U.S. v. PHILADELPHIA NAT. BANK

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Argument of Lee Loevinger

Chief Justice Earl Warren: Number 83, United States, appellant versus the Philadelphia National Bank et al.

Mr. Loevinger?

Mr. Lee Loevinger: Mr. Chief Justice, may it please the Court.

This is an antitrust case that comes up on direct appeal from a judgment of the District Court in Philadelphia.

The suit seeks to enjoin the merger of the Philadelphia National Bank referred to in the briefs in sometimes as PNB and the Girard Bank on the grounds that the merger violates the antitrust laws.

The District Court found that the Sherman Act applied to the transaction, but that it was not violated.

The application of the Sherman Act is not an issue on this appeal, but its violation is.

The controlling facts are largely statistical and they're not disputed, although, there is substantial disagreement as to their interpretations.

The crucial questions raised by this case are (a) Does an area in which firms conduct all of their business compete with each other and encounter the preponderant part of their competition constitute a relevant market for a merger case and (b) Does the combination by a merger of firms controlling more than one-third of a large market constitute unreasonable lessening of competition or restraint of trade.

The government contends that both questions must be answered yes.

The issues arise in this fashion; Philadelphia National and Girard Bank are located across the street from each other at Broad and Chestnut Streets in Philadelphia.

Philadelphia National has 27 branches and Girard has 38 branches.

All of these are in Philadelphia or the three adjoining counties of Montgomery, Delaware and Bucks.

By law, the Philadelphia Banks are permitted to have branches or conduct banking business only in these four counties.

These four counties are referred to in the record and here as the Philadelphia metropolitan area or the Philadelphia area.

Philadelphia National has over $1 billion in assets.

Girard has about three quarters of a million dollars in assets.

The merged bank would have one and three quarter billion dollars in assets or 37% of all banking assets in the Philadelphia area.

The merged bank would be 50% bigger than the second biggest bank, three times as large as the third bank and would have more assets than all of the other 37 banks in the Philadelphia area put together.

The reasons given for the merger are that it would give the merged bank a larger lending limit and thus bestow prestige upon it.

Mr. Potts, the President of the Philadelphia National Bank testified then in his judgment, the most important benefit of the merger to the two banks would be the prestige factor, which would include a larger lending limit.

Now, this lending limit is the maximum above that a bank can loan to any single borrower, and amounts go above 10% of the capital and surplus of the bank.

Yes sir.

Unknown Speaker: The Judge outside of prestige, wouldn't it also enable the merged bank to compete with New York banks and other banks of getting business?

Mr. Lee Loevinger: Yes sir, it would.

This is their contention that it would enable the merged bank to compete with the banks in New York or loans exceeding the lending limit of the two banks, which are $6 million for Girard and $8 million for Philadelphia National.

In other words, it would enable them to compete in the market or submarket for multimillion dollar loans, which as I shall show the Court, constitutes approximately one one-hundredth of 1% of the entire banking market in which these companies are engaged or what I would submit to the Court is this most microscopic submarket that has ever been presented to this Court in an antitrust case.

Justice Potter Stewart: How many banks are there eligible to make loans of that magnitude?

Mr. Lee Loevinger: There are five other banks in -- well, there are no banks in Philadelphia, Your Honor, that are eligible to make loans of $15 million.

There are five other banks in Philadelphia that are eligible to make loans over $1 million and therefore in the plus million or multimillion dollar submarket.

The precise number in the United States is not specified in the record and there certainly are some in New York, but the alleged reason for the merger was to enable these banks to compete in this multimillion dollar submarket with the New York banks.

This was the precise finding and it was this view that led the District Court to the conclusion that Philadelphia is not a relevant market in which to test the competitive effects of the merger, because the banks had this competition for multimillion dollar loans with the New York banks.

Justice Potter Stewart: This small figure you gave us, this percentage of a single -- fraction of a single percentage point, this was by one bank to one --

Mr. Lee Loevinger: No sir, this is the number of customers of the two banks who are interested in the multi-million dollar loans.

The two banks between them, I have the figures later in my presentation.

Justice Potter Stewart: Of these two banks?

Mr. Lee Loevinger: Yes sir, of these two banks.

Justice Potter Stewart: Well neither one of them was eligible to make loans of the magnitude of the New York Banks?

Mr. Lee Loevinger: I'm talking about the amount of loans over $1 million, one-tenth of 1%.

These banks have $6 million and $8 million lending limits now.

One-tenth of 1% of their customers have taken loans over $1 million.

And one-one hundredth of 1% of their customers have ever taken or sought loans over $5 million.

$5 million is well within the lending limit of both banks now, so that the -- what they are talking about is the ability to engage in a wholly speculative sub- market, because there isn't even any showing in this record that they would get a single customer who would take from them a loan in excess of $8 million.

There is a showing that there are a total of nine loans in excess of $5 million, out of a total of over a 120,000 loans that these companies have in the Philadelphia area.

This is the magnitude of the relative markets that we are talking about in this case.

Unknown Speaker: [Inaudible]

Mr. Lee Loevinger: It's $15 million; actually it's $1 million more than the combination of the $6 million and $8 million because they intend to transfer some money from profits to surplus.

Unknown Speaker: [Inaudible]

Mr. Lee Loevinger: There is some testimony that there are some loans in the multi-million dollar range in Philadelphia, yes sir.

Unknown Speaker: [Inaudible]

Mr. Lee Loevinger: Sir?

Unknown Speaker: [Inaudible]

Mr. Lee Loevinger: The only evidence on that is the 1955 survey of the Federal Reserve Board that shows that there is something -- that there is $113 million loaned in Philadelphia by New York banks.

There is no indication how many loan this is or in what amount.

Actually the evidence in the record shows that there are loans that banks participate in that these banks themselves have participated in, ranging as high as a $162 million for a single loan.

So this 113 might represent one or two or three loans, there is nothing in the record to indicate.

The government contends that the error -- yes sir.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: There were some general statements of that character made, yes sir and that is what the bank is arguing.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: There is no evidence supporting that sir.

The appellees called a half a dozen representatives of large business in Philadelphia.

All of them testified that they had accounts in New York as well as in Philadelphia.

They have loans and some of them have loans, not all of them have loans from these banks, none of them were at or near the lending limit of these banks.

All of them have connections with New York banks.

They testified without exception, they would continue their connections with New York Banks, most of them were a large national companies, as indeed these big business customers of these banks are, and these large national companies have accounts with literally hundreds of banks throughout the United States and they do not intend to change.

There was no testimony from any single witness as I recollect the record that said that any loan would be brought to these banks in excess of their present lending limit, if their lending limit were enlarged.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: Yes sir, yes sir.

Justice Tom C. Clark: And [Inaudible]

Mr. Lee Loevinger: Some of them, yes sir.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: No sir, there is no evidence in the record that that's so.

There is no reason in the world to assume that this occurred other than by the product of natural growth in the market.

These people talk a lot about meeting the market demands and it is our position that they are perfectly at liberty to meet the market demands.

If the market demands a bank of that size in Philadelphia, these banks will grow to that size of the market.

However, for them by what this Court itself has characterized as the abnormal or unnatural means of swallowing up competitors for them to take this step of engulfing the market is contrary to the Antitrust Laws.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: I have no recollection on the subject sir and there is nothing in the record.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: We have a merger case pending in Chicago.

Justice Tom C. Clark: [Inaudible]

Mr. Lee Loevinger: Many of these banks have merged and these banks themselves have previously merged.

Philadelphia National has had nine previous mergers and Girard six, if I recollect correctly.

There has been a lot of merger and they have testified that these mergers were with smaller banks in order to give them branches throughout the area in order to enable them to serve their customers, including their big customers incidentally and there has been no objection raised to these mergers.

But there is a difference between a large central city bank controlling on the one hand 21% and another one controlling 16% of the banking assets in a community merger or a bank merging with small outlying bank where the percentage control of banking assets of the community is relatively insignificant, and it is this difference that we say is significant in this case.

Justice William J. Brennan: What's the measure of lending capacity in that?

Mr. Lee Loevinger: 10% of the assets of the capital and surplus sir.

So --

Justice William J. Brennan: [Inaudible] deposits plus --

Mr. Lee Loevinger: I'm not a sufficient expert in banking accounting to tell you and it wasn't explored in the record.

Justice William J. Brennan: Well, I [Inaudible]

Justice Hugo L. Black: [Inaudible]

Mr. Lee Loevinger: Sir.

No deposits I think are not included.

Justice William J. Brennan: No asset.

Justice Hugo L. Black: You know the capital and the surplus, you know --

Mr. Lee Loevinger: Sir?

Justice Hugo L. Black: What is the capital and surplus of this bank, I don't find it here?

Mr. Lee Loevinger: Well, it's at least $80 million because they have an $8 million lending limit.

Their total assets --

Justice Hugo L. Black: You have that in your brief?

Mr. Lee Loevinger: Sir?

Justice Hugo L. Black: You have that in your brief.

Mr. Lee Loevinger: Yes, I believe so, the assets are approximately $1 billion for one bank and three quarters of a billion for the other.

Justice John M. Harlan: This merger had to go before the comptroller [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: He approved it didn't he?

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: And what other branches of the government opposed it?

Mr. Lee Loevinger: The Federal Reserve Board and FDIC.

Now, the points that I hope to cover in argument are first, that the most relevant market for this case --

Justice Potter Stewart: And did Justice Department oppose it from the beginning?

Mr. Lee Loevinger: Yes sir.

Justice Potter Stewart: Filed an objection with the Comptroller.

Mr. Lee Loevinger: [Inaudible] without saying.

Justice Potter Stewart: Well, I mean at the comptroller level.

Mr. Lee Loevinger: We opposed it in representations to the comptroller prior to the approval, yes sir.

Justice Hugo L. Black: Did the Federal Reserve take the position?

Mr. Lee Loevinger: Yes sir.

The Federal Reserve Board opposed it on the grounds that it would lessen competition in the Philadelphia market, specifically.

The position of the Federal Reserve Board is specifically set forth in our brief.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: No sir.

This is the Federal Reserve Board, the Federal Reserve Board of Governors in Washington.

Justice Arthur J. Goldberg: Washington?

Mr. Lee Loevinger: Yes sir.

Justice Hugo L. Black: Do they have a witness or --

Mr. Lee Loevinger: No sir, but their report on this matter is in evidence in full.

Now the points that I shall seek to make are first that the most relevant market for this case clearly is the Philadelphia area for a number of reasons, because the banks involved do all of their business there and indeed are authorized by law to do business only within the Philadelphia area.

The banks complain that the demarkations of political sub-units are arbitrary and indeed they are, in a sense, as all market limits are arbitrary, however in this case they are less arbitrary than usual because the limits of these political subdivisions are the legal limits of the authority of the banks here to do business.

In the second place, the customers in this area require local banks for their banking service as the appellees themselves have shown.

In the third place, over 95% of all the customers of both banks involved here are residents of this area.

In the fourth place, outside competition exists for only fraction of 1% of the customers in this area, as I shall demonstrate and finally because the banks involved here actually compete with each other in this area in every phase of banking.

My second point is that the merger will give the resulting bank control of more than one-third of all the banking business done in this market.

My third point is that the combination by merger of large and viable firms controlling more than one-third of a market as vast as this, lessens competition and restraints trade in violation of the Sherman Act.

A holding here that acquisition of such a market share is legal would sanction the reduction by merger of the number of competitors in this or any similar market to no more than three.

This result, I submit, is completely inconsistent with the competitive market structure and with the antitrust laws.

Now, let me address myself to the issue of the market.

The discussion of the market in terms of the relevant markets suggest that there is or maybe a single unique discrete area that can be identified as the market.

This of course is erroneous and misleading.

The market is simply a conceptual tool for the analysis of complex economic phenomenon.

Markets overlap, and any single enterprise competes in a number of different markets.

A market is always surrounded by a peripheral area in which trade crosses its arbitrary boundaries and the outer limits of all markets are vague and fuzzy.

This was recognized by this Court in the Times Picayune case in which I believe Mr. Justice Clark said, “The "market," as most concepts in law or economics, cannot be measured by metes and bounds nor does the substance of Sherman Act violations typically depend on so flexible a guide.”

Now, the market that is to be applied in antitrust cases has been laid down by this Court in Standard Stations and the Tampa Electric Case in which it is said that since preservation of competition is the object under the Antitrust Laws, the area of effective competition between the parties is the relevant market.

This concept has been applied in numerous cases such as Paramount where you held first run theaters in a single city to be a relevant market or International Boxing, in which championship boxing matches as distinguished from all other boxing matches were held to be a relevant market and in which the Court said that definition of the part of trade or commerce encompassed by the Sherman Act involves distinctions in degree as well as in kind, which is illustrated in the application of the Sherman Act to trade or commerce in a localized geographical area.

Now the Court here found that commercial banking viewed collectively with the relevant line of commerce of product market and this is not contested and it is not an issue on the appeal.

The banks insist that the mode of competition among commercial banks is unique and they argue that it consists primarily of convenience and quality rather than a price.

Actually, there is substance to this argument, that they don't carry a fine.

That the point is that banks sell only service, of course banks deal in money as all businesses deal in money, but this isn't the commodity that they are selling.

What they are selling is service and all of the service that these banks render, they render within the Philadelphia area.

All of their banking offices are there, all of their deposits are received there.

All of their books of accounts are received there.

All their loans are disbursed there.

All their officers and employees are employed there.

Now, what the controversy in this case arises out of is the fact that although all their business is done in Philadelphia, some of it is done with nonresident individuals or corporations and this is the source of the mass of statistics that you'll find in the record.

However, there are two points to note in connection with this.

In the first place, the nonresidents constitute a very small minority of the customers of both banks.

This again is sometimes obscured by the presentation of these statistics in dollar figures rather than in terms of the number of customers, but the nonresidents is minute percentage, really, of the total number of customers involved here.

In the second place, the nonresidents no less than the residents who do business in Philadelphia require banking service in Philadelphia.

Justice John M. Harlan: How about the converse, residents of the Philadelphia area doing business with non area banks, New York banks?

Mr. Lee Loevinger: There is no showing that there are any of these beside from a couple of dollar figures, the 1955 survey that I refer to, sir.

The testimony is and the testimony --

Justice John M. Harlan: I thought you said there was $113 million of town -- out of area banks, business in the area.

Mr. Lee Loevinger: There is no showing that this by residents of the Philadelphia area.

This may very well be by nonresidents.

Now, I don't know whether it's worthwhile to take the time to burden the Court with some of the figures or not, but just to give you an idea, the total number of checking accounts in both banks is 236,000, the number of savings and time accounts in both banks is about 240,000.

In both cases, the number by the bank's own statistics, the number of accounts by nonresidents is less than 5%.

Over 95% of all checking accounts, savings account and time deposits are held by people who are classified as residents.

Justice Potter Stewart: What's the percentage in terms of the size of the accounts, the relative figures in dollars not customers?

Mr. Lee Loevinger: Those are in the bank statistics, I don't have them at my fingertips.

Justice Potter Stewart: And wouldn't that be of some relevance to, at least in the banks, looking at the argument that the purpose of this merger was to attract large accounts in Philadelphia?

Mr. Lee Loevinger: It's of some relevance.

Justice Potter Stewart: You don't have the statistics.

Mr. Lee Loevinger: I don't say that they're totally irrelevant but I do say this --

Justice Potter Stewart: Can you tell me where they are in the record?

Mr. Lee Loevinger: No, this is the point Your Honor.

Justice Potter Stewart: Can you tell me where they are in the record if you please?

Mr. Lee Loevinger: I'm sure that the appellees will have these figures Your Honor.

I don't have the figures.

They're in the appellees' briefs as a matter of fact by dollar amounts, but my point is simply this.

Assuming that there are large amounts involved by a few customers who are able to go to New York and the testimony of the President of the Girard Bank and of other witnesses was that a customer who desired to borrow $1 million or more could go to another city, but that the smaller customers were confined to their local area and there is no conflict about this testimony, assuming that there are large amounts, even assuming that there was substantially more customers than the record shows, this still does not make Philadelphia either not a market or not relevant.

The important thing is that Philadelphia is a relevant market.

Of course there are other markets that these banks may compete in, and of course there are some large amounts involved in some of these other things, although compared to the total they are not large, but the -- I'm sorry in our brief at page 34, using the appellees' figures we show the distribution by amounts.

For example the demand deposits of individuals by amount 89% of the demand deposits of individuals are from residents of the Philadelphia area.

The demand deposits of corporations and partnerships 71%, of time and savings deposits 88% of amount.

IPC that's Individual Partnership and Corporation deposits 79% of the amount is from residents of the area and so forth.

Unknown Speaker: [Inaudible]

Mr. Lee Loevinger: Yes sir.

Well the two banks represent the following percentages of the total amounts of the various categories.

The numbers refers only to trust.

Now, the taking commercial and industrial loans all together which are the ones principally in issue here and these are set forth in our appendix, it will be seen that there are just 70 out of over 7,000 commercial and industrial loans that are over $1 million.

Therefore of commercial -- of the sub-market of commercial and industrial loans, there is just 1% that lies or less than 1% that lies in this sub-market of multi-million dollar loans.

But when you add to these 7,000 commercial and industrial loans the 115,000 or 120,000 loans to all the residents of the Philadelphia, the Philadelphia area and these are the residents of the Philadelphia area according to defendants' own exhibits, 120,000 loans, the 70 loans, the 70 business loans in the multi-million dollar markets shrink to one-one hundredth of 1% by number of customers of the people served by these two banks.

And I simply submit that regardless of how much is done in amount by one-one hundredth of 1% of the total number of people served, I don't say that that's unimportant to be disregarded.

I do say that you cannot disregard the 99% and 99 one-hundredths percent of the customers who are served in the less than million dollar market and that's what the Court below did.

The Court below said that Philadelphia was not a relevant market.

Now I don't see how you can say that any area in which 99 and 99 one-hundredths percent of the customers that you serve reside is not a relevant market.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Not the factual findings, no Your Honor.

I think that the District Court clearly misconceived the legal concept of the market and the legal intent and the nature of competition, as this Court has outlined it and as all economic and legal students of the subject have said it to be.

It is just a misconception of the facts.

There is no real dispute as to the facts.

Justice Arthur J. Goldberg: [Inaudible] disregard those findings?

Mr. Lee Loevinger: No, but this is irrelevant.

This is how they do it, a baby grows more than an adult but this doesn't mean that the adult has no advantage of size.

Of course, the small banks are growing faster.

Small businesses in any field will grow faster measured as the Court measured them, measured in terms of percentage, a bank that starts in business with $1 million or $2 million will increase very rapidly in percentage size, but the growth of all the small banks in the Philadelphia area put together is a small fraction of the total growth of these two banks involved here and would be an even smaller fraction of the merged bank.

The merged bank is not going to grow on percentage terms because it's just too big to grow in percentage terms.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: I wouldn't say per se, no we are not arguing for per se rule here, but where there is no other business reason that the merger of two banks in a large market which together between them control more than a third of the market means that this Court must adhere to the same rule for other banks and that therefore this Court is holding that no more than three banks are required in any banking market, and I say -- submit that this is not what competition mean, this is what the Antitrust Laws means.

As a matter of fact, this is what the defendant themselves say the situation should be.

The defendant themselves have argued, they argued in their emotion to affirm, their witness Mr. Jennings got on the stand and they have a finding to the effect, that three banking alternatives are all that anyone needs.

However, I submit that this reduction of a market to a very small segment of a few sellers is precisely what the competition does not mean, is in consistent with what this Court has said it means and with what it has been held to mean.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Yes sir the Columbia Steel case I think is wholly inapplicable.

As a matter of fact, the Columbia Steel case supports our view with respect to the market.

In the Columbia Steel case, U.S. Steel sought to acquire Consolidated Steel and U.S. Steel sold the overwhelming part of its business outside of the nine-state area in which Consolidated did business.

The Court however held that the area in which Consolidated, the acquired company did business was the relevant market for that -- for purposes of that case because this was where competition would be effected, if at all.

Incidentally, in the Columbia Steel case Consolidated did do business in the national market, but this Court noted that its business in the national market was one-half of 1% and dismissed this as being of no significance, that is far greater than the percentage participation in the national market of the Girard and Philadelphia National Banks here.

On the other hand, there is no dispute that the overwhelming proportion of the business of the two concerns involved here is in fact done in the Philadelphia area.

Therefore, by the rule of the Columbia Steel case, you must take that area as the relevant market, for purposes of judging the effect of the merging.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: 23% sir, but the Court noted that this was a declining and unstable percentage in Girard of very special circumstances which had to do with war production.

If Your Honor will recall this came up shortly after World War II, I think it was 1946, 1947.

It actually reached this Court in 1948, and the Court noted that the exceptional circumstances of the market, of that market and of the national market made the market shares then held very unstable.

It noted for example that the market share of United States Steel had been declining from some 40%, 45% down to about 30% or 29%.

Incidentally the horizontal competition that was involved was that in structural steel products.

Consolidated -- only 16% of Consolidated's output was in structural steel products.

So that the percentage of extinction -- the extinction of competition related to a smaller percentage of the market, a declining percentage of the market, a questionable percentage of the market and a very minor percentage of the business of Consolidated as well as a very small percentage of the business of the acquired company.

Here the contrary is true that this is a much larger percentage of the market, a growing percentage of the market, a stable percentage of the market and it involves something between 95% and 100%, or if you want to figure it by, even by these methods of figuring something between 80% and 90% of the business done by the companies involved here.

It's a wholly different situation factually.

Justice William J. Brennan: Just looking at page 22 to your reply brief, that table?

Mr. Lee Loevinger: Yes sir.

Justice William J. Brennan: Do I correctly understand that the loans over $1 million, 34 are in the four-county area, that is the two banks and 36 are outside the four-county area?

Mr. Lee Loevinger: 36 are derived from non residents of the four-county area and 34 derived from residents of the four-county area that's true --

Justice William J. Brennan: What that's mean?

What you mean with non residents?

Mr. Lee Loevinger: Well this is the way that statistics comes to us.

It was never explored in the record.

As a matter of fact, there was some exploration in the record of defendants' Exhibit 26 and defendants' Exhibits 40 which reported to list their largest customers by domicile and it was ascertained that on defendants' exhibit 40 which had 47 of largest customers of Girard all of them had main offices or important offices in the Philadelphia area, 26 which had the 27 largest customers of Philadelphia National, 23 definitely had main offices or important offices in the Philadelphia area, one was in Camden, New Jersey, and one in Baltimore, and two were unknown.

Justice William J. Brennan: Well this doesn't then necessarily mean that 34 are from businesses within the four-counties and 36 businesses outside the four-counties, is that right?

Mr. Lee Loevinger: No sir, it means that 34 are from businesses that are domicile within the four-counties and 36 --

Justice William J. Brennan: Domicile that leads me up here, what you mean domicile?

Mr. Lee Loevinger: I don't know the record simply doesn't explore these subjects sir except -- some of the exhibits there was cross examination most of them there was not.

We simply took this -- the government attorneys took the statistics that they came from appellees.

Justice Tom C. Clark: Well, did that say that the 36 came from applicants outside the four-counties?

Mr. Lee Loevinger: This might well be the case.

Justice Tom C. Clark: What significance do you give that?

Mr. Lee Loevinger: Well, the significance I give to that fact sir is that there are just 34 people who come to these banks for loans over a million dollars from outside the four-county area and that that is very, very few when compared to the 120,000 customers that they have for loans within the four-county area.

Justice Tom C. Clark: You put the emphasis on the loans within.

Mr. Lee Loevinger: Yes sir.

Justice William J. Brennan: Well, that means something like this Silco is now [Inaudible] as I gather that Silco plant is within the four-county area, that an application of Silco, I don't know whether they borrow money in these amounts or not, but if they did then an application might now come from Detroit instead of from Philadelphia.

Mr. Lee Loevinger: It might very well, yes sir.

That's exactly the case.

Justice William J. Brennan: That would then be non resident rather than?

Mr. Lee Loevinger: Yes sir.

This is a distinction that permeates the record.

Now, I could nip it in any event it is immaterial where most of these people, where these loans came from and they certainly in the absence of some showing that there is a necessity for them to do business outside because what they are doing is selling, banking service inside the Philadelphia area.

They themselves stress the fact that they're selling service and we agree that they're selling service, they are not selling money; they're selling banking service.

They're like banking service stations that have 65 branches within this four-county area.

When a motorist comes to a service station for service he may have a New Jersey or New York or a Honolulu license plate but he want service at the place of that service station Philadelphia or Washington or wherever it is.

When people come to Philadelphia for banking service, the unique and the distinctive and the valuable thing that they are the getting there is not a different kind of money it's a different location.

They want banking service in the Philadelphia area.

Insofar as there is a multi-million dollar banking loan market, the appellees now are fully qualified and do participate in it and there are extensive exhibits in the record showing their participation in the so called participation loans, loans ranging all the way from $5000 to a $160 million in which they have incidentally participations ranging from under $5000 to over $5 million, but in none of these multi-million dollar loans in which they participate is there is the extent of their participation in excess of $5 million or even close to their lending limits.

Now the -- I think that it is therefore fair to say that the Philadelphia area that's been limited is a market.

Of course there are other markets.

We don't deny that there are national markets and that there are perhaps even international markets.

All we say is that simply because there are other markets and simply because these banks may have some participation whether it is small as I say it is or slightly larger is immaterial, the degree of that participation is essentially material, that where they have an important participation in an area like Philadelphia as large as it is with as many customers, with as many billions of dollars involved, this is a relevant market.

Within this relevant market you can measure their market share by indisputable figures.

They have 37% of the assets.

They have 36% of all the deposits.

They have 39 -- they will have if they are merged to have 49% of all the deposits of other banks held by Philadelphia Banks.

They will have 34% of all the loans of Philadelphia Banks.

They will have 65 offices or nearly one-forth of all the banking offices in the Philadelphia area.

This market share then represents the proportion of the banking business done in Philadelphia and controlled by these two banks which is all the banking service that is available to 99 or 99 and nine-tenths percent of the residents of Philadelphia who are not in the multi-million dollar loan category.

99 and nine-tenths of a percent of those people who seek loans from banks in Philadelphia, seek loans of less than a million dollars.

As to these people, they are relinquished to the Philadelphia banking assets and if the merger is permitted, these banks will control more than one-third of these banking assets.

Now, the banks contend of market shares have a different significance in banking than they do in other businesses, because as they say banks do not own the funds they lend, they owe them and the bank cannot prevent its depositors from withdrawing demand deposits at any time.

In fact, however, it seems to me to be clear that market shares are more firmly established in banking than they are in most lines of commerce.

There is a continuing relationship between banks and their customers that does not exist in other businesses.

Customers for shoes or gasoline or milk can readily change the seller without notifying the seller.

A bank depositor or a bank borrower can't payoff his loan or withdraw his deposits without notifying the bank.

It requires significant effort for him to go out and get a substitute bank.

Further banks are used as financial reference sources to control business opportunities.

The need for geographical convenience is been stressed by the bank themselves, in numerous applications for branches which are in evidence and as well in their own testimony.

A business or a professional man cannot afford to incur the ill-will of an important banker.

Consequently bank customers are very slow and low change which was confirmed again by the testimony of Mr. Potts, President of Philadelphia National, who said that if there is one fact “that banks know about it, is that of a nurture and the depositors are very low to change their accounts except for good cause.”

Therefore, this brings you to the controlling question of whether the combination by merger of banks controlling one-third of a market of this size is a restraint, a prey.

Now, it is perfectly clear that all of the competition between the bank themselves would be wholly extinguished, this was found by the Court and there is no denying it.

The Court however says, that the -- because this will reduce the number of banks in the Philadelphia area by only one, that it will not have the affect of substantially restraining competition or affecting competition.

Justice William J. Brennan: Let's see, you said that is a restriction, that was [Inaudible]

Mr. Lee Loevinger: Well, that's Section 7 sir.

I'm arguing -- Section 7 is argued in the brief and we are relying on it, but I simply don't have time to cover both sections.

I'm relying on Section 1, because I think that the restraint is so perfect, is so clear, that Section 1 fairly invalidates this merger and the Court need to proceed no further.

Our point on Section 7 follows a fortiori.

Now, the decision in the present case was issued in January of 1962 which was some months before the decision of this Court in Brown Shoe.

Consequently the Court below relied on the decision of the Second Circuit in the American Crystal Sugar case and used the so called qualitative substantiality test.

However, I submit that the Court -- in the first place this Court has, I think somewhat repudiated that test but even if it had not, that had the Court below read the district court's opinion in American Crystal Sugar, which was affirmed and expressly endorsed by the Court of Appeals, it would have found that the rule of the American Crystal Sugar case expressly disavows the basis upon which the present case rests.

In American Crystal Sugar, there were two small companies, neither one of which, there weren't small, but the two substantial companies, but neither one of which were or were to be come by merger the leaders in the industry who together proposed to combine 13% of the market and they said that by combining 13 X 13% of the market they could better compete with the industry leaders.

The district court alone said this is not what competition means for large companies to compete in order better to compete with giant companies and it held the merger was forbidden and that is the very heart of the case that the appellees made here.

As a matter of fact, that argument --

Justice William J. Brennan: Follows a fortiori.

Mr. Lee Loevinger: -- has I think best been met by the words of the Judge Weinfeld in the Bethlehem Steel case, which I submit deserved the specific approbation of this Court.

Judge Weinfeld said, “Congress and its efforts to preserve the free enterprise system and the benefits to flow to the nation and to the consumer, did not, in enacting the antitrust laws, intend to give free play to the balancing power of gigantic enterprises and leaves the less powerful purchaser helpless, but Congress thought to preserve as a social and economic order not dependent on the power of a few to take care of themselves.

And this, as of matter of fact, is very close to the words of Chief Justice Warren dissenting in the DuPont case, although I think that the Court did not disagree with him on this point where he said a few sellers tend to act like one, in industry which does not have a competitive structure, will not have competitive behavior.

The public should not to be left to rely upon the dispensations of many in order to obtain the benefits which normally accompany competition.

Such beneficence is of uncertain tenure only actual competition can assure long run enjoyment of the goals, of a free economy.

I think that we can best test the positions of the government and of the banks in this case by examining the practical consequences of projecting these positions beyond the case.

The government position would not impede the growth of large banks by expansion to meet market demands and it would permit the merger of any but the largest banks holding dominant positions in their local markets.

The government position would ensure the preservation of a substantial number of large, vigorous, and competitive banks in markets of size of Philadelphia.

The bank position, on the other hands they argued, would clearly and certainly permit the reduction of banks in any market to no more than three in any event.

The bank position would carry to it's logical conclusion, which says that the local market is irrelevant and we can look at the national market would permit the merger of even these three in any markets smaller than New York in order to permit the banks to compete with the larger New York banks.

Thus, the logical result of the bank position would be that we would end by having a single market in every market smaller than New York and probably have only three alternatives or competitors left in New York.

I think that there cannot possibly be any position, any choice between these alternatives nor any doubt as to which one Congress intended this Court to make as between the two of them.

I would like to save the reminder time for rebuttal if it pleases the court.

Chief Justice Earl Warren: You may judge Loevinger.

Mr. Price?

Argument of Philip Price

Mr. Philip Price: With the permission of the Court, we will divide our argument.

I will discuss the facts, how banks operate, what the evidence was -- actually was that was presented to the Court below by the appellant and what the evidence was presented by the appellees and so make a very brief reference to the Clayton Act.

Mr. Littleton will discuss the Sherman Act and the effect of the Sherman Act in this case and the facts with particular reference to the Bank Merger Act of 1960 and it's effect as well as the effect of the legislative history upon the popular interpretation of the rule of reason under the Sherman Act if Your Honors suggest so far.

First, this case is brought in the name of the United States, but the government does not properly --

Unknown Speaker: [Inaudible]

Mr. Philip Price: I'm going to cover the inapplicability of Clayton Act to this case.

Although, this case is brought in the name of the United States, the government is not properly the appellant.

This essentially is a dispute between two branches of the government, the Antitrust Division of the Department of Justice and the Comptroller.

The Comptroller decided this merger question, on the basis of the public interest as he was authorized to do under the Bank Merger Act of 1960.

As he was required to do, he asked for the advice or the suggestions of the Attorney General, the Department of Justice, the Federal Reserve, the FDIC in respect only of their opinion on the effect of this merger on competition, probably without regard to whether the public interest was involved, that wasn't their function.

The Department of Justice and the Federal Reserve and to some extent the FDIC reported that in their opinions the effect of the merger on competition would be deleterious.

The only evidence that we have in the case on that subject is the evidence presented by the Department of Justice which the court below found to be totally inadequate to sustain its opinion.

No evidence whatever from either the Federal Reserve or the FDIC, except the X party statement which appeared in the form of their two reports.

No witnesses were called to explain those statements.

No witnesses were called to give the basis for the opinions expressed, and therefore as the court below pointed out, there was no more validity suggested as to those then there was as to the opinion expressed by the Attorney General, which he found to be completely unfounded.

But this case involves a charge of a violation of the Sherman act under the Clayton Act in respect of two banks in Philadelphia.

It has nothing whatever to do.

With the mergers which may or may not take place will be contemplated in New York and Chicago and Lexington and in other places.

It involves solely the question of whether these two banks, the Federal, Girard, and the Philadelphia National Bank in Philadelphia, may properly merge without violation of the Sherman act and if, and whether on the contrary that merger would constitute an improper and excessive diminution in competition in Philadelphia and excess of concentration.

Those are the only two things charged in the complaint which had been pursued since the original complaint.

Now the court below, contrary to what has been suggested a moment ago, decided this case purely as a question of fact.

This Court is asked to review and to reverse the Court below purely on questions of fact.

The Court below assumed that the Clayton act applied, but held that it was not violated.

It held that the Sherman act applied and decided as a matter of fact that it was not violation.

So that, for this Court to reverse, the District Court would require it to declare that the finding of the facts of the court below were clearly erroneous and in order to oppose this subject to the understanding, it's necessary to consider two things.

First, what is the need to banking; second, what was the evidence presented to the Court below which led it to the conclusion which it announced.

Now, banking is essentially different from general industry, from manufacturing and the complete failure of the Department of Justice to understand and give effect to this difference is probably what is the fundamental basis for this case, and certainly is the fundamental basis for the argument that has been presented, both orally and in the brief.

Now I shall like to say first something about the background situation as it existed in the Philadelphia which led to this merger proposal.

Until 1950, these two banks were essentially wholesale banks, wholesale is a colloquial term applied to banks which deal in large sums, preferably large deposits and large levels.

For example, in the early days the Philadelphia National Bank was probably reluctant to accept a deposit of less than $10,000.

The Girard for many years had only 10,000 depositors and as Girard's have said they now have over 200,000.

Deposits, individual deposits, and corporate deposits up in the millions of dollars in demand deposits were quite common and it was a bank, or banks which dealt largely in that type of business that were called wholesale banks.

They were looked down upon the retail bank business done by the smaller banks because that involved a lot more trouble and handling small amounts of money and large number of deposits.

However, probably 1933 when it became unlawful to pay interest on the demand deposits, both private depositors and corporate depositors concluded that they shouldn't leave millions of dollars on deposit earning nothing and with the added sophistication of corporate treasures, those moneys were drawn out in large quantities and invested in short-term government bonds, in commercial paper, in time deposit.

So that the demand deposits, for which the bank could not pay any interest were translated so far as they could be into time deposits where they had to pay the interest in order to get them.

The result of that was, that the banks were required, these wholesale banks were required to seek elsewhere for the cash which they had to have to increase their deposit account, because although it was suggested a moment ago that the deposits were not too significant, actually a bank can't exist without deposits.

It can't do business without deposits.

Deposits constitute approximately 90% of the resources of a commercial bank and therefore if the deposits were withdrawn the bank would collapse, it couldn't possibly do its business with simply this capital and surplus.

So that the banks sought this other source of money, and that required it go into the retail business.

That trust could transfer large sums in the aggregate, but small individually to the suburbs of Philadelphia, led the banks to pursue their customers in the suburbs and in the course of doing so they merged with the local country banks who then were too small to handle the influx of business that had come from the city.

And together the combination produced a benevolent result as it was testified to by the only witness called by the appellant, who knew anything whatever about Philadelphia, and that was Professor Key.

He said these mergers were beneficial.

They were necessary in order that the banks might keep up with the growing business in the community and it was good for everybody.

Justice Potter Stewart: You're talking about the prior mergers?

Mr. Philip Price: I'm speaking now about the mergers which were promoted and prompted and made necessary by the movement of capital to the country.

Those are the mergers which were equal --

Justice Potter Stewart: But there were some --

Mr. Philip Price: But, it's not this much.

Justice Potter Stewart: Some nine mergers, about one of the banks and some --

Mr. Philip Price: That's correct, yes sir, quite enough.

In addition however --

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: Yes sir, yes sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: I can do it very briefly by saying that the banks, as business grew, the small banks became totally incapable of handing and they lost business and could only stay alive at all by merging with a larger bank, that's the point of view of the smaller bank.

The point of view with a large moving into the country, it was the only way it could get into the surrounding area because of the restrictions upon opening new branches.

So that it was not only a marriage of convenience but of a great advantage to both and it resulted in the diminution of the number of banks, but a great increase in the number of branches.

So, that there are now some 300 branches in the four-county area and although there were fewer banks, only 17 banks.

Along with this movement of the country and the growth of activities locally, there was a great improvement in the business situation in Philadelphia and its surroundings so that the amount of business that required banking accommodation greatly increased.

That is shown with the exhibits in the case, in the growth of business in the surrounding area but there was a great lag in the growth of banks so that the largest banks in Philadelphia became totally unable to handle the business which came to them by virtue of they being in the same area and these big businesses which had outgrown the local banks then were forced to go and did go to many cities, but smaller than Philadelphia but which had banks larger than Philadelphia.

For example Pittsburgh, which had a bank then with a $25 million lending limit which was produced by mergers incidentally.

There is a bank in Boston which had $20 million.

There is a bank in Cleveland which has more, Dallas $10 million.

So that these business people, went not only to New York in large numbers which has 17 banks with a lending limit in an excess of a $1 million, but they went to these other cities as well.

There were 41 banks in Philadelphia, the four-county area, handling all the local business, but the large business went elsewhere because it couldn't be handled locally.

Now, banking is essentially different from commerce or the manufacturing business itself and it is this that should be -- is recognized by the Court below following the guide that was given to it by Congress.

When the Congress had before it this Bank Merger Act of 1960, the house report says, banking offers problems acutely different from other types of business.

The Senate report said, it's impossible to require unrestricted competition in the field of banking and impossible to subject banks to the rules applicable to ordinary industrial and commercial concerns.

And Senator Robinson who is the chairman of the Committee on Banking and Currency said, banking is too important to permit unrestricted competition.

It is impossible to subject bank mergers to the Clayton act under which a merger would be barred if it might tend substantially to lessen competition regardless of the effects on the public interest.

And it was that approach that led the comptroller to reach the conclusion which he did, and which is now challenged not on the ground stated by Congress as the reasons why merger should be allowed but on this very limited statistical approach of the Department of Justice.

The fundamental difference between banking and manufacturing is this.

When a bank lends all the money that is in the till it has to quit, it can't make any more.

It's not the Bureau of Engraving and Printing.

It can't continue to manufacture money and unless it gets more deposits which are purely the voluntary act of some private individual or a company, it has to go out in lending business until the loans are paid off or until more deposits come in and that's because the deposits are 90% of the resources that were available to any bank to lend to it's customers.

Only 10% is due to the capital and surplus of the bank but 90% to the deposits and therefore it is completely dependent upon the uncontrolled will of depositors who can come and go as they please and do as they please.

Print this transcript Transcript: 

Argument of Philip Price

Chief Justice Earl Warren: -- United States, appellant versus the Philadelphia National Bank Et Al.

Mr. Price you may continue your argument.

Mr. Philip Price: May it please the Court.

I think when we recessed yesterday I had just challenged the statement in that a bank has any control over its deposits.

I'd like to give two illustrations.

Some years ago in Pennsylvania, the Secretary of Banking refused to permit any bank to allow more than 3% on --3% or 2.5% or 3% on its current deposits, at a time when New York allowed a half or 1% more than that.

Until the Secretary of Banking of Pennsylvania changed that regulation, $3 million moved out of the Philadelphia National Bank to New York without any power on the part of the bank to control that move.

Another illustration; in New York City over a period of six months, a $150 million moved out, was withdrawn from term deposits of New York banks; because of a slight difference in the interest rate it was possible to earn a whole lot amount of money.

That represented the amount of cash that would have provided commercial and industrial loans of $90 million and as for as demand deposits are concerned, of course by definition, they are withdrawable by the depositor without notice.

Simply a check will withdraw all the money on demand deposit without prior notice to the bank and the bank has absolutely no control over it.

Therefore, the number of deposits or the fact that the deposits does not constitute anything in the nature of control that is similar to the kind of control that we talk about when we were speaking of manufacturing company.

There is no possibility therefore of the price war such as were suggested in the brief of the Appellant.

There is no power to control anyone because money is the only commodity that banks handle and that is fluent, it moves rapidly throughout the country at no cost and therefore, can be transferred from one city to another by mail, by telegraph and practically by telephone.

Now the three functions of the commercial bank essentially involve the deposit activity and the lending activity and the collateral services that are rendered by the bank.

There is no competition, no price competition for deposits, because banks may not allow any interest except that which is permitted by law and regulations and that applies to everybody.

So there can't be any advantage for one bank over another in that field.

Banks have to operate within the limits prescribed by regulation, which amounts to the character of investments they may make, but loans have to be short term to be liquid, they may not be more than 10% of the capital surplus of the company -- of the bank, which means in a fact that they may not be more than about 1% of the aggregate deposits of the bank.

Loans may not exceed 60% of the deposits ordinarily or about six times the capital of the bank.

60.5% must be kept on deposit with the Federal Reserve as cash reserve and an addition secondary reserve must be kept by the bank itself as a hedge against the possibility of sudden and unacceptable withdrawals.

So that the operation of a bank is entirely different from any manufacturing company and its stock in trade, cash, is subject to withdrawal practically without notice.

The term deposits of course 30, 60, 90 days there was that much notice, but when the time runs out, the money maybe withdrawn without any explanation whatever.

So far as deposits are concerned, there is no competition insofar as loans are concerned.

There are no price of competition in loans, because the interest rate is in effect fixed by the operations of the Federal Reserve in controlling the volume of money that's available to banks.

For example, the open market operations which the Federal Reserve buys and sells some $30 billion worth of government securities, can either withdraw cash from the banks and therefore reduce the capacity of the banks to lend or put cash into the banks when the Federal Reserve buys bonds, buys [Inaudible] and that makes money easier and therefore, interest rates might be affected.

So that the control of interest rates is not in the hands of the bank stocks, but in the hands of Federal Reserve itself.

The aggregate money market in the United States, the free quick money market is in excess of $500 billion.

The amount that any one bank has under its capacity to lend is vastly less than that and therefore, it would be quite impossible for any bank to exercise any control over the money market so far as loans are concerned.

Now, I'd like to say a word about this -- operations of small bank in terms in relation to enlargement.

Within its resources, within its capacity to lend with 10% limit, the lending limit of the bank itself, a small bank can compete as effectively with a large bank as two large banks with one another.

That was justified too by all the witnesses who had any knowledge of the operations of banking.

And in that connection, I'd like to say a word about the foolishness referred to yesterday of the three banks.

It was suggested that the court below indicated that if this merger went through, it will be prepared to approve mergers indefinitely until we were reduced to three banks.

Nothing can be further from the fact.

The three-bank question came up in this way, several witnesses testified that so far as out in to choices on the part of a borrower were concerned, that if a borrower were turned down by three banks, you probably didn't have a bankable loan and he'd have to go some place other than to a commercial bank to get a combination.

Therefore, the court below in determining whether or not there was any limitation upon competition here, in this case, considered that testimony about three banks and said that in those circumstances and the circumstances plus the evidence in the case, 17 banks in Philadelphia provided ample alternate choices for any perspective borrower for any possible banking need that he might have and that the 41 banks in the four-county area provided just that much more.

Unknown Speaker: [Inaudible]

Mr. Philip Price: No sir, no sir.

I was speaking only about banks not so all the court was speaking about in connection with those three.

They also going to get money from insurance companies, they get money from factors; they get money from other sources.

But speaking purely and simply of the commercial loan, still there were ample alternate choices for any needs of the average borrower.

Justice Potter Stewart: As I -- Mr. Price, I understood Judge Loevinger's point about the three banks, it was this, that this merger would result in one bank having about a third of the business in this four-county area and if that was right for these two banks, then it would be right for other banks.

So you would end up with three banks in the four-county area, Philadelphia, assuming that the banks wanted to merge.

Mr. Philip Price: But they would have to go but --

Justice Potter Stewart: With the three bank point as I understood it?

Mr. Philip Price: Well, but it was based upon this suggestion that three banks would be enough to provide what was needed of competition wise and otherwise for the area.

That of course ignores the authority of the comptroller to determine whether in the public interest it would be better or worse to have three or more or less than three banks in Philadelphia --

Justice Potter Stewart: I suppose there are some communities, small communities in the nation where there is only one bank --

Mr. Philip Price: There are 7000 of those, sir.

Over 7000 have only one bank.

Great many have only two or three, but here we're talking out about a particular situation which is Philadelphia where they have 17 to start with, they have 41 in the four-county area, they have 116 in the ten-county area.

And when you get up above the level of the lowest loans 10,000 and 50,000 loans, you immediately become in competition with New York where there are 17 banks that have lending limits of 100 of a million, over a million dollar.

Eight which have, I beg your pardon?

Unknown Speaker: [Inaudible]

Mr. Philip Price: In New York, the 17 have a million dollar lending limit, eight have a $10 million lending limit, six a 15 and three have a lending limit in excess of the aggregate of all the lending limits of all the Philadelphia banks put together.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: The need of the community that have banks -- a bank that can handle its own needs.

The defendants produced the testimony of seven or eight business people, large businesses, Chief Executive Officers of large businesses who said that they would prefer being in the Philadelphia area to borrow from Philadelphia banks, but they were forced go primarily to New York, but also to Chicago, to Boston, to Pittsburgh, to Cleveland, to Dallas to get the money that they needed to operate.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: The additional business justification is the added money that would be brought to Philadelphia by having business connections of that sort who deposit large sums in the Philadelphia bank from which the competitive bankers in the Philadelphia testified they all would benefit, They welcomed this merger because they said it would bring more money to Philadelphia, more business to Philadelphia and that all the banks including the smaller ones would benefit from it.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: Every bank has a competitive advantage over every other bank based upon difference in size, because under the law, a bank may not lend more than 10% of its capital and surplus.

So that a bank that can lend $1 million has a competitive advantage over a bank that may lend over a $100,000 and similarly a bank has a $15 million lending limit has a competitive advantage over one that may lend only 10, but the competitive advantage is measured by the difference of the resources, which under the law, one may use and the other may not.

So that it does not take away business from a smaller bank, because within the resources of the smaller bank, each one is on a par.

It only gives it an additional feel within which it may operate, which the smaller bank never had and can't have under the law.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: That is so, but that's merely because of the resources.

It's the natural result of having limited resources as contrasted with unlimited resources relatively speaking, so that a -- but that doesn't mean that the bigger bank can take something away from the smaller bank, the smaller bank just can handle to start with.

And in Philadelphia, the fact that we haven't got a bank that can handle this business drives it to New York where it can be handled, where it is handled, which now being handled by the banks there, which have this so far competitive advantage.

Now the purpose of this merger is to make for the first time, a Philadelphia bank competitive with larger banks in New York and elsewhere with which they can't compete now simply because it's too small.

Justice William J. Brennan: Mr. Price, is there any evidence of exactly how many of these larger loans were lost in New York or Dallas or other banks?

Mr. Philip Price: No, sir you can't tell that, because unless some perspective borrower comes in and said I would have borrowed this, you don't know.

Justice William J. Brennan: I mean these executives who testified?

Mr. Philip Price: They were seven or eight business people did testify.

One said he put a loan of $10 million in New York, $10 million in Chicago.

Another one he put so much elsewhere, so that they were seven or eight illustrations of it, but obviously the fish that got away that didn't even nibble, could not be measured and therefore it was maybe a matter of judgment.

Justice William J. Brennan: Could you clear up for me a question I asked Judge Loevinger yesterday, what's the significance of 36 out of area loans over $1 million?

Mr. Philip Price: Curiously enough that exhibit which he described to the banks and said they didn't adequately explain it, it is shown on the face of the paper by as being government exhibit 181.

So that apparently he didn't understand his own exhibits.

That shows that loans over a millions dollars of these particular ones which were calculated in 1955 from somewhat incomplete statistics were made to borrowers outside the four-county area and 34 were inside the four-county area, that's all that means, but it doesn't purport to indicate the number that was --

Justice William J. Brennan: But I wonder does it mean that the Philadelphia banks now do attract the borrowers from some distance from the four-county area?

Mr. Philip Price: Oh, certainly, oh, yes sir. Oh, yes, indeed.

Justice William J. Brennan: That is not only for using local four-county businesses, but --

Mr. Philip Price: Not at all.

Justice William J. Brennan: It might be business in the Detroit area.

Mr. Philip Price: They do as 34 -- I think 34% of their commercial business is done outside the four-county area, 64% in Dallas.

Justice William J. Brennan: Well, I mean outside the four-county were used with businesses outside.

Mr. Philip Price: Borrowers outside the four-county area, oh yes.

Justice William J. Brennan: Not the borrowers who may have offices outside the area, but clients within the area.

Mr. Philip Price: No, not clients within the area, borrowers outside the area.

There is a large business done with customers who have no connection with Philadelphia at all, where competition with New York banks, but can't meet them beyond relatively limited amount

Justice William J. Brennan: Well then, I gather, is it the hope that if the merger were approved, the larger loan limits would attract even more of this business from outside the area?

Mr. Philip Price: Yes, sir.

That was the opinion of the bankers, not only the bankers, the members of the staffs of the two appellees, but the bankers who were competitors, the seven or eight bankers who testified as competitors that they welcome this merger because they expected to bring this additional business to Philadelphia area for the benefit of them and business generally.

Justice William J. Brennan: Well, from that kind of business who but the banks would profit in the Philadelphia area?

Mr. Philip Price: The fact that you have deposits makes it available for local loans as well as --

Justice William J. Brennan: It would attract more deposits from those borrowers?

Mr. Philip Price: I beg your pardon.

Justice William J. Brennan: You might hope that it would attract larger deposits from these borrowers of larger loans?

Mr. Philip Price: That is the normal practice of borrowers and the evidence showed here that of the large borrowers, a million dollars and up, the Philadelphia National Bank had deposits of about twice the amount of the loans.

So they had a 100% more available for local use.

The Girard had about 50% more, so that is the definite advantage that comes from bringing money in from the outside, which the appellant brushes off by saying they don't believe it, but the evidence shows that was the result of such a visit.

My time is up, but I would like to say in answer to Mr. Justice Brennan's question about Clayton Act, a word about it and why it doesn't apply?

The Clayton Act when amended in 1950 to extend asset acquisitions was extended only to asset acquisitions by companies, which were subject to the Federal Trade Commission Act, banks are not and therefore, the banks were not covered with section 7.

And the Attorney General for the last ten years has been actively turned up the swayed Congress to amend the law so as to include banks within its scope.

Congress has persistently refused to do so.

And therefore, what the appellant is asking this Court to do here is not only to legislate, but to legislate in a way in which Congress for ten years has refused to do.

I read yesterday a brief excerpt from a statement by Senator Robertson and I will add only one more to it which is in full volume, who said it is this and this is in discussion of the 1968, it is this distinction between banking and another business, which justifies different treatment for bank mergers and other mergers and which led the senate to reject the flat prohibition of the Clayton Act test, which applies to other mergers.

So that I suggest here they're trying to get this Court to do something that the Congress has persistently refused to do and therefore, its price there --

Justice William J. Brennan: Well, that's of some significance [Inaudible]

Mr. Philip Price: I can understand why he would not want to discuss it orally and that suggests also I can see why he would try to burst out with all and to suggest also a perfectly good reason by Congress confided to the comptroller, rather than to antitrust department, the Department of Justice, the responsibility for deciding whether a merger was in the public interest or not.

Now, we go to Mr. Littleton.

Chief Justice Earl Warren: I was wondering if this merger is permitted, would the argument that you are making today also apply in the event of this new merged bank sought to merge with the next largest bank in Philadelphia.

Mr. Philip Price: It would have less validity, because it would then be in competition and able to complete with these larger banks in New York, which it now cannot compete with and would be able to hold business or gain business, which now is completely outside of its capacity to handle.

Chief Justice Earl Warren: Well, wouldn't there still be larger banks in New York that could loan still more money?

Mr. Philip Price: There would –-

Chief Justice Earl Warren: Why wouldn't the same argument apply then if you took a next biggest bank?

Mr. Philip Price: Because there are not so many more than a $15 million, I said that there are only six of those in New York.

Now the three that are enormously large, and there would be no necessity for anybody to achieve a 55 or 60 or $65 million lending limit in order to handle the businesses in Philadelphia that may be in New York

Chief Justice Earl Warren: Why not if there is no area there in around Philadelphia, those four-counties don't constitute in the area, when you are in competition with New York, why couldn't you make the same argument to take the next biggest bank and then the next one after that?

Mr. Philip Price: Because our argument is confined to the business that originates in the Philadelphia area and this is -- the Philadelphia area does not yet need a lending limit anything approaching $50 million.

Chief Justice Earl Warren: I thought you –

Mr. Philip Price: It was testified.

Chief Justice Earl Warren: I thought you said a little while ago that a third of your business was commercial business was outside of --

Mr. Philip Price: That's correct, but it isn't in the $55 million test.

$15 million would put us in competition with six of the largest banks in New York, which we can't compete with now and that would be enough to take care of the normal needs of the Philadelphia business, which now has to go to New York, because they want loans in the range of $10 to $12 million.

Now if at some future day, business in Philadelphia required loans of $50 or $60 million that bridge can be crossed at the time.

What Mr. Jennings testified that the reason for the so called concentration, which is found objectionable by the appellants, is to meet the existing need in particular localities of business, the local business.

Now, we are not trying to take business away from New York, we are trying to keep business in Philadelphia which now goes to New York because it can't be held, can't be handled at all.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Philip Price: The participation is explained in considerable detail in the findings of fact and the opinion and I will summarize it only this way sir.

They participate with correspondent banks to help them out, smaller banks as their correspondents, but they don't participate themselves, banks or loans which are in the $10 or $15 to $20 million class.

Any participation there is made by and directed by the borrower, not by the banks themselves.

Justice Arthur J. Goldberg: Why?

Mr. Philip Price: Because it's much too much trouble for large banks -- large borrowers to establish commercial relationships with a number of banks.

If they can go to one bank and get their entire needs.

The banks that borrow a $150 or $200 or $300 million, I mean the businesses that borrow that, obviously can't go to any one bank.

Those are banks that already have established commercial relationship all over United States.

So that when they're borrowing a $100 million, they are passing out to bank ABCD throughout the country, the amount that they want intact and usually that's $10 million to $15 million top limit.

But banks themselves do not participate, in their point of view, they may lose a customer.

But from the point of view of the customer, the customer doesn't want to be bothered with that kind of arrangement.

I yield to Mr. Littleton.

Chief Justice Earl Warren: Yes.

Argument of Arthur Littleton

Mr. Arthur Littleton: Mr. Chief Justice, may it please the Court.

I should like, if I may, to address myself at the outset to the Sherman Act, because in this case the Department of Justice has asked that an injunction issue against this merger under section 1 of the Sherman Act.

Now the Sherman Act condemns unreasonable restraints.

The un-contradicted testimony of numerous bankers, businessmen, economists is that not only there had been no unreasonable restraint, there will be no unreasonable restraint from this merger, there will be no restraint of any kind whatsoever.

This Court has said that for an injunction to issue under section 1 of the Sherman Act, there must be a definite showing of illegality.

The Department of Justice on whom the burden falls to show that has failed utterly to show any definite facts demonstrating the illegality of this merger.

Instead of that, they have abandoned such oral testimony as was presented and they presented 100s of pages on it and rely entirely on statistics.

Now, I'd like to discuss those statistics in a few moments, but right at this point, I should like to amplify what Mr. Price has said about the reasons for the merger.

This was not to monopolize, nor to insulate these banks from competition.

It was for a perfectly good business reason, mainly the whole Philadelphia business, which has been going to New York and to other cities.

The activities of the outside banks that is the bank's foreign to Pennsylvania or foreign to the Philadelphia area which come into Philadelphia, our legion, Judge Loevinger would have you to believe and his brief would have you believe that this is de minimis.

The footnote on page 10 on our brief indicates that in many, many, many places in this record where it is stated that Philadelphia fairly swarms with emissaries from outside banks.

New York -- not only New York, First Boston.

First Boston National Bank is one of our biggest competitors.

They have people in there all the time.

Mellon Bank out in Pittsburgh, which is infinitely larger, very much larger than our bank, constantly in Philadelphia soliciting, even Dallas, Cleveland, St. Louis, because there are many cities in the United States much smaller than Philadelphia that have a larger bank and these banks come into these fast growing Philadelphia industries and get the business which should be going to Philadelphia banks and which would be going to the Philadelphia banks under the testimony of the businessmen, another bankers who were called, provided there was the bank with a lending limit sufficient to take care of their needs and with resources which would enable them to make the kind of loans that these enlarging and growing businesses require.

It was demonstrated and there are exhibits to show that business and industry have grown in the Philadelphia area in the last 10 years at just twice the rate that the bank's resources and the bank's lending limits have grown.

This is because of the great upsurge of business in the Delaware Valley.

This is one of the main reasons and purposes of this proposed merger.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Not at all, not at all.

That doesn't follow at all.

It --

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: I suppose they are, but there is ample competition from outside as well as from inside the Philadelphia area or the four-county area that Judge Loevinger contends for.

At all times, there's infinite competition.

As Mr. Price has said, there are 17 banks in New York with a lending limit of a $1 million or more.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Certainly it would.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: I guess he would.

Excuse me sir, I can't see any reason why he shouldn't be able to.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: No, he hasn't.

Excuse me?

If you'd turn to page -- if you'd turn to page 13 of our brief, you'll see that a customer that wants up to a $1 million would have 7 alternative choices in the four-county area.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Well, how many of you need to have competition, if Your Honor please.

This doesn't effect competition in that area and it enables us to compete with the giants from the industry existing not only in New York, but in other parts of the United States that are coming in and getting this Philadelphia business.

Now the Congress in adopting the Bank Merger Act of 1960 and incidentally, that is printed in full in the appendix to our brief, showed and the congressional record, I beg your pardon, the legislative history which is also in our appendix for a large part, also showed the considerations that were given and all the way through those debates and the reports of the Senate Committee and the reports of the House Committee, it is shown and demonstrated that Congress felt that banking should not be subjected to the same kind or restrictions or to be subjected to the same test as those under the Clayton Act, but they wanted to have some definitive statute and they passed the Act of 1960, which put in the hands in this case, because it's a National Bank, of the Comptroller of the currency, the duty of ascertaining the facts relative to any merger where the resultant bank was to be a National Bank.

They said that he should consider six banking factors or elements and also the possibility of the effect of the merger on competition or tendency toward a monopoly.

Justice Hugo L. Black: May I ask you one question relevant to that argument --

Mr. Arthur Littleton: Yes.

Justice Hugo L. Black: Just as to the thrust of it?

Are you -- is your argument that the new act of Congress repealed the Clayton Act insofar that it applies to banks?

Mr. Arthur Littleton: If Your Honor please, it didn't repeal the Clayton Act, [voice Overlap] because the Clayton Act by its terms does not apply to banks.

Justice Hugo L. Black: I mean the sections which you refer --

Mr. Arthur Littleton: Section 7?

Justice Hugo L. Black: Yes.

Mr. Arthur Littleton: Of the Clayton Act?

It is not apply to banks by its terms.

My argument does not say it repealed the Sherman Act under which this action is brought for an injunction.

The act of 1960, we argued --

Justice Hugo L. Black: You did not say that it didn't repeal the Sherman Act to that extent?

Mr. Arthur Littleton: We are not arguing that here.

We argue that below if Your Honor please and there is a great deal of weight that can be given to it if you go through the legislative history of this case, but Judge Clary decided that against this below, because he said while he was greatly impressed that this is something that is intended by Congress to be left entirely to the Comptroller of the Currency in this case by the Federal Reserve that for it to be a State Bank, nevertheless he felt that the Sherman Act still applied.

Now I would say to you that we consider whether we should raise it up here, the El Paso case came down in the mean time and that didn't give us very much encouragement.

We filed our brief and Pan America came down and while at first that made us wonder upon analysis, I don't believe it could have been very much help in this situation, but we came to the conclusion if Your Honors please, that we have here so strong a case, because there is not one scintilla of evidence in this case and is so found by the District Court that showed that will be the slightest restraint or the slightest tendency toward a monopoly, and he is found that straight through and there is no countervailing testimony.

Justice Tom C. Clark: Well, then what was the objection of the Federal Reserve Bank?

Mr. Arthur Littleton: The Federal Reserve Bank filed a report on the competitive aspects only, under this act of 1960.

If it is one that needs to be determined by the Comptroller of the Currency, he has the authority, the jurisdiction, the responsibility to determine whether the merger should be approved.

He asked for an advisory on the effect and competition from FDIC from Federal Reserve Board and the Attorney General.

He is not bound by that.

That is purely an advisor and --

Justice Tom C. Clark: Well, what -- is there a report in the record, I glanced through it and it's so large and [Inaudible] I was not able to find it.

I wondered if there is a copy in the record?

Mr. Arthur Littleton: Copy of the Federal Reserve?

Justice Tom C. Clark: Yes.

Mr. Arthur Littleton: Copy of the FDI stage, copy of Federal Reserve.

Justice Tom C. Clark: You know the page [Inaudible] --

Mr. Arthur Littleton: I'll give it to you right away.

Justice Tom C. Clark: You probably would give it to me.

Mr. Arthur Littleton: But while I am getting to page -- may I just read you from the Senate Committee on banking and currency and the legislative record, the Committee wants to make crystal clear its intention that the various banking factors in any particular case maybe held out way the competitive factors and that the competitive factors, however, favorable or unfavorable are not in and of themselves controlling on the decision.

And of course, the banking agencies are not bound in their considerations of the competitive factors by the report of the Attorney General.

They will have much information in their own files and they may obtain information or advice on the competitive factors from other sources.

The Committee Amendment is only intended to make sure that the banking agencies get a report on the competitive factors from the Attorney General in each case, but it's up to the particular Administrative Officer and the very thing that you've mentioned if Your Honor please, the size of this record shows the wisdom of leaving it entirely in the hands of the Administrative Officer, to which the Comptroller of the Currency in this case, because he took months to go into all this and he came to his conclusion after he reviewed all the six banking factors, including the convenience and the needs of the public, which makes it a public interest test, a reasonable test as Your Honors had said under -- in the Section 1 of Sherman Act cases.

And if I had my choice, I would say that it ought to be left with the Administrative Officer, but I don't think that we should argue that here, because if it's decided against below and I say I don't think the decisions of this Court would sustain us, but nevertheless it indicates.

I would say to you if Your Honor please --

Unknown Speaker: [Inaudible]

Mr. Arthur Littleton: That the Federal Reserve report is Government Exhibit 161 in the record 2822.

Justice William J. Brennan: That's the page.--

Mr. Arthur Littleton: That's the page.

Justice Hugo L. Black: 28.

Mr. Arthur Littleton: 28 22.

Justice William J. Brennan: Could you just say in a sentence and the fact what was the Federal Reserve report?

Mr. Arthur Littleton: Federal Reserve report came to a conclusion that it would have an effect on competition and --

Justice William J. Brennan: An adverse effect.

Mr. Arthur Littleton: Adverse, adverse effect in competition.

Chief Justice Earl Warren: As you indicated is, there is no competitive disadvantage, would you mind telling us why the -- or what the Federal Reserve Bank said made it anti competitive?

Mr. Arthur Littleton: Well, I think just size and concentration, the things that Judge Loevinger had been arguing here Your Honors, but you see, it's an irrelevant --

Chief Justice Earl Warren: You say you'd judge that -- is that what they said?

Mr. Arthur Littleton: That's what they said.

Yes, that's what they said, but I submit to Your Honors that the Federal Reserve advisory report on competitive aspects of this is irrelevant in this situation.

Here we had a two months' trial.

The Department of Justice could have called people from the Federal Reserve to come in and give their reasons and be subjected to cross-examination.

The District Court said, he is not going to substitute the ex parte report of anybody who doesn't come in and like all the witnesses that we had, the banker witnesses and the customer witness and the economists, who subjected themselves to searching cross-examination on this, he is not going to substitute or the decision of the man in whose hands Congress placed the responsibility for this job on such an ex parte untested report, which was written months in advance of this trial and was written without the advantage of hearing all the facts and figures which were developed at the trial.

And for that reason --

Justice William J. Brennan: I gather these advisory -- are they ever conceded by their –-

Mr. Arthur Littleton: They were not.

What they're doing now -- I think each one of the banking bodies, the comptroller, the Federal Reserve, I think with this merger now they do have a hearing that which anybody can appear.

Justice William J. Brennan: But they did not.

Mr. Arthur Littleton: But they did not at this time, any place.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Yes.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Yes.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: That's for the new merged bank, there is none now.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: No sir.

Excuse me, there are two.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Yeah, well, all right, false, but then --

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: Right sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: You see --

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: That's right Mr. Justice Goldberg, a resident in Philadelphia, but you have Philadelphia swarming and teaming, where there was one witness who said that the New York bankers said, Philadelphia is a happy hunting ground of New York Banks.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: All right.

Well it maybe so, probably not except that in Philadelphia we don't have a big enough bank to properly compete with these giants?

In Pittsburgh they do, in Boston they do.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: But of course, the competition that existed between the two disappeared, but it has to be significant competition.

It has to be significant.

Competition, this Court has said, it has to mean something, it has to be of some value, this has no value.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: That is right, that is right.

To state it another way, we take the figures that Judge Loevinger insisted on yesterday, because he said he wanted to talk about people instead of dollars and he said that 96% in numbers of customers under $10,000 were in the four counties.

All right, we will take that and rotate -- we will accept this four-county area for purposes of argument.

96% of these bank's customers will have 41 alternative choices to go for their banking, how many more do you need to have competition.

At the same time, at the other end of this scale, we will be able to compete in the big national market, not only for big national business, but to hold our own business.

The Court found and made a definite find that this merger would bring many, many beneficial effects to the Philadelphia area and my time doesn't permit me to go over all of them, but they are in our brief, because I want to move to the final point of my argument, which I believe is the touchtone in this whole case.

Certainly, Judge Loevinger here has predicated his entire argument on it.

Chief Justice Earl Warren: Mr. Littleton, I'd like to ask you just one question about the Federal Insurance Deposit Corporation, did they express an opinion?

Mr. Arthur Littleton: They expressed the opinion that this would benefit competition and would be helpful to competition in the regional, national and international field, which is what we were trying to get.

They said it probably would have some effect on local competition.

Again, nobody from FDIC was called, nobody came.

This was a report written long before this trial.

They didn't have the benefit of what was coming to the trial.

May I ask Your Honors to turn to page 18 of our brief, because this is really the crux of this case?

Now Mr. Price has demonstrated to you all I think that banks cannot control their deposits.

Judge Loevinger made some statement yesterday that this big bank would be able to control its depositor and control it -- controlling its borrowing.

Judge Loevinger would think of that and reflect on it a minute, he'd see how unsensible that is, I don't know where he has his bank account, but let's assume he has it in the biggest bank in New York.

He can change his depository right now by writing out a check for his balance and depositing them in the smallest bank in Washington and immediately he has affected a change and no matter how big the bank is, it couldn't control him at all in doing that.

If he had a loan outstanding, he could go to any bank in Philadelphia or Washington or New York because I assume Judge Loevinger's loan would be a good loan [Laughter] and in less than 24 hours those banks would be delighted to take the loan over from the biggest bank in New York and the biggest bank in New York couldn't stop it, of course there is no control.

But let's --

Unknown Speaker: [Inaudible]

[Laughter]

Mr. Arthur Littleton: He would be with me if I were a banker, but let's accept the fact that even though we can't control our deposits that this big risk of concentration, they use this nasty word concentration, what it means is their share of the banking assets in a given area.

They say that would be 36% and in this if Your Honors please, I say is the touchtone of this case.

If you look at page 18, it is a schedule of cities of over 100,000 populations with the concentration in the biggest bank in each as of June 30th, 1956.

If we get down to Philadelphia, it is 79 and there we have inserted the concentration, which the Department of Justice claimed this bank will have after the merger and look there are 78 cities of 100,000 or more in the United States of America which have a higher concentration of banking assets in the lead bank in each of those cities than this bank would have after the merger.

Well, now was there ever a better opportunity for the Department of Justice in any antitrust case to show, to predict what the effect of this concentration created by this merger would have on competition, what restraints it would produce?

There they have 78 test tubes.

They did not bring in a single witness from any one of those cites to say what the effect on competition in banking, this so-called concentration in the lead bank in each of those cities has.

I don't know whether they even looked into the test tubes, but if they looked they apparently didn't like what they found and the reason they didn't is because all the testimony in this case is to the contrary, namely that there is ample and active competition in banking in every one of those cities.

Now how can they come in here and say, sure we haven't produced anything to show what's going on in San Francisco, where they have a bank with 58.7% concentration.

They don't say there is no competition in banking in San Francisco.

This great concentration in the lead bank in San Francisco is a restraint, while we know there is active competition in banking in San Francisco, but they haven't tried.

Look at Saint Paul, Minnesota 55.6% and in Duluth, Minnesota 44.7% and in Minneapolis, Minnesota 38.3%, all much higher concentrations than this merged bank will have and I assume that Judge Loevinger would have had ample opportunity and ability to produce witnesses from those three Minnesota cities to show if witnesses could be found to say that, “Oh yes, this concentration in the lead bank has completely blocked competition.”

Justice Hugo L. Black: Would you agree that he could ask the witness or just assuming the witness would tell us on some of the cities and say has this concentration in this bank reduce competition, and just asking that as a conclusion --

Mr. Arthur Littleton: Well he could --

Justice Hugo L. Black: How is he going to prove it?

Mr. Arthur Littleton: Well, he brought little bankers from little towns all over the United States, including one from some little town of 4000 in California to ask him about that, he could certainly have brought somebody from there.

From San Francisco, why he goes all the effort to bring the little man from the town of 4000 in California instead of bringing somebody from San Francisco.

Justice Hugo L. Black: Isn't it always a question in an antitrust case?

I'm asking because I just want to view as to whether -- to what extent competition has been reduced?

Does it not necessarily follow that if you had 50 banks in a place and you suddenly merged all of them but six, the competition would be reduced whether anybody said it or not?

Mr. Arthur Littleton: Well it might be sir, it might be sir, but that isn't our case.

Justice Hugo L. Black: Well I understand it is not -- it's always a question of how many?

Mr. Arthur Littleton: That's right.

Justice Hugo L. Black: And of course, that's the way it always starts and if you have -- how low do you get before it becomes the --

Mr. Arthur Littleton: We are trying, but this one merger case.

Justice Hugo L. Black: I would have to say that it is unreasonable, well that's the problem.

Mr. Arthur Littleton: We're trying this one merger case --

Justice Hugo L. Black: I'm not saying it is easy.

Mr. Arthur Littleton: Right.

And they have not shown where Philadelphia is any different from any of these other cities.

Justice Hugo L. Black: Suppose not?

Mr. Arthur Littleton: Why 36.2?

Justice Hugo L. Black: Maybe someone that knows something about these cities, who has lived in them or does live in them would know pretty well from having lived there or something, well that gave that bank [Inaudible] kind of runs that.

Mr. Arthur Littleton: Well, then if it is up to the Department of Justice on whose shoulders the burden the proof is to produce such people.

We produced one man from Camden and you'll notice Camden has got a very high concentration.

Justice Hugo L. Black: [Inaudible]

Mr. Arthur Littleton: We produced the President of not the First Bank, but one of the banks lower down on the list and we said to him, how about this concentration in your city in the Camden Trust Company.

The man we called is President of the First Camden National.

Justice Hugo L. Black: He favored it, didn't he?

He favored reducing the number of banks, didn't he?

Mr. Arthur Littleton: No, he didn't at all.

Justice Hugo L. Black: Well, what did he said about competition?

Mr. Arthur Littleton: What he said was that the fact that Camden, the Camden Trust Company has this higher concentration of assets than we have doesn't give it the slightest power.

Justice Hugo L. Black: Well, he was a lender, not a borrower?

Mr. Arthur Littleton: Well, he was a very sophisticated banker if you please and he said that he was giving and he was interested in the success of his own bank and he said, they can't affect us in anyway.

Justice Hugo L. Black: I would say that --

Mr. Arthur Littleton: They can't affect.

Justice Hugo L. Black: I would say that a banker would be sophisticated enough to know that we can reduce the number of lenders that he had to compete with, but he would have a more -- it would be easier for him to --

Mr. Arthur Littleton: He was there --

Justice Hugo L. Black: [Inaudible] he wanted.

Mr. Arthur Littleton: He was there to testify, and he did.

He was there to testify as to whether the fact that the Camden Trust Company, a bank much bigger than his had 55% of whatever the percentage was of the banking asset had anti competitive effect on him and he said, “No, we compete everyday.”

They said, they can't --

Justice Hugo L. Black: Did he say anything about lenders, about borrowers?

Mr. Arthur Littleton: He said we make loans.

They can't control us in the loans, they can't control us in interest rates, they can't control us in service charges.

And he says, it's not only us it's the other smaller banks, they are all competing.

There is no, there is no bad effect on competition, simply because the lead bank so-called, the number one bank has this so-called concentration of assets.

Justice Hugo L. Black: You would agree here that they would at some point at which it would have an effect on competition, wouldn't it?

Mr. Arthur Littleton: You mean the merger and merger and merger?

Justice Hugo L. Black: That's right.

Mr. Arthur Littleton: Oh!

Certainly there'd be some point, but that would have to be determined by the facts.

And all the facts that have been brought out in this merger by bankers, by the very competitors that Judge Loevinger says he is trying to protect from anti competitive effects or restraints from this merger.

They were the ones, who came in and said, but this merger is not going to hurt us, there is no way in which it can do anything but help us, it will bring more business in.

There will be a greater pool of credit in Philadelphia.

We will share in this.

It will bring business in the industry in Philadelphia.

We'll lend maybe to them, we maybe the second bank, we'll lend to the satellite companies, it will come around a big company.

We will lend to the individual officers and employees.

This is going to be good for Philadelphia.

Justice Hugo L. Black: That would be somewhat wouldn't it, like getting one of the automobile manufacturers and process where they -- being reduced from year-to-year, one of them to testify that he wasn't hurt by the fact that the competition was being reduced to fewer and fewer businesses.

Mr. Arthur Littleton: Well I submit to Your Honor that if there are 41 banks left in the area, which the Department of Justice has picked out which we accept for purposes of argument that is not being reduced very, very much.

Justice Hugo L. Black: I'm asking you these questions, because I realize the difficulty of [Inaudible].

Mr. Arthur Littleton: Yes but the burden --

Justice Hugo L. Black: How you prove it?

Mr. Arthur Littleton: Here, here --

Justice Hugo L. Black: Whether you have to have evidence and if so, what evidence?

Mr. Arthur Littleton: Well, it's the Department of Justice who has to produce the evidence.

Our evidence was that there is ample and active competition in every one of these cities, which has a higher concentration of assets in the lead bank than the Philadelphian National and Girard will have after they are merged and that is shown on page 18.

Justice Hugo L. Black: Well –-

Chief Justice Earl Warren: I'm looking at page 18 and I notice that the one with the lowest concentration in any of these 110 cities is the one that you [Inaudible]

Mr. Arthur Littleton: Yes, New York, because that's where the giants in the industry are, of course.

Chief Justice Earl Warren: But there is no one over 21% there and you already have 36%.

Mr. Arthur Littleton: Well, that doesn't have any effect on us.

I mean that doesn't relate to us.

Chief Justice Earl Warren: Well, then if that doesn't have any affect on you, why do the rest of these figures or why are they so important that the New York --

Mr. Arthur Littleton: The ones that we --

Chief Justice Earl Warren: The New York figure that is your greatest competitor you say, the one that is taking all your business away doesn't have more than 21% concentration in any one of its biggest banks, why then do these others that have different percentages help you?

Mr. Arthur Littleton: I don't think the two things are related if Your Honor please.

The reason that in New York, the biggest bank only has 21% is because there are a lot of giants of almost equal stature in New York, all of which come over and compete with us.

Now you take the other cities that I speak of, the 78 [Inaudible]

Chief Justice Earl Warren: Chicago only has 25?

Mr. Arthur Littleton: That is right, because you have giants in Chicago, but look at San Francisco, look at Los Angeles, look at Detroit, look at Boston all of which have bigger banks than we have.

There the concentration in the lead bank is much greater than ours.

The point I'm trying to make if Your Honors please is if there is no adverse effect on competition, if there is no restraint in those 78 cities, how can the Department of Justice come in here and say because Philadelphia will have a lead bank with 36.2% for the banking assets after this merger, there is bound to be a restraint.

The way for them to prove it was to bring people into show that there was such a restraint in these other places.

What's peculiar about Philadelphia?

They haven't shown any peculiarity about Philadelphia.

Why should we be kept in this position?

Justice Hugo L. Black: May it not be true, I realize the force of your argument, but look at Gary, Indiana, 88 and four-tenths of a percent, do you need much proof there to think that they might be [Inaudible]

Mr. Arthur Littleton: We had used the proof by people who knew.

Justice Hugo L. Black: From Gary, Indiana?

Mr. Arthur Littleton: From every one of these cities.

Justice Hugo L. Black: 88 and four-tenths of a percent.

What do they say about Gary?

What is the population of Gary?

Mr. Arthur Littleton: The comptroller -- the First Deputy Comptroller of the Currency, the man who had formerly been First Deputy Comptroller of the Currency stated that he had made a study, that the Comptroller of the Currency's office had made a study three years before of all cities over 50,000 and with one slight exception, every city with a greater concentration in the lead bank than Philadelphia will have after this merger is enjoying adequate and ample banking competition and the public is being served.

Justice Hugo L. Black: Did that include Gary?

Mr. Arthur Littleton: I don't know whether it included Gary or not.

Justice Hugo L. Black: I would think if these figures might indicate to me that it has drawn influence that maybe the comptrollers has not been controlling them much, if they then done this by merger, if they've done this by merger --

[Laughter]

Mr. Arthur Littleton: If Your Honor please, I think you picked onto Gary, but you got to remember it, you probably want --

Justice Hugo L. Black: That's one on the list you showed me.

Mr. Arthur Littleton: That's right.

The proximity of Gary to Chicago, you see Gary is right next to Chicago.

And this naturally has that effect and they're in competition, you see they are in the competition with all the Chicago banks for the business just as we are with New York.

Justice William J. Brennan: Mr. Littleton is there any evidence in the record or the reaction of the other Philadelphia banks in this view?

Mr. Arthur Littleton: Yes, sir.

We called eight or nine heads of other banks large and small and they are in agreement that this merger would be a good thing for Philadelphia; it would not affect them competitively.

There would be no restraint.

They'd be able to compete just as well as they're and the competition in banking in Philadelphia is right at this height, right at this height sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: No, sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Arthur Littleton: No sir, there was no [Inaudible]

Justice Tom C. Clark: Mr. Littleton I understand [Inaudible] there is no controversy [Inaudible] in relevant market?

Mr. Arthur Littleton: Judge Loevinger said yesterday that Judge Clary had predicated his opinion on a mistaken view of the market.

Judge Clary didn't.

He didn't agree with them that the four-county area was the relevant market, neither did we, but Judge Clary accepted it for purposes of argument and made all his findings and wrote his opinion as if the four county area is irrelevant.

We are doing exactly the same thing in this argument.

We are not making any point of that here.

Although, it is the most tortured lot of statistics that they put in there, because they do not pay any attention to the 43% of our loans that come from outside and incidentally, if Your Honor please, right over in Camden, RCA, one of our good customers, would be a better customer if we had greater resources and had a higher lending rate, that they will not even include in our relevant mark.

Justice Tom C. Clark: I take it then we should consider the four counties as relevant?

Mr. Arthur Littleton: We are perfectly satisfied if you consider the four counties as relevant, because the testimony of the witnesses, it seems to me is unanswerable.

It hasn't been answered by government.

All they do is bring in these statistics that after this merger we will control 36.2% of the banking assets in the Philadelphia area and I say that that table on page 18 completely destroys that as the argument.

Justice William J. Brennan: Well Mr. Littleton well if that is -- we can accept the premise that the market in the four county area, does that now hold at least for the Sherman Act problem we have decide, the issue be reasonable?

Mr. Arthur Littleton: Well it narrows it in the fact that it seems to me that if you start with a relevant market of the four counties, if you are willing to accept it, I should think you would want to consider it a little, because it goes so against the reality --

Justice William J. Brennan: I know, but why should we, if Judge Clary and you argue it here on the premise without quarrelling over it, why shouldn't we approach the decision and if we did then would we have to decide anything except the issues reasonably?

Mr. Arthur Littleton: That's right.

Thank you Your Honor.

Chief Justice Earl Warren: Mr. Loevinger.

Argument of Lee Loevinger

Mr. Lee Loevinger: Chief justice, may it please the Court.

Justice Hugo L. Black: May I ask you before you start?

Mr. Lee Loevinger: Yes, sir.

Justice Hugo L. Black: Do you agree that Section 7 of the Clayton Act does not apply to bank?

Mr. Lee Loevinger: No, sir.

As a matter of fact, I think there has been a little misapprehension about that, Your Honor.

The Court below held that it did apply to banks.

It was held that it did apply to banks by the Court of the Third Circuit in the Transamerica case.

The argument in this case is whether or not the transaction involved here comes within the scope of Section 7 of the Clayton Act as an acquisition of stock rather than assets.

I'd like not to get into that because it's a narrow technical point.

Justice Hugo L. Black: I didn't understand the statement made, but you said that [Inaudible] just everybody knew that Section 7 didn't apply to banks.

Mr. Lee Loevinger: No, sir.

Justice Hugo L. Black: [Inaudible]

Mr. Lee Loevinger: The Court below held that it does and it has been held that its does, I think it's clear that it does.

The question is, as to the character of the transaction and because of the narrowness of that point.

I would rather rest it on my brief than proceed to the discussion of the merits of this case.

Justice William J. Brennan: Mr. Loevinger if you are right.

If your argument in the brief is right, certainly it's a different problem, isn't it, that Section 7 applies?

[Inaudible] very different --

Mr. Lee Loevinger: I think the case is so clear under Section 7 that there is no use discussing it and I want to discuss the --

Justice Hugo L. Black: Well, why discuss the other then?

Mr. Lee Loevinger: Sir.

Justice Hugo L. Black: Why discuss the other four under Section 7.

I don't understand?

Mr. Lee Loevinger: Because there is a question as to the character of the transaction involved here as to whether or not it is a stock rather than an asset acquisition.

Justice William J. Brennan: But if we agree with your position then certainly the tendency too is a very different test.

Mr. Lee Loevinger: Yes, sir, but I think that the restraint of competition in this case is so clear that the issue ultimately presented to this Court and which this Court should decide is whether a restraint in a market as large, important and significant as Philadelphia can be justified by an alleged or supposed advantage in a small national submarket or a small national market for multi-million dollar loans.

This is the business justification that Mr. Justice Goldberg was talking about and that I think is the crux of the case and perhaps I should --

Justice Hugo L. Black: Are you raising your claims under 7?

Mr. Lee Loevinger: No sir, I am resting on the brief, sir.

Justice John M. Harlan: You find the Sherman Act question [Inaudible]

Mr. Lee Loevinger: Yes, sir this case is complex and difficult and that involves enough figures as it is, without getting into the technicalities of the precise transaction and as to whether stock or asset acquisition involved in this long agreement drafted by Philadelphia lawyers.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: No, sir.

I think that you got exactly the same problem.

I think there isn't any real dispute as to the fact.

I think real dispute is that the legal test applied by the lower Court.

Justice John M. Harlan: [Inaudible] figures and you are asking us to overrule findings of the district court made [Inaudible] both sides?

Mr. Lee Loevinger: No, sir.

Justice John M. Harlan: [Inaudible] stand in this Court, it seems to me asking us to overturn findings made by the district court not on the basis of [Inaudible]

Mr. Lee Loevinger: No, sir.

I disagree wholly with Your Honor, and I'd like to tell you why. In the first place, it is not live testimony as it has been represented.

For example, this alleged testimony about Gary, Indiana was testimony by Mr. Jennings who had one time had been a Deputy Assistant Comptroller, but is now President of the largest bank in Texas and was at that time that he testified.

And his testimony was that he thought that there was plenty of competition in Gary, Indiana even though it had approximately 90% of its assets in one bank.

And he is the man who testified and this is the testimony they rest on that the two banking alternatives is plenty for anybody who is seeking a bank loan.

Justice Hugo L. Black: [Inaudible] he ever borrowed any money and [Inaudible]

Mr. Lee Loevinger: No sir, he didn't.

[Laughter] The banks have referred to this table on 18 as heart of their case.

I call the Court's attention to the fact that the concentration ratio was essentially inverse to the size of the community.

And that New York and Chicago as the Chief Justice noted are close to the [Inaudible] Now, it is true that we didn't call any people from all of these 100 communities, they mentioned Saint Paul, Minneapolis and Duluth.

It might be of interest to know at the time of the trial, witnesses in those cities from the banks were being called before a grand jury and within the last two weeks we've returned three indictments and filed three civil antitrust suits in Saint Paul, Minneapolis and Duluth with respect to banking.

I don't think that they can make very much out of that.

As far as live witnesses, the fact is that the banks themselves called no live witnesses from the other six to eight banks in Philadelphia.

They called banks only from small -- witnesses from small satellite banks that have large deposits or that held stock in one of the banks involved in the present merger.

Further, it is perfectly clear as we point in our reply brief that when these banks say that competition would be increased what they are saying is in the words of one of the witnesses, competition will get worse.

We're going to have to work harder and compete harder in the face of the advantages of the merged bank in order to maintain our place.

This is what they mean when they say that competition will be increased or competition will remain the same, because the merged bank will have so much of an advantage that the other banks will be at a disadvantage.

Now, it's true that we're resting on statistics to a large extent, but I take it that this means that what we are using is facts instead of speculation and I call the Court's attention to page 18 of our reply brief, for example.

There is all this talk about; you need a big lending limit in order to compete with the New York banks.

Now here are the -- according to the defendant's own exhibit, Exhibit 1 here are the amounts of loans in other cities that the New York banks have ranged according to size.

And I call the Court's attention to the fact that of the cities that had more loans from New York banks, most of them have larger lending limits in Philadelphia.

There is simply no relationship between this large lending limit and the amount of business done in a community by the New York banks.

That business done in a community by the New York banks is governed by the need for the specialized kind of services that the defendant's own witnesses testified they got from the New York banks in the international market with respect to specialized oil departments and other things of precisely this character.

Now, when you talk about business justification, the best example or the best evidence of what the business justification can be in this national multi-million dollar market is what it actually has been.

It's very easy for a banker to get up and say, well, we'd like to compete with the Bank of London and the Chase Manhattan and these big banks, we would love to be in this big market.

What have they done?

Both these banks here have ample lending limits and ample funds to get into the multi-million dollar market now and so, they can loan up to $6 million and $8 million respectively.

There are $5 million or more loans amount to 9 in total number and $56 million in total amount.

This is less than one one-hundredth of a percent of the total number of loans less than 6% of the total amount of loans.

So that for this market or submarket, they are going to sacrifice competition in the Philadelphia market and I submit that whatever the rule of reason may dictate in other situations that, that cannot be a sufficient business justification for this kind of a merger in this situation.

Now, Mr. Price has argued that there is a difference between banking and other types of business.

He has said that the difference between banking and other types of business is the significance of deposits, now precisely we concede exactly that.

It is perfectly true banks don't manufacture their raw material or their products as other businesses do, they are dependent on deposits and that is the -- but what Mr. Price or Mr. Littleton failed to do is to point out the significance of this fact.

The significance of this fact is that when you combine banks controlling 36% of the deposits in Philadelphia, you have eliminated competition from 36% of the market in Philadelphia, because it is the deposits, which constitute the pool from which the loans are made.

This isn't a matter of one less out of 40 banks.

This is a matter of the credit pool from which loans can't be made, being combined in two massive chunks of 15 and 21%.

So the 36% of it constitutes a single unified control and there isn't any question that they do in fact control the 36% of the deposits in Philadelphia.

It's perfectly obvious that the smaller banks are going to have their credit pool exhausted long before this massive bank that has more loans than all the 35 small banks and three times as many, as I recollect the 35 small banks, but together each one of these banks has more deposits than all the 35 small banks put together.

So that this isn't eliminating one bank, this is the equivalent of wiping out all 35 small banks in Philadelphia as active competitors in the loan pool.

Mr. Clark or Justice Clark or Justice Brennan, I believe asked for the report of a Federal Reserve Board of Governors, this is worthy of a note.

This is what the Federal Reserve Board of Governors said, and I quote, “The proposed consolidation of two of the three largest banks in the area would substantially less in both existing and potential competition.

The resulting bank would obtain dominant position with pending competitive advantages which is strongly adverse to the preservation of the effective competition,” at page 2834.

Now, it has been said that we called no witness from the Federal Reserve Board, it's perfectly true.

No witness appeared for the comptroller either and it is significant, the Federal Reserve Board opinion is preceded by an extensive analysis with many facts with careful reasoning that leads up to the conclusion.

The decision of the comptroller was simply as far as we can ascertain an oral decision rendered go ahead and merge boys and the only thing -- the comptroller held no hearings, the comptroller took no evidence aside from what was submitted to him by the advisory agencies and the banks, the comptroller wrote no opinion, the comptroller gave no reasons for his opinion and the only thing from the comptroller that appears is a letter of approval that appears at page 3049 that's dated February 28th, three days after this lawsuit was started, because it refers to the lawsuit.

So that if any weight is going to be given to the opinions of Federal Regulatory Agencies, I respectively submit that the Federal Reserve Board opinion on its face is entitled of vastly more weight than the opinion of the comptroller and that the conclusion that it comes to is indubitably the correct conclusion.

And faced with that issue of whether or not in the minute, not minute, let me strike that from the record -- that in the national market for multimillion dollar loans, you are not entitled to give a questionable and small advantage to these banks at the expense of competition in the whole vast Philadelphia market.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: Two months to be precise sir.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: No, sir.

I said that his approval was rendered three days after the lawsuit in this case was -- or his letter of approval was dated three days after we filed our lawsuit.

Our lawsuit was filed February 25th, 1961, his letter was dated February 28th it appears in the record at page 3049 and refers to the fact of the pending lawsuit.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: It should be looked at from the point view of the customers and of the competitive bank sir.

Justice John M. Harlan: I understand that [Inaudible]

Mr. Lee Loevinger: Precisely, yes sir.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: Yes, sir and that is why we think that the restraint is so indubitably clear.

Mr. Littleton has argued before the Court and it's clear on the record that over 99% of the customers of both banks are borrowers -- of the borrowers are under $50,000 borrowers.

And therefore, by the clear and unequivocal testimony confined to the Philadelphia market, within that market the proposed, by their own statement, the proposed merger would combine 36% of the available credit pool into the control of a single bank and would deprive the customers of the alternatives presently before them with the division of this 36% between at least two banks.

So, I think that from the viewpoint of the customers, there can't be any question that there is a significant and substantial and important restraint or limitation upon competition.

Justice Hugo L. Black: What is the percentage of the next largest bank?

Mr. Lee Loevinger: The next largest bank would be about 50%, against smaller, the figures as I gave them yesterday and as I recollect them Your Honor are that this bank would have assets amounting to 37% of all the bank assets in Philadelphia.

The next largest bank would have -- it would be 50% larger than the next largest bank, three times as large as the third bank and larger than all the remaining banks put together.

Justice Hugo L. Black: What you have is a combination of the two largest banks, is that it?

Mr. Lee Loevinger: These are technically the second and third largest bank, but at the present time, the Philadelphia National and the First Pennsylvania Company, which is the largest are very close and in some respect the Pennsylvania, the Philadelphia National is larger.

There are essentially two important large banks in Philadelphia that are --

Justice Hugo L. Black: This will leave two large banks.

Mr. Lee Loevinger: Yes sir.

Justice Hugo L. Black: How does that figure -- what's the relative figure or percentage?

Mr. Lee Loevinger: This one would be 50% larger than the second bank, three times as large as the third bank and as large as all the remaining banks combined plus some left over.

Justice William J. Brennan: That's understandable with evidence of some of these other Philadelphia banks that this would be a good thing both for them and for their customers, is that it?

Mr. Lee Loevinger: No sir, I deny that.

Mr. Horne President of the Broad Street Trust, when called -- asked whether or not a merger of a bank giving it a larger lending limit would be good, he said as a matter of pride, yes.

As a matter of competition, I don't know.

That's the largest Philadelphia banker that was called or the representative of the largest Philadelphia bank.

The representative of other banks said, it would increase competition and what they clearly meant was that they were going to have to the work harder to maintain their position in the face of the advantages held by the merged bank and several of them made this perfectly clear.

The testimony is cited in our replied brief --

Justice William J. Brennan: Was there any specific fact finding by Judge Clary on this subject?

Mr. Lee Loevinger: Yes, I believe Judge Clary said that the competition would be increased in Philadelphia and he referred to this kind of testimony.

Justice Hugo L. Black: Did anyone of them testify that increased competition to the extent that the banks from which this man was testifying might have to lend money at a lower rate?

Mr. Lee Loevinger: No, sir.

There is no testimony that this would have any effect on rates directly.

Justice William J. Brennan: Would you agree -- I think Mr. Price told us, it couldn't have any effect on rates.

Mr. Lee Loevinger: No, sir, I disagree.

I think that this is wholly false --

Justice William J. Brennan: Maybe be I misunderstood Mr. Price?

Mr. Lee Loevinger: He did say that and this is one of the points I – Mr. Price suggested if I recollect correctly that rates are controlled.

This not only is not true but the thing that we are seeking to do here to preserve competition is necessary to the Federal system of regulation.

The Federal Reserve Board does not undertake directly to control interest rates.

Interest rates are not set by the Federal Reserve Board --

Justice William J. Brennan: What is the fact among the Philadelphia banks today, they all charge the same rates or?

Mr. Lee Loevinger: No, sir.

There are varying rates, there are varying service charges, there are differences in service charges and in rates between the two banks involved here and there is in evidence the report of task forces, setup by these two banks to determine what the rates should after merger and the Court found and it is the fact that in every case the rate adopted was the one more favorable to the bank and less favorable to the borrower, but with respect to this matter of the regulation of rates sir, if I may explain our view.

In fact, what the Federal Reserve Board does is set the so-called rediscount rate, which is essentially the rate at which the banks can borrow.

Now it is indispensable to the influence upon the economy of this rediscount rate that the rates to private borrowers should flexible enough, so that they follow the rediscount rate move up and down as a Federal Reserve Board establishes the rediscount rate.

If there is monopoly or restraintive trade or other inflexibility in the banking system, then the banks cannot respond in moving their interest rates to follow the rediscount rates, so that the whole scheme of federal influence upon the economy falls.

And there is no direct control by the Federal Reserve Board, there is simply an indirect influence through its ability to set the rediscount rates and if we permit restraint, if we permit monopoly, its influence is reduced and eventually to nothing.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Yes Sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: The merger has no other point sir.

There would be no reason for a merger, if it didn't give it a competitive advantage.

Justice Arthur J. Goldberg: [Inaudible]

Mr. Lee Loevinger: As a matter of fact, there is a specific testimony on that sir from the President of the Girard bank, who got up and testified that one of the reasons for the merger was that they were spending too much time competing with each other.

And that if they could have this merger, they could stop wasting their energy competing with each other and go out into the national and the international field and spend their energies there.

This was his testimony as to the reason for the merger.

Justice John M. Harlan: May I ask you a question?

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: You said yesterday [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: I believe that when you talk about relevant market, this is a conclusion of law sir.

The fact that it's denominated to finding a fact is insignificant.

The facts are perfectly clear and in fact, the Lower Court adopted or affirmed numerous of the findings of facts proposed by both sides.

Among those, it included a finding proposed by the defendants that the relevant market was not Philadelphia.

I think that this is so clearly observed that it's scarcely deserves a very serious consideration, because the fact is that Philadelphia is a market and is relevant to this case.

The question is whether or not the affects of this merger in the Philadelphia market are to be disregarded, because of the potential advantage in the national market, which the Court directed its attention to.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: [Inaudible]

Mr. Lee Loevinger: Yes sir.

I think this is a conclusion of law, not a finding of fact and I think that none of the facts that are specifically found as such, when they are separated out from the conclusion of the Court below need to be reversed.

Justice John M. Harlan: [Inaudible] the effect on competition is pertinent?

Mr. Lee Loevinger: Yes sir.

Justice John M. Harlan: And those findings [Inaudible]

Mr. Lee Loevinger: No, sir because again these are conclusions.

The Court and the findings that it found are specifically -- the proposed findings are all key to testimony, the findings are key to testimony of the kind that I've referred to, a team of bankers who said the merger would increase competition meaning, we're going to have to work harder if this merger is permitted.

The President of I think it was one of the -- I have forgotten which organization said “We are going to have to compete harder, because the merged bank will have more offices and will do more advertising then we will so we're going to have to work harder.”

Another witness said, “The competition in his words were; will get worse” and what he meant was that we are going to have work harder.

This is all cited in our reply brief sir, set out there and it is perfectly clear what is meant by so-called increased competition.

What is meant by increased competition in this sentence is increased competitive pressure on the other Philadelphia banks.

Justice William J. Brennan: You mean in effect, we are going to have to struggle harder to hang on to what we have got?

Mr. Lee Loevinger: Yes sir, precisely this is what they said in almost those words.

Thank you, sir.