## Facts

- Philadelphia National Bank (PNB) and Girard Trust Corn Exchange Bank agreed to consolidate into a single bank.
- PNB and Girard were the second- and third-largest commercial banks among 42 banks headquartered in the Philadelphia metropolitan area.
- The consolidation would have created the largest local bank, holding roughly 36% of area assets and deposits and about 34% of net loans; the two largest banks would control about 59%, and the top four about 78%.
- The local banking market had been trending toward concentration through prior acquisitions; by 1960 the number of area banks had fallen substantially from prior years.
- Under the Bank Merger Act of 1960, federal banking authorities sought competitive-factor reports from the Federal Reserve, FDIC, and the Attorney General; each advised that the consolidation would substantially lessen competition.
- The Comptroller of the Currency approved the merger despite the adverse competitive assessments.
- The United States sued to enjoin the consolidation under § 7 of the Clayton Act; the district court denied relief, and the government appealed directly to the Supreme Court.

## Issues

1. Whether § 7 of the Clayton Act, as amended in 1950, applies to bank mergers and consolidations.
2. Whether the Bank Merger Act of 1960 displaced the antitrust laws or required courts to defer to banking regulators on § 7 questions.
3. Whether the proposed consolidation may substantially lessen competition in the relevant line of commerce and section of the country.

## Decision

- The Supreme Court reversed and ordered an injunction against the consolidation.
- The Court held that § 7 applies to bank mergers; Congress intended the 1950 amendments to reach the full range of corporate combinations without exempting banks.
- The Court held the Bank Merger Act did not repeal, supersede, or immunize bank mergers from antitrust enforcement and did not require exclusive or primary resort to banking agencies.
- The Court defined the relevant product market as commercial banking and the relevant geographic market as the Philadelphia metropolitan area.
- The Court found the merger presumptively unlawful because it would create a firm with an undue share of the market and would significantly increase market concentration; the banks did not rebut the inference of likely competitive harm.

## Legal Principles

- Clayton Act § 7 targets mergers whose probable effect may be substantially to lessen competition, focusing on likely future competitive conditions rather than proven present harm.
- Bank mergers are subject to § 7 absent a clear congressional directive exempting them.
- Sector-specific regulatory review of competitive factors does not, by itself, displace federal antitrust enforcement.
- A merger that produces a firm with an undue market share and materially increases concentration is presumptively illegal under § 7; defendants bear the burden to clearly show the merger is not likely to lessen competition substantially.
- “Line of commerce” and “section of the country” are determined by functional substitutability and the area of effective competition; commercial banking may constitute a distinct line because of its legal ability to accept demand deposits.

## Conclusion

The Court applied § 7 to commercial banking and enjoined a regulator-approved bank consolidation after finding that the deal would significantly increase concentration in a defined local market, creating a presumption of likely competitive harm that the banks failed to overcome.


United States v. Philadelphia Nat'l Bank, 374 U.S. 321 (1963)