United States v. First City National Bank of Houston

PETITIONER:United States
RESPONDENT:First City National Bank of Houston
LOCATION:Sealy Corporation

DOCKET NO.: 914
DECIDED BY: Warren Court (1965-1967)
LOWER COURT:

CITATION: 386 US 361 (1967)
ARGUED: Feb 20, 1967 / Feb 21, 1967
DECIDED: Mar 27, 1967

Facts of the case

Question

  • Oral Argument – February 20, 1967
  • Audio Transcription for Oral Argument – February 20, 1967 in United States v. First City National Bank of Houston

    Audio Transcription for Oral Argument – February 21, 1967 in United States v. First City National Bank of Houston

    Earl Warren:

    United States, Appellant, versus First City National Bank of Houston.

    Mr. Turner you may continue your argument.

    Donald F. Turner:

    Thank you Mr. Chief Justice, may it please the Court.

    Very briefly, we have before us two cases involving bank mergers and dismissal of complaints brought by the Government involving interpretation of the Bank Merger Act of 1966 and more particularly the following provisions.

    The Act provides that in determining whether or not to approve a bank merger, the responsible banking agency whose approval is required shall not approve any proposed merger transaction whose effect in any section of the country may be to substantially lessen competition or tend to create a monopoly or in which in any other manner would be in restraint of trade unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.

    The statute further provides that in any action brought under the antitrust laws challenging a merger which has been approved by a bank agency, the court shall review de novo the issues presented.

    And it further provides that in any antitrust proceeding, the standards applied by the Court shall be identical with those the banking agencies are directed to apply under Paragraph 5, the paragraph which I just quoted.

    Now yesterday, I endeavored to discuss one issue raised by the Houston banks in their case, namely an issue — a claim that the dismissal in that case was simply on the basis that the Government has failed to allege facts concerning convenience and needs rather than on the basis that the Government had failed to meet the burden of proof on both competitive needs and the competitive consequences and convenience and needs.

    Today I want to address myself to what we deem to be the two major issues on the case which are closely interrelated.

    And the first is whether the Bank Merger Act of 1966 contemplates that in an antitrust proceeding, the function of the court really is to apply a review standard to the determination made by the banking agency, that is to say the kind of review standard that would be applied, say by the Court of Appeals in reviewing the action of the ordinary administrative agency made on the basis of the full hearing and the full record.

    Second, assuming that this is not so, that it is the function of the court to make an independent determination and come to its own conclusion whether the burden of proof is on the Government to allege and prove not only the necessary anticompetitive consequences but also the — a negative proposition that these are not out — not clearly outweighed by the convenience and needs of the community.

    Potter Stewart:

    Mr. Turner —

    Donald F. Turner:

    But whether on the other hand, that is a matter to be — to be raised by defendants with the burden lying on them.

    Yes Mr. Justice?

    Potter Stewart:

    If this is a review procedure —

    Donald F. Turner:

    Yes.

    Potter Stewart:

    — of the more or less conventional kind, then I suppose, it’d be rather clear that the burden is on the Government —

    Donald F. Turner:

    That is correct.

    Potter Stewart:

    — that the jury —

    Donald F. Turner:

    That is correct.

    Potter Stewart:

    Right.

    Donald F. Turner:

    And as if we — if it is a review procedure, not only is the burden on the Government to allege and prove the negative proposition that I have just suggested —

    Potter Stewart:

    (Inaudible)

    Donald F. Turner:

    — probably considerably more than that —

    Potter Stewart:

    — administrative finding, yes.

    Donald F. Turner:

    Namely that the determination of the agency either was based on insubstantial evidence —

    Potter Stewart:

    Or was capricious or —

    Donald F. Turner:

    Or was arbitrary and capricious.

    Potter Stewart:

    Right, right.

    Donald F. Turner:

    That’s correct.

    Abe Fortas:

    Mr. Turner, —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — before you just launch on this aspect from your argument.

    I’m still concerned by the fact that the complaint is based only on the Clayton Act with no reference to the provisions of the Bank Merger Act.

    Well, let’s suppose that we adopted the Government’s position here subject to what you said yesterday, that is to say that the provisions of the Bank Merger Act do govern here.

    Donald F. Turner:

    Yes.

    Abe Fortas:

    Wouldn’t we have to affirm or send this case back in some way for you to amend your complaint, because your complaint is based solely on the Clayton Act and there’s a question in my mind as to where that leaves the case and deal with your — the statement that you made yesterday which I think is quite obvious sad to say —

    Donald F. Turner:

    Yes sir.

    Abe Fortas:

    — that the Bank Merger Act does govern here.

    I don’t understand why the Government brought the case solely as a Clayton Act case if the provisions of the Bank Merger Act governed, and if the provisions of the Bank Merger Act governed as you indicated yesterday, I wonder if this case can go to trial under this complaint when if it’s appropriate for the case to go to trial under this complaint.

    Donald F. Turner:

    Mr. Justice, I — we think it is, as I think I tried to indicate yesterday, I — we wouldn’t — we would not have raised in the serious objection if the point you now make was made by the District Judge and he had said, “Won’t you please amend your complaint to read — say — to charge a violation of the Clayton Act as amended by the Bank Merger Act of 1966.”

    Abe Fortas:

    The judges don’t usually phrase things that way, Mr. Turner, in my —

    Donald F. Turner:

    I —

    Abe Fortas:

    — experience anyway.

    Donald F. Turner:

    Yes.

    I’m afraid I lacked court experience but in any event, if this point have been made, we would have had no objection of that.

    I think our complaints were technically correct because the Bank Merger Act as I suggested yesterday does not itself create a cause of action.

    The cause of action is still an antitrust cause of action and what the Bank Merger Act does is as you’ve — as you pointed out and as we all know is obvious indicate that in a antitrust action involving a bank merger, the court shall apply the particular standard that is set forth.

    Now, I find it little hard to see why the trial can’t proceed on the basis of the complaint as the Government has drafted it, so long as everybody is aware of the proposition that I’ve just suggested.

    I think it makes a little difference to us whether the complaint reads one way or the other.

    I don’t think it’s a decisive question or one that has any material impact on the way that the case would be tried, nor does it leave the defendants unaware of what the issues are.

    Now I would like to proceed to the question as to whether this statute gives to the antitrust court the task of simply reviewing the agency determination for the purpose of determining whether it was arbitrary, capricious or not, or whether it gives to the court it’s normal function in an antitrust case of making an indeterminate — an independent determination of the issues that are raised.

    Now of course it is the Government’s position that the Bank Merger Act clearly contemplates that the Court in many cross action involving a bank merger shall make an indetermine — independent determination of the legality of the merger under the standards of the Act and not merely review the banking agency’s determination to see if it was supported by substantial evidence or it was arbitrary or capricious.

    William J. Brennan, Jr.:

    Mr. Turner.

    Donald F. Turner:

    Yes?

    William J. Brennan, Jr.:

    Is my recollection accurate, that the — this provision reviewed de novo come really from a proposal of the Attorney General by letter?

    Donald F. Turner:

    That is correct sir.

    William J. Brennan, Jr.:

    And didn’t that letter suggest that the provision provide for a trial de novo?

    Donald F. Turner:

    Let me — the sequence was this.

    Trial de novo, it was used in one letter by the Attorney General, a letter I believe dated September 24.

    Donald F. Turner:

    The phrase review de novo appeared in the proposed draft of a statutory provision laying down standards applicable to bank mergers —

    William J. Brennan, Jr.:

    And the — do we have —

    Donald F. Turner:

    — appearing in the letter of January 5th — accompanying a letter of January 5th, 1966.

    William J. Brennan, Jr.:

    Do we have any history of why the choice of the word review rather than trial?

    Donald F. Turner:

    I don’t think we do Mr. Justice.

    The Comptroller’s brief suggest some executive history if I may call it that, to the effect that there was some significance in the change of words from trial to review —

    William J. Brennan, Jr.:

    Incidentally is the power to correct.

    Donald F. Turner:

    I can only say having been a participant and I would not raise this.

    I don’t want to say to myself having been a participant in all of the agency discussions that I do not share their recollection.

    My recollection is that the question never came up.

    I think — in short of it is, our position is that the words are really interchangeable.

    William J. Brennan, Jr.:

    Well, I —

    Donald F. Turner:

    There’s no particular significance to be attached —

    William J. Brennan, Jr.:

    Well, I —

    Donald F. Turner:

    — to one or the other.

    William J. Brennan, Jr.:

    I guess will ultimately with the statutes which provides the trial de novo —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    — but isn’t the expression of review de novo unusual?

    Do you know of — do you any other statutes there?

    Donald F. Turner:

    No, I don’t.

    And as a matter of fact, the statute that was involved in the Smithfield case which is cited rather heavily by appellees in both of these cases did not itself use the phrase review de novo.

    It used the word trial de novo.

    And I must say having read the case that I failed to see how it supports the position of the appellees argue that it does, to me it’s manifest from reading the opinion that the court is using the words trial and review de novo interchangeably.

    The statute as I said uses the word trial de novo, courts to review and will set aside the determination, it found to be unwarranted by the facts to the extent that the facts are subject to trial de novo.

    That was the statute the court was interpreting in that case.

    And later on, the court prior to remanding said, “We will request the court below, the District Court to review de novo the action of the Comptroller.”

    As I said it seems to me that as far as that court was concerned, there was no particular significance in using one word or the other.

    I must say that the Attorney General who existed — a legislation which would have removed antitrust jurisdiction to the end would hardly calculate that they abused the phrase review de novo in his own proposed statute, if it had the consequences that the appellees now contend that it does.

    Now — but for the problem Mr. Justice Brennan that you have just raised, namely whether there is any peculiar significance in the use of the word review as opposed to trial, it seems to us that the words of the statute clearly give to the court the responsibility of making its normal independent determination of the issues that are presented in an antitrust case involving bank mergers.

    The only difference being that the issues may be somewhat broader and somewhat different in response to the different standards of the Bank Merger Act directs the court to apply.

    Donald F. Turner:

    We would also suggest that this consequence is made perfectly clear by the legislative history including most particularly the fact that bills wre rejected which would have either immunized bank mergers once approved by the banking agencies from antitrust attack or would have provided precisely the kind of review that appellees now suggest the statute the respondent asked did.

    In fact, the original bill proposed by Senator Robinson, S. 1698 provided that — it would have provided that the authority to approve mergers consolidations and acquisitions herein conferred on the Comptroller of the currency, the Board of Governors, and the court — and FDIC shall be exclusive and plenary and any banks participating in any transaction authorized or approved under the provisions of this Section shall be and they are relieved from the operation of antitrust laws.

    That was Senator Robertson’s original proposal.

    The original proposal by Representative Ashley in the House, H.R. 11011 would have provided review in the Court of Appeals, precisely identical with the kind of review say of an FTC, an FPC, or an FCC determination providing anybody including the Attorney General could go to the court and in that court, the findings of the agency as to the facts, if supported by substantial evidence shall be conclusive and all the other usual —

    William J. Brennan, Jr.:

    (Inaudible) that proposal would have planned a review —

    Donald F. Turner:

    That’s right.

    William J. Brennan, Jr.:

    — within the confines of the record made before the agency.

    Donald F. Turner:

    Well, that would have been an interesting problem if that bill had passed.

    In view of the fact that the — well, I take it back.

    That actually — bill, I think it provide for a hearing, so that would —

    William J. Brennan, Jr.:

    Well, if we could —

    Donald F. Turner:

    — have solved that problem.

    I’m not absolutely sure on that and if I’m wrong, I will correct it later.

    My recollection (Voice Overlap) —

    William J. Brennan, Jr.:

    Well — and ordinarily in an FTC —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    — review of the Federal Trade Commission determination —

    Donald F. Turner:

    That’s right.

    William J. Brennan, Jr.:

    — is the record before that agency?

    Donald F. Turner:

    That’s right, that’s right.

    And if there — any effort is made of course in Court of Appeals to produce new evidence, that must be by way of motion, namely — and the normal procedure would be then to remand that the court thought that the new evidence was pertinent and should be heard, the normal procedure would be to remand the court — to the agency itself to reopen the record and reconsiders determinate — the matter on the basis of the new evidence.

    William J. Brennan, Jr.:

    And is it that that kind of review you think the Ashley proposal contemplates?

    Donald F. Turner:

    The Ashley proposal did, yes.

    William J. Brennan, Jr.:

    It contemplates.

    Donald F. Turner:

    That’s correct.

    And that was incidentally the bill which was most strongly criticized by the Attorney General in his first letter to Chairman Patman of September 24th, 1965.

    William J. Brennan, Jr.:

    Was that when they’ve suggested that the proceeding before the Comptroller was not comparable because not really an antitrust (Voice Overlap) —

    Donald F. Turner:

    That’s right and — well, as the Attorney General pointed out in that letter, the — there are vast number of applications for bank mergers, they run in the hundreds.

    There has not been in the past provision for hearings and this makes sense because the vast majority of these cases are such that — certainly insofar antitrust considerations are involved, there’s no problem that’s going to be presented.

    And, the enormity of the test that would be assumed by the banking agency is they have full scale hearings on each one of these applications would be really great.

    Donald F. Turner:

    Well — but the point that was made was, given the fact that this kind of abbreviated disposition is appropriate for bank agency approval.

    This clearly suggests that in any judicial proceeding brought under the antitrust laws, that that determination should not get the kind of weight that an administrative agency determination normally gets.

    And it was suggested that — in that letter and in the later letter, although we did not get exactly the statute we wanted, that in terms of the standards that the appropriate way of dealing with this matter was the, why do we think the Bank Merger Act finally did deal with it?

    William J. Brennan, Jr.:

    Well, under the Government’s view, how much weight is given to proposal?

    Donald F. Turner:

    To the determination Mr. Justice as such, it seems to me none.

    To expertise on particular issues, I don’t think there’s any single answer to that.

    That is in urging of this Act does not give the court simply a review function for reviewing the determination of the Comptroller.

    We are not urging for the other banking agency, we are not urging at all that the expertise of those agencies to the extent that it exist and with regard to the particular issues in which it’s important is going to be disregarded.

    They have, as you know by statute, the opportunity to appear as a party, an opportunity that has been taken every time it has been presented, whether they appear as a party or not, the banking agency official could appear as a witness and evidence can be put in.

    William J. Brennan, Jr.:

    So what (Voice Overlap) —

    Abe Fortas:

    What was the (Voice Overlap) —

    Donald F. Turner:

    And — he wouldn’t be entitled, you know, to the treatment of the — that any expert would (Voice Overlap) be entitled to.

    William J. Brennan, Jr.:

    If the evidence would be put in and then under the Government’s view —

    Donald F. Turner:

    Well, it would be —

    William J. Brennan, Jr.:

    — a banking agency would have to produce some evidence not merely that this is our determination based on certain facts.

    We applied to our expertise and reached this conclusion.

    Donald F. Turner:

    Well again, I would say that under the procedures that are established as properly interpreted, the final determination of the agency is not entitled in anyway.

    William J. Brennan, Jr.:

    Yes.

    Donald F. Turner:

    In the actual court proceeding, when particular issues came up that may have peculiar aspects about them on which the banking agency may have expertise, the court may well pay that rather high regard.

    William J. Brennan, Jr.:

    Well, concretely, as I recall it, there’s a rather detailed, and indeed supplemental, even more detailed explanation of the grounds upon which the Comptroller reached the conclusions he did.

    Now, would all of that have to be the subject of evidence or would he be simply permitted to come in and testify, “These are the things that we considered.”

    Donald F. Turner:

    Well, —

    William J. Brennan, Jr.:

    A lot of factual statements there whether (Inaudible) —

    Donald F. Turner:

    That’s right.

    Well, the —

    William J. Brennan, Jr.:

    And that — that’s a —

    Donald F. Turner:

    The factual statements as such, I would suppose, could not be introduced as evidence and these are more in the nature of con — fact conclusions not evidence.

    William J. Brennan, Jr.:

    But, for example if that (Voice Overlap) —

    Donald F. Turner:

    And in the court proceeding, the facts that laid behind those findings —

    William J. Brennan, Jr.:

    Well, their staff studies said —

    Donald F. Turner:

    — would presumably have to be adduced.

    William J. Brennan, Jr.:

    The staff studies as I recall it referred to —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    I’m speaking of what you —

    Donald F. Turner:

    Yes.

    Well, whether they would be admissible as evidence, and if so, for what purpose would be a matter for the ordinary rules of evidence.

    If — again, if they’re conclusory, they would be open to challenge on the basis of the — on the ground that the basic facts have not have been presented.

    William J. Brennan, Jr.:

    Well, it does seem to me what the — that this really is saying that the — all of the issues are retried, would all of that means on the way of evidential burden (Voice Overlap) —

    Donald F. Turner:

    That is correct, but I would — you know, in a sense, retrial is not an appropriate word because in — and a lot of these issues, if not all, all of them never have been tried —

    William J. Brennan, Jr.:

    Have not been tried —

    Donald F. Turner:

    Have never been tried because of the summary nature of the proceedings before the banking agency.

    Now, I would like to make just two or three points in connection with the legislative history to indicate why it is we think the conclusion we urge is correct.

    One is this, the primary purpose of the Act, one of the primary purposes of the Act was clearly to eliminate the application of disparate standards among the banking agencies and between the baking agencies in the courts.

    It is — or a thread running through the entire legislative history and the relevant reports is the desire that there’d be uniformity insofar as the standards applied by the agencies and the courts are concerned.

    Now, we simply point out that you cannot achieve uniformity, in fact you clearly do not as between court and administrative agencies if the administrative agencies are directed to apply the standards that the Bank Merger Act sets forth, and the court applies not those standards but a review standard overturning the agency determination only if it finds it arbitrary and capricious.

    Those are not the same standards, those are different standards.

    Abe Fortas:

    Is there anything in a banking situation that makes that uniformity more desirable than in other parts of our economy that tells us if you apply for the argument you’ve just made to other parts of our economy, Mr. Turner has suggested that you have been — reconsidered all the problems of whether the quasi judicial administrative agencies aren’t desirable.

    For example I have a recollection that there are certain overlaps between the court jurisdiction at the instance of the Department of Justice and the jurisdiction of the Federal Trade Commission, and what you just said if you sort uniformity —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — and, you say it can be achieved only as a result of a court decision, I would think that they’d have a fundamental national policy to be reconsidered or are you saying to us that that is explicit in the legislative history here?

    Donald F. Turner:

    Yes, I’d — I would prefer not to tackle the other questions if I — [Laughter]

    Abe Fortas:

    I should think not —

    Donald F. Turner:

    I am simply contending a — suggesting that with regard to this particular area, it seems clear to us from the legislative history that among the things of principal concern to Congress was a feeling that the standards of the bank agencies were applying in approving or disapproving mergers were quite dissimilar from those that had been applied by the courts.

    To be specific, I’m sure it was felt.

    Indeed, I think it was suggested at more than one point that the banking agencies were not applying the standard of Philadelphia National Bank.

    And what Congress wanted to do is to make sure as best as it could, that at east they started out trying to apply the same standards.

    And what I’m saying is you can’t — that aim would not be achieved if the agencies are directed to apply particular standards and the court simply applies the kind of review that is normally made for an administrative agency.

    Moreover —

    Abe Fortas:

    Yes, the proposition is arguable too.

    I mean, you said exactly the converse of what you now said.

    Abe Fortas:

    But what I want to ask you is whether — I don’t remember this —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — hearing in the Committee reports, do you have it briefed?

    Let’s see — you have it, the brief to, I’ll —

    Donald F. Turner:

    Oh!

    Abe Fortas:

    Well, I — it slipped my mind now but —

    Donald F. Turner:

    Yes, I think — I have the Committee report here and it says the major purpose of the bill is to resolve the apparently conflicting interpretations which have been made — given the Bank Merger Act of 1960.

    This is the House Report to the company declining the bill that was passed.

    Abe Fortas:

    You construe that with the — do you construe that as either not to mean conflicts between the executive agencies on the one hand, the courts on the other hand?

    That I didn’t get when I read that provision.

    Donald F. Turner:

    I’m not sure at this point that I understand the question maybe I’d better restate —

    Abe Fortas:

    Your argument is not merely that there are conflicts among the courts, and in general, the sort of conflicts that we have in applying antitrust —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — standards in all parts of our economy.

    And your argument is that there’s a conflict between the courts on the one hand and the executive agencies on the other hand.

    Donald F. Turner:

    There was or thought to be — there was — or there was or thought to be by the Congress a difference in approach.

    And I must say I don’t suppose anybody really disputes that proposition.

    And what we are suggesting is that the purpose of the Bank Merger Act was to — as best as you can, eliminate that difference.

    And my argument is that you don’t eliminate it by applying — by putting the courts in the position of applying a review standard.

    Particularly in light of the fact that there’s not one bank agency but three who can take quite different approaches to these questions as indeed these cases indicate and both of these cases, the Federal Reserve Board made a different assessment of the competitive factors than did the Comptroller.

    And if the court’s function is limited simply to one of reviewing the agency determination to see if it’s arbitrary and capricious, it is impossible to bring the agencies into some sort of line because they could pursue substantially diverse halves in assessing factors of this kind and still be arbitrary and capricious.

    I will — if I may continue this argument a little later, I’d like to save —

    William J. Brennan, Jr.:

    Mr. Turner, may I ask —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    May I just ask you —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    — to ask a question.

    It does seem to me that the Government’s position really reducing the agency in the proceeding in court pretty much to the role of an expert witness.

    Donald F. Turner:

    That is correct.

    William J. Brennan, Jr.:

    And I take it that you say that the Congress really intended to have the courts, as an original matter, apply the standards of the —

    Donald F. Turner:

    Bank Merger Act.

    William J. Brennan, Jr.:

    — Bank Merger Act, including the needs of the community.

    Donald F. Turner:

    Any other — that’s right.

    And the issue I’ve not yet reached, but I will do in arguing the second case —

    William J. Brennan, Jr.:

    Yes, you hope.

    You hope.

    Donald F. Turner:

    — is whether that is — I mean the second case that is here before us now.

    William J. Brennan, Jr.:

    So you’re hoping we’ll reach it in that.

    Donald F. Turner:

    Yes, is whether that proposes any peculiarly difficult, impossible burdens on the court.

    William J. Brennan, Jr.:

    Yes.

    Donald F. Turner:

    And I’d like, as I may, save a couple of minutes for rebuttal on this case.

    Earl Warren:

    Mr. Searls.

    David T. Searls:

    Mr. Chief Justice and may it please the Court.

    There have been six decisions rendered ever since the passage of the merger — Bank Merger Act of 1966 by the trial courts, the federal trial courts.

    Each of those six decisions is contrary to an adverse to the Government in this case.

    In each of those six cases, the trial judge held that the Bank Merger Act of 1966 was the controlling statute.

    One of those six decisions is a three-judge court by — in the Northern District of California, one Circuit Judge and two District Judges sitting.

    In the present case, the suit is brought under Section 7 of the Clayton Act.

    And the trial court passed strictly on pleading a question because the only issue before the court was on a motion to dismiss.

    And properly so, on motion to dismiss, the only question is does the pleading state a claim on which relief can be granted.

    As a matter of law, does it state a cause of action?

    So the trial judge as the learned counsel for the Department of Justice have conceded, did not reach the question as to the weight to be given, the Comptroller’s opinion and decision.

    The trial judge was merely holding in this case, you have to bring the case under the Bank Merger of 1966.

    You have to allege in your complaint those issues, those standards which make up the test or the Bank Merger of 1966.

    Now, it’s clear that the trial judge is passing on a pleading question and we have setout in our — in the appendix to our brief, a colloquy between the court and the counsel for the Department of Justice.

    The Court said, “Well, the burden, I am not too much concerned about the burden of proof, but as to what is actually necessary for you to allege.

    That is what we are concerned about here.”

    The court rather said, “I recognized full will that this is very important and serious litigation.

    And I have no more desire than Judge Clarie had to dispose of this matter on a matter of pleading.

    Normally of course we don’t.”

    David T. Searls:

    Then he said to the attorney for the Department of Justice, “The defendants and the intervener as I understand it, such authorities are here seem to say, that it is necessary for you to allege, (a), that the effect would be anticompetitive, and (b), that it is not outweighed by the convenience and need.

    It seems to me as simple as that.”

    Then he further said, “I think it is just a question as to whether or not you have alleged the cause of action or if you ought to amend and undertake to do so, if you haven’t already done it.”

    The trial judge almost solicited the Department of Justice in this case to come forward and amend the complaint.

    And although the Department gave no indication that they had any desire to amend, when the trial court entered this judgment of dismissal, he gave them 10 days in which to amend.

    Now the position, if the court please —

    Earl Warren:

    But wasn’t the suggestion that they amend their complaint based upon on the assumption that they would carry the burden, that they claim in this Court they’re not entitled to — are not required to carry it.

    David T. Searls:

    Well certainly — ordinarily, the burden of proof follows the burden of pleading, I agree with that.

    Earl Warren:

    Yes.

    David T. Searls:

    That does not necessarily follow and this Court has held that it does not necessarily follow.

    But the Court here was not reaching the burden of proof.

    That would not more properly come before a trial judge in a pretrial hearing or on the trial of the case.

    Abe Fortas:

    Well, Mr. Searls, what do you do at the first paragraph on 3 (A) of your brief, the court remarks?

    David T. Searls:

    I am ought to view in the light of these few authorities which we have at this time, that the pact of 1966 made some rather substantial changes in the law.

    I understand the cases to hold the burden to be on the plaintiff, to allege and prove an anticompetitive effect of the merger, and further that that is not outweighed by the convenience and needs aspect of the matter.

    I think the court was saying under these authorities which you have submitted to them.

    It appears to me that the plaintiff has the burden to allege and prove, he was analyzing those authorities, he said those are what those cases hold.

    But he said, the question before me on a motion to dismiss is a question of pleading, have you alleged sufficient facts for stated cause of action.

    Earl Warren:

    But he really did determine both the matter of pleading and the burden of proof, didn’t he?

    David T. Searls:

    Your Honor I don’t think — as I said on the previous page, at the beginning of this Appendix, the Court said, “Well, the burden, I am not too much concerned about the burden of proof but is what is actually necessary for you to allege?”

    I think the trial court only determined the question of pleading, what was necessary to allege.

    But he analyzed the authorities to hold that the burden was on the plaintiff to allege and prove.

    Earl Warren:

    And if they had amended, he would’ve required them the proof?

    David T. Searls:

    I think he would because I think Your Honor the burden of proof is on the Government in this case, to prove both of the standards by the — that set — that is set forth in the test of the Bank Merger Act of 1966.

    Earl Warren:

    And that’s the issue we’re determining here.

    David T. Searls:

    Not the burden of proof in our case, in a — I think for the motion to dismiss is sustained, it is only a matter of looking at the complaint and saying, “Does the complaint state a cause of action an — as a matter of law.”

    In view of the Bank Merger Act of 1966, does this complaint state a cause of action?

    I think that was the only issue before the trial court.

    Now, Your Honor I want to submit that the position taken by the Department of Justice before Your Honors is entirely different from the position taken in these six cases in the trial court.

    The Department of Justice has taken a consistent position in the trial court that Section 7 governs Bank Merger Act by the bank mergers even since the Bank Merger Act of 1966.

    David T. Searls:

    I think it is clear from the position that they’re taking in the trial courts, they were seeking to have a determination such as was obtained in Philadelphia National Bank, in which this Court held that the Bank Merger Act of 1960 did not in any way change the substantive standards to be applied in a suit for violation of the antitrust law, this Court so held.

    But in the Bank Merger Act of 1960, there was no provision that the Department of Justice and the courts had to follow the same test and the same standards that the Comptroller was required to follow.

    This Court recognized that fact to be true and said that the Bank Merger Act of 1960 did not change the substantive test to be applied in a suit claiming a violation of antitrust laws.

    That was one of the main reasons for the passage of the Bank Merger Act of 1966, was to set forth and provide as the Committee stated in its report or the Banking Committee in the House.

    The bill would’ve established a single set of standards for the consideration of future mergers by the banking supervisory agencies, the Department of Justice, and the courts.

    And what was this single set of standards?

    The Court said, “It would include both the effect of the merger on competition and the convenience and needs of the community.”

    Those are the two elements that make up the test and we submit that that has been carried forward into the statute of — it was finally passed.

    Whether they say these cases were brought in the trial court on an entirely different theory, we now find, the counsel for the Department of Justice say this morning and also yesterday, that we do belong — we do not dispute, the Bank Merger specifies the standards to be applied by the District Court in any antitrust proceeding brought against bank mergers.

    The Government in no way has intended to dispute this by drafting its complaint in terms of Section 7.

    But if — then, it’s further said yesterday and today, if any court had merely requested us to amend our complaints to make reference to the Bank Merger Act, we would have done so.

    But what was the — what’s been the position that’s been taken to the trial courts from these cases?

    The first decision, the three-judge court case in California rendered before this suit was ever filed, the Crocker-Anglo case.

    The court set forth what the position of the Department of Justice was.

    In its opinion, the court said it is the Government’s view that the new statute made no substantial change in the law or standards to be applied in passing up on the issues here presented.

    The Government puts it does then, it quotes the Government’s position.

    It is of course the essential position of the Government that the 1966 amendment to the Bank Merger Act has not resulted in substantial change in substantive antitrust law or in the standards used by the courts in determining the legality of bank mergers.

    But then the three-judge court in California said, “We find no difficulty in concluding that then you win that made substantial changes in the substantive law and in the standards to be applied in this case.”

    Hugo L. Black:

    Did the state — what they were?

    David T. Searls:

    Those standards were, yes Your Honor.

    Hugo L. Black:

    Did it state what the substantial changes were?

    David T. Searls:

    Yes, yes Your Honor, that they —

    Hugo L. Black:

    And what would’ve been required if all merger illegal before that?

    David T. Searls:

    The standard was a substantial listing of competition.

    Hugo L. Black:

    That was already entered.

    David T. Searls:

    But in Section 7, the Clayton Act, it says in any line of commerce, the phrase in any line of commerce was left out of the Bank Merger Act of 1966 and the congressional history discloses that it was intentionally omitted so that you would not determine the competitive impact, say, in commercial banking as Your Honors held in the national — Philadelphia National Bank case, but you would determine the competitive impact in the light of all the financial institutions which might be competing with commercial banks such as mortgage loans, company savings loan, associations and so forth.

    Hugo L. Black:

    And then another step.

    David T. Searls:

    And then they — and then the other step was the public interest provision which is not included in Section 1 of the Sherman Act.

    And it is not included in Section 7 with the Clayton Act.

    And that is whether the anticompetitive effects of the proposed merger are clearly outweighed in the public interest in meeting the convenience and needs of the community to be served.

    David T. Searls:

    And then, the Bank Merger Act of 1966 said, “In every case, the responsible agency shall take into consideration the financial and managerial resources and future’s prospects of the existing and proposed institutions and the convenience and needs of the community to be served and further provides that courts should follow the same standards in a suit — in a judicial proceeding.”

    Hugo L. Black:

    Am I wrong in thinking that the only real basic difference between you and the Government on that is that they agree that you’ve got to weigh it and balance, they claim that it’s your burden of proof?

    David T. Searls:

    They claim it’s a defensive matter.

    Hugo L. Black:

    Yes, they claim it.

    David T. Searls:

    Yes, and I’m going to get to that Your Honor.

    Hugo L. Black:

    The burden of proof is on the defendants?

    David T. Searls:

    They say that you have to raise it as a defense, and of course it may or may not be raised as a defense that depends — its optional where the defendant what defense will they raise of course.

    And I’m won’t — I’m going to come to that matter Your Honor.

    Hugo L. Black:

    Well, isn’t that the only basic difference between them?

    David T. Searls:

    That is one of the basic differences I’d say Your Honor.

    We say Section 7 has no application because the substantive standards of Section 7 are no longer to be applied.

    William J. Brennan, Jr.:

    That’s an argument Mr. Searls, I gather that they can’t plead any cause of action in the bank merger case except by reference to the Bank Merger statute itself.

    Is that right?

    David T. Searls:

    As far as substantive law is concerned.

    William J. Brennan, Jr.:

    That’s what occurred to me.

    David T. Searls:

    Yes.

    William J. Brennan, Jr.:

    That the omission of in any line of commerce in and of itself makes in a bank merger case an antitrust aspect, entirely one under the Bank Merger Act without reference to the Clayton Act.

    David T. Searls:

    I think that’s true.

    Not just the admission of any in line of commerce, but also —

    William J. Brennan, Jr.:

    To hold —

    David T. Searls:

    — the addition of the convenience and needs.

    William J. Brennan, Jr.:

    Well, then this is to say then that under the Bank Merger Act, the — this pleading is wholly defective because there’s no reference to the Bank Merger Act but only to the —

    David T. Searls:

    Section —

    William J. Brennan, Jr.:

    — Section 7.

    David T. Searls:

    That is — we take that position Your Honor, yes sir.

    Byron R. White:

    But Mr. Searls, what happens when a merger is attacking the Section 1 of the Sherman Act?

    David T. Searls:

    The Bank Merger Act of 1966 —

    Byron R. White:

    I don’t — I just want to ask you about Section 1 of the Sherman Act, if someone attacks a bank merger and — like it has in that past — like what’s happened in the past, what — do you think there’s any inquiry in the line of commerce?

    David T. Searls:

    No Your Honor, I don’t think there could be in any inquiry into the line of commerce.

    Byron R. White:

    In Section 1?

    Byron R. White:

    Under the Section 1 (Voice Overlap)?

    David T. Searls:

    In Section 1 because, I think Section 1 is supplanted in bank merger cases by the Bank Merger Act of 1966, just like the Section 7 is.

    Byron R. White:

    So, why you — I’m just questioning your automatic assumptions because the words line of commerce were omitted, that there is to be no inquiry in the line of commerce.

    David T. Searls:

    Yes sir, but the Congressional history shows Your Honor —

    Byron R. White:

    Well, there are other antitrust statutes under which the inquiry is made when there is no words like — there are no words like that either.

    David T. Searls:

    In Section 1.

    Well, of course that does not appear in Section 1 of the Sherman Act.

    But the Congressional history of the Bank Merger Act of 1966 discloses that the words in any line of commerce were intentionally omitted from the statute.

    Now as I’ve said, the position taken here, the Bank Merger Act of 1966 is not applicable is different from what — before the trial courts when they rendered these six decisions.

    Just right — were said in the Crocker-Anglo case, the Government took the position, well, there is no substantial difference under the Bank Merger Act of 1966.

    Section 7 is still applicable.

    Now in the Saint Louis Bank merger case, the trial court as here sustained a motion to dismiss for failure to state a claim.

    And in the Saint Louis Bank case, the Court said the plaintiff, that is the Department of Justice, takes the position of the Sherman and Clayton Acts are still the only statutes applicable to this suit and that BAM of 1966 has an effect upon the Comptroller.

    In other words, in the Saint Louis case, the trial judge said that’s the position of the Government, the BMA — the Bank Merger Act of 1966 has an effect only upon the Comptroller.

    But as far as the judicial proceeding is concerned, it is only a Section of the Sherman Act and Section 7 of the Clayton Act which were applicable.

    And I on this case, the trial court sustained a motion to dismiss stating that the plaintiff’s complaint does not beat — meet the basic minimum standards of notice pleading in that it has not alleged a violation of BMA 66, the Act that applies to all bank mergers.

    So the court sustained a motion to dismiss.

    The complaint in this case — the bank — in the Saint Louis case had gave the Government 20 days in which to amend and just to say it failed and refused to amend in this case, they have failed and refused to amend in the Saint Louis case.

    Now, in the Provident Bank case in Philadelphia which will follow this case in argument, the trial judge said the court therefore finds that since Justice has definitelyrefused to try its case under BMA 66, the bank should not be subjected to the expense and inconvenience of a trial when the Justice refused to prove other than admitted facts to establish its case.

    And likewise in the present case, the trial judge here says, “I get the impression you don’t really want to amend and if you don’t want to amend, if you want to stand on this one proposition so that Justice under Clayton 7 will still control mergers or any mergers of banks.

    Anyone would say that you didn’t overlook this allegation regarding to the Bank Merger Act of 1966, inadvertently or accidentally, it’s intentionally.

    And so in this complaint as before Your Honors here and the — which is the same complaint as before the trial court of course, they have alleged, and this complaint appears in the appendix of the Government’s brief.

    They have sought to enjoin this bank merger as a violation of Section 7 of the Clayton Act.

    Under the heading, the offense charged, they have alleged, it appears on page 75 of the Government’s brief.

    They have alleged in regard to the offense charge that the two banks have entered into an agreement of merger and that such agreement is violative of Section 7 of the Clayton Act.

    And in the prayer, they had asked that the court adjudicate that supposed merger violates Section 7 of the Clayton Act.

    There is no reference whatsoever to the Bank Merger Act of 1966 in their complaint.

    There’s no reference to the standards as set forth in the Bank Merger Act of 1966 in this complaint.

    They referred to the line of commerce as being commercial banking which was the line of commerce this Court followed in the Philadelphia National Bank case.

    I submit Your Honors that in the trial courts in these six cases, the Government has followed a very consistent position, and that position is the bank — that Section 7 of the Clayton Act is applicable just as in they said — just as they said in Crocker-Anglo, the Bank Mergers Act of 1966 has made no substantial changes.

    David T. Searls:

    We can still follow the bank — Clayton Act Section 7.

    Byron R. White:

    Well, what is wrong about that?

    David T. Searls:

    Because the Bank Merger Act of —

    Byron R. White:

    Well, let’s assume that they’re wrong about that, then on what point?

    David T. Searls:

    What if they’re wrong about that, then they have failed to state their claim upon which relief can be granted as a matter of law I would say Your Honor.

    Byron R. White:

    Do you think it’s because you’re not mentioning the (Inaudible).

    David T. Searls:

    Not mention, I’m alleging the facts but set forth the tests of the Bank Merger Act procedures.

    William J. Brennan, Jr.:

    Well, indeed she goes so far as the state merely because they mention Section 7.

    David T. Searls:

    I beg Your Honor?

    William J. Brennan, Jr.:

    The very reference, the Section 7 I thought you were arguing is that — is self-established as if they are not alleging the court’s law.

    David T. Searls:

    Because they refer only to Section 7.

    William J. Brennan, Jr.:

    Right.

    David T. Searls:

    They show that they’re only trying to apply the standards of Section 7.

    William J. Brennan, Jr.:

    Or maybe I misunderstood you, Mr. Searls.

    Do I — I thought your argument was they couldn’t plead any cause of action except predicated on the Bank Merger Act.

    David T. Searls:

    I have said, they must bring their case on the Bank Merger Act of 1966 because the — that was the intention of Congress that this provision as a matter of substantive law would be substituted for the standards of Section 7 —

    William J. Brennan, Jr.:

    Yes, but —

    David T. Searls:

    – of the Clayton Act.

    William J. Brennan, Jr.:

    — is that an argument?

    The Bank Merger Act actually supplants Section 7.

    David T. Searls:

    I think it is.

    William J. Brennan, Jr.:

    But —

    David T. Searls:

    And that’s my —

    William J. Brennan, Jr.:

    Therefore, no cause of action predicated on — that the bank merger on Section 7, you say a good cause of action.

    David T. Searls:

    That’s my position Your Honor.

    Earl Warren:

    The judge — court below said I think that the petition fails to state a cause of action in that it alleges only the first step and not the second step which is necessary for the plaintiff to support.

    David T. Searls:

    Yes, Your Honor.

    Earl Warren:

    Now, is it your position that if the Government had amended and had pleaded the second step that the complaint would still be defective?

    David T. Searls:

    No, Your Honor.

    Earl Warren:

    Well I thought —

    David T. Searls:

    No.

    Earl Warren:

    I just understood in the colloquy with Justice Brennan that if a — if they used Section 7 of the Clayton Act at all, that it would be — they would not state a cause of action they had to do it solely under the Bank Merger Act.

    David T. Searls:

    I think the reference to Section 7 would be surplasage but I don’t think it — I think they could come forward and allege the two steps, and that’s what the trial court said.

    You must allege a substantial lessening of competition and you must further allege that the anticompetitive effects are not clearly outweighed in the public interest in meeting the convenience and needs of the community to be served.

    If they alleged the facts establishing those two steps, then I say the complaint would be sufficient on a motion to dismiss regardless what they allege about Section 7 —

    Earl Warren:

    May I —

    David T. Searls:

    — of the Clayton Act.

    Earl Warren:

    But you do contend, do you not that the Bank Merger Act wiped out Section 7 of the Clayton Act insofar as it applied to bank mergers?

    David T. Searls:

    As the — these standards set forth in Section 7.

    It wiped out those standards and substituted other standards to test the legality of the bank merger.

    Earl Warren:

    What did it leave in Section 7?

    David T. Searls:

    It may have left the remedy, the procedure under Section 7, or the procedure under the Sherman Act, or the remedies under the Sherman Act or under the Clayton Act.

    But as far as the standards to be applied the substantive standards, I say they were suspended by the Bank Merger Act of 1966.

    Now we say that this provision, the second step, the convenience and needs of the community is an intricate part of the test.

    It’s one of the elements of the test.

    It’s not an exception as is contended for by the Department of Justice.

    But as a —

    Earl Warren:

    Mr. Searls.

    David T. Searls:

    — public interest provision is where do the ultimate issue to be determined under Section — under the Bank Merger Act of 1966.

    Abe Fortas:

    Mr. Searls, before you reach that.

    I want to clarify my own understanding on what you’re saying here.

    As I have thought rather that there were two separate and distinct questions.

    One, regardless of what is in the Bank Merger Act, that it is the Bank Merger Act here that governs rather than Section 7 of the Clayton Act, and that your contention is that this complaint is fatally defective because it asked that — it’s says it is filed under Section 15 of the Clayton Act to prevent and restrain the violation of Section 7 of the Clayton Act as amended by the Act of December 29, 1950 period.

    So that I thought that number one, you were arguing that the complaint is fatally defective because it seeks to restrain the violation of Section 7 without any reference for the — under the Bank Merger Act.

    And then number two, is separate and distinct argument relates to what the situation would be if the Bank Merger Act had been pleaded or if this complaint were construed so as in some way to plead the Bank Merger Act.

    And on that second leg of the argument, is it your position that puts the Government is in disagreement that the Government if it pleaded, the Bank Merger Act would then have to plead both the competitive impact, competitive effect, and the failure — and the absence of offsetting community advantages.

    David T. Searls:

    Your Honor that summarizes my position exactly.

    I wish that —

    Abe Fortas:

    So, that there aren’t these two both separate attacks on the complaint and not just one.

    David T. Searls:

    That is true.

    David T. Searls:

    There are those two attacks and that is exactly our position here.

    Now, we say under no case — under no situation, should this case be reversed to give the Government an opportunity to amend.

    They had an opportunity to amend.

    They exercised their election to stand on their complaint and refuse to amend.

    The facts have been placed in the state of limbo and held in the state of advance by reason of the statutory injunction that follows the filing of a complaint.

    And they are in very vulnerable position.

    They cannot continue it indefinitely this way.

    Now, the Government having elected to stand on this complaint and refused to amend, we submit that it would not be proper to give them a second opportunity to amend.

    Byron R. White:

    What if you are wrong on that Mr. Searls, would you rather have a — would you like the case reversed anyway and set backs the Government can amend?

    David T. Searls:

    No, Your Honor.

    This case is reversed, this merger will not be approved.

    Is — so I’ve been instructed —

    Hugo L. Black:

    If what —

    David T. Searls:

    If this case is reversed, this merger will be terminated.

    It will not —

    Byron R. White:

    Then what if the court agreed with you, the Government’s complaint didn’t state a cause of action but agreed with the Government that it — ought to have an opportunity to amend, would you then say send it back and then have it come back up here on the same issue?

    David T. Searls:

    No, Your Honor.

    Byron R. White:

    You’d rather have — just reach the other issue?

    David T. Searls:

    The banks will not stand by for any case of reversal.

    The merger will be terminated because that smaller bank had given a notice of termination that this merger can’t be consummated by June 30.

    That’s why I say we stand to fall them out, a motion to dismiss which was sustained by the trial court.

    Now I’m dividing my time equally with the counsel for the Comptroller of the Currency.

    Earl Warren:

    Mr. Metzger.

    Eugene J. Metzger:

    Mr. Chief Justice may it please the Court.

    The issues decided by the court below in either the pleading question suggested by my distinguished colleague Mr. Searls nor the narrow technical question and secondary question on the locus of the burden of proof on the convenience and needs suggested in the brief of the Department of Justice.

    Rather — it was the decision of the lower courts that Section 7 of the Clayton Act have been supplanted as the legislative test of bank mergers by the new, substantively distinct statutory scheme embodied in the Bank Merger Act of 1966.

    This standard was rejected by the Department of Justice and the courts below.

    They flatly denied that the Bank Merger Act of 1966 had any substantive effect as Mr. Searls quoted from the Justice at brief in the Crocker case which was the first expression of Justice’s position through their brief in the lower court in this case, the Houston case, which was the last expression of its opinion where they said and I quote from their brief below, Section 7 of the Clayton Act is still applicable to bank mergers.

    It has not been replaced or repealed by the Bank Merger Act of 1966, and the plaintiff is not required to plead or prove a violation of the Bank Merger Act.

    Now, the point Mr. Justice Fortas’ raised before is particularly relevant to the reasons why the Department of Justice has taken this position.

    Eugene J. Metzger:

    It was not an act of casual intransigence upon the part of Justice below that it only alleged a violation of Clayton 7, nor is it an act of mere whim that counsel here has changed his posture from that below to argue convenience and needs is the question rather than which is the applicable statute.

    Justice needs an independent statute upon which to predicate the logic of its case.

    If the Bank Merger Act of 1966 has supplanted Clayton 7, then Justice’s suit must be predicated upon and taken from the Bank Merger Act of 1966.

    If that is so, the internal logic of that statute requires with us to considerate as a review of the statute and a review standard the Justice must apply.

    It was for this reason that the court below suggested that the — the Justice below suggested that Clayton 7 still applied.

    They needed an independent statute to get them into court.

    They needed to say, “We don’t need the Bank Merger Act of 1966, we must — we can sue under our own statutory standards.”

    Now we shall demonstrate that Clayton 7 no longer applies to banking and Justice’s suit consequently to quote Judge Clarie below, lies within the ambit of BMA 66.

    Hugo L. Black:

    May I ask you if it’s in the language in the Bank Merger Act which supports that?

    Eugene J. Metzger:

    Yes, I will get to that in a moment Mr. Justice Black.

    Hugo L. Black:

    That it specifically states that Section 7 is no longer to be applicable to bank mergers?

    Eugene J. Metzger:

    The application of the precise terms of the Bank Merger Act of 1966 precludes the application —

    Hugo L. Black:

    But —

    Eugene J. Metzger:

    — of the Clayton 7.

    Hugo L. Black:

    — does it say so?

    Eugene J. Metzger:

    No, let me explain this to you sir.

    The Bank Merger Act of 1966 states that in any suit, you shall apply the standards of this Act.

    Now let us take any possible instance in which a bank merger might arise.

    The banks proposed a merge.

    No suit can arise until the bank merger — the bank regulatory agency approves that merger since — that is a requirement of the statute.

    So we start from the premise that any bank merger as to which an antitrust suit is brought must be one which has been approved by the bank regulatory agencies.

    Now then we have two possibilities, either the bank regulatory agencies properly carried out the standards established in the Bank Merger Act or they did not.

    Now let us assume the first case where the standards of the Bank Merger Act of 1966 were met by the bank regulatory agency.

    That is, its determination was correctly that either the statute did not substantially lessen competition or that if it did that that was all the common public interest by the convenience and needs of the community to be served.

    In that event, the Bank Merger Act of 1966 states that the courts must in the first instance apply the same standard and in the — Section 7 (b), and Section 7 (c) of the Bank Merger Act of 1966 provides that in the event of the standards of BMA 66 have been made by the bank regulatory agency that the Department of Justice may not sue on any other action.

    Well, the net effect of that is, if the bank regulatory agency properly met the standards of BMA 66, no Clayton Act suit could be reached, no Clayton Act decision could be reached.

    And let’s take the other side of that point, suppose that the agency was incorrect, and it could not, it did not meet the standards of the Acts, the court in applying the standards of BMA 66 as instructed in Section 7 (b) would so find.

    They would find as a fact that the agency was incorrect and it should not have approved the merger.

    The statute, Section 7 — Section 5 says, the agency shall not approve and then follows the test that we’ve just discused.

    Well, if the agency shall not approve and they did improperly approved and the court so finds in the first instance, it can now — it may have never reached a Clayton 7 issue because its whole case is before — is decided before it.

    Eugene J. Metzger:

    The Bank Merger Act of 1966 says the agency should not have approved.

    The court finds the fact that it should not have approved.

    Therefore it says to the agency and to the banks, “No, you may not go through with this merger since we find that the standards of the Act were not met.”

    Then in any instance, we will never reach a Clayton 7 case.

    Therefore, that internal logic makes it impossible for Clayton 7 to continue to apply.

    Hugo L. Black:

    Well, if that’s the logic, what language is in the Act or in the report of the Committee, it said the long established used of the application of Section 7 of the Bank Merger was to be repealed.

    Eugene J. Metzger:

    The legislative history also supports that Mr. Justice Black in that —

    Hugo L. Black:

    That being the center of being in it to establish an entirely new procedure, is there any language that says that either in the statute or in the report?

    Eugene J. Metzger:

    In the legislative — there is no specific language that says, “We are now in this process repealing.”

    Hugo L. Black:

    Well, why shouldn’t it have said it if the Section 7 was to be done away with?

    Eugene J. Metzger:

    I think we could’ve avoided a great deal of difficulty if it had said that sir.

    Hugo L. Black:

    Of course it (Inaudible).

    Eugene J. Metzger:

    But let me say to you the legislative history which also demonstrates the same facts Mr. Justice Black.

    In the legislative history, we have the fact that the Ashley-Ottinger Bill which is — which was essentially the bill was ultimately enacted, set down the same standards that are in this bill today.

    And it said — it stated these standards in the terms which are set forth in the appendix of our brief.

    The next day after the Ashley-Ottinger Bill was passed by the Committee, the Representative Royce proposed an amendment to the Ashley-Ottinger Bill.

    Now all his amendments said and the only thing it said was, “Let’s have this standard of Section 5 (b) apply Sections 1 of the Sherman Act and Section 7 of the Clayton Act.”

    That’s the only substantive difference between Representative Royce’s proposal and the Ashley-Ottinger Bill.

    Now that proposal of Representative Royce was rejected by the Committee.

    And that they say, “The only difference between the two is the specific reference to Section 1 of the Sherman Act and Section 7 of the Clayton Act.”

    Now, he proposed to amend 5 by also specifically stating that Section 2 is still applied.

    Now of course that is already — was already covered in Ashley-Ottinger by Section 7 (a) (b) and Section 2 (a) (b).

    But, to the court — so the congr– the Committee said, “Fine, we’ll accept your amendment.

    We’ll accept your addition 5 (a).”

    It made no substantive difference by they put it in.

    The only thing of his proposal that he rejected was a proposal to specifically refer to the Act — the action in the antitrust court as being a Section 1 of the Sherman Act or a Section 7 of the Clayton action.

    Earl Warren:

    Is it your position that — Mr. Metzger, that if it had been suggested to Congress that it specifically repeal Section 7 of the Clayton Act so far as bank mergers are concerned, that Congress would’ve done that in order to carryout the effect of this Act as we now have it.

    Eugene J. Metzger:

    I think they did do that and consciously did do that.

    I just think — they —

    Earl Warren:

    Where do we —

    Eugene J. Metzger:

    — neglected to say it.

    Earl Warren:

    Where do we get that?

    Eugene J. Metzger:

    We get that from the logic of say — of the Bank Merger Act of 1966 —

    Earl Warren:

    Well, I’d like —

    Eugene J. Metzger:

    — which I currently going to do.

    Earl Warren:

    I’d like to stick with Mr. Justice Black’s suggestion that you go to the language rather than your —

    Eugene J. Metzger:

    Yes.

    Earl Warren:

    — view of the logic.

    Eugene J. Metzger:

    Yes.

    Earl Warren:

    Or it might be —

    Eugene J. Metzger:

    Unfortunate —

    Earl Warren:

    — more attention to us.

    Eugene J. Metzger:

    Unfortunately, Mr. Chief Justice, we do not have language on either direction.

    I suggest that the only logic of the statute and the only legislative history supports the inevitable conclusion that I have reached regarding this into which I have already adverted.

    Hugo L. Black:

    How long had Section 7 been used with reference to bank mergers?

    Eugene J. Metzger:

    The first case in which Section 7 was charged and it was settled before it reached the courts was Transamerica in 1959.

    Then, of course we had our (Inaudible) Pennsylvania bank was the first case that actually reached this Court in 1963.

    Up until that time, it had been thought by many commentators that for various technical reasons that the bank merger — that bank mergers were exempted in the Clayton Act.

    Hugo L. Black:

    But within my experience as to some extent, I thought that Congress decided to repeal a long existing statute but they didn’t do it by circumlocution.

    Eugene J. Metzger:

    What you’re —

    Hugo L. Black:

    — by logic, but did it by language.

    Eugene J. Metzger:

    You’re suggesting a repeal Mr. Justice Black, and I don’t think we necessarily reached that question.

    Hugo L. Black:

    What you —

    Eugene J. Metzger:

    I think what it has done —

    Hugo L. Black:

    (Voice Overlap)

    Eugene J. Metzger:

    — is to substitute —

    Hugo L. Black:

    — not repeal, has just done away where the court (Inaudible).

    Eugene J. Metzger:

    It has substituted.

    It has substituted other antitrust standards —

    Hugo L. Black:

    But there’s no —

    Eugene J. Metzger:

    — for the antitrust standards —

    Hugo L. Black:

    — language — you can’t cite any language of anybody that indicated it was substituted.

    Eugene J. Metzger:

    Well, let me cite the language of the statute in which it recites some Clayton Act standards and omits others and it adds other standards to the previously applicable Clayton Act standard.

    Hugo L. Black:

    But does that ever take away all the standards of Section 7?

    Eugene J. Metzger:

    It takes away some of it and —

    Hugo L. Black:

    Does it take away all —

    Eugene J. Metzger:

    — applies — it applies some of the standards where Section 7 had used and takes it to its own and adapts them as its standards.

    Of course, in the chain circumstances of this Act which establishes its own frame of reference within which to examine this antitrust criteria.

    Byron R. White:

    What is the — how do — how does the department bring an antitrust action under the — I suppose the Act contemplates that there might be an antitrust action.

    Eugene J. Metzger:

    Yes.

    It — our view of that is —

    Byron R. White:

    Under the antitrust laws.

    Eugene J. Metzger:

    Under the antitrust laws, and our view of that is simply that the Bank Merger Act of 1966 is a part of those laws, that the Bank Merger Act —

    Byron R. White:

    This is a merger — this is an — this is a new antitrust law?

    Eugene J. Metzger:

    Yes, it is an antitrust law which applies in banking specifically for banking just as there are different antitrust standards and therefore even called an antitrust laws to apply to various (Voice Overlap) —

    Byron R. White:

    You have to get to that position, don’t you?

    Eugene J. Metzger:

    Yes, I think so.

    Byron R. White:

    Otherwise, there are — yes.

    Eugene J. Metzger:

    Yes.

    Earl Warren:

    But the same argument apply to the Sherman Act?

    Eugene J. Metzger:

    Yes.

    If you —

    Earl Warren:

    — applied to — as applies to the Clayton Act?

    Eugene J. Metzger:

    Yes, if you’ll note, they also picked up language in the Bank Merger Act of 1966 which purports to encompass those portions of the Sherman 1 standards which they have chosen to adopt.

    Now of course the scheme of the Bank Merger Act of 1966 is to preserve entirely Section 2 of the Clayton Act.

    It specifically refuses to concede — it refuses that it has anything to do with Section 2 of the Sherman Act.

    It disclaims any change in the applicability of that state — standard.

    Hugo L. Black:

    Your argument in sum and totally is that this Act did away with the antitrust laws application, the bank merger —

    Eugene J. Metzger:

    Not at all, Mr. Justice.

    Hugo L. Black:

    — as a whole except as covered by the Act — this Act?

    Eugene J. Metzger:

    That’s correct, but it didn’t do away with them since most of the standards —

    Hugo L. Black:

    Well, it’s after it’s covered by this Act.

    Eugene J. Metzger:

    That’s right.

    Since most of the standards were picked up by this Act, we really feel that’s merely a change in focus.

    Now, the second question which arises naturally under this — the standard is what is the nature of the review that’s taken place here.

    Is it a general judicial review of the decision of the regulatory agency wherein the court reserves to itself questions of law and statutory standards?

    Or is it, as Justice claims, not a review at all?

    But an independent inquiry untainted by the conclusions of the bank regulatory agency, a mere image of the Bank Merger Act in 1960.

    We believe that the procedure of difficulties which this Court found to be a fatal impediment in BMA 60 have been cured in this statute.

    Bank regulatory agencies on review we feel then should have the same treatment accorded them as other regulatory agencies.

    Hugo L. Black:

    Why does it say de novo?

    Eugene J. Metzger:

    The de novo standard Mr. Justice Black, we feel relates to the ability to introduce new facts.

    Hugo L. Black:

    What does de novo mean?

    Eugene J. Metzger:

    The dictionary says the word de novo means a fresh.

    We feel that it’s quite clear that, in this review, unlike many agency reviews say the ICC or the FCC where the court is precluded from inquiring into the facts either by these terms of the statute or by judicial interpretation that that — the word, the effect of the words de novo in this statute has been to establish that the court is not so precluded in this instance that when the court is examining this decision of this agency, it is free to search out such new facts as it may bear — shed light upon the issues.

    Earl Warren:

    Were you to look into it or required to?

    Eugene J. Metzger:

    Required to, of course Your Honor.

    Hugo L. Black:

    What’s the meaning of trial de novo?

    Eugene J. Metzger:

    For the word trial de novo has been variously interpreted because of its constitutional difficulties, initially to hold a trial without reference to the decision below but a number of courts in order to preserve —

    Hugo L. Black:

    That’s the way it’s treated throughout the nation, isn’t it?

    Eugene J. Metzger:

    Well, no, a number of courts Mr. Justice —

    Hugo L. Black:

    Through trial de novo?

    Eugene J. Metzger:

    A number of courts having — in order to preserve the constitutionality of a alleged statutory trial de novo of a — an administrative agency’s decision, have found it necessary to amend judicially that the term trial de novo to mean simply that they’re going to make a complete inquiry into the facts but they will not substitute their judgment to that of the agency since that they feel that would be unconstitutional.

    Hugo L. Black:

    What about a trial de novo of the case coming from an inferior court, of a county to the Circuit Court of the county finds it, what is a trial de novo —

    Eugene J. Metzger:

    As this Court stated in the Keller case, trial de novo in that instance is acceptable so long as the first court —

    Hugo L. Black:

    What does it mean?

    Eugene J. Metzger:

    It means, as we indicated earlier, that a complete new trial of the facts and the law.

    Hugo L. Black:

    But just as though there had been no trial below.

    Eugene J. Metzger:

    That’s correct.

    But that only in those instances where the court below is not an Article III court because then you run into the same question in the court —

    Hugo L. Black:

    Well I’m not talking about constitutional questions —

    Eugene J. Metzger:

    Yes.

    Hugo L. Black:

    — I’m talking about what those words mean.

    Eugene J. Metzger:

    Yes.

    In that context, they have that meaning.

    I think simply in this statute we’re being asked to determine the scope of judicial review of an agency determination of a broad discretionary statutory term which is — has been in the first instance referred to that agency.

    In that case, I suggest this Court’s decision in the last term in Atlantic Refining where it said, “When the Congress has provided that administrative agency initially apply a broad statutory term to a particular situation, our function is limited to determining whether the Commission’s decision has warrant in the record for reasonable basis in the law.”

    I feel that this is the standard to what you should have continued to relate yourselves.

    Byron R. White:

    And in spite of the lack of the record?

    Eugene J. Metzger:

    Now, the lack of the — that isn’t quite true —

    Byron R. White:

    Or provisions where you — or any statutory —

    Eugene J. Metzger:

    There is a provision for a record and there is a very substantial record here Mr. Justice White.

    I wanted to have a chance to correct that impression you may have gained.

    Byron R. White:

    Oh, let me ask — before you get to that — at least there’s no trial type hearing before the —

    Eugene J. Metzger:

    The — there is when sought.

    Now we have for several years —

    Byron R. White:

    That’s what in this case?

    Eugene J. Metzger:

    Well, there was not one in this case, no one asked for one.

    Byron R. White:

    As in the Philadelphia case?

    Eugene J. Metzger:

    No, but there was in — for example Crocker.

    Byron R. White:

    Do you think the statute requires it?

    Eugene J. Metzger:

    No, I do not think the statute requires a hearing.

    I think —

    Byron R. White:

    And there wasn’t one in this case?

    Eugene J. Metzger:

    There was not one in this case that if this —

    Byron R. White:

    Well, then what are — what’s the argument then?

    Eugene J. Metzger:

    The stand — you suggested sir that there is no record here.

    There was a very substantial record developed in all of these bank mergers.

    Byron R. White:

    Yes, but not made accurate, the kind of a hearing that was behind the Atlantic Refining Company transaction or could be —

    Eugene J. Metzger:

    Yes, that can be held Mr. Justice White.

    Byron R. White:

    Yes, but now what —

    Eugene J. Metzger:

    The question it advanced was, “Is it fair, can we make our determination lacking a hearing?

    Is Justice fairly treated in not having a hearing in these cases since it may not be able to obtain all the facts?”

    But it can.

    All it need do is ask for a hearing and as an aggrieved party our —

    Byron R. White:

    Well, tell us —

    Eugene J. Metzger:

    — our regulations —

    Byron R. White:

    That’s the one —

    Eugene J. Metzger:

    — prevent them to hold it.

    Byron R. White:

    Tell us what actually happened here, I mean it —

    Eugene J. Metzger:

    Our — actually in these two cases that are presently before this Court —

    Byron R. White:

    Well, let’s take the Houston one.

    Eugene J. Metzger:

    Alright, in the Houston case, an application was received.

    That application was accompanied by a substantial economic brief in which the agency — which the merging bank set forth their contentions as to the convenience and needs of the community and as to the competitive effects and set forth a numerous statistics as to the structure of the market and the nature of the city.

    Now —

    Byron R. White:

    And what examination did you make with those reference —

    Eugene J. Metzger:

    That is a sworn statement.

    At — in the first instance are — our examination is a — the — an examiner is sent out into the field to make inquiry as to the accuracy of those representing —

    Hugo L. Black:

    Is that found in this case?

    Eugene J. Metzger:

    That was not in this case.

    To make inquiry and to do accuracy of these representations and also to test the community reaction to the merger and that of the banks as well or —

    Hugo L. Black:

    How do you go about that?

    Eugene J. Metzger:

    Pardon me?

    Hugo L. Black:

    How do you go about testing the community reaction of the —

    Eugene J. Metzger:

    Community leaders are asked their reaction to this particular merger whether they feel it would help or hurt or be a matter of indifference to the development of the community.

    Hugo L. Black:

    Who was that?

    Eugene J. Metzger:

    Everyone of the principal banks, a number of the principal businessmen of the community who are related to that industry.

    It’s a substantial inquiry.

    It takes four to five days on a merger of this size for the examiner to make his survey and they send — submits a report of that to the regional administrator for the particular region in which he operates who then makes a cover report in which he makes his recommendation.

    Hugo L. Black:

    Who does he incline with?

    Eugene J. Metzger:

    He is —

    Hugo L. Black:

    How did he get beyond —

    Eugene J. Metzger:

    He makes the (Inaudible).

    Hugo L. Black:

    — the banking community?

    Eugene J. Metzger:

    The region — the regional administrator —

    Hugo L. Black:

    How do you get beyond the banking fraternity’s reaction to this?

    Eugene J. Metzger:

    The regional administrator is in daily contact with those banks which he supervises.

    He knows them all personally, he works with them, he works with the — those members of the community who have interest in banking and he is able to talk through his dummy conversations with everyone.

    Is able to get a pretty good assessment on —

    Hugo L. Black:

    I presume, he makes an extensive inquiry among the prospective borrowers from the bank?

    Eugene J. Metzger:

    Borrowers or one of the groups that — of course if these businessmen aren’t borrowers, they are one of the groups that are reached, yes.

    Hugo L. Black:

    With those that associates with the bank, I understood you to say.

    Eugene J. Metzger:

    With the banking community, not — it’s not — not at all with the particular banks involved in the merger.

    Now, when the —

    Earl Warren:

    Can you make a detailed findings of fact?

    Eugene J. Metzger:

    We do, if you will note in Appendix C to the Justice Department’s brief starting at page 83, there is about 25 pages of their brief relating to the findings that we made in Houston.

    Earl Warren:

    Does the examiner make those findings?

    Eugene J. Metzger:

    The examiner makes findings which are reviewed by the regional administrator which are in turn reviewed by a Committee at — in our Washington office, which makes — it’s only an independent inquiry into what it feels to be the justifications.

    He makes his own decisions.

    Each one of those members of the Committee makes his own observation and then this bulk of documentation, its presented to the Comptroller for his ultimate decision.

    Abe Fortas:

    Mr. Metzger, is it your understanding that all of these material would be admissible in the subsequent court proceeding and if so, on what theory?

    Eugene J. Metzger:

    And if this was a review.

    Yes, very definitely it would have to be.

    If it is not a review, well then of course we run into the evidence problems that as (Inaudible).

    Abe Fortas:

    Well, I think it has now been proved beyond possibility of dispute, that there’s a certain amount of ambiguity in that word review.

    And what the — on what query, if there is a court proceeding, let us suppose that the Department’s view is right and that what’s necessary here is a de novo proceeding before the court in the sense that once the Justice Department files its complaint, the proceeding goes ahead like any other Section 7 case.

    You nevertheless think that the total dossier or whatever it might be called before the Comptroller could be put in evidence, hearsay —

    Eugene J. Metzger:

    You can’t —

    Abe Fortas:

    — or rumor or everything else?

    Eugene J. Metzger:

    You can put it into evidence —

    Abe Fortas:

    Huh?

    Eugene J. Metzger:

    You can put into evidence Mr. Justice Fortas the expertise of the agency and the literally thousands of years of experience in relation with the issues —

    Abe Fortas:

    Well, apart —

    Eugene J. Metzger:

    — that the —

    Abe Fortas:

    Apart from that —

    Eugene J. Metzger:

    — the officials of the agency have.

    Abe Fortas:

    I thought all this stuff you were just telling us — how about all the stuff you were just telling us about?

    Eugene J. Metzger:

    Yes.

    Abe Fortas:

    The reactions of business leaders and so on.

    Eugene J. Metzger:

    As a technical question of evidence, I would say that in the event that the nature of the review was a judicial review of an administrative agency determination, I should say that that would be evidential.

    If it is not, I think — suggest, we would have to prove all of these all over again and much of it, you can’t, simply cannot.

    William J. Brennan, Jr.:

    Well, we can’t approve it or would you just take your examiner as an expert witness and be described as sampling techniques (Inaudible) that he makes and so forth among (Voice Overlap)?

    Eugene J. Metzger:

    Much of that, the District Courts wouldn’t allow in, much of it is second hand.

    It’s a hearsay, its —

    William J. Brennan, Jr.:

    Well, they might not, but they might allow him to what was the predicate of his expert judgment if the interest of the community requires a merger.

    Eugene J. Metzger:

    Yes, and then — and — but that same expert judgment is applied at every step of the review procedure within our agency up through to fin — the final decision by the Comptroller who was weighing factors that perhaps weren’t even considered.

    Byron R. White:

    Let’s assume for the moment that the Department of Justice introduced evidence on the needs of the community, would you be satisfied on the rest of the record that is made before the Comptroller?

    Eugene J. Metzger:

    Ordinarily of course, if they introduce some new facts we feel it would be appropriate.

    If they introduced something substantial, it really — we had not considered —

    Byron R. White:

    But you wouldn’t want to rest on that record either then?

    Eugene J. Metzger:

    We think at that point, it would be appropriate for the court as they do in ordinary judicial reviews to remand to the agency for consideration of these new facts which apparently they had not considered below.

    This is done everyday with the FTC here and civil hearings and reviews of other agencies.

    Earl Warren:

    Does the examiner take evidence?

    Does he swore witnesses and —

    Eugene J. Metzger:

    He does not —

    Earl Warren:

    — judge up their credibility?

    Eugene J. Metzger:

    He does not.

    We do provide for hearings at the request of any party.

    We have been having for some time at which if a hearing is requested, for example if Justice had requested a hearing here, they would have had a formal record, witnesses would have been sworn and there would have been a report present to take down whatever was decided.

    Earl Warren:

    Oh, yes but as a —

    Eugene J. Metzger:

    And there’ll be cross examination —

    Earl Warren:

    Do you — responded to one of the Justices, that isn’t required by the law?

    Eugene J. Metzger:

    It is not required by the law, but the only — if the only person objecting to the inadequacy of our record is one who has opportunity to make that record complete, we suppose that that individual really has no right to complain.

    If Justice doesn’t want any part of our hearings, in the Crocker case, we offered them to come in, and the court asked them to come in and they refused.

    They — he felt that there was nothing that we could add to the Clayton 7 case that they had brought.

    And therefore —

    Byron R. White:

    You have (Voice Overlap) — you have hearing examiners and anything — are you setup to comply with the Administrative Procedures Act?

    Eugene J. Metzger:

    Not the Administrative Procedure Act Mr. Justice White, we feel —

    Byron R. White:

    Well, how could that require a hearing — establish any mechanic for a hearing before the (Voice Overlap)?

    Eugene J. Metzger:

    Oh, or we’d —

    Byron R. White:

    So, what would you be subject to?

    Eugene J. Metzger:

    There has been a considerable body of law developed over the last several years.

    Earl Warren:

    Considerable what?

    Eugene J. Metzger:

    Body of law, developed over the last several years as to what standards we — our hearings must hold.

    Byron R. White:

    Well like the Smithfield case, you don’t agree with the Smithfield case apparently?

    Eugene J. Metzger:

    After the Smithfield, we agreed in — largely with Smithfield.

    Byron R. White:

    I think he had corrected everything, since you’ve changed your procedure quotes (Voice Overlap) —

    Eugene J. Metzger:

    We have, there —

    Byron R. White:

    — that no longer applies?

    Eugene J. Metzger:

    There has been — there are some 50 cases, branch cases in the lower courts now at which our hearing procedures are very much at issue and those hearing procedures have been refined over the years after Smithfield in order to accommodate the question raised by that court.

    Our hearing procedures are substantial.

    They are not APA and in a complete format, but they do apply I think procedural due process and the rights to all — with the parties.

    APA gives — they also deal with the — that kind of situations that you have within the case, that they’re just not an agency type of review, what’s repealed.

    Eugene J. Metzger:

    Now the APA, Mr. Justice White, provides something quite different.

    The APA provides that it will review and it will sup — would apply an administrative accuracy to an agency action, not to an agency hearing.

    An agency action is to find as anything the agency may do which finally affects the rights of an individual even to doing nothing.

    Now we certainly can hold a hearing and do nothing in regard to that.

    I suggest accordingly that that makes it very clear that the due process of right that comes out of our decisions need not follow a hearing.

    The Section 1009 of Title 5 which is the APA procedure referred to permits an arbitrary and capricious standard to apply to a decision of an agency which is not a decision, which may be a determination by an executive sitting behind the desk with no record of any kind.

    It may be a failure to act entirely.

    Eugene J. Metzger:

    It may be an action that has some hearing proceedings but not full panoply.

    It could be just about anything.

    So I don’t think that could create any real problem.

    I think either on this case — on that case is the (Inaudible) either of the Government where Senate based to authority of this legislation, if I may say, I would (Inaudible).

    Eugene J. Metzger:

    If I may have several minutes to do that, I would like to do that.

    Earl Warren:

    Well, I think we have enough time allotted for these two cases.

    They want to give you a little more time on the other case, you can.

    But the —

    Eugene J. Metzger:

    The first action, the — April 5th, 1965, Mr. — Senator Robertson introduced his bill of 1698.

    This bill proposed that the antitrust laws would not apply to banking to do anything.

    And that all mergers which have taken place before May 3rd, 1960 would be considered acceptable and could not be attacked.

    Byron R. White:

    Yes.

    Eugene J. Metzger:

    This was amended by a motion of Senator Proxmire in June of 1965 to provide that Justice would have 30 days in which to bring a Sherman 1 or Clayton 7 action.

    And that the wiping out of all liability on previous mergers would be moved up from May 3rd, 1962, the date — the prospective date of the enactment of Senator Proxmire’s Bill.

    This bill was passed by voice vote of the Senate on June 11th, 1965.

    It went to the House where Senator — where Representative Patman’s Committee, Banking and Finance Committee of the House took it under advisement and Representative Patman did his best to bury it that point.

    I think it’s very — would be very germane if the court would study Appendices A, B, and C of our brief to note the legislative history of the entrance of the Representative Robertson to Representative Patman to avoid any bill being enacted.

    Now, on September 15, 1965, Representative Ashley, who had taken the lead from bringing any bill to pass in this — in the House, proposed 11011.

    Now this bill provided pretty much the same standards that are in BMA 66, but it did provide in addition that the agencies were to home a full APA hearing on each and every merger proposal.

    Now, as you know, there are only — oh, (Inaudible) in a moment.

    The Justice Department wrote back on September 24th and suggested that this would be inappropriate, that all of these merger hearings were not really relevant that in only a few instances would any anti — serious antitrust questions arise therefore it would be economically inadvisable to follow the full APA procedures and bank mergers.

    Thereupon, Representative Ashley rewrote 11011.

    Now, he didn’t change the basic standards of the Act.

    What he did was to remove the full APA hearing on every case.

    Now, this was passed by the Committee, this Ashley-Ottinger Bill was passed by the Committee on October 19, at a hearing at which Representative Patman was not present, a majority of the Committee was there.

    When they go and Representative Patman learned that the Committee’s hearingwas in session, he sent Representative Royce into the Committee and asked for that — the hearing be dissolved — the meeting be dissolved as not in accord with the instructions of the Chairman.

    The Committee ignored Representative Royce’s proposal and passed the Ashley-Ottinger Bill on the 19th.

    On the next day Representative Royce proposed his alternative in which he suggested that Sections 1 and Section 7 be reintroduced into the standards.

    You will recall that Representative — Senator Proxmire’s bill would have applied Clayton 7 and Section 1 of the Sherman Act.

    Representative Ashley took it out of his bill.

    Eugene J. Metzger:

    Representative Royce proposed to put it back in, then that was rejected by the Committee.

    On January 5th, the Justice Department proposed to Representative Royce a bill which would have effectively destroyed the Bank Merger Act.

    It would have brought it back to the position right after the Pennsylvania bank case.

    Section 5 of the proposed bill by Justice would have reduced the Bank Merger Act to nothing more than a recognition of the failing company, a failing-company doctrine.

    Now that was the basic proposal of the Attorney General of January 5th, not to review de novo.

    The review de novo in Section 7, in his proposed Section 7 had no meaning or effect at all if they could get the Congress to accept the failing bank doctrine as being the test for the Bank Merger Act of 1966.

    Potter Stewart:

    But it was a trial de novo anyway.

    It wasn’t reviewed though, was it?

    Eugene J. Metzger:

    It — the term review — trial de novo was in the September 24th letter objecting to 11011.

    Now there was no reference of any kind in the letter of January 5th to review de novo.

    The term was contained in the attachment to say as — dismissed within Section 7 with no — with reference in the text to the letter to it at all.

    The text of the letter adverted to Section 5 which proposed to change the terms of what became BMA 66 to be nothing more than a legislative recognition of the failing-company doctrine adopted by this Court in Pennsylvania Bank.

    Hugo L. Black:

    Did you say who originally proposed the language review de novo?

    Eugene J. Metzger:

    The language of review de novo first appears in the record in the attachment to the January 5th letter of the Department of Justice.

    We suggested —

    Hugo L. Black:

    Of the Department of Justice?

    Eugene J. Metzger:

    Yes, we suggested —

    Hugo L. Black:

    Which was opposed to making the — giving a Comptroller all the power?

    Eugene J. Metzger:

    Yes, and opposed by Section 5 of that statute proposing that the Bank Merger Act in effect be wiped out and be returned back to the PNB decision.

    Now that was the basic essential position taken by the Department.

    The review de novo standard would not have hurt the Department at all if it (Inaudible) — if the Congress had accepted the Section 5 then proposed by — thank you very much.

    Earl Warren:

    Mr. Turner.

    Donald F. Turner:

    Mr. Chief Justice I’m going to utilize what time remains for brief comments on points made by Mr. Searls and I think — I only have two to make and one is in the nature of a restatement of our view on the Bank Merger Act and the pleadings in response to the formulation of the Houston Bank’s position that developed in the colloquy between Mr. Searls and Mr. Justice Fortas.

    And in substance, our view is simply that all the Bank Merger Act does is to create a defense like the McGuire Act creates a defense to a charge of resale price maintenance.

    Abe Fortas:

    What do you do about the elimination of the phrase in any line of commerce?

    Donald F. Turner:

    That was my second comment.

    That — but — just to finish up with this, we think simply it creates another defense namely that a merger otherwise unlawful is not unlawful if it can be shown that the convenience and needs of the community are so served but this clearly outweighs the (Voice Overlap) —

    Abe Fortas:

    Oh, but Mr. Turner —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — those words which appear in —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — Section 7 —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — do not appear in the Bank Merger Act —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    Isn’t that right?

    Donald F. Turner:

    Sir?

    Well, I beg your pardon?

    Abe Fortas:

    Isn’t that correct, that the —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — the section 7 uses the words in any line of commerce, the Bank Merger Act in stating what appears to be the exact standard of section–

    Donald F. Turner:

    Right.

    Abe Fortas:

    — 7, eliminates those words.

    Well, isn’t that — is my understanding correct?

    Donald F. Turner:

    Our position is — it will be due — I will say it here and we will certainly assert it in any proceedings below in cases that this omission is inadvertent of no particular consequence.

    Abe Fortas:

    But it is (Inaudible) — it is omitted.

    Donald F. Turner:

    That’s right.

    Abe Fortas:

    That is — take a —

    Donald F. Turner:

    That’s correct.

    Abe Fortas:

    — look at page 69 of your brief.

    Donald F. Turner:

    Yes sir.

    Abe Fortas:

    And in 5 (b) the standard is set out.

    Donald F. Turner:

    That’s correct.

    Abe Fortas:

    And down to the word unless it tracks the words of Section 7 of the Clayton Act except that the qualifying phrase in any line of commerce is left out.

    Donald F. Turner:

    That is correct.

    Abe Fortas:

    Now it seems to me that it’s arguable that that is a very important indication that this is a different — a new standard that the Congress enacted and is applicable to bank mergers in displacement of the Section 7 Clayton Act standard.

    I’m not saying that that is so and — that I do suggest that that is a point that you have to meet because if that is so, then the conclusion may follow that it was the intent of Congress that the governing standard in bank mergers should be the Bank Merger Act rather than Section 7 of the Clayton Act.

    Donald F. Turner:

    Well, I don’t think that were saying — that I’ve been saying two different things here.

    First, as to whether the omission of the phrase in any line of commerce is significant, it is indeed arguable.

    It is arguable if that indeed it was deliberate and significant and works a significant change in the standards to be applied, I could possibly dispute that.

    Donald F. Turner:

    I will hasten to the add as I’ve said a moment ago to the view of the Government that this is not so and I might briefly indicate the reasons why it’s inconceivable to us how you can conduct any rational inquiry as to what the consequences of a merge — bank merger is going to be unless you have some idea of the lines of commerce affected.

    Well —

    Potter Stewart:

    Whether or not that’s only the commercial banks to expand the goal and that’s constitutional or otherwise.

    Donald F. Turner:

    That’s right, now you can’t —

    Potter Stewart:

    Otherwise, you would —

    Donald F. Turner:

    You can’t —

    Potter Stewart:

    Otherwise you would include steamships and steel company and everything else?

    Donald F. Turner:

    I mean, the — if the proposition would be that you should so to speak and I think the position of the Comptroller boils down to this, that you should disregard plain economic common sense in the definition of market —

    Well, certain —

    Abe Fortas:

    (Voice Overlap)

    Donald F. Turner:

    — and we don’t think that’s appropriate.

    Abe Fortas:

    — and unfortunately, we don’t have to face up to that right now.

    Donald F. Turner:

    That’s right.

    Abe Fortas:

    Our problem is whether the omission —

    Donald F. Turner:

    That’s right.

    Abe Fortas:

    — of that language does or does not indicate an intent on the part of Congress that the applicable standard for whatever it might —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — mean —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — is a BMA standard rather than the Section 7 standard.

    Donald F. Turner:

    On that —

    Abe Fortas:

    That’s the only relevance —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — that it has here as I see it.

    Donald F. Turner:

    Yes, and we do not — that, I — we do not dispute and I don’t think that’s inconsistent with the proposition I’m just suggesting.

    We do not dispute with the Bank Merger Act standard is applicable in a Section 7 proceeding and incidentally we have never disputed this below.

    I could —

    Potter Stewart:

    Well, Mr. Turner, I thought —

    Donald F. Turner:

    Yes.

    Potter Stewart:

    I thought much earlier in today you —

    Donald F. Turner:

    Yes.

    Potter Stewart:

    — conceded that it was an error to call it a Section 7 proceeding in the complaint in this case.

    Donald F. Turner:

    Oh, I didn’t concede, it’s an error of law.

    Potter Stewart:

    Oh, I kind of misunderstood you then.

    Donald F. Turner:

    No, I — by my position to restate it and I — I’m sorry if I didn’t make it clear, is that Bank Merger Act, to know Bank Merger Act is a matter of pleading, what is involved is an antitrust case.

    That’s what is —

    Potter Stewart:

    Well, but nobody —

    Donald F. Turner:

    — referred to —

    William J. Brennan, Jr.:

    No, I think nobody (Voice Overlap) —

    Donald F. Turner:

    — in the Bank Merger Act —

    Potter Stewart:

    (Voice Overlap)

    Donald F. Turner:

    — to bring an antitrust proceeding.

    Potter Stewart:

    When you bring an understand?

    Donald F. Turner:

    Now, if —

    Potter Stewart:

    — 15, isn’t that in this case?

    Donald F. Turner:

    It maybe more artful pleading and it may be more appropriate pleading to say — to charge a violation of Section 7 as amended by Bank Merger Act of 1966.

    That is not in — that may be (Voice Overlap) —

    Potter Stewart:

    Except that (Inaudible) report to amend Section 7.

    Donald F. Turner:

    I beg your pardon?

    Potter Stewart:

    That I could not report to amend Section 7, didn’t it?

    Donald F. Turner:

    Not in so many words.

    That’s another reason why we didn’t — it’s just simply as a matter of pleading.

    We just saw a particular point to it.

    Potter Stewart:

    This is a (Voice Overlap) —

    Donald F. Turner:

    It’s not as clearly to say the Court in any antitrust proceeding shall apply the standards set forth.

    That we do not dispute.

    Byron R. White:

    And one of the antitrust actions — the Act, specifically refers to is that — if it — that if the Sherman Act acted or —

    Donald F. Turner:

    Made a Section 7 action.

    Byron R. White:

    (Inaudible)

    Donald F. Turner:

    That’s correct.

    William J. Brennan, Jr.:

    Well, and what is that, (Inaudible)?

    Potter Stewart:

    Well, this is — when it’s brought under Section 15, its a Clayton Act action, isn’t it?

    Donald F. Turner:

    That’s correct.

    That’s right.

    I (Voice Overlap).

    Potter Stewart:

    (Voice Overlap)

    Donald F. Turner:

    In a merger case, the Section 1 Sherman Act charges redundant and we don’t deal — and that we just don’t use it anymore.

    If there are no further questions, I think that completes —

    Earl Warren:

    Very well.

    Donald F. Turner:

    — my rebuttal on this.

    Earl Warren:

    Number 972, United States, Appellant, versus Provident National Bank et al.

    Mr. Turner.

    Donald F. Turner:

    Mr. Chief Justice, and may it please the Court.

    I will simply continue my discussion of the nature — of what we view to be the nature issues in this case only briefly restating before I proceed our principal — the principal arguments I have covered as to why we believe under the Bank Merger Act the court is still as in any antitrust case required to make an independent determination and I will simply, briefly summarize the points we think the statute is clear in a way that it reads, it provides that the court shall apply the identical standards which the agency is directed to apply, and clearly a review standard would not be an identical standard.

    It provides that there shall be review de novo of the issues presented, not the determination made by the banking agency.

    Finally, it’s clear enough to all that the review standard would amount to an outright repeal of the application of the antitrust laws to bank mergers and this Court has repeatedly held — repeals by implication the antitrust laws are not likely to be implied.

    And we think certainly a repeal should not be implied where as noted in this Court’s opinion in Philadelphia Bank, direct regulation of the banking industry does not extend that the prices charged for banking services and were accordingly the maintenance of competition is highly important for reasons also stated in Philadelphia Bank opinion which we think are completely valid competition in fact may even be more important in this industry than in others because of it’s effects upon entry in other businesses.

    And certainly finally repeal should not be implied or presumptive weight given to an immunizing decision that is based not on a full scale administrative adversary hearing with full opportunity for cross-examination of witnesses and other presentation of evidence were on the kind of summary proceeding that is involved here.

    And very briefly again with regard to the legislative history, we simply point to the fact that several bills which would have done what the appellee’s laim was done here were rejected by Congress and the bill that you have before you was passed.

    Now —

    Hugo L. Black:

    What would they have done?

    Would they have given the Comptroller final right to determine the banks in mergers?

    Donald F. Turner:

    One bill would have Mr. Justice Black.

    The original bill filed was —

    Hugo L. Black:

    But that’s the object which the counsel assault at that time?

    Donald F. Turner:

    He may speak for himself.

    I’m quite sure that he would’ve been delighted with such a solution.

    Hugo L. Black:

    Did he make any statements about his position on mergers before the Committee?

    Donald F. Turner:

    Again, I’m not fully familiar Your Honor with all of the statements that the Comptroller has made but I think it is a fair representation that is viewed to the best of my recollection that indeed he would have favored legislation which would have eliminated the right of the Department of Justice to obtain in the court antitrust proceeding and independent determination of validity of a merger.

    I think that’s a fair statement.

    Donald F. Turner:

    This would would’ve been provided for by the original bill filed by Senator Robertson.

    Robertson S. 1698 would have immunized from the operation the antitrust laws determinations made by the banking agencies.

    William J. Brennan, Jr.:

    May I ask Mr. Turner —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    Were there differences between the House and the Senate versions of the handout in conference?

    Donald F. Turner:

    Well, there were no differences ironed out Mr. Justice Brennan.

    The bill that finally passed to the House was submitted to the Senate and passed to — the best of my recollection, without change —

    William J. Brennan, Jr.:

    Is that (Voice Overlap) —

    Donald F. Turner:

    — as a substitute to the Senate bill.

    William J. Brennan, Jr.:

    I — (Voice Overlap) —

    Donald F. Turner:

    Now incidentally, there’s one aspect of the legislative history which — which none of us have brought out and that is another purpose of the legislation and at least some of the esteem behind it, was a desire to eliminate divestiture in three bank cases that the Government had won.

    And in fact the bill that passed the Senate was a bill that did nothing else but that.

    It had no impact on substantive rules and antitrust proceedings in future cases at all.

    It would have provided a 30-day limitation, but insofar as substantive rules were concerned, the bill that first passed the Senate would have simply immunized pending cases.

    And then after the rather tortured progress of this through the House, the bill was — we finally see was passed by the House and was substituted in the Senate and there was no further — there were no further changes.

    Hugo L. Black:

    Is there a provision for review de novo to the product of the Department of Justice’s effort in connection with those bills?

    Donald F. Turner:

    That was, that language is precisely the language that the Attorney General proposed —

    William J. Brennan, Jr.:

    What do you —

    Donald F. Turner:

    — in his letter.

    William J. Brennan, Jr.:

    — understand of review de novo means?

    Donald F. Turner:

    We understand that to mean, Your Honor, and it is our contention that it means that once an antitrust case is filed attacking a bank merger, that all of the relevant issues that are raised under the appropriate standards are to be tried the way — the court de novo and the determination, the final conclusion, the final determination made by the banking agency is not of itself to be given presumptive weight.

    That’s what we understand that to mean.

    Now, as I indicated in a response earlier to a comment by Mr. Justice Brennan, we are not by any means denying that the banking agencies have expertise which — in such court proceeding may on one or several issues get a considerable amount of weight, depending on the persuasive quality of the presentation on the nature of the issue.

    Let me give a specific example on which I think this would probably be likely to occur or the banking agencies have indeed a long time experience with problems of bank failure and imminent bank failure.

    And on the basis of that experience, their judgment as to whether certain factual indication suggests the likelihood or the danger of bank failure would I suppose be entitled to be listened to with considerable respect.

    William J. Brennan, Jr.:

    Well, how about the matter for example of managerial reporting of which much was made as I recall it in the Comptroller’s defense (Voice Overlap) —

    Donald F. Turner:

    I in the abstract Mr. Justice Brennan really say how expertise would play a role there.

    Now, one of the disputes —

    William J. Brennan, Jr.:

    Well, is that (Inaudible) —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    — that there were some suggestions that a new (Inaudible) was needed in one of these —

    Donald F. Turner:

    That’s right.

    William J. Brennan, Jr.:

    (Inaudible)

    Donald F. Turner:

    In the Houston case, it’s sort of a reverse twist.

    William J. Brennan, Jr.:

    Is that all of what —

    Donald F. Turner:

    Normally the larger bank in acquiring the smaller bank, the argument is that the smaller bank’s management has become mediocre and did —

    William J. Brennan, Jr.:

    Was the other way around?

    Donald F. Turner:

    The other way around in the Houston case.

    But this is a factor commonly relied on.

    Now, this incidentally is an issue of substance on which in any antitrust proceeding I am sure that we and the banking agencies are rather going to — are going to rather sharply conflict because an issue we will always raise against the claim of that kind is whether the merger is necessary to resolve the management problem that has been relied upon by the Comptroller.

    There are other ways of solving management problems, and we think it’s quite appropriate and we’ll argue in any proceeding that there must be some demonstration that there was no other solution at hand which was likely to take care of this.

    But this again, I don’t want to argue issues of this kind.

    I think it’s a (Voice Overlap) —

    William J. Brennan, Jr.:

    Aren’t that — don’t you think they’re irrelevant to —

    Donald F. Turner:

    Yes.

    William J. Brennan, Jr.:

    — the interpretation of (Voice Overlap) —

    Donald F. Turner:

    Well this really takes me into the — into what I think is the heart of the issue.

    I mean, the basic claim that is being made exclusively by the appellees now in the Provident case or by the Comptroller’s office is that what is involved here are issues which are just not suitable for determination by the court.

    Now I think really the argument breaks down into two parts, first that the banking agencies have greater expertise in assessing the various factual issues that might come up under the Bank Merger Act standard.

    And second on an issue I think should be kept apart and I certainly will discuss it but I want to set it aside for a moment that the balancing of competitive considerations against convenience and needs is a balancing of interest that is somehow ill-suited to court determination.

    Now, of course, we see no force in either of these contentions.

    Now, with regards to the expertise on factual issues, I think in view of what the statute clearly provides in our view and what the legislative history indicates, namely a desire on the part of the Congress, that the Court shall continue to exercise their functions and carry on an independent proceeding here and make an independent determination that it will not do simply to maintain that there is some greater expertise on the — in part of the agencies that has to be shown that there’s some reason to believe, the court simply cannot handle these issues and we do not think that is so.

    Now, let me just go into some of the issues that may be raised, we believe that most if not all of —

    Earl Warren:

    I think we’ll recess now —

    Donald F. Turner:

    Yes.

    I’m sorry.

    Earl Warren:

    — Mr. Turner.

    Donald F. Turner:

    Thank you.

    Earl Warren:

    Mr. Turner, you may continue with your argument.

    Donald F. Turner:

    Mr. Chief Justice, may it please the Court.

    Donald F. Turner:

    If I may again briefly recapitulate, I’m now taking up the question whether the courts are so incapacitated for dealing with the kinds of issues that are involved in proceedings of this kind that despite what we think is the plain meaning of a statute and the plain implication of legislative history, this Court should read in a review standard of some kind and needless to say we think the courts clearly are not.

    There are, as I suggested really two issues here or it breaks down into two parts.

    One, whether the banking agencies have a greater expertise or — let me put it differently, whether the courts lack expertise in assessing the various factual issues that might come up.

    And second, whether the balancing of considerations that might be involved under the Bank Merger Act statute is so wholly unsuited to courts that to impose it on them would raise something akin to a constitutional question.

    Abe Fortas:

    Mr. Turner?

    Donald F. Turner:

    Yes?

    Abe Fortas:

    Would you think that the underlying material considered by the Comptroller of the Currency would be admissible in the court proceeding, that is to say the in — the sort of information that Mr. Metzger is talking about, the views of people in the area, businessmen and so on and collect them, that sort of thing.

    Donald F. Turner:

    I would — it’s a little hard for me to answer that in general without reference to particulars.

    I don’t — and I also must myself confess considerable amount of ignorance on rules of evidence.

    Abe Fortas:

    Well, really what I’m —

    Donald F. Turner:

    I think it would be admissible at least certainly if they call these people to testify —

    Abe Fortas:

    Well —

    Donald F. Turner:

    — which they would probably do, would they?

    Abe Fortas:

    Well, that wouldn’t be — that also is a problem.

    The problem is whether in your view of this case you would attach any significance whatever to the issue of the word review, that is to say whether you would say, I concede for example —

    Donald F. Turner:

    Yes.

    Abe Fortas:

    — that you might say that we do concede that review, the word review has some significance in the sense that the material that was before the Comptroller of the Currency, as well as his report or decision or whatever it was would be a part of the court record.

    I think that’s a real problem as to what the word review means and as far as I understand it you take the position that review de novo of the issues gives no means that no effect whatever will be given to the proceedings before the Comptroller of the Currency, and that is a — that’s the question which I really directing my inquiry.

    Donald F. Turner:

    Well, it — it’s hard for me to answer that question precisely.

    I think substantially the answer is yes, or put it this way, the what — the way you put the position is substantially correct.

    I think I wouldn’t go so far as to say that it has no impact or would have no impact.

    Let me suppose for example that the facts brought out in the judicial proceeding more or less correspond to those that were developed by the Comptroller and were a part of his record.

    And let us further suppose that on some of those issues, some of those factual questions say for example, on the likelihood of bank failure or risk of bank failure, his expertise would deserve considerable recognition.

    Then I can envisage a situation in which — if the court was so to speak on the race (Inaudible), it more or less, the facts were not reasonably in dispute and the judgment of the Comptroller was that the acquired bank was going to fail, the judge might go he himself would not — might have some doubt on this, would pay some regard to this.

    But I think in short, that the role of the expertise of the banking agency would apply is not something that can be answered generally.

    I think it cannot be answered easily out of the context of the specific issues that any particular case raises.

    And to go back to your question again, just as you’re saying, is it generally so that the conclusion of the Comptroller as such would not be entitled away, I think I would again be inclined to say yes, that is our position.

    I don’t see how — I think it is that it derives from our position really that what is involved here is an independent determination by the courts of the issues in the case.

    Now, to get that —

    Hugo L. Black:

    Do you really —

    Donald F. Turner:

    Yes, Mr. —

    Hugo L. Black:

    Do you really take the position I gather, Section 7 remains in effect just as it was before, but that the court in determining the question of whether its been violated, takes into consideration the view — the factors of the Michigan —

    Donald F. Turner:

    That’s right, the standards of the Bank Merger Act which — and again, I —

    Hugo L. Black:

    And that the courts —

    Donald F. Turner:

    Yes.

    Hugo L. Black:

    — still have that function to perform?

    Donald F. Turner:

    Again, I don’t want to get into a cripple with my friends on the other side.

    This position is the position the Government has consistently taken below.

    Let me just quote briefly from our brief in Houston, in opposition to the motion to dismiss and I quote page 8 of the brief, “Plaintiff does not mean to suggest that the 1966 Act has no relevance in this lawsuit or has no way affected the fair existing law.

    The 66 Act affects prior law in two ways.

    One, it sets forth standards to be applied by the banking agencies.

    And two, directs that the court apply those same standards.

    Now I have further citations from our briefs and filings in both courts below but the chart of it is we — well, our position is that what the Bank Merger Act has done has modified and supplied a new set of standards, the precise (Inaudible) meaning of which is yet to be determined in the cases that come up and in specific context but which leaves unimpaired and unlimited in any substantial way the role of the court in deciding the issues laid before it and making the conclusion of the statute that directs it to make is correct.

    Now, and with regard to the kinds of issues as I were saying, it seems to me that all of the issues that have been mentioned in the appellee’s brief in this case and the Comptroller’s brief esoteric as they may sound in a way they were put can all be translated into issues which are the kinds of issues that the courts have repeatedly dealt with in antitrust cases.

    The courts have long dealt with all manner of issues bearing on the competitive consequences of mergers.

    They have dealt with problems of market definition in both the product and geographical sense and some industries where that problem of market definition is at least equally as complex as it is in banking.

    They have dealt with claims that a merger will have pro-competitive consequences by providing a stronger competitor for existing larger companies, by permitting economies of scale, by providing a full line of products and the like.

    The courts have had issues like this before them an antitrust cases whether the courts in any particular case have concluded that these are relevant or not is another question, but they are not issues that are foreign to the Court.

    Now as I said, I think all of the factors that have been cited are translatable in the issues of this kind and let me just take for you two or three of the examples.

    Our frequent allegation is that the merged institution will be able to provide services which neither existing bank could supply or could supply them more efficiently.

    Now, you can’t evaluate a claim of this kind except in terms of the market concerned by asking for whom those services are intended, whether those customers can currently get them from other sources, that is to say whether other banks providing them, and whether the addition of another supplier which allegedly the numerous bank, would they, will or will not materially improve the competitive performance of the market.

    This is true for example of the issue raised by the appellee banks here.

    They claim that the merged bank will be able to provide a wider trust service.

    Now the significance of that can only be evaluated by asking how many other sources of trust service are there in Philadelphia.

    How significant would the addition of this bank — of this further bank be assuming it would be able to do better merged than unmerged.

    Let me take the question, the issue which is commonly relied on by the banking agencies in approving these mergers that the merged bank will have a larger loan limit.

    And therefore, will become an additional participant in the large loan market.

    Now this is just another way of saying that the merger will add a competitor in the large loan market and again the question is how important is this?

    And I may say parenthetically that one of the reasons why we have take — we have made the guess and the prediction that the Bank Merger Act will not substantially affect results in these cases is that by and large as indeed parts of the Comptrollers’ opinions point out, the large loan market by and large is already a highly competitive market in a higher numbers of banks from coast to coast participate so that normally the addition of one more bank that can loan $10 million as compared with six, is that adding any bank in which there are already a large number of sources competing vigorously for that kind of loan.

    Let me give you —

    Byron R. White:

    But what if a — one of the Bank —

    Donald F. Turner:

    Yes.

    Byron R. White:

    — Merger Act indicated is the needs of the community, so to speak, taken into account, namely the —

    Donald F. Turner:

    Well —

    Byron R. White:

    — the benefit of having a local source of a large — of larger loans hadn’t been able to be made locally before.

    Donald F. Turner:

    Well that, would be an aspect of the question that I have just read.

    I mean, the argument could be made —

    Byron R. White:

    Yes, but it’s an additional —

    Donald F. Turner:

    — even though —

    Byron R. White:

    It’s an additional aspect that hasn’t been or — you haven’t normally taken into account.

    Donald F. Turner:

    Oh no, the courts, I am sure, I cannot pull off the top of my head an example but I’m sure that in the past, in evaluation of competition involves — and valuation of service as well as price, and location and convenience as well as price.

    And of course, if the claim is made that the addition of a local source for a large loan is significant, you — this is a factual issue which you can get at.

    As a matter of fact, it’s commonly argued or I’m a — I rather suspect assume that this is indeed significant, and if my memory is correct, there was testimony by some businessmen in the earlier Philadelphia National Bank case that indeed having a local bank capable of 19 large loans would be advantageous.

    Byron R. White:

    Yet, I believe that that was supposed to (Inaudible) —

    Donald F. Turner:

    That’s a —

    Byron R. White:

    — a larger might attract some larger industry.

    Donald F. Turner:

    Yes, this is an issue I want to take up directly in just a moment.

    This is another aspect I think of the same claim.

    Now again, without wanting to argue the point, it seems to me that that poses a simpler — that poses a fact question, the testimony of these people can be evaluated.

    It may not be worth very much.

    I have here for example an interim report of Pennsylvania Banking Law Commission which asks for economists to study the banking system in Pennsylvania and what should have done about it.

    And on this particular issue, one of the economists, Professor Philips of the University of Pennsylvania says there is little evidence beyond that’s found in direct support of merger application citing the Philadelphia Bank case that large borrowers are in fact inconvenienced by having to rely on banks in other cities.

    Shopping for large loans is not uncommon and the incremental cost to borrowers — of contracting banks in other cities are negligible.

    It is undemonstrated and improbable if the industrial growth of the state is in any appreciable way, adversely affected by the absence of multibillion dollar commercial banks.

    Now, I offer that again, not as proof of the proposition but simply to suggest that the issue that’s posed there is one (Inaudible) in the competence and familiarity of the courts.

    Now, the example I was about to get to which I think boils down to this issue, is a claim that — to rely it on the Houston case that the increased size of this bank will contribute to growth and employment, in this case in the Houston area.

    The Comptroller — and I quote said in his opinion, “The failure of the Houston banks to keep paced with the growth of its area has led to unfortunate results.

    Cities with more satisfactory banking facilities can attract industry which needs large scale financing.

    Moreover, many local projects are simply unable to obtain financing due to the preference of large banks in other areas for projects in those areas.”

    No evidence was cited to support these conclusions.

    Donald F. Turner:

    And interestingly enough, later on in the Comptroller’s opinion and this appears on page 115 of our brief, in dealing with the question of relevant market, the Comptroller says, “Banks in New York, Boston, Chicago, and Dallas and the West Coast entered the Houston area and obtained sizable loans.”

    In 1957 Federal Reserves study for example report that New York banks alone held $375 million of loans to Houston borrowers, the largest amount of out-of-city loans made by New York banks that year.

    This intense competition from out of state bank has not evaded over the years but has in fact increased in vigor.

    Now, whether the Comptroller was right in the first place or in the second place again is not an issue, it seems to me that the fact issue as presented is not one so esotery that it cannot be dealt with in a judicial proceeding.

    Now let me turn to the claim that the requirement of the statute that the court may have to balance, convenience and needs or probable effects on convenience and needs against any competitive consequences, somehow imposes upon the court a burden which is so foreign to foreign to it that it raises serious constitutional questions as to the appropriate division of legislative and judicial responsibility.

    I’m frank to say that we have great difficulty understanding the courts with this argument because what it’s really saying is that courts cannot weigh and balance conflicting interest.

    Hugo L. Black:

    Has there had to be any of —

    Donald F. Turner:

    Yes.

    Hugo L. Black:

    — in the past —

    Donald F. Turner:

    Well —

    Hugo L. Black:

    — decisions of the court in antitrust cases, the balancing of that kind?

    Donald F. Turner:

    I’m — I will give some specific examples Mr. Justice of cases that have arisen under Section 7 of the Clayton Act in which people are certainly endeavored to get the court to balance and wherein fact the court has or has not depending upon whether the claim is an appropriate one.

    We gave in our — and in antitrust law generally, one example we gave is the court’s opinion in the Tampa Electric case involving the validity of the requirements contract and the court specifically said that in view of the economic benefits to both parties involved in requirements contracts that the rule or rather harsh rule applicable to time clauses would not be applicable to requirements contracts, even though the economic consequence, and say, in the sense of foreclosure is precisely the same.

    Hugo L. Black:

    Well, does the Act —

    Donald F. Turner:

    Now, let me go —

    Hugo L. Black:

    Does the Act do anymore than refer to an element which has always been considered by the courts?

    I don’t (Voice Overlap) —

    Donald F. Turner:

    I don’t think so.

    I don’t think so Mr. Justice it may require a different balance.

    Let me —

    Hugo L. Black:

    As to what reason?

    Donald F. Turner:

    As to what’s appropriate, that is — let me put it this way.

    Hugo L. Black:

    You say, the weight to be given.

    Donald F. Turner:

    Let me — yes.

    Let me give a specific example.

    It has been held at least, by at least one District Court and I think this Court has had occasion to rule on it at least in dictum, that under Section 7 of the Clayton Act, if there are anticompetitive consequences from a merger in any one line of commerce that alleged pro-competitive benefits in another line that may be affected by the merger are irrelevant, that is that the court in — because of the statute cannot offset one against the other.

    It seems clear that to us, under the Bank Merger Act that this particular rule would not be appropriate in bank mergers.

    Banks indeed do have effects on several different lines of commerce and it seems to us that if the phrase, if that — to give effect to the proposition that convenience and needs made at some time clearly outweigh anticompetitive effects.

    But that is one of the circumstances in which a court might reach that kind of a decision.

    But the point I’m trying to make is that the decision under Section 7 as it stands depends upon the language of that Act.

    Donald F. Turner:

    And I have never heard anybody suggest that there would be anything unconstitutional for the court to have reached a different decision, namely to say that in evaluating a merger, pro-competitive consequences in one line may be offset against anticompetitive consequences as a — in another.

    This decision was an interpretation of a statute.

    And as I say, I never heard it suggested and I would be surprised if it were that it would be unconstitutional for the court to reach a different result.

    Byron R. White:

    Well, the end result of that argument is that that the Comptroller’s decision is final.

    I would take it, and not your argument, the other side of it, but it is unconstitutional for the courts to consider this question at all.

    Does it mean that the agency decision should be final, isn’t it?

    Donald F. Turner:

    Well, that’s my impression of what their argument is that it is not appropriate for a court to make decisions of this kind.

    I think one of the problems with the argument is that the banks and the Comptroller have described what I would call simply factual issues as policy issues.

    Let me give you an example from the appellees’ brief in the Provident case on page 30, they say, “In the final analysis, public interest means what is good for the community.

    Do the business and financial institutions in the community need banks with larger lending loans?

    Would new businesses be attracted if the banks in the community offered more sophisticated services?

    Would the merged institution as the trustees to attract specialized personnel?

    Will it be efficient enough to afford them?

    Will improvement in its services stimulates its competitors to improve their services?

    These are the questions that must be answered and then they say these are preeminently legislative in nature.

    And I would say that’s a mischaracterization.

    They’re essentially factual in nature.

    And that the kinds of factual issues that the courts as I say have dealt with in antitrust law repeatedly and it seems to me it has never been seriously argued that it’s unconstitutional to balance competing interests.

    Abe Fortas:

    Excuse me.

    Donald F. Turner:

    Yes, yes sir.

    Abe Fortas:

    Mr. Turner, before you get through, I would like to hear from you as to what happens in bank merger cases now under this Act or otherwise with respect to the private suits?

    And second, I suppose that the banking agency and the Comptroller of the Currency or otherwise turns down the merger, does that mean that the banks cannot go ahead with it —

    Donald F. Turner:

    That is correct.

    Abe Fortas:

    — and that they don’t have any — do they have any judicial review?

    Donald F. Turner:

    They have recourse, I’d — I think under the general provisions of the Administrative Procedure Act or Hobbs Act that is for review of agency determinations (Voice Overlap) —

    Abe Fortas:

    How would that be done?

    Donald F. Turner:

    Of the statute I believe Mr. Metzger was describing.

    Abe Fortas:

    How would that come about?

    Donald F. Turner:

    Well, there are the — there the standard would be in a court, I think this is a provision that’s applicable.

    It’s 5 U.S.C. 706 — well, 702 grants the right of review.

    Donald F. Turner:

    A person suffering legal wrong because of agency action are adversely affected or aggrieved is entitled to judicial review.

    Abe Fortas:

    That’s a —

    Donald F. Turner:

    It’s sort of a catch all.

    Abe Fortas:

    Now, let’s have a —

    Donald F. Turner:

    Then 706, the standard is as follows.

    The reviewing court shall compel agency action unlawfully withheld or unreasonably delayed and hold unlawful and set aside conclusions found to be arbitrary, capricious, and abuse of discretion or otherwise not in accordance with law, and unwarranted by the facts to the extent that the facts are subject to trial de novo.

    This was the statute involved in the Smithfield case.

    Abe Fortas:

    I don’t know if (Voice Overlap) —

    Donald F. Turner:

    The short of it is that if the agency turns them down, this is the only out from their review and it is that — it is of — it is an agency review test.

    Abe Fortas:

    Well, I suppose it’s arguable that I don’t know whether there’s any evidence in the legislative history to this effect but I suppose it’s arguable that one way to construe the review de novo provision of the Bank Merger Act is that — it was intended to mean the same thing as the Administrative Procedure Act.

    I mean, just to see if I could state a little more clearly that what you’re not telling us is that if the banking agency disapproves a merger proposal, the parties can then go into the District Court and that the standard in the District Court will be whether the agency action is arbitrary etcetera.

    But now you tell us that — and what I’m suggesting is the possibility that whether that same standard could’ve been applied here where the banking — Bank Merger Act says that if the Department of Justice starts a suit to the court, the court shall review de novo the issues —

    Donald F. Turner:

    Yes, and that of course —

    Abe Fortas:

    — presented.

    Donald F. Turner:

    Well, it could be argued this way Mr. Justice Fortas, and indeed that is the interpretation of the Comptroller would wish you to adopt.

    Let — I wouldn’t — I would just simply say that the two situations are not symmetrical and that a symmetrical solution therefore is not appropriate.

    The mere — in other words, I see no good reason why somebody who losses on the merger application if he is limited to a review for abuse of discretion is necessarily means in the absence of any statutory declaration to the contrary that the antitrust laws should be repealed in their application to merger’s that are approved.

    Abe Fortas:

    Oh no, no, no, no, the — that’s not involved here at all.

    The question is whether the court review —

    Donald F. Turner:

    That’s right.

    Abe Fortas:

    — of an agency approved as to be — it should be governed by the same standards as the —

    Donald F. Turner:

    That’s right.

    Abe Fortas:

    — court review of an agency discipline.

    I am —

    Donald F. Turner:

    Well, I —

    Abe Fortas:

    So far as we’re concerned, the question is whether that is what Congress intended in using these curious words, review de novo, with the issues presented.

    Donald F. Turner:

    Well I, — my comment was made advisably because I think it does involve or repeal the antitrust laws.

    If you adopt — if you interpret review de novo to be coterminous with the kind of review that’s provided in the Hobbs Act, or agency is upset only if there is no substantial evidence to support the findings or if the discretion has been abused.

    Abe Fortas:

    I guess I see it (Voice Overlap) —

    Donald F. Turner:

    That sets aside the antitrust law.

    Abe Fortas:

    I guess I see my problem.

    I had not regarded the antitrust provision as a sole custodian of the antitrust laws.

    And there are statutes of the Federal Trade Commission and jurisdiction, phrase of the agencies, and here, the Comptroller of the Currency, this particular case that they had been jury — in primary jurisdiction administrate the antitrust laws.

    Donald F. Turner:

    Well, then it comes back I think Mr. Justice Fortas to the kinds of considerations that we endeavored to put forward earlier.

    I mean, I have no doubt whatsoever that Congress could have done this.

    There were several bills proposed which would have the bill that was proposed — that was finally passed provide that there’ll be an antitrust proceeding, directed the court to apply that same standard, as that with the agencies apply, as a legislative history indicates that the court wants uniformity as among agencies and between agencies in the court.

    And we would simply say again that we don’t think the statute that’s worded in this way is appropriately interpreted by virtue of focus on this phrase review de novo which incidentally we propose to have this rather an amazing effect.

    Abe Fortas:

    No, no (Inaudible) — Mr. Turner, the court would still review it and it’s the legal standard presumably, the ultimate custodianship of the legal standard would be in the court.

    Even if the court reviews under the standards of the Administrative Procedure Act, the question is really, it would — seems to me, one of — who is going to make a judgment as to whether the particular facts before would fall within appropriate legal standards.

    Donald F. Turner:

    I don’t — I, Mr. Justice Fortas, I can’t disagree that that’s the issue.

    That is the issue and I — our own feeling is that everything points against that kind of a result.

    Again, I’m not suggesting for the moment that the Congress could not have (Inaudible) done this.

    But there are very clear ways of doing it.

    And there were bills before Congress which would’ve clearly done it in the traditional usual way.

    And I guess what we’re really saying is that the phrase review de novo as it appears in this statute simply will not bear the weight of a conclusion which amounts to repeal the antitrust laws.

    Abe Fortas:

    How many agencies are there that are given power to make a final determination of a violation of the antitrust law?

    Donald F. Turner:

    I don’t think anybody is given the final authority to determine a violation of the antitrust laws.

    The difficult situation is that the antitrust laws are set aside, that there’s a paramount consequence set aside.

    The ICC can approve a railroad merger even though it has anticompetitive consequences which would clearly amount to a violation not only to the Clayton Act but to Section 2 of the Sherman Act and mergers of the railroads, mergers of trucks, and the like.

    The anti — the Department of Justice, the only role which it performs is an intervener before the agency endeavoring to persuade it, not to approve the merger if it doesn’t think so.

    But if the agency does, the avenues opened for attacking the act are severely limiting.

    Hugo L. Black:

    For what?

    Donald F. Turner:

    They’re limited in that, the agency’s determination, if based on substantial evidence and based on proper procedures and if they handle the issues right as a matter of law is final and that’s the end of it.

    Hugo L. Black:

    But there’s any language appropriate in this Act such as in the in the ICC and FTC —

    Donald F. Turner:

    We think clearly not —

    Hugo L. Black:

    — that compensates that?

    Donald F. Turner:

    Clearly not, clearly not.

    Hugo L. Black:

    We have to stretch what is found, isn’t it?

    Donald F. Turner:

    That is our position.

    And we don’t see any good reason for stretching.

    Donald F. Turner:

    There is no problem posed for a court here that is so insurmountable or even close to it that there is a reason for this Court to stretch to go — to read a review standard into this legislation.

    Hugo L. Black:

    Its power in connection with deciding whether the antitrust law has been violated given to any agency, without some kind of hearings where parties can be heard.

    Donald F. Turner:

    As Mr. Justice Fortas said, of course the Federal Trade Commission has dual jurisdiction with us over the range —

    Hugo L. Black:

    That’s right.

    Donald F. Turner:

    — the range of antitrust law —

    Hugo L. Black:

    (Inaudible)

    Donald F. Turner:

    — that being subject to review.

    Hugo L. Black:

    Do they have hearings?

    Donald F. Turner:

    Yes sir they do.

    They have hearings.

    William J. Brennan, Jr.:

    Well, they must have filed it back there.

    Donald F. Turner:

    That’s right, that’s correct, that is correct.

    I would like to move on if I may to the last issue which is short of the issue of the stay which I — well, I think will only take a couple of minutes, and that is the question whether if we are right so far, meaning that there should be no review standard, the Government has the burden of proof on the issue of convenience and needs.

    William J. Brennan, Jr.:

    And then, you say something about the record that is made in this —

    Donald F. Turner:

    I beg your pardon?

    William J. Brennan, Jr.:

    Are you going to say something about the record that is made on this page — I mean, that if — was there some kind of a stay?

    Donald F. Turner:

    No, there’s virtually no record on the stay motions, the parties in both cases put in extensive submissions of affidavits in factual assertions.

    William J. Brennan, Jr.:

    I thought there was a difference between the Houston and this Provident, directed in that regard, am I wrong?

    Perhaps, I am — I must be wrong, I thought there was a —

    Donald F. Turner:

    No.

    The — well in the —

    William J. Brennan, Jr.:

    (Voice Overlap)

    Donald F. Turner:

    — Provident case, there were more extensive proceedings that is there were more, that the case got farther along in the pretrial stage than it had in Houston.

    In that, the judge first declare — overruled a motion to dismiss the complaint on a pleading question and then there was a pretrial and the court indicated what he thought the Government had to prove in order to sustain it’s case and it came out in the course of our various submissions that we were not prepared and we did not believe we had to assume the burdens which has pretrial order indicated — he thought which he had assumed.

    And it was because of that, that the motion to dismiss were removed and the judge then granted the motion.

    Now on the burden of proof, I would again point to the language of the statute and what we think is the plain implication of the House Report and was pertinent legislative history indicating that what was created here substantially was an exception, the ordinary antitrust principles and we think by all ordinary standards where someone is claiming the benefit of an exception, it is up to them to plead it and to assume the burden of proof on that issue.

    I will quote briefly from the House Report.

    It says, “The bill acknowledges that the general principle or the antitrust laws that substantially anticompetitive mergers are prohibited applies to banks.”

    But permits —

    Hugo L. Black:

    But the (Voice Overlap) —

    Donald F. Turner:

    — applies to banks —

    Potter Stewart:

    Are you reading from what?

    Donald F. Turner:

    I’m reading from the House Report.

    Potter Stewart:

    House Report.

    Donald F. Turner:

    Yes, Mr. Justice.

    Potter Stewart:

    Thank you.

    Donald F. Turner:

    Which accompanied the final bill.

    Potter Stewart:

    Right, thank you.

    Donald F. Turner:

    But permits an exception in cases where it is clearly shown that a merger is so beneficial to the convenience and needs of the community that it would be in the public interest to permit it.

    Hugo L. Black:

    Well, I assume you wouldn’t be — suppose the Government wouldn’t assume to prove whether the (Inaudible) saying it would be exactly what the Government within the public interest.

    Donald F. Turner:

    Well that’s (Inaudible).

    Now of course, we are not totally unaware of the elements of the defense — what the defense is likely to be.

    We have seen the submission that the banks have made to the — proving banking agencies.

    We have seen sometimes as opinions.

    Sometimes the opinions don’t come out till after we file our case.

    So we are totally unaware but it seems to us that this hardly indicates that we should assume the burden of pleading and alleging the negative, namely that there are no convenience and needs to be served which would clearly outweigh the competitive considerations, because the parties are clearly free to drop issues they have raised, to raise new ones, and at best would be wasteful to compel the Government to try to go around refuting in advance claims that they don’t even know will be made.

    The last point I want to make is with regard to the stay and I will just refer you I think to our brief in which to be set forth in some detail the reasons why we believe that if the court agrees with us, that these complaints should not have been dismissed, you should rule that the statutory stay provided for in the Bank Merger Act automatically revives.

    We of course are not contending that the stay — that the — that you should decide right now that that stay should stay in effect forever.

    On remand, the parties would be free to renew their motions for dissolution of a statutory stay.

    We — our contention is that the whole tenure of the Act which is entitled a view to prevent the need for dissolution of banks indicates that this statutory stay is not to be dissolved except on a very heavy showing on the part of defendants.

    And here, the statutory stays were dissolved not on the basis of any showing of that kind but concomitantly with the dismissal of the complaints.

    And if this Court should rule of the dismissal was inappropriate, we think the stay should revive.

    Thank you.

    Earl Warren:

    Mr. Ballard.

    Frederic L. Ballard, Jr.:

    Mr. Chief Justice, may it please the Court.

    I’d like to address myself first to a question raised by Justice Black — seems to Mr. Justice Black — what seems to me to be — go to the heart of this case.

    As I recall his question it was, has anyone — any court ever suggested that the kind of weighing, the kind of public policy, public interest determination which is made in this Act is beyond the ordinary competence of a court.

    And of course the answer is clearly yes, that was suggested in the Philadelphia National Bank case.

    And I know that you are all familiar with the language but perhaps I will read it anyway.

    We are clear however that a merger, the effect of which may be substantially to lessen competition is not safe because on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial.

    Frederic L. Ballard, Jr.:

    A value choice of such magnitude is beyond the ordinary limits of judicial competence and in any event has been made for us already by Congress when it act — enacted the amended Section 7.

    Now, in a nutshell Your Honors, our position is that when Congress enacted the Bank Merger Act of 1966, it restored that ultimate reckoning of social or economic debits and credits required that to be made and it required the court to take some part in that process.

    That brings me to the second point.

    I think it was Mr. Justice Black also who asked whether the Act allows the banking agency, either the Federal Reserve Board, the Federal Deposit Insurance Corporation, or the Comptroller to approve a merger even though it would clearly and unquestionably violate Section 7 or Section 1.

    And the answer is perfectly clearly yes, there is a clear warrant in the statute for the banking agency to approve a merger even though it’d be an anticompetitive merger.

    And thus, as far as the banking agency is concerned, the situation is on all force with the situation before the ICC or before the Civil Aeronautics Board.

    The — and we are in the same situation that you are in the seaboard, the ultimate decision here is not whether this merger would violate Section 7 or Section 1, the ultimate determination here is whether this merger is in the public interest.

    Now, I have said that there is no doubt the agency has the power to approve such a merger and this brings me to the third question which are the question which both Mr. Justice White and Mr. Justice Fortas have alluded to and that is what finality should be accorded to that determination by the agency?

    Now, I feel this has — there are two factors to this.

    One, how good is the procedure before the agency and what kind of a review procedure should there be before the court?

    Perhaps we can illustrate that best by the facts of this case by which I mean the Provident case as they are set forth in the rather extensive appendix which we have filed with our brief.

    You will see that the commencement of an application is an economic brief which in this case ran approximately 60 pages long and in which the parties are directed to address themselves to the issues of competition and public convenience and necessity.

    Following this, the agency receives reports from the other agencies on the factor of competition but not the factor of public convenience and necessity.

    And I stress this because there is a tendency to feel that if one of the other agencies has called the attention to what it conceives to be serious competitive effects of this merger that then when the agency charged with the ultimate determination approves the merger that in some way it is overruling or disregarding reviews of the other agency, this is not necessarily so.

    The first agency which it rendered the advisory report is limited only to competition and does not express its views on convenience and needs.

    Now, the next step as far as the banks are concerned is to supplement their presentation and in our case we were not able to print for you the very extensive supplementary material.

    This material was designed to answer every question which the Comptroller had raised and to answer every question which the Federal — apparently, the Federal Reserve Board had raised in its advisory opinion, we feel that it did that.

    Most of that material went to the Department of Justice, not all of it but all that we felt the Department would be interested in.

    Concurrently with this, there is an investigation which a — is a private investigation by the banking agencies.

    Mr. Metzger has indicated to you the general nature of it.

    The — I believe that Mr. O’Malley will be arguing for the Comptroller in this case may go a little more — deeper into it.

    I found in the hearings before the House Committee on S. 1698 at page 899 a long description of the investigative procedure conducted by the Federal Deposit Insurance Corporation.

    I think you will — as you read this description, you will feel that the Federal Deposit Insurance Corporation, and the Comptroller, and the Federal Reserve Board make a thorough effort to verify the factual material that is asserted in the application and to find out what the effect of the merger will be on the community in general.

    Now, they do not hold a hearing.

    Routinely, they do not hold a hearing.

    They can hold hearing, but they usually don’t.

    The reason why they don’t do this is I think obvious, if you start to think about the kinds of issues that are before them.

    A bank — first of all, a bank operates in a fishbowl.

    Its statistics, all the facts that are known to it are common knowledge to the examiners.

    When the examiners come in as they do twice a year, when the examiners come in for a special application on a merger, the bank tells the examiner anything he wants to know.

    Frederic L. Ballard, Jr.:

    So the facts at issue, the facts in an application are rarely at issue — the deposits and loans, the ratios, where the bank does business, all these kind of thing are known.

    The second thing about a bank is it’s a creature of confidence.

    It maintains its business.

    It keeps its depositors, it keeps its customers, only so long as they have complete confidence in the bank that they’re dealing with.

    Now many of the factors that will be involved in any agency, in any merger, are factors as to which confidence is important.

    Of course, if you have a bank that is failing or floundering, the last thing you want is an evidentiary type of hearing at which that will be discussed.

    But it goes much deeper than that.

    If a bank feels that the merger will improve the quality of its service, it is extremely difficult in an evidentiary type hearing to explain that without explaining at the same time that there is something substandard about its present service.

    This may boil all very well if you know the merger is going through.

    But if you don’t know the merger is going through, this may just be the thing that will not only lose confidence for the bank, but make the service deteriorate further because the man and the bank who is — department you have even indirectly run down may very well not be there the next day, he may find another bank that appreciates his services more.

    So there is excellent reason why the hearings have traditionally been dispensed with in bank cases.

    Now then, what does the statute do about this?

    And I’m now speaking about this statute as interpreted by the court below because that after all is the question in the Provident case.

    Judge Clarie had all these problems to wrestle with and he wrestled with them over a long period of time, and he came out with a interpretation of these — of the Act which makes very good sense.

    Judge Clarie and this statute say, “Since there was no hearing below, we will afford a hearing in the District Court, not the Circuit Court because Circuit Courts normally don’t take testimony.

    We will have a hearing in the District Court.

    And that hearing, every issue that has come up in the course of the application can be reviewed and the parties are free to put in any in — any testimony they want.”

    Now, when we trench upon the confidential areas, I assume that the court will treat that in camara with all the confidentiality that is necessary.

    Now, Judge Clarie goes further than that.

    He says that, “At the hearing the court will find the facts.

    There is no question in this case that substantiate — the substantial evidence rule.

    In this case, Judge Clarie ruled, “The court will find the facts only when you get to the area of discretion, whatever it may be, will the court vow to the Comptroller’s expertise, the Comptroller’s informed judgment.”

    Supposing the court’s findings (Inaudible) wrong in those facts or substantial (Inaudible)?

    Frederic L. Ballard, Jr.:

    As I envision this procedure Your Honor, the issues would involve as Mr. Turner had said, essentially factual things, to take a rather simple one, will there be a substant — with substantial economies relating to this merger.

    Now these — the existence of this issue is identified in the application itself and it is further elaborated in pretrial proceedings including a lengthy pretrial brief.

    Now, the parties will be free if the Department of Justice wishes to challenge that factual issue, they can bring in all the testimony they want and prove that they can, that there will be no incompetence.

    Another issue in this case is that the bank served different portions of the city (Voice Overlap).

    And that — in the process, no weight were given to the findings of the (Inaudible)?

    Frederic L. Ballard, Jr.:

    As I understand it Your Honor, there will be —

    Byron R. White:

    No weight at all?

    Frederic L. Ballard, Jr.:

    Well I think in this situation, we would be about —

    Byron R. White:

    Can you suggest —

    Frederic L. Ballard, Jr.:

    Where Justice — where Mr. Turner was, I think it would depend upon the Comptroller’s evidence (Voice Overlap) —

    Byron R. White:

    Something has to be determined de novo if you just don’t give weight to the previous determination.

    Frederic L. Ballard, Jr.:

    I believe that would be right sir.

    But when it comes to the ultimate question, you see what we have, we have here an ultimate determination by the Comptroller that this merger weighing all these factors, some pro, some con, some rather speculative, some immediate.

    He has — you have an ultimate determination that that is in the public interest.

    Abe Fortas:

    Well, now what did he — is that what he concluded?

    Frederic L. Ballard, Jr.:

    He decided —

    Abe Fortas:

    The statute says that he is not to approve the merger if its effect is anticompetitive this — in shorthand, unless he finds that they are outweighing factors of public interest, the convenience and the need.

    Now, what — how do you construe the Comptroller’s general action?

    Did he conclude that there are no — that there’s no anticompetitive factor here that requires disapproval or did he rely on the — on less qualities?

    Frederic L. Ballard, Jr.:

    Mr. Justice Fortas what I think he did is this, and it’s very easy to do.

    I think he took the pro-competitive, the pro-competitive effect of the merger and balanced it first against the anticompetitive effect and came out with a conclusion that the overall effect on competition was favorable.

    Then he added a few more points.

    Abe Fortas:

    Well that’s why you read it and maybe to be the way I read it, but if you talk about the court proceeding as a review proceeding in any sense, then your next question is.

    What’s he reviewing?

    What’s the court reviewing?

    What conclusion or what finding is the court reviewing?

    And that’s why I confess to some difficulty —

    Frederic L. Ballard, Jr.:

    I think what he is —

    Abe Fortas:

    — that the Comptroller’s opinion — because it seems to me is something about — and I think it’s the last paragraph or next to the last paragraph.

    What he did was precisely what you’ve just stated which is to say that on the of this, it looks okay.

    And instead of saying that I have — in terms of statutory standards, I find that it’s not anticompetitive or alternatively saying that while I find that it’s anticompetitive, there are offsetting factors.

    Excuse me, I mean in this connection, was it in the other case where there was the opinion of the Comptroller Saxon and then (Voice Overlap) —

    Frederic L. Ballard, Jr.:

    That was in the other case —

    Abe Fortas:

    — the supplementary opinion by his successor.

    Frederic L. Ballard, Jr.:

    In this case Your Honor, it is of course true that he did not follow precisely the statutory scheme and we perhaps all could wish that he had.

    Nevertheless, it seems to me quite clear that he identified the factors which in his view made this merger in the public interest.

    He identified a pro-competitive effect.

    Frederic L. Ballard, Jr.:

    He identified efficiencies.

    He identified improved quality of service.

    He analyzed the anticompetitive effects which have been pointed out to him in which are — which would be there under a — under the complaint in this case.

    He analyzed that.

    And he came out when he was through with a final answer, with a final conclusion that it is in the public interest and that we would be hurting the economy of Philadelphia if (Voice Overlap) —

    Abe Fortas:

    Yes, it’s awful and messy in that the —

    Frederic L. Ballard, Jr.:

    Your Honor —

    Abe Fortas:

    — what does on the one hand — if the Comptroller had said, “Yes, sir, it had the anticompetitive effects, but under the last clause, I find that they are offset by the public interest.”

    Then you could spend from that an argument to the effect that the Government should have made an allegation in its complaint directed to that, which is the substance of your position as I understand it.

    Frederic L. Ballard, Jr.:

    Well, Your Honor in —

    Abe Fortas:

    But you can’t (Voice Overlap) —

    Frederic L. Ballard, Jr.:

    — in our case —

    Abe Fortas:

    (Voice Overlap)

    Frederic L. Ballard, Jr.:

    In our case, as you know, the complaint was upheld over our objection, on the ground that it was a notice of pleading and that we knew what the charge against us was.

    But when you come down to this posture of the case as it is presented to this Court, there is no question about these things.By this time, two things had happened.

    The court had ordered parties to set forth the issues and the facts on which they were reminded.

    And so in this case, if the Department of Justice had any issues to take, there was ample opportunity to refine and define those issues so that when it went before the court, the court would know where the parties were in dispute as to either what the facts were or what weight should be assigned to it.

    The second thing that had happened in this case is there had been a complete discovery and the Department had asked — had filed lengthy interrogatories asking — going down through the application itself and asking what is the ground for this contention, what is the ground for that contention, what is the ground for the next contention?

    So that by the time this case was presented to Judge Clarie, there had been ample opportunity to get at the precise issues that I think about are new, Mr. Justice Fortas.

    And to go back I feel that under Judge Clarie’s ruling here, what is entitled to weight is the Comptroller’s ultimate determination based on this mosaic of considerations and to the extent that the department would be successful in the trial in taking the underpinning out from under that determination.

    They might show that they’ve pulled enough from the box out from underneath it that he was wrong, that he didn’t follow the statute’s plea standard.

    He didn’t properly understand it or even properly follow it.

    But to the —

    Byron R. White:

    But it indicates the court might — would have — would make its own assessment of these facts.

    Here are the facts that are different from what the Comptroller found.

    We — does the court then just makes its own determination of the public need and then compare it with the Comptroller?

    Or does it say, “Well, we don’t have to make any determination of our own.

    We don’t think there’s enough facts.”

    And (Inaudible) destroyed to a —

    Frederic L. Ballard, Jr.:

    I don’t think a court can make its own determination of public need, Mr. Justice Black.I really don’t see it has —

    Byron R. White:

    (Inaudible) tell whether the Comptroller was wrong?

    Frederic L. Ballard, Jr.:

    It seems to me Your Honor as I have said that in order to find —

    Byron R. White:

    You’re just saying the Comptroller is that that’s the end of the matter.

    Frederic L. Ballard, Jr.:

    No, sir I don’t believe so, I mean —

    Byron R. White:

    Even though some of the facts of which he — supposed he based his judgment defend that proof.

    Frederic L. Ballard, Jr.:

    No sir, that’s — my point is, I feel that if — I — you misunderstood me.

    My point is —

    Byron R. White:

    (Voice Overlap)

    Frederic L. Ballard, Jr.:

    — that if you pull the props up from under the Comptroller’s determination and if you get enough props, his determination would fall there.

    I think that’s what the standard of review is here, or if you prove that he acted capriciously arbitrarily.

    Byron R. White:

    But — well, then you would say that if you pull enough props up the court would say, “Well, look that this thing has to go back here.”

    Frederic L. Ballard, Jr.:

    It could say that if it felt that that was a part —

    Byron R. White:

    But you couldn’t — you say he didn’t — couldn’t go on in itself decide the case.

    Frederic L. Ballard, Jr.:

    Well, I think Your Honor that they could say that the basis for his determination had been so destroyed that his determination was outside the bound for his discretion.

    Byron R. White:

    Well then, what happens though?

    Frederic L. Ballard, Jr.:

    I think the — that’s the end of the matter.

    I don’t think it has — I would suppose that if the court would —

    Byron R. White:

    I know, but the Act requires that a merger be judged by this standard in BM — in the BMA.

    Frederic L. Ballard, Jr.:

    Yes sir.

    Byron R. White:

    Then how can you disapprove it until that decision is made possible?

    Frederic L. Ballard, Jr.:

    I’m sorry Your Honor, I don’t follow your question.

    The — in my hypothetical case, the Comptroller has purported to do that.

    In fact that’s what he has done.

    Byron R. White:

    But court then finds the factual — his factual basis — that the facts he offered (Inaudible).

    Frederic L. Ballard, Jr.:

    Yes sir.

    Now it seems to me that in that situation they are —

    Byron R. White:

    His approval then — is then you say vitiated.

    Frederic L. Ballard, Jr.:

    Yes sir.

    Byron R. White:

    But then — but the Act said that the merger should be approved if a — if its consistent with the public interest.

    Frederic L. Ballard, Jr.:

    No —

    Byron R. White:

    Somebody has to decide —

    Frederic L. Ballard, Jr.:

    Excuse me Your Honor.

    The Act doesn’t say that.

    The Act says that the Comptroller may not approve an anticompetitive merger.

    Byron R. White:

    Unless —

    Frederic L. Ballard, Jr.:

    Unless.

    And therefore if you find that all the props are pulled out from under his arguments on convenience and needs, it seems to me that then he may not approve the merger — the merger be approved —

    He is wrong?

    Byron R. White:

    Would you say that the banks in that situation would not does not have the right to present their own case to the court on public need and to make any argument to the court and ask the court itself to decide it?

    Frederic L. Ballard, Jr.:

    No Your Honor, I would — I felt that before you pull the props out, you give the banks a chance to be heard.

    That is I think the — and I — this is what —

    Byron R. White:

    On the facts?

    Frederic L. Ballard, Jr.:

    Yes sir.

    In other words, this is what Judge Clarie envisioned.

    He envisioned that the Department of Justice would put in its contentions on the facts and then the banks would put in theirs, and the Comptroller would put in his if you will and when it was through, the court, I take it would decide whether there was warrant for the Comptroller’s opinion in the facts as found by the Court, this being the Smithfield APA procedure.

    William J. Brennan, Jr.:

    Well it seems, Mr. Ballard — is there a difference between you and the Comptroller in the nature of the review?

    Frederic L. Ballard, Jr.:

    I’m not sure of that Mr. Justice Brennan.

    I have the case before me.

    The case before me I have Judge Clarie’s ruling.

    I have his handling of the hearing matter.

    Now, I’m not quite sure where the Comptroller stands.

    William J. Brennan, Jr.:

    Well, I —

    Frederic L. Ballard, Jr.:

    He has to consider all cases and I think perhaps he takes —

    William J. Brennan, Jr.:

    I rather have the impression from Mr. Metzger’s argument, the Comptroller’s view was, so long as the limit of four corners or whatever it is the Comptroller relied upon, just support his determination and that’s as far as this Court can go.

    The court can’t make redetermination of facts, perhaps, I’m wrong.

    Frederic L. Ballard, Jr.:

    Well, Your Honor, in our case, the court announced in no uncertain terms that it was going to make a redetermination of the facts.

    William J. Brennan, Jr.:

    You’re satisfied with that?

    Frederic L. Ballard, Jr.:

    Yes sir.

    Hugo L. Black:

    How did it do it?

    How did it get evidence?

    Frederic L. Ballard, Jr.:

    Sir, we didn’t get to the evidence point.

    The court announced that that was the kind of a hearing it was going to — to hold.

    Then it asked the parties to submit the outlines of the testimony —

    William J. Brennan, Jr.:

    Outlines of the testimony?

    Frederic L. Ballard, Jr.:

    Yes sir.

    And when the Department of Justice submitted its outline of testimony, it stated that it was not going to submit any testimony as to the existence or the significance of factors of convenience and need.

    And at this point, the banks moved for a final judgment, the nature of a judgment that you would make after the plaintiff has finished his case and when he has not met the burden of proof assigned to him and the judge made — entered a final judgment in our favor on that basis.

    Hugo L. Black:

    Let’s get back to the burden of proof question.

    Frederic L. Ballard, Jr.:

    Yes sir.

    Hugo L. Black:

    — finally put you right back up?

    Frederic L. Ballard, Jr.:

    Yes sir.

    Now, —

    Hugo L. Black:

    Whose burden it is?

    And if it’s the — if it’s your burden the court was wrong in dismissing you, wasn’t they?

    Frederic L. Ballard, Jr.:

    Yes sir.

    I would like to take one minute more to answer one other question that came up in the course of the discussion with Mr. Turner.

    I wish that — I wish I had more time to go into the question of what the nature of this public policy determination, but it is covered in our brief.

    Perhaps, this one question will illustrate it as well as anything else.

    They had a discussion here about merger (Inaudible).

    And there was a discussion about — well, if the loan isn’t available in this city then it will be available in that city, and if it isn’t available for one bank, it will be available for several banks.

    Now, this may be probably is the standard antitrust analysis of a market situation.

    Perhaps it’s even an economic analysis if it not be a banking analysis.

    To a bank, there are — there is — there are two forms of large amount.

    One is, when you are just the participant, when you just have a share of the amount and this is nice but it isn’t, it doesn’t — it does not improve the quality of service of the bank very much.

    The other position is the lead position.

    In the lead position, you are the man — if your people who work at the time (Inaudible), to work with the borrower, to decide what is the most appropriate form of loan to have, and whether they — whether the financing should be in one piece, all the intricacies that are becoming more and more apparent in bank lending.

    Now, it’s the biggest bank, that is the lending — the leading bank in almost every case.

    We have cases in our — in our submission here for the situation where a bank starts out as a lead bank and its men are getting this kind of training and expertise.

    And then other banks are brought in because our bank can no longer satisfy the customer’s demands and then bigger banks are brought in.

    And finally, they get a bigger share.

    Frederic L. Ballard, Jr.:

    And then, what happens?

    Our bank is no longer the lead bank.

    Now this is bad not only for our bank but for our community because the reputation of our bank as a leading bank, a bank with skilled personnel, expert in these situations, is what brings business to our community.

    More than that, that same expertise that they developed in these big situations are used in their smaller amounts, so that when we get edged out of the lead position, the quality of our service, the expertise of our people, our prestige, and our ability to serve our smaller customers all suffer.

    Now this is the kind of thing that the Comptroller knows, the Federal Reserve Board knows instinctively, this is the warp and woof of banking.

    It is not the kind of thing that a District Court knows, and with all due deference it is not the kind of thing that the Department of Justice seems to pay its attention.

    And it is the kind of thing that I think the Congress had in mind, when it said that a merger should be judged on the public interest, as the interest of the total community, weighing any anticompetitive needs — effects against — the beneficial effects in meeting the convenience and needs of the community.

    Thank you.

    Hugo L. Black:

    Can I ask you this, what do you understand to be the main purpose of this bill?

    Frederic L. Ballard, Jr.:

    I think the main purpose of this bill Justice Black was to restore the public interest, the test of public interest to these situations as a result of the Philadelphia National Bank case.

    The —

    Hugo L. Black:

    Was it not to provide for a right system of judicial review of mergers in advance of their completion so as to prevent judicial decrees thereafter to apply in mergers to be eliminated.

    Frederic L. Ballard, Jr.:

    I think there was a very important point Your Honor, yes sir.

    Hugo L. Black:

    That’s — that seems to have been the point fit in the purpose of the bill — title of the bill.

    Frederic L. Ballard, Jr.:

    Yes Your Honor it is an extremely important point.

    The only —

    Hugo L. Black:

    They said, to establish a procedure for the review of the old bank merger so as to eliminate the necessity or the dissolution of merged banks and for the public.

    Frederic L. Ballard, Jr.:

    Yes sir.

    And I think one of the other purposes as stated by Senator Robertson, when he first — put the first bill and it’s to restore the (Inaudible) of public interest.

    And that I think is the reason why the court below is correct when it said that the view taken here by the Department of Justice which just ignores the expertise of the federal banking agencies, just ignores them, treats them the way we treat Magistrate Courts in Philadelphia.

    That I think — it was — it’s — the court is correct in holding that that is not in accordance with the difference usually given, let’s say, the Federal Reserve Board and we don’t have any question about people in this particular case, it’s just not in accordance with the deference given to them and it is not in accordance with the normal function of a District Court under Article III of the Constitution.

    Earl Warren:

    Mr. O’Malley.

    Joseph J. O’Malley:

    Mr. Chief Justice, may it please the Court.

    I believe that the discussion up to this point has confused the concepts of competition and convenience and needs.

    The argument of the Department of Justice seems to be predicated upon the equation of competition in convenience and needs, for although the Department has conceded in argument that it considers and has always agreed in the courts below that the Bank Merger Act of 1966 has resulted in different standards or that it has accepted the standards of the Bank Merger Act of 1966, there is a serious question as to what they mean by the standards of BMA 66.

    For example in the Crocker-Anglo case in California, subsequent to — that case was tried prior to the enactment of the Bank Merger Act of 1966.

    Subsequent to the Act’s passage, the three-judge court in the Northern District held a further hearing and invited all parties to submit additional evidence and at that time the Comptroller of the Currency intervened as a party in accordance with the right given to him by the Bank Merger Act.

    They also — and by the briefs — and in its brief, the Department took the position, “It is of course the essential position of the Government that the 1966 amendment to the Bank Merger Act has not resulted in any substantial change in substantive antitrust law or in the standard used by the courts in determining the legality of bank mergers.”

    Again in the Crocker case, the Department told the court that the convenience and needs of the community to be served is but a reiteration of the failing-company doctrine long recognized as an integral part of subtle antitrust laws.

    Thus incidentally, this position was cited by the Crocker court in its opinion of October 6 which remanded the cases to the Comptroller for further findings, under the Bank Merger Act of 1966.

    Joseph J. O’Malley:

    Now, is not adopted by the court in California.

    Again in the case of U.S.v. Third National Bank in Nashville which was filed prior to the passage of the Bank Merger Act of 1966, but tried fully subsequent to the passage of that Act, the Department again represented to the court that the standards probably codified the somewhat greater contours of the failing-company doctrine which was adverted to in the Philadelphia National Bank opinion.

    And again in the Provident case which is now before the court and as a statement of position immediately prior to the dismissal of this action, the Department took the case that — took the position that it was the solvency of banks which was to be weighed against the anticompetitive effects.

    So, the department has taken the position really that the Act has done nothing but impose a tougher anticompetitive standard upon banks or that has codified the Philadelphia National Bank case.

    Now we are somewhat concerned that the representation by the Assistant Attorney General that the Department has always conceded in the courts below that the standards of the new Act applied to bank mergers and litigation is nothing more than an assertion by him that Clayton 7 still applies in full force and effect for if the Bank Merger Act merely incorporates the standards of the Philadelphia National Bank case and the failing-company doctrine —

    Hugo L. Black:

    Did you —

    Joseph J. O’Malley:

    — then there is absolutely no difference —

    Hugo L. Black:

    Do you understand —

    Joseph J. O’Malley:

    — on the standards that he —

    Hugo L. Black:

    — to be the argument of the Government now?

    Joseph J. O’Malley:

    I beg your pardon Mr. Justice Black.

    Hugo L. Black:

    Do you understand that to be the argument of the Government before us?

    Joseph J. O’Malley:

    Yes I do.

    This —

    Hugo L. Black:

    I didn’t quite think so.

    Joseph J. O’Malley:

    I believe, Mr. Justice Black, that the position of the Department here is that each of the factors — and this is the way I understood the argument, that each of the factors which might be decided by the Comptroller of the Currency under the convenience and needs portion of this statute are only those factors which somehow or another relate to competition.

    And therefore —

    Hugo L. Black:

    No, I thought they admitted that the new Act made it necessary to consider the question of convenience to the community but that the burden of proof was on the defendant.

    Joseph J. O’Malley:

    Well, I believe you’re — we’re talking about a different aspect here Mr. Justice Black.

    I believe that the Department has taken the position that the — there is no basic difference between convenience and needs and competition that each of the convenience and needs facts or determinations by the Comptroller, only those to competition, whether or not it’s probably pro-competition.

    So in effect they are turning the terms of this Act and to — direction to the Comptroller or the banking agency to weigh the anticompetitive effect of a merger against the pro-competitive effect of a merger.

    Now, this of course is negated by the terms of the Act itself where Section 4 of the Act specifically is the banking agency, the right to approve a merger involving a bank that is in danger of failing without asking the Department of Justice for an advisory report.

    As the banking agencies are required to ask in a case with a bank that it’s solving, or whether it might be substantial, anticompetitive effects.

    There is no point in Congress having asked an Act which does nothing more than codify the failing-company doctrine in the an — in antitrust law because nobody has ever challenged the failing-company doctrine.

    And this goes directly to the constitutional issue which is involved in this case.

    The authorization of a merger by a banking agency is a function that under this Act is delegated directly to that agency by the Congress.

    And it is definitely a legislative act being performed by the Comptroller or the banking agency involved.

    Convenience and needs means nothing more than competition, then obviously the courts have always been considered competent to assess competitive effects and it’s properly a judicial function.

    But the court is not allowed and cannot be granted the power by Congress to go around chartering banks, authorizing branches for banks or to approve mergers by banks is very definitely a legislative function they cannot be constitutionally delegated to a District Court.

    Now, convenience and needs —

    Abe Fortas:

    Well, what — I thought the courts have been doing this act.

    Joseph J. O’Malley:

    Well, as I —

    Abe Fortas:

    I mean, I thought the courts have been doing this — that for a great many years in the antitrust field.

    Joseph J. O’Malley:

    I don’t believe so —

    Abe Fortas:

    Well, I —

    Joseph J. O’Malley:

    I don’t believe so Mr. —

    Abe Fortas:

    Isn’t that (Voice Overlap) — if it’s unconstitutional, but I think there has been a lot of it around.

    Joseph J. O’Malley:

    The Department arrest — the Department relies Mr. Justice Fortas upon several cases in which the court has apparently done that, the California, the FTC, the El Paso case, the Philadelphia National Bank case and I believe there’s another one, the RCA case.

    And yet in the California case, this Court in writing its opinion pointed out that in all of these cases that the Department is relying upon, there was no permissive legislative scheme by which the agency was required to balance antitrust considerations against the public convenience and needs.

    In those cases where the statute does require that, this Court has in effect upheld the agency on review.

    I might cite the Seaboard case for one, and the Panagra case for another.

    Abe Fortas:

    Why didn’t they — what — tell me, I don’t want to interrupt this — because of your argument, but can you tell me on what basis the Comptroller decided this case?

    Did he decide it on the grounds that there was no anticompetitive effect or did he decide it on the grounds of the unless clause, that there was no overriding public interest?

    Joseph J. O’Malley:

    He decided on both, Mr. Justice Fortas, he —

    Abe Fortas:

    He then say —

    Joseph J. O’Malley:

    — decided this —

    Abe Fortas:

    He then say which he used, does he?

    Joseph J. O’Malley:

    He decided first that there was no substantial anticompetitive effect under the terms of the new statute which according to the legislative history, we believe, permits, and requires the courts to take into consideration all the financial institutions —

    Abe Fortas:

    Could you show —

    Joseph J. O’Malley:

    — rather than just a (Voice Overlap) —

    Abe Fortas:

    — show me where he states that conclusion?

    Joseph J. O’Malley:

    I’m not sure he states that, not many words Your Honor.

    Abe Fortas:

    Well, that’s my problem because I’m restricted to words.

    Joseph J. O’Malley:

    The last paragraph of his opinion which appears on page 112 B of the appendix of the Philadelphia Bank —

    Abe Fortas:

    That’s exactly that confuses me.

    Joseph J. O’Malley:

    But, pursuant to the 1966 Amendment to the Bank Merger Act, we find that the merger of Provident — that Provident National Bank and Central Penn National Bank clearly conforms to the statutory criteria and is in the public interest —

    Abe Fortas:

    The application —

    Joseph J. O’Malley:

    — which is the —

    Abe Fortas:

    — is therefore approved?

    Joseph J. O’Malley:

    That’s correct.

    Joseph J. O’Malley:

    That’s correct Your Honor and in — that prior to — the body of the opinion — there’s a thorough analysis of the competitive effects of this particular merger and the discussion of the benefits to the community.

    Although he didn’t come out in the — and used the language of the statute, it must be inferred that in making his determination in the final paragraph of this opinion that he conformed to the statutory language.

    Abe Fortas:

    Would you mind if I ask you something about the preceding case, the —

    Joseph J. O’Malley:

    I know something about it Your Honor.

    Abe Fortas:

    But — it’s my recollection, I may be wrong that there is — that in the findings and opinion of Comptroller Saxon, when he was the Comptroller of the Currency, he said that — I find in effect, I find there no anticompetitive effects, but if they — they’re offset by the public interest —

    Joseph J. O’Malley:

    Yes.

    Abe Fortas:

    — as I remember this, it’s very rough.

    And then his successor in the supplementary opinion said that, I find there are no anticompetitive effects and I don’t have to reach the unless clause.

    Do you know whether that is correct?

    Joseph J. O’Malley:

    I believe that is correct —

    Abe Fortas:

    That’s very different from what we have in this case as I see it.

    Joseph J. O’Malley:

    Of course Comptroller Saxon was the Comptroller at the time that it was issued and the supplementary opinion was given to the court as the opinion of the new Comptroller because of the change in Comptroller.

    That was solely it.

    I don’t think it was incumbent upon the new Comptroller to wish an opinion at all but he felt would be helpful to the court to have his views.

    Abe Fortas:

    Yes.

    Well, I bring it up just because there we at least, if my recollection is correct to what it may be worth, we do have a specific formulation that I can understand I think as to the statutory provision from which the decision turns namely that there are no anticompetitive effects as it came out in the watch.

    Joseph J. O’Malley:

    Yes, and in this —

    Abe Fortas:

    But here we don’t have that as I — so far as I can make out of this opinion.

    Joseph J. O’Malley:

    In this case, it says that there are no substantial anticompetitive effects.

    But that — but regardless —

    Abe Fortas:

    It’s all wrapped up with the public interest so you can —

    Joseph J. O’Malley:

    I might note that they —

    Abe Fortas:

    — move the other way you want to.

    Joseph J. O’Malley:

    I might note that in arriving at the decision in the Houston case, the Comptroller may have been influenced by the decision in the Crocker-Anglo case in which the court directed the Comptroller to reach new findings under the Bank Merger Act and that if he determine there was no substantial anticompetitive effect, then he was to hypothesize an anticompetitive effect and advise the court what his findings would be in that case upon the convenience and needs of the community.

    So that could well have been the source of the — that language.

    I believe —

    Hugo L. Black:

    May I?

    Joseph J. O’Malley:

    Yes sir, of course —

    Hugo L. Black:

    If I understood your constitutional argument to be this, the Act provides that after having found — have an anticompetitive effects unless it finds that the anticompetitive effect was to pose transaction that clearly outweighed public interest by this probable effect of the transaction, meeting the convenience and needs of the community to be served.

    Do I understand that you’re saying that the courts are judicially incompetent to decide this?

    Joseph J. O’Malley:

    Judicially competent?

    No.

    Hugo L. Black:

    Incompetent.

    Joseph J. O’Malley:

    Yes.

    Yes sir, Mr. Justice Black —

    Hugo L. Black:

    Are judicially incompetent?

    Joseph J. O’Malley:

    That is correct.

    That is our position because the determination of convenience and needs, the determination of convenience and needs is legislative function especially when it comes to authorizing something in the future, a new rule which in this case is a merger which creates an effect in no institution.

    This is a legislative function that cannot be delegated to the judiciary.

    Hugo L. Black:

    Can be delegated to the Comptroller?

    Joseph J. O’Malley:

    It can be because the Comptroller is an administrative officer and it’s historically true that the Congress or a legislature can delegate any part of its functions to an administrator.

    For example — I don’t think anyone would deny that the Congress (Inaudible) have the right to charter a bank and have a new Act for each charter or that it could approve a merger and have a new Act for each merger.

    But this of course would impose an insurmountable burden upon the Congress, so it turns the duties over to an administrator.

    They cannot turn them over to a constitutional court which has a judicial function.

    Now the assessment of competition is certainly within the court’s competence.

    But not —

    Hugo L. Black:

    Under your argument, doesn’t do any good to give the court a review on that point, they can’t do anything about it.

    Joseph J. O’Malley:

    The court can review — the court can in effect arrive on its own determination as to competition in the competitive effect.

    Hugo L. Black:

    But not this other point?

    Joseph J. O’Malley:

    You can find — under the concept of review de novo, and I might indicate Mr. Justice Black and the court, that the review de novo was suggested originally in conferences between the Government agencies involved here.

    And it appears first in the record —

    Hugo L. Black:

    Suggested by whom?

    Joseph J. O’Malley:

    It was — appears first in the record in the January 5th letter of the Attorney General, not in the letter itself but in a draft proposal of legislation — bank merger legislation, but the term review de novo appears in that draft proposal and would be — it would be accurate to say that that would give the courts competence to review the proposal, but the proposal may be solely determining the legality of a bank merger, the competitive effect and it included standards such as convenience and needs only insofar as a effective competition.

    William J. Brennan, Jr.:

    But what was the court’s role in your view in convenience and needs?

    Joseph J. O’Malley:

    In this — with the Act as it now stands?

    William J. Brennan, Jr.:

    Well, the — your constitutional argument, I gather.

    Joseph J. O’Malley:

    Yes, yes.

    William J. Brennan, Jr.:

    If the Act can’t go further than what you are about — rather tell me.

    Joseph J. O’Malley:

    The court may assess the competitive factors and determine whether or not the —

    William J. Brennan, Jr.:

    No (Voice Overlap) —

    Joseph J. O’Malley:

    — substitute its own opinion there.

    William J. Brennan, Jr.:

    (Inaudible) to convenience and needs?

    Joseph J. O’Malley:

    They can review the findings of the Comptroller.

    And if it finds that those — if it finds, that the findings of the Comptroller have substantial evidence behind them, if the record has been developed properly, that it must let them stand.

    William J. Brennan, Jr.:

    Well, I (Voice Overlap) —

    Joseph J. O’Malley:

    If there has been no hearing and insufficient record, then it must find that the Comptroller was —

    William J. Brennan, Jr.:

    Well, I think that’s —

    Joseph J. O’Malley:

    — arbitrary and capricious.

    William J. Brennan, Jr.:

    — the ordinary agency review.

    Joseph J. O’Malley:

    That is correct Your Honor.

    William J. Brennan, Jr.:

    Now what about the — and you did (Inaudible), that was — I thought that if you believe that on the issue of convenience and needs, the court might take evidence and independently arrive at some of the underlying facts its bear on convenience and needs, you don’t have — do you not agree with that?

    Joseph J. O’Malley:

    Well, the courts have done that.

    They did this in —

    William J. Brennan, Jr.:

    No, do you —

    Joseph J. O’Malley:

    In effect, yes if there is not —

    William J. Brennan, Jr.:

    (Inaudible) the court may do this?

    Joseph J. O’Malley:

    If there is an insufficient record, for example no hearing, the court in Crocker for example was unwilling to — had remanded the case to the Comptroller for hearings and further specific findings of facts in that case, under the Bank Merger Act of 1966.

    Upon the submission of these findings —

    William J. Brennan, Jr.:

    (Voice Overlap)

    Joseph J. O’Malley:

    — the court called a new hearing and invited the parties to submit any new evidence —

    William J. Brennan, Jr.:

    Yes, but they —

    Joseph J. O’Malley:

    — they had.

    William J. Brennan, Jr.:

    — allow you, (Inaudible).

    You’re telling me now that yes, even on convenience and needs, the Comptroller’s determination at least to the extent of the underlying facts may be the subject of independent evidence on new determination of those underlying facts by the court.

    Joseph J. O’Malley:

    I would say Your Honor — Mr. Justice —

    William J. Brennan, Jr.:

    Is that what you’re saying may be done?

    Joseph J. O’Malley:

    In effect, yes.

    But I would say this however that there have been no hearings in these cases and relying upon — if the record is complete —

    William J. Brennan, Jr.:

    I’m trying to discover what the — what’s the constitutional argument is; it comes to me —

    Joseph J. O’Malley:

    I would —

    William J. Brennan, Jr.:

    — you gave it away?

    Joseph J. O’Malley:

    I would say Mr. Justice Brennan that if the record of the Comptroller is — shows substantial evidence upon which he base his discretion, then the court has — cannot overrule it, the Comptroller’s decision.

    Now I’m trying to draw the distinction that the lower courts have made in cases where there have been no particular hearings.

    In the Smithfield case which is a branch case for example, the court said that if there is no hearing and no formal record —

    William J. Brennan, Jr.:

    Will you — well, how — you simply need — neither of these cases, have you had a trial-type hearing?

    This is what Smithfield dealt with, right?

    Joseph J. O’Malley:

    That’s right.

    That’s correct.

    William J. Brennan, Jr.:

    The failure to have a trial-type hearing in this (Inaudible), the consequences it provide as a matter of judicial review.

    But why don’t — why doesn’t the same result follow it followed Smithfield?

    That’s neither of these cases was of a trial-type hearing.

    Joseph J. O’Malley:

    Let me understand your question Mr. Justice Brennan.

    You are asking if in effect we are following Smithfield here whether it is — no hearing that the court can introduce new evidence or evidence that —

    William J. Brennan, Jr.:

    What I’m suggesting is that —

    Joseph J. O’Malley:

    — and make —

    William J. Brennan, Jr.:

    — if you’re following Smithfield accurately, Smithfield found that the determination, the judicial determination was appropriate since in fact your branch determination, whatever that was there, was not made — done in the basis of any trial-type hearing.

    Joseph J. O’Malley:

    I believe that the Smithfield case held that the court could take evidence and reach findings of fact — find — have its own findings of fact.

    William J. Brennan, Jr.:

    In the (Voice Overlap) —

    Joseph J. O’Malley:

    But if then, after looking at these facts that it had determined, it had found that the determination of the granting of a branch blessed upon the discretion of the Comptroller, then the court could not overturn the discretion.

    In other words, the court was finding out in the absence of the record whether there was substantial evidence to uphold the Comptroller and that’s pre — that’s exactly what I’m saying here.

    The court can find out if no evidence and no record exist, then the court can move in and find out if the — if there is that type of evidence.

    But if there’s substantial evidence to support the decision of the Comptroller which may not be formulated in a formal order or formal record, then the court can reach its own findings of facts (Voice Overlap) —

    Byron R. White:

    Mr. O’Malley, your argument does — doesn’t reach the capability of a court in determining the competitive factors accruing to a judgment?

    Joseph J. O’Malley:

    I don’t think there is any —

    Byron R. White:

    Let’s assume for the moment that in a suit, the bank with a bank merger attacking the Comptroller, it is alleged that the Comptroller just had wrong (Inaudible) on the competitive factors and is proved that he is, I suppose that it — that ends the case, doesn’t it?

    Let’s assume that the Comptroller has concluded that effect from competition will be ministered as it did in this case.

    Joseph J. O’Malley:

    Yes.

    Byron R. White:

    And that the — as a matter of fact pro-competitive factors are such that the net effect of the merger will be pro-competitive.

    Let’s assume that the court — I suppose that they’re hoping that the court to assess those arguments and those conclusions — let’s assume that the court can determine that the Comptroller was just wrong in his conclusions about the competition, then he really hasn’t weigh — he hasn’t weighed the public need against the right thing, hasn’t he?

    Joseph J. O’Malley:

    No, he would not have, however —

    Byron R. White:

    But then what happens (Voice Overlap)?

    Joseph J. O’Malley:

    Except that he has gone one step further in this case, Mr. Justice White.

    Byron R. White:

    Well, let’s just — what happens then if the court makes that determination?

    He does — certainly he does —

    Joseph J. O’Malley:

    And in fact —

    Byron R. White:

    — fact to the Comptroller or does it just say, “Well, —

    Joseph J. O’Malley:

    I believe in a case —

    Byron R. White:

    The merger is over then.

    Joseph J. O’Malley:

    No.

    I believe in a case like that Mr. Justice White, if the facts of competition were found not to be true, that without making any determination then as to convenience and needs.

    I believe it could be remanded to the Comptroller for further findings.

    Byron R. White:

    I guess you just about — have to conclude that rather than say to the court could then weigh the competitive effects that it did find, I think, against what the Comptroller said to public needs.

    Joseph J. O’Malley:

    I believe that the exercise and the expertise and the discretion of a banking agency or any administrative agency charged with the administration of any industry would not be a fit subject or judgment by a court except that — as to the extent that if it don’t have substantial evidence to back it up.

    I might note that in talking about convenience and needs citing a — in the case of Bank of Italy v. Johnson which is 251 P.2d 784, it discusses convenience and needs specifically.

    It says the phrase would seem to be as difficult of definition as police power, public convenience and necessity, due diligence, or probable cause as these expressions are used in our law.

    The impossibilities of definition will not be tracked in the least from the necessity of understanding the task and ascertaining the fact in each case, and it is for the superintendent of bank’s isocracy and to ascertain them in the exercise of his power.

    In that exercise, he performs an executive or administrative function and not a judicial one, and held that the power of the state could not transfer a legislative or rather a judicial function to a Comptroller.

    Byron R. White:

    Well, you understand in this case that the Comptroller in effect found that the — that there was — that there — that wholly aside from the public — he wouldn’t even have needed the — he wouldn’t have had to get to public need, would he?

    He in effect found there was no violation of an antitrust law?

    Joseph J. O’Malley:

    He would not have had to get to (Voice Overlap) —

    Byron R. White:

    But he is really saying that Section 7, if there were a Section 7 cause of action or whatever the standard is that there was just no violation of any antitrust standards.

    Joseph J. O’Malley:

    He is saying that there is no violation of the standards of the Bank Merger Act of 1966 when one assesses the competitive effect of this particular merger.

    Byron R. White:

    Without even getting to public needs.

    Joseph J. O’Malley:

    But —

    Byron R. White:

    He needn’t (Inaudible).

    Joseph J. O’Malley:

    Further, Mr. Justice White, he did state that this did meet the statutory criteria, and was in the public interest, and he did consider the convenience and needs of the community.

    Again because of the indications of the court, that they wanted an alternative and —

    Byron R. White:

    But if he’s —

    Joseph J. O’Malley:

    — the more substantial anticompetitive —

    Byron R. White:

    But if he is right, there was no competitive impact.

    Byron R. White:

    He didn’t need to talk about public need and convenience.

    Joseph J. O’Malley:

    That’s correct and he — this gets on —

    Byron R. White:

    So that the — so that this case may rest on whether he is right on competitive impact, because it has to otherwise, he hasn’t weighed the needs and convenience against the — to what actually may happen.

    Joseph J. O’Malley:

    Well, the competitive facts are fully discussed in the opinion of the Comptroller in this case.

    Every fact is considered as lying — is outlined there —

    Byron R. White:

    But he —

    Joseph J. O’Malley:

    And —

    Byron R. White:

    But he ends up like concluding that the effect of the merger is pro-competitive.

    Joseph J. O’Malley:

    That’s correct.

    Byron R. White:

    Overall?

    Joseph J. O’Malley:

    That’s correct.

    Now the — there are several other points here if the Court please.

    One is that this Act was also debated under the term Bank Holding Company Amendments of 1966 some seven months after this Act was passed.

    And it was debated on the Senate floor and was opposed by Senator Hart who had opposed the Bank Merger Act of 1966 on the ground that this Act was, as Senator Hart turned it, an unwarranted weakening of the antitrust laws.

    He moved to strike the identical language from the Bank Holding Company Amendments and the Senate reaffirmed the language of the Bank Merger Act and the implication that this did not create a tougher competitive standard but an entirely different standard for the assessment of bank mergers by a vote of 11 to 64.

    The — Mr. Justice White I believe brought up before the question of line of commerce and the omission of the line of commerce.

    This is not to say that you are going to take in steamships and everything else in assessing a bank merger Mr. Justice White.

    Byron R. White:

    Well, there is a line of commerce then —

    Joseph J. O’Malley:

    What —

    Byron R. White:

    — that you have (Voice Overlap) —

    Joseph J. O’Malley:

    What we are saying in effect is that it has been expanded in this phrase as contained in the report, House Report.

    It has been expanded to take in the realities of competition.

    All of those institution which compete —

    Byron R. White:

    But nevertheless, the line of commerce.

    Joseph J. O’Malley:

    I believe it was eliminated.

    Byron R. White:

    I know, I know.

    But when you —

    Joseph J. O’Malley:

    The effect is —

    Byron R. White:

    Still have to talk about what input — what the competitive factors you’re going to include —

    Joseph J. O’Malley:

    What we are doing if we take a look at the antitrust law, the Philadelphia National Bank case, we are including a lot of lines of commerce and saying that you have to affect the — or judge the overall effect of the merger —

    Byron R. White:

    (Inaudible)

    Joseph J. O’Malley:

    — upon the cluster —

    William O. Douglas:

    Do you think he concluded a —

    Joseph J. O’Malley:

    — the cluster (Voice Overlap) —

    William O. Douglas:

    — a larger — that it created a larger or a broader line of commerce?

    Joseph J. O’Malley:

    Much broader, much broader —

    Byron R. White:

    But still a line of commerce?

    Joseph J. O’Malley:

    — financial institution.

    But — I believe its — many lines of commerce which must be considered in the context of the financial competition.

    Byron R. White:

    But nevertheless, there is a line of commerce into that —

    Joseph J. O’Malley:

    We have made the argument that the line of commerce here Mr. Justice White is money.

    Byron R. White:

    Well, that’s (Voice Overlap) —

    Joseph J. O’Malley:

    (Vioce Overlap)

    Byron R. White:

    So your answer is yes, the answer is yes.

    Joseph J. O’Malley:

    Further, we believe that the court should consider also that mergers and the approval of mergers that its only one function of a banking agency.

    It must effectuate a national banking policy particularly the Comptroller of the Currency who has charged the chartering, branching, and merging in the National Banking System and that the mergers are but a small part of — for example the United States last year, there are 35 more bank charters than there were mergers.

    In the entire years of 1965, only one merger was attacked by the Department of Justice, so that the — the expertise of the Department in its responsible ability that the effectuation of a national banking policy is a function that was given to it by the Congress, and upon that rest of course our constitutional argument that deals —

    Abe Fortas:

    Do you mean at the end of the year, there were 35 more banks and they have been given the —

    Joseph J. O’Malley:

    There are 25 — there are more charters —

    Abe Fortas:

    (Inaudible)

    Joseph J. O’Malley:

    — in 1965 than there were mergers.

    Abe Fortas:

    The mergers are banks that merged?

    Hugo L. Black:

    That is (Inaudible)

    Joseph J. O’Malley:

    The banks have merged — I’m sorry, mergers, mergers.

    Abe Fortas:

    (Inaudible)

    Joseph J. O’Malley:

    Mergers, in other words are —

    Abe Fortas:

    And that to go in that field, banks —

    Joseph J. O’Malley:

    There would be 300, no — there would be 330 banks involved in mergers.

    Abe Fortas:

    Yes.

    Joseph J. O’Malley:

    But there would be 165 surviving, so only 165 banks were merged out of existence.

    Abe Fortas:

    Right.

    Joseph J. O’Malley:

    There were 200 and some banks created.

    Abe Fortas:

    So it’s — so you have —

    Joseph J. O’Malley:

    So in —

    Abe Fortas:

    — about — so you have (Voice Overlap) —

    Joseph J. O’Malley:

    On balance you would have more.

    Abe Fortas:

    — net deficits of banks?

    Joseph J. O’Malley:

    No, you would have more.

    You would have more.

    You eliminate 165 and you create 202.

    Abe Fortas:

    I see.

    Joseph J. O’Malley:

    Thank you.

    Earl Warren:

    Mr. Turner.

    Donald F. Turner:

    Mr. Chief Justice, may it please the Court.

    I think there’s only one issue that we care to comment on any further unless the court has further questions.

    I believe that all of the questions that have been raised as to just how a review procedure suggested by the appellees in these cases would work opposes the issue very sharply as to whether a statute like the one we have here really contemplates what they suggest.

    Mr. Ballard and the Comptroller in various ways attempt to resolve the questions that are raised.

    How many props have to be knocked out before the Commission — for the agency’s opinion is to be set aside?

    What if the bank gives new reasons not given before — not put before the agency?

    What if the Government puts in rebuttal evidence which is not before the agency?

    Should there be remand?

    If so, when?

    If the court makes its own determination of the underlying facts, how can it tell whether the Comptroller abused his discretion?

    Now, I am not suggesting that these problems are not soluble.

    This Court in the end could determine the circumstances in which remand was to be made when the Comptroller’s opinion should go down.

    But what I am suggesting is that the Court would have to construct a detailed set of review procedure, a detailed set of rules governing how these cases would be disposed of and that these seems wholly inappropriate —

    Abe Fortas:

    Well, wouldn’t it be exactly —

    Donald F. Turner:

    — to base on the kind of the statute that we have here.

    Abe Fortas:

    Wouldn’t it be exactly the same problem if there is under Administrative Procedure Act in the event that the Comptroller refused to approve a merger?

    And now the banks since started a proceeding under the Administrative Procedure Act and don’t you have all — having these problems all over again right there?

    Donald F. Turner:

    Yes you do (Voice Overlap) —

    Abe Fortas:

    Would you agree that that proceeding would lie as I understand it.

    Donald F. Turner:

    Well, as I say, you can answer the question.

    I’m not saying the questions cannot be answered.

    You can adopt.

    You could lift over by the way, the procedures set forth although there are some unresolved issues on that —

    Abe Fortas:

    (Inaudible)

    Donald F. Turner:

    — suggested by the Administrative Procedure Act.

    Abe Fortas:

    But the questions we asked is now — and it’s turning bad as I see it.

    The question for us is that whether in using these strange words, the strange combination of words in the Bank Merger Act is — Congress intended for us to say that yes, a procedure for review de novo of the issues involved here is — needs that there’ll be a proceeding alike the proceeding under the Administrative Procedure Act.

    Donald F. Turner:

    That is the issue we’ll put and we simply feel on the basis of what transpired leading up to this legislation, what the Act says, consequent reference to antitrust proceeding, the fact that indeed the issues raised are not as (Inaudible) as arcane if they might have first like — seemed to be.

    All of these goes to suggest that — whereas indeed that solution is possible that is not appropriate.

    Abe Fortas:

    Mr. Turner if the Comptroller of the Currency said “No”, refused to approve the merger and that the banks then resorted to a District Court under the Administrative Procedure Act and the District Court applying — would then go on with the Comptroller’s action trying to find out whether it was arbitrary.

    Suppose that the District Court did find that it was arbitrary and held that the merger should be approved, is it your understanding that the District Court could so order or would the —

    Donald F. Turner:

    I’m not —

    Abe Fortas:

    — District Court reverse and remain —

    Donald F. Turner:

    I’m not sure about that.

    I — I’m not familiar enough with the cases know how would come out.

    Smithfield in fact raises some rather difficult problems which I think Judge Sobeloff’s dissent alludes to.

    To my knowledge and my knowledge unfortunately is quite well on this, there — this is an issue that has not been settled.

    In these (Inaudible), I can make guesses.

    But in the statute which says that you can only overturn the decision that is arbitrary and capricious.

    If it is the kind of issue which was normally entrusted to the agency and not normally made by the judge, I suppose you find facts were on — you sent it back and have him try again.

    I must say however — I should add in connection with the Comptroller’s and the other banking agencies power to approve that they can and have disapproved mergers from many reasons other than anticompetitive consequences.

    In fact, only two mergers out of the 140 that have transpired since the statute has passed have been disapproved and they have been disapproved for reasons other than anticompetitive consequences.

    So, what he — or the approval in other words, the approval power and the power to disapprove is not coterminous with the antitrust or even with — coterminous with the Bank Merger Act.It goes well beyond that.

    Byron R. White:

    Mr. Turner, —

    Donald F. Turner:

    Yes.

    Byron R. White:

    I think you already told us that — I’m just curious, expression of review de novo originated with the tests?

    Donald F. Turner:

    That is —

    Byron R. White:

    Is there anything to indicate this —

    Donald F. Turner:

    (Voice Overlap)

    Byron R. White:

    Is there anything to indicate that when you use it, you had in mind anything like the former review that the Comptroller has suggested or —

    Donald F. Turner:

    Well, on —

    Byron R. White:

    — that related to the Administrative —

    Donald F. Turner:

    I hesitate to introduce testimonial evidence before this Court, but in response to your question we had no such idea.

    I can’t — if we had —

    Byron R. White:

    It may have been —

    Donald F. Turner:

    — we would’ve — we would rapidly substituted some other language.

    Abe Fortas:

    It may have been — it may have been that these were words of legislative diplomacy rather than words of legal art.

    Donald F. Turner:

    I’m afraid — Mr. Justice Fortas it wasn’t even that.

    If it were held that this — the use of this word were decisive I must say from our standpoint it wouldn’t — would’ve been one of the greatest inadvertencies in history.

    Abe Fortas:

    And then, it was.

    Donald F. Turner:

    I trust not.

    Byron R. White:

    Well, I — clearly enough that you had to use the review by trial, but you don’t have the (Inaudible).

    Donald F. Turner:

    Yes, and in retrospect — in view of the facts, you would’ve had an easier time, I wished we had used it.

    Byron R. White:

    Well, I am — I must say that that wouldn’t — you still have to go on and say why even if the court determines everything anew about any regard of the agency determination.

    And you still have — admitting as you do that the BMA standard applies.

    Donald F. Turner:

    That’s right.

    Byron R. White:

    Do you still have to go on and say —

    Donald F. Turner:

    That’s right.

    Byron R. White:

    — why you did not have to allege and prove the factors which go into — all of the factors which go into a judgment under it and the only answer you have to say to that, that is a — that it’s a — just traditionally acceptance to antitrust —

    Donald F. Turner:

    I might think —

    Byron R. White:

    — laws must be alleged and proved by those who rely on it.

    Donald F. Turner:

    Well, I think it’s broader than that Mr. Justice White.

    I think most of the usual questions you asked, when you’re asked where should the burden of proof lie fall in our favor in this of a question.

    Byron R. White:

    But in this particular —

    Donald F. Turner:

    Most of the evidence is — in fact all of it, a good part of it on convenience and needs is within the hands of the banks —

    Byron R. White:

    Why is it —

    Donald F. Turner:

    — and he’s got better access —

    Byron R. White:

    Could you tell me why in this case the convenience and needs in any balancing is relevant at all?

    Donald F. Turner:

    I’m not sure —

    Byron R. White:

    Because the Comptroller started out a proposition that there was no anticompetitive effect.

    That as a matter of fact, the merger has a favorable effect on competition.

    Now, you have to get by that — (Inaudible) if you get by that, at the outset, the case is over, isn’t it?

    Because you allege — you alleged in your complaint that there has been a violation of antitrust laws, Section 7.

    Donald F. Turner:

    That’s right.

    Byron R. White:

    Now, if you’re right on that, he is wrong.

    Donald F. Turner:

    I would — he —

    Byron R. White:

    Isn’t that right?

    Is that wrong in that or what?

    Donald F. Turner:

    Well —

    Byron R. White:

    — on that or what?

    Donald F. Turner:

    He is wrong in having decided that there were pro-competitive benefits.

    It would still be open to the courts under our view of the proceedings that are involved, namely the independent determination of the issue if they — if the evidence so convinced the court to find that —

    William J. Brennan, Jr.:

    It would be —

    Donald F. Turner:

    — that the merger would serve convenience and needs —

    William J. Brennan, Jr.:

    So you would say that —

    Donald F. Turner:

    — and this would clearly outweigh.

    William J. Brennan, Jr.:

    So you would say that it — you have to commit the — Comptroller is wrong, that the case isn’t over yet because the bank —

    Donald F. Turner:

    In the —

    William J. Brennan, Jr.:

    — they come in and prove their side of the case?

    Donald F. Turner:

    That’s right.

    Byron R. White:

    And have the court make their own —

    Donald F. Turner:

    That’s right.

    Now needless to say that, well, we have not been — will not concede and will endeavor to disapprove the contentions that they make on the convenience and needs and we will most earnestly cross-examine witnesses and the like and we will argue eventually the weight to be given to the convenience and needs that are alleged.

    But I — as I said, the case is not —

    Byron R. White:

    But even on the terms of your opposition —

    Donald F. Turner:

    Yes.

    Byron R. White:

    — even on their own terms —

    Donald F. Turner:

    Right.

    Byron R. White:

    — if you prove that there were anticompetitive effects on their approach of the case, the case is over.

    Donald F. Turner:

    Yes.

    Byron R. White:

    They just say the Commission — the Comptroller’s judgment was false and so does the merger.

    Donald F. Turner:

    This is an issue that I had not really thought of.

    I take it, what you’re suggesting is that even that the antitrust proceeding just stops at that point because the Comptroller’s approval is erroneous and therefore —

    Byron R. White:

    On their —

    Donald F. Turner:

    — there is no valid approval to permit them to go ahead and merge.

    I take it that’s what —

    Byron R. White:

    (Inaudible)

    Donald F. Turner:

    — your issue — your point is.

    I — this is frankly one I had not thought of.

    I don’t think it’s necessary to the disposition of this case and if I may, I’d like to dock out on it.

    Byron R. White:

    I would put it the other way, the — maybe your approach doesn’t need determination it did.

    Donald F. Turner:

    Any further questions?

    No, I think not.

    Earl Warren:

    We’ll adjourn now.