Friday, January 17, 2014

U.S. v. Philadelphia National Bank case brief

U.S. v. Philadelphia National Bank case brief summary

FACTS
The DOJ challenged the merger of the second and third largest banks in Philadelphia, which would have resulted in the four largest banks having approximately 77% of the geographic market.

HOLDING
The Court ruled that a merger producing an unduly significant market share that significantly increases the concentration in the market is illegal absent a clear showing that the merger is not likely to have anticompetitive effects. The Court also noted that a fundamental purpose of the 1950 amendments to the Clayton Act was to arrest the trend toward concentration.

DISCUSSION
  • The Court rejected three justifications for the merger: expansion into the suburbs could be done organically without using mergers, there was no lack of adequate banking facilities to justify merging in order to compete with New York banks (not the case of two small firms merging to compete with the leaders in their market), and mergers that lessen competition cannot be saved merely because it is beneficial by some other measurement.
Analysis
  • Philadelphia National Bank clearly enshrines the structural presumption, requiring a clear showing of lack of anticompetitive effect to rebut the presumption.
  • Von’s Grocery Co. (1966) and Pabst Brewing Co. (1966) prohibited mergers of chain stores with 7.5% share but that may have threatened Mom & Pop groceries and brewers with 24% in WI, 11% in the tri-state area, and 4.5% nationally; this was the high tide of the structural presumption.

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