Book Reviews

• Published date: 01 June 1975
• Author: Paul M. Horvitz
• Date: 01 June 1975
• DOI: 10.1177/0003603X7502000206
• Subject Matter: Book Reviews

BOOK

REVIEWS

Ernest

Kohn and Carmen

J.

Carlo, Potential Competition:

Unfounded Faith or Pragmatic Foresight? New York

Banking Department (1970), 29 pp.

The courts have generally rebuffed the Justice Depart-

ment's efforts to

halt

bank mergers on grounds of potential

competition.

After

losing several such cases in district courts,

the

Justice

Department unsuccessfully appealed the case of

the acquisition of the

First

National

Bank

of Greeley, Colo-

rado, by the

First

National Bancorporation. Subsequent de-

feats on this issue were sustained by the

Justice

Department

in cases of bank mergers in Washington

and

Connecticut.

One aspect of potential competition concerns the effect,

on

present

competitors in the market, of a potential

entrant

"waiting in the wings";

that

is, a

current

effect,

not

one

which

may

develop in the future. Related to

that

issue,

and

most relevant here, is the possibility

that

the potential en-

trant

will actually enter the market.

There

are

many who

believe

that

analysis of these possibilities is not an appro-

priate

activity

for

regulatory agencies or the courts. As one

critic has

put

it ;'

...

the potential competition issue [is] the fountainhead

of a new religion,

or

theology, since

it

is founded on

faith, maintained on belief

....

The study by Kohn

and

Carlo is aimed precisely

at

this

issue-can

potential competition be assessed on an objective,

quantifiable

basis'

They argue

that

the use of potential com-

petition considerations

has

been vindicated by actual develop-

ments,

and

thus its use

has

proved to show

"pragmatic

fore-

sight"

rather

than "unfounded

faith"

in "theological

pre-

cepts."

1Douglas V. Austin, "Limitations of the Potential Competition

Theology," Magazine of Bank Administration, September 1969, p. 32.

411