THE ANTITRUST ASPECTS OF BANK MERGERS[dagger]
PROF. FELSENFELD: I would like to welcome you here this morning to Fordham Law School.5 My name is Carl Felsenfeld. I am the Director of the Financial Services Institute, which is one of the sponsors of today's program, along with K&L Gates6 and the American Antitrust Institute7 in Washington.
I would like to mention two major events. One is the United States Supreme Court case United States v. Philadelphia National Bank in 1963,8 that held, among other things, that banks are subject to the antitrust laws in their merger activities and that banking is essentially a local business.9 The Philadelphia National Bank case was strict in their antitrust considerations.
We jump ahead thirty-one years, when the Riegle-Neal Banking and Branching Efficiency Act of 1994 was enacted.10 That, for the first time, enabled banks in the United States generally to go interstate.11 That led, of course, to the mammoth mergers that we have seen, which brings antitrust laws to mind.
What I have seen since 1994 is that the number one bank in the country will merge with the number five bank in the country and create a multi-state institution, with billions of dollars in assets, and if it is found to violate the antitrust laws, the solution is to knock off half a dozen branches in the Peoria area or something like that, which makes me wonder: Do we really have an effective law of antitrust for banks? I hope the discussion today will consider that.
With that, I just want to thank the Fordham Journal of Corporate & Financial Law12 for all their help. Doug, why don't I turn it over to you. It's your program.
MR. BRODER: Thank you, Carl.
Good morning. My name is Doug Broder. I'm the co-head of the Antitrust Group at K&L Gates, resident here in New York. Our panel this morning is going to discuss the substantive competitive analysis of bank mergers. We have two very distinguished and knowledgeable panelists who are going to talk to us about this subject.
Bert Foer is the President of the American Antitrust Institute in Washington, a nonprofit think tank focused on antitrust issues.13 Bert's career has included both private law practice, at Hogan & Hartson and Jackson & Campbell, and government service, as the Assistant Director and the Acting Deputy Director of the FTC's Bureau of Competition.u While at the FTC, Bert was a commissioner on the National Commission on Electronic Fund Transfers.15 Bert also served in the private sector as the CEO of a chain of jewelry stores for twelve years.16 Bert is a graduate of the University of Chicago Law School, has an A.B. from Brandeis and an M.A. in political science from Washington University.17 Bert is going to focus on the legal analysis of mergers.
Anne Gron is a senior consultant in the securities and Finance Practice of NERA Economic Consulting.18 Anne has conducted research on, among other things, the effect of regulation in banking and insurance, and the effect of bank portfolio composition on lending.19 Before joining NERA, Anne was an assistant professor at the Kellogg School of Management, after beginning her career as an assistant professor at the University of Chicago's Graduate School of Business.20 Anne received her Ph.D. in economics from MIT, after graduating from Williams College with a degree in economics and computer science.21 Anne, logically enough, will focus on the economic side of bank merger analysis.
Before I turn things over to Bert and Anne, I would like to briefly outline the statutory and regulatory context within which bank mergers are analyzed. Generally, the basic law that governs merger analysis in the antitrust laws is the clayton Act, section 7, which outlaws mergers and acquisitions "the effect of which may be to substantially lessen competition or create a monopoly."22 Enforcement of section 7 is invested primarily in the Department of Justice ("DOJ"), and specifically in the Antitrust Division of the Department of Justice, and in the Federal Trade Commission ("FTC") and its Competition Bureau. …