card plans, loans for
securities purchases, trust services, investment services, computer and account
services, and letters of credit. Savings banks do not.
16

It is true that under state law savings banks soon will be able to provide some
checking account services. Conn.Pub.Act No. 73195 (May 14, 1973).6 This
will increase the degree of direct competition between savings banks and
commercial banks, because demand deposits have traditionally been a unique
attribute of the latter institutions. But even this new authority for savings banks
will not allow them to serve commercial customers, who constitute a significant
percentage of the clientele of commercial banks. The state statute empowering
savings banks to offer demand deposits forbids those banks from marketing the
service to anyone 'for the purpose of, or in connection with, the carrying on of
any business, trade, occupation or profession.' Id., 1(a), 5. Thus, under the
new Act, savings banks will be restricted to offering personal checking
accounts. Id., 2.

17

We do not say, and Phillipsburg National Bank, supra, and Philadelphia

National Bank, supra, do not say, that in a case involving a merger of
commercial banks a court may never consider savings banks and commercial
banks as operating in the same line of commerce, no matter how similar their
services and economic behavior. At some stage in the development of savings
banks it will be unrealistic to distinguish them from commercial banks for
purposes of the Clayton Act. In Connecticut, that point may well be reached
when and if savings banks become significant participants in the marketing of
bank services to commercial enterprises. But, in adherence to the tests set forth
in our earlier bank merger cases, which we are constrained to follow, we hold
that such a point has not yet been reached. Accordingly, on remand the District
Court should treat commercial banking as the relevant product market.

II
18

The District Court ruled that the relevant geographic market, or 'section of the
country,' under 7, is the State as a whole. 362 F.Supp., at 283. We think the
District Court erred on this point for several reasons. If the State were the
relevant geographic market, it would then be appropriate to analyze this not as a
potential-competition case but as a direct-competition case involving the
consolidation of two firms holding an aggregate market share of approximately

10%. Even if this figure is 'shaded' by a factor of 10% to account for the
influence of banks in New York see id., at 260; Philadelphia National Bank,
374 U.S., at 364 n. 40, 83 S.Ct., at 1742, the consolidation of CNB and FNH
would create a firm holding a 9% share of statewide commercial-bank deposits.
Mergers between direct competitors producting smaller shares of less
concentrated markets have been held illegal under 7. E.g., United States v.
Von's Grocery Co., 384 U.S. 270, 86 S.Ct. 1478, 16 L.Ed.2d 555 (1966).
19

The State cannot be the relevant geographic market, however, because CNB
and FNH are not direct competitors on that basis (or for that matter on any
other basis pertinent to this appeal). The two banks do not operate statewide,
nor do their customers as a general rule utilize commercial banks on that basis.
The offices of the two banks are restricted to adjoining sections of the
southwest segment of Connecticut. Although the two banks presumably market
a small percentage of their loans to large customers on a statewide or broader
basis, it is undoubtedly true that almost all of their business originates locally.
For example, 'about 88% of CNB's total deposit business derive(s) from the
towns in which CNB had offices.' 362 F.Supp., at 250. As the District Court
noted in a finding that is inconsistent with its conclusion on the appropriate
section of the country, '(c)ommon sense . . . would indicate that the relevant
market areas of CNB and FNH generally coincide with where each has
established branch offices.' Ibid.

20

As indicated by our opinion today in Marine Bancorporation, 418 U.S. 602, 94

S.Ct. 2856, 41 L.Ed.2d 978, the relevant geographic market of the acquired
bank is the localized area in which that bank is in significant, direct competition
with other banks, albeit not the acquiring bank. This area must be defined in
accordance with this Court's precedents in prior bank-merger cases. Yet the
District Court's conclusion on this issue conflicts with Philadelphia National
Bank, supra. The Court emphasized in that case:

21

'In banking, as in most service industries, convenience of location is essential to

effective competition. Individuals and corporations typically confer the bulk of
their patronage on banks in their local community; they find it impractical to
conduct their banking business at a distance. . . . The factor of inconvenience
localizes banking competition as effectively as high transportation costs in other
industries.' 374 U.S., at 358, 83 S.Ct., at 1738 (footnote and citations omitted).

22

In recognition of the local character of the great majority of commercial bank

activities, Philadelphia National Bank indicated that the relevant geographic
market in bank-merger cases must be drawn narrowly to encompass the area
where 'the effect of the merger on competition will be direct and immediate.'

Id., at 357, 83 S.Ct., at 1738. Moreover, the geographic market must be

delineated in a way that takes into account the local nature of the demand for
most bank services. It 'must be charted by careful selection of the market area in
which the seller operates, and to which the purchaser can practicably turn for
(alternatives) . . ..' Id., at 359, 83 S.Ct., at 1739 (citations, internal quotations,
and italics omitted). Because the economic scale of separate categories of
consumers of bank services will vary, a workable compromise must be struck
'to delineate the area in which bank customers that are neither very large nor
very small find it practical to do their banking business . . ..' Id., at 361, 83
S.Ct., at 1740. 7
23

On remand the District Court must determine pursuant to the localized

approach denoted above the geographic market in which CNB operates and to
which the bulk of its customers may turn for alternative commercial bank
services. It must do the same with regard to FNH, for this case presents the
unusual fact situation of a consolidation of two banks, each with a history of de
novo geographic expansion, rather than the acquisition of a geographically
stable bank as in Marine Bancorporation, 418 U.S. 602, 94 S.Ct. 2856, 41
L.Ed.2d 978. The task is important, because the definition of the respective
geographic markets determines the number of alternative avenues of entry
theoretically open to CNB in piercing FNH's area of significant competitive
influence and vice versa.

24

We are not unaware of the difficulty of the assignment confronting the District
Court. An element of 'fuzziness would seem inherent in any attempt to delineate
the relevant geographical market.' Philadelphia National Bank, supra, at 360 n.
37, 83 S.Ct., at 1740. The task is made especially taxing here by the
fragmented character of the distribution of the banking offices of the two
banks, especially CNB. Apparently because the Connecticut branching statute
has created a checkerboard of 'open' and 'closed' towns, see n. 1, supra, CNB
and FNH have not expanded in the past in a manner that produced readily
definable, completely covered areas around the towns where they have their
home offices. There is, for example, a gap consisting of four towns in the
extreme southwest section of Connecticut in which CNB has no offices,
although it has established offices in almost all of the surrounding towns in that
part of the State. That gap presumably will have to be excluded from
consideration on remand.

25

The difficulty of the responsibility imposed on the District Court with regard to
defining the geographic markets of the two banks is ameliorated by several
considerations. First, the burden of producing evidence on this subject is on the
Government. The Government repeatedly notes that it is not required to define

geographic markets by 'metes and bounds,' citing United States v. Pabst

Brewing Co., 384 U.S. 546, 549, 86 S.Ct. 1665, 1667, 16 L.Ed.2d 765 (1966).
To the extent that this means that such markets need notindeed cannotbe
defined with scientific precision, it is accurate. But it is nevertheless the
Government's role to come forward with evidence delineating the rough
approximation of localized banking markets mandated by Philadelphia National
Bank, supra, and Phillipsburg National Bank, supra.
26

Second, we affirm that portion of the District Court's judgment holding that the
Government cannot rely, without more, on Standard Metropolitan Statistical
Areas (SMSA's) as defining the geographic markets of the two banks. See 362
F.Supp., at 249250, 281282. SMSA's are prepared by the Office of
Management and Budget to determine areas of economic and social integration,
principally on the basis of the commuting patterns of residents.8 They are not
defined in terms of banking criteria, and they were not developed as a tool for
analyzing banking markets. Id., at 249. Exclusive reliance on SMSA's here
may lead to inaccuracies. For example, as the District Court noted, only 57% of
CNB's deposits originate from the Bridgeport SMSA. Id., at 250, 282. This is
because CNB's offices extend to several areas outside the Bridgeport SMSA.
The Bridgeport SMSA is relevant, if at all, only to the CNB offices located in
Bridgeport, and even then it is at best a crude indicator. The same is true of the
New Haven SMSA and the FNH offices located in the town of New Haven. In
sum, although the Bridgeport and New Haven SMSA's may be helpful in
defining the general metropolitan characteristics of southwest Connecticut, they
are not sufficiently refined in terms of realistic commercial banking markets to
satisfy the Government's burden. The Government must demonstrate more
accurately than is possible solely with SMSA's the localized banking markets,
or areas of significant competitive influence, surrounding the sites where CNB
and FNH maintain their banking offices.9

27

Third, the District Court may not, as the banks would have it, rely solely on
towns as the relevant geographic markets. The towns served by the two banks
are highly significant geographic units, because state law restraints on de novo
branching are defined in terms of towns. See n. 1, supra. But not all towns are
closed to de novo branching by one or the other bank, and it seems fair to
assume that the area of significant competitive influence of some bank offices
may extend beyond town boundaries.

28

On remand, the District Court must delineate the localized banking markets
surrounding the sites where CNB and FNH maintain their bank offices. It must
then evaluate the economically and legally feasible alternative methods of
entry, if any, into those areas available to one bank or the other. In so doing, it

should keep in mind the considerations outlined today in Marine

Bancorporation, 418 U.S. 602, 94 S.Ct. 2856, 41 L.Ed.2d 978.10
III
29

In conformity with its approach in Marine Bancorporation, the Government

argues that the State as a whole, although not a banking market, is nonetheless
a 'section of the country' within the meaning of 7 of the Clayton Act. The
Government repeats the concern expressed in Marine Bancorporation, see 418
U.S., at 620, 94 S.Ct., at 2869, that a statewide linkage of oligopolies 'may'
arise and that large banks across the state 'may engage' in more standardized
behavior as a result.11 Moreover, the Government contends that a statewide
approach is appropriate because the challenged consolidation would eliminate
one of eight banks in Connecticut with the potential for statewide operation.
'Thus the effect of a merger which eliminates even one of these banks will be
felt statewide, for it will have an impact in every local market in the state where
that bank does not currently operate but which it might otherwise enter.'12

30

We reject the Government's statewide approach here, as we did in Marine

Bancorporation, supra, at 620, 94 S.Ct., at 2869. The Government's argument
that 'a geographic area need not be a banking market to be a section of the
country . . .'13 is foreclosed by the precedents. Id., at 620622. 94 S.Ct., at
2869 2870. Its theory of linked oligopolies appears to be as devoid of
evidentiary support here as it was in Marine Bancorporation. Finally, its
concern for any area of the State in which CNB or FNH 'might' enter
independently of the consolidation is too speculative to establish a case under
the Clayton Act. In advancing the latter argument, the Government borders on
espousing a per se rule against geographic market extension mergers by
Connecticut commercial banks so long as any town in the State remains open to
de novo branching. On remand the District Court will address itself to the
geographic markets in which CNB and FNH presently operate.14

31

The judgment is vacated and the case is remanded for further consideration
consistent with this opinion.

32

It is so ordered.

33

Judgment vacated and case remanded.

34

Mr. Justice WHITE, with whom Mr. Justice DOUGLAS, Mr. Justice
BRENNAN, and Mr. Justice MARSHALL join, concurring in part and

dissenting in part.
35

Although I agree with Part I of the majority opinion, as to the relevant line of
commerce, I dissent from that part of the opinion dealing with the
determination of a relevant geographic market.

36

The Court holds that 'the relevant geographic market of the acquired bank is the
localized area in which that bank is in significant, direct competition with other
banks, albeit not the acquiring bank,' relying on a statement to similar effect in
United States v. Marine Bancorporation, Inc., 418 U.S. 602, 94 S.Ct. 2856, 41
L.Ed.2d 978. Accordingly, the Court rejects the proposition, which the appellee
banks accepted below,* that the merger of FNH and CNB should be analyzed in
terms of its effect on possible potential competition in areas not in or adjacent to
the New Haven and Bridgeport markets, however those markets are to be
defined.

37

There is certainly nothing in this Court's past cases on mergers under Clayton
7 which requires this result. Even if Bridgeport and New Haven are relevant
geographic markets, there can be more than one relevant geographic market in
which to test the possible effects of a merger. Section 7 of the Clayton Act
speaks to lessening competition 'in any section of the country' (emphasis
added), and as the majority acknowledges in Marine Bancorporation, 418 U.S.,
at 621 n. 20, 94 S.Ct., at 2869, in United States v. Pabst Brewing Co., 384 U.S.
546, 86 S.Ct. 1665, 16 L.Ed.2d 765 (1966), the Court 'held that the
Government had established three relevant markets in which the acquired firm
actually marketed its productsa single State, a multi-state area, and the
Nation as a whole.' To be sure, the selection of any relevant geographic market
in a banking case must be chosen in terms of the needs of the customers and the
area in which sellers operate, United States v. Philadelphia National Bank, 374
U.S. 321, 357359, 83 S.Ct. 1715, 1737, 10 L.Ed.2d 915 (1963), but this may
result in several possible markets, especially in a potential-competition case
where a merger might affect the economic behavior of existing firms in various
markets.

38

As I read the majority opinion, if one assumed that FNH and CNB were the
two largest banks in Connecticut, and, although located in southwest
Connecticut, both had the capability and interest to enter a concentrated
banking market in northeast Connecticut, it would be improper for the
Government to oppose their merger, since neither bank had as yet entered the
northeast Connecticut banking market. The majority describes the possibility of
such dual entry as 'too speculative.' Ante, at 673. What is a relevant geographic
market is an issue entirely distinct from who is a potential competitor. It is

obvious, for example, that while New Haven and/or its environs is a relevant
market of banking competition, it may nonetheless be true that CNB may not
prove to be a potential competitor with respect to that market. It, therefore,
follows that whether the banking market in northeast Connecticut is a relevant
banking market, is a question entirely separate from whether FNH and/or CNB
should be considered potential competitors in that market, and whether the
elimination of one of those competitors lessens either the possibility of
deconcentration in that market or, under the 'wings theory,' affects present
competition in that market. Since the majority professes to leave issues of
potential competition to the District Court on remand, it should not preclude a
finding that this merger will affect banking competition in areas of the State
other than Bridgport of New Haven. The possibility of finding many banking
markets in Connecticut is an entirely separate matter from finding one banking
market in the State under a theory of statewide linkage of oligopolies. The latter
assumes that a section of the Country need not be a banking market; the former
does not.
39

I agree that the case should be remanded. As I understand the task of the
District Court, once it has decided what the relevant grographic markets are, the
case is to be analyzed in terms of the 'wings theory' of potential competition
enunicated in United States v. Falstaff Brewing Corp., 410 U.S. 526, 93 S.Ct.
1096, 35 L.Ed.2d 475 (1973), and the deconcentration theory now accepted by
this Court in Marine Bancorporation. As to these matters, I adhere to my views
as stated in Marine Bancorporation.

Under state law in Connecticut, commercial banks may not branch into a town
cantaining the main office of another bank (the so-called 'home office
protection' provision). Conn.Gen.Stat.Rev. 3659 (1972). Towns that
contain the main office of a bank are referred to as 'closed' towns. The
remaining towns are 'open towns.' The term 'town in Connecticut refers to a
political subdivision of the State, somewhat analogous to counties in other
States. It does not denote a metropolitan area, although some cities are more or
less congruent with the towns in which they are located.
There are 169 towns in Connecticut. The effect of the 'home office protection'
provision is to create a checkerboard of 'open' and 'closed' towns reflecting the
location of the main offices of the banks operating in the State. State law
forbids any bank that does not have its headquarters in Connecticut from
operating banking offices within the State. Conn.Gen.Stat.Rev. 3659(4).

See 362 F.Supp., at 281. The relevant provision of the Bank Merger Act of

1966, 80 Stat. 8, 12 U.S.C. 1828(c)(5)(B), proscribes any bank consolidation:

'whose effect in any section of the country may be substantially to lessen
competition, or to tend to create a monopoly, or which in any other manner
would be in restraint of trade, unless . . . the anti-competitive 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.'
Section 7 of the Clayton Act, 38 Stat. 731, as amended, 64 Stat. 1125, 15
U.S.C. 18, by comparison provides in pertinent part:
'No corporation engaged in commerce shall acquire, directly or indirectly, the
whole or any part of the stock or other share capital and no coporation subject
to the jurisdiction of the Federal Trade Commission shall acquire the whole or
any part of the assets of another corporation engaged also in commerce, where
in any line of commerce in any section of the country, the effect of such
acquisition may be substantially to lessen competition, or to tend to create a
monopoly.'
3

As we have noted, the District Court identified some of the services offered by
both savings and commercial banks, including real estate mortgages, personal
loans, and time deposits. As the District Court put it in another context, it would
be 'ostrich-like,' 362 F.Supp., at 254, to assume that the two types of banks are
not in direct and vigorous competition with regard to the services they share or
are not viewed by many bank customers as more or less fungible for purposes
of those services. Cf. United States v. Phillipsburg National Bank, 399 U.S.
350, 360, 90 S.Ct. 2035, 2041, 26 L.Ed.2d 658 (1970). That savings and
commercial banks are direct competitors in some submarkets, however, is not
the end of the inquiry, as Phillipsburg makes clear. Ibid.

App. 1793.

Id., at 1795.

The pertinent provisions of Conn.Pub.Act No. 73195 will take effect no later
than December 31, 1975, although the enactment of certain federal legislation
or other specified events not relevant here may trigger those provisions at an
earlier date. See Id., 7.

The Court's approach in Philadelphia National Bank to defining geographic

markets for commercial banks was reaffirmed in Phillipsburg National Bank,
399 U.S., at 362365, 90 S.Ct., at 20422044.

App. 14351437.

The federal bank regulatory agencies define a bank's service area as the
geographic area from which the bank derives 75% of its deposits. See 362
F.Supp., at 250. The service-area concept may be considerably more useful in
this case than SMSA's, although this is a matter we leave to the District Court
on remand.
In Marine Bancorporation, supra, 418 U.S., at 619, 94 S.Ct., at 2869, we
affirmed the District Court's determination of the Spokane metropolitan area as
the relevant geographic market. That holding was not an affirmation of SMSA's
as banking markets; SMSA's were not at issue in that case. The Spokane
metropolitan area was defined as the relevant geographic market in Marine
Bancorporation because it is an insulated banking market, is comparatively
small by geographic standards in the Western States, contains all the banking
offices of the target bank, and is the area from which that bank draws some
90% of its deposit accounts.

10

we note that it is not at all clear that the District Court's holdings as to potential
competition were based on a statewide appraisal of the consolidation at issue,
despite its conclusion that the State was the relevant section of the country. For
example, the court's findings with regard to 'toehold' acquisitions refer to
SMSA's towns, and service areas, 362 F.Supp., at 265, and its conclusions
under the heading of 'potential competition' speak of service area, service
market, and towns. Id., at 286287. Because the District Court did not clarify
what local area, if any, it considered controlling for purposes of the potentialcompetition doctrine, we are unable to hold that its error in denoting the State
as the relevant section of the country, see id., at 283, may be ignored.

11

Brief for United States 34.

12

Id., at 33 (emphasis added).

13

Id., at 31.

14

The District Court also concluded that assuming, arguendo, that the
consolidation violated the Clayton Act, it nonetheless met the standards of the
'convenience and needs' test of the Bank Merger Act of 1966, 12 U.S.C.
1828(c)(5)(B). 362 F.Supp., at 288. Its findings on the 'convenience and needs'
defense are not controlling, however, if it erred in the standards applied in
judging the status of the consolidation under the Clayton Act. United States v.
Third National Bank, 390 U.S. 171, 183184, 88 S.Ct. 882, 890, 19 L.Ed.2d
1015 (1968). See also Phillipsburg National Bank, 374 U.S., at 369370, 83
S.Ct., at 1745.

One of the principal witnesses presented by the appellee banks, Dr. Peck,
analyzed the effect of this merger, and the removal of FNH as a potential
competitor, along with CNB, on the various banking markets in the State.