## Facts

- The United States sued under § 7 of the Clayton Act to block a proposed consolidation between Connecticut National Bank (CNB) and First New Haven National Bank (FNH).
- The Government alleged the merger would lessen competition by eliminating significant potential competition in commercial banking, including in the New Haven and Bridgeport areas.
- CNB was headquartered in Bridgeport and operated 51 offices in Bridgeport and nearby towns; FNH was headquartered in New Haven and operated 22 offices in New Haven and nearby towns.
- The District Court rejected the Government’s potential-competition theories, citing state branching restrictions, the banks’ expansion plans and capabilities, regulatory attitudes toward new charters, and the feasibility of entry through “foothold” acquisitions.
- The District Court defined the relevant product market to include both commercial banks and savings banks, and defined the relevant geographic market as the entire State of Connecticut.
- Judgment was entered for the defendants, allowing the consolidation; the United States appealed directly to the Supreme Court.

## Issues

1. Whether the relevant “line of commerce” under Clayton Act § 7 was commercial banking alone, rather than a combined market including both commercial banks and savings banks.
2. Whether the relevant “section of the country” under § 7 could be defined as the entire State of Connecticut, rather than localized banking markets where customers obtain alternative commercial bank services.
3. In a banking potential-competition case, what evidentiary and analytical standards govern definition of the relevant geographic market.

## Decision

- The Supreme Court, in a 5–4 decision, vacated the District Court’s judgment and remanded.
- The Court held the District Court erred by defining the product market to include both commercial banks and savings banks; commercial banking could be a distinct line of commerce for § 7 analysis.
- The Court held the District Court erred by treating Connecticut as the relevant geographic market; in potential-competition cases the geographic market must be a localized area where the acquired bank competes significantly and directly with other commercial banks.
- The Court rejected the Government’s alternative theory that the State, even if not a banking market, could qualify as the relevant “section of the country” under § 7.
- On remand, the District Court was directed to determine the geographic market for each bank based on where the bulk of its customers can turn for alternative commercial banking services, with the Government bearing the burden of producing evidence.

## Legal Principles

- Clayton Act § 7 requires proof of a relevant “line of commerce” and “section of the country” in which a merger’s effect “may be substantially to lessen competition, or to tend to create a monopoly.”
- For § 7 banking cases, commercial banking services may constitute a distinct product market, separate from savings banks.
- In potential-competition banking cases, the relevant geographic market is a localized commercial banking market defined by competitive realities and customer behavior, not by statewide political boundaries.
- The Government bears the burden of producing evidence defining localized banking markets.
- Administrative or political boundaries may inform but do not control market definition; reliance solely on metropolitan statistical designations is insufficient, and town boundaries are relevant but not dispositive.

## Conclusion

The Court vacated approval of the CNB–FNH merger because the lower court used an overbroad product market and an improper statewide geographic market; it required a commercial-banking product market and localized geographic markets tied to where customers realistically obtain alternative commercial banking services, and remanded for further proceedings under those standards.


United States v. Connecticut Nat'l Bank, 418 U.S. 656 (1974)