Section 7 of the Clayton Act and “Control” in Bank Holding Company Regulation

• Author: James F. Falco
• Published date: 01 December 1973
• Date: 01 December 1973
• DOI: http://doi.org/10.1177/0003603X7301800402
• Subject Matter: Article

SECTION

7 OF

THE

CLA

nON

ACT

AND "CONTROL" IN

BANK

HOLDING

COMPANY

REGULATION

by

JAMES

F.

FALco·

I.

INTRODUCTION

AND

BACKGROUND

At

the time of the enactment of the

Bank

Holding Com-

pany

Act of

1956,1

the

Board

of Governors of the

Federal

Reserve System" estimated

that

there were 46 bank holding

companies

that

would be subjected to

its

regulation because

of the Act's definition of a bank holding company as a com-

pany

owning 25%

or

more of the shares of each of two

or

more banks." The

BHCA

defined a "company" in such man-

ner

as to specifically exempt so-called one-bank holding com-

panies,

that

is, companies managing

or

controlling no more

than

a single bank," from BHCA coverage and, therefore,

federal regulation. One-bank holding companies were specifi-

cally exempted from federal regulation of the formation and

expansion of bank holding companies because they were few

in number;

their

relevance to the two principal problems

zeroed in on by Congress in enacting the regulatory legisla-

tion" was speculative"

and

inconsistent with the philosophy

•Antitrust Division, Department of Justice, Washington, D.C.

I12 U.S.C.

§§1841-49

(1956), as amended 12 U.S.C.

§§1841-50

(1970) [hereinafter BHCA].

• 12 U.S.C.

§1841

(f)

[hereinafter Board].

8S. Rep. 1095, 84th Cong., 2d Sess. (1956), reprinted in 1956 U.S.

Code

Congo

&Ad. News 2482, 2483 [hereinafter 1956 Legis. Hist.].

4

ld.

at

2488.

II

ld.

at

2483:

"(1)

The unrestricted ability of a bank holding

company group to

add

to the number of its banking units, making

possible the concentration of commercial bank facilities in a par-

ticular area under a single control and management; and (2) The

combination under single control of both banking and nonbanking

enterprises, permitting departure from the principle that banking

institutions should not engage in business wholly unrelated to bank-

ing. Such a combination involves the lending of depositors' money,

715

716

THE

ANTITRUST

BULLETIN

of the bill"

prepared

by the Committee on Banking

and

Cur-

reney," As originally enacted, the BHCA, in terms, did not

immunize violations of existing law;

nor

did

it

create any

defenses to

"any

prohibited

antitrust

or monopolistic act,

action, or conduct." \I

Following the Supreme Court's decision in United States

v. Philadelphia National Bank, which held

that

Section 7 of

the Clayton

Act

applied to bank mergers despite enactment

of the Bank Merger Act of 1960

;10

and, Congress' subsequent

amendment of the Bank Merger Act to provide, inter alia, a

unique affirmative merger defense

for

banks shown to be in

prima

facie violation of Section 7 of the Clayton Act, the

so-called "convenience and needs" defense

not

available to

nonbanks P! Congress passed the first amendments to the

BHCA

in 196612

that

made available the unique

antitrust

whereas other types of business enterprise,

not

connected with bank-

ing, do not involve this element of trusteeship."

6[d. at 2488-89:

"It

is.possible to conjure up visions of monopo-

listic control of banking in a given area through ownership of a single

bank with many

and

widespread branches. However, in the opinion

of your committee, no present danger of such control through the

bank holding company devices threatens to a degree sufficient to war-

rant

inclusion of such a company within the scope of this bill. Should

legislation of

that

nature

prove desirable in the future, the Congress

is free to act upon a showing of need for such a law."

7[d.

at

2482:

"In

general, the philosophy of this bill is

that

bank

holding companies ought to confine

their

activities to the management

and

control of banks

and

that

such activities should be conducted in a

manner consistent with the public interest."

8

Id.,

"The Committee on Banking

and

Currency, to whom was

referred the bill (S. 2577) to define bank holding companies, control

their

future expansion,

and

require divestment of their nonbanking

interests

....

"

912 U.S.C. §1849 (1956), as amended 12 U.S.C. §§1849(a)-(f)

(1966).

10

374 U.S. 321 (1963).

11

United States v. First City National Bank of Houston, 386 U.S.

361 (1967); United States v. Third National Bank in Nashville, 390

U.S. 171 (1968).

:ut Act of

July

1, 1966, Pub. L. No. 89-485, §7, 80' Stat. 237,

amending 12 U.S.C. §1842 (1956).