## Facts

- The United States sued under § 7 of the Clayton Act to enjoin a proposed transaction in which National Bank of Commerce of Seattle (NBC), a wholly owned subsidiary of Marine Bancorporation, Inc., would acquire Washington Trust Bank (WTB), a Spokane-based commercial bank.
- NBC was a large Seattle-headquartered bank with extensive statewide branching, but it operated no branches in the Spokane metropolitan area.
- WTB was a medium-size Spokane bank with seven branches; it held about 18.6% of Spokane-area deposits, in a market where two larger banks held roughly 42.1% and 31.6%.
- The government did not allege current competition between NBC and WTB in Spokane; it relied solely on potential competition theories.
- The government argued the acquisition would: (1) eliminate NBC as a likely de novo or small-acquisition entrant that could deconcentrate Spokane banking; (2) remove present competitive discipline from NBC’s perceived threat of entry; and (3) eliminate WTB as a possible future regional or statewide rival to NBC.
- Washington and federal banking regulation required approvals for branching and acquisitions, and branching limits made independent entry uncertain.

## Issues

1. Whether the relevant product and geographic markets were properly defined as the business of commercial banking in the Spokane metropolitan area for § 7 analysis.
2. Whether the acquisition violated § 7 under an “actual potential competition” theory by eliminating NBC’s probable, reasonably imminent independent entry into Spokane.
3. Whether the acquisition violated § 7 under a “perceived potential competition” theory by removing present competitive effects attributable to Spokane banks’ perception of NBC as an entrant.
4. Whether § 7 was violated because the acquisition would eliminate WTB’s alleged potential to grow into a regional or statewide competitor of NBC.

## Decision

- The Supreme Court affirmed the dismissal of the government’s complaint.
- The Court accepted the market definition as commercial banking in the Spokane metropolitan area.
- The Court held the government failed to prove that NBC probably would enter Spokane independently within a reasonable time and that such entry would yield a more competitive market structure than the acquisition.
- The Court held the record did not show that NBC’s perceived entry exerted significant present competitive influence on Spokane banks.
- The Court rejected the claim that WTB’s future emergence as a major rival to NBC was sufficiently concrete to support § 7 liability, particularly given regulatory contingencies.

## Legal Principles

- A proper definition of relevant product and geographic markets is a necessary predicate to deciding whether a merger may substantially lessen competition under § 7.
- Potential competition theories under § 7 apply only to a narrow class of mergers and require substantial factual showings.
- For actual potential competition, the government must show a probability of independent entry by the acquiring firm within a reasonable period and that such entry would likely produce a more competitive structure than acquisition of the target.
- For perceived potential competition, the government must show that the acquiring firm’s perceived threat of entry currently imposes meaningful competitive constraints that the merger would remove.
- Where entry and market structure are significantly shaped by banking regulation, predictions about independent entry and competitive effects must be supported by concrete evidence rather than conjecture.

## Conclusion

The Court held that § 7 did not bar NBC’s acquisition of WTB because the government did not prove probable and timely independent entry by NBC, did not substantiate present competitive effects from NBC’s perceived entry, and relied on speculative claims about WTB’s future growth in a regulated banking environment.


United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974)