It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past.1
The landscape of the United States dual banking system2 changed dramatically in recent decades. The extent of this change, and the consolidation trend in the financial services industry, challenge the assumption that commercial banks provide services which are unique and insulated from non-bank competition.3 Today, commercial banks face increasing competition from various industries, and much of that new competition recognizes no geographic boundaries. Those charged with overseeing this industry in turmoil must move beyond old assumptions about banking products, services, and markets, as embodied within outdated merger review methodologies. This Article addresses the past, present, and future of banking consolidation with an aim to propose modern reforms to the multi-agency approach to banking antitrust analysis.
"The market increasingly is being taken by non-banking entities, both on the credit and deposit side," according to a banking consultant in 1993.4 Customers are taking their business to non-traditional institutions (brokerages, mortgage lenders, and insurers) for their online banking services.5 The advent of "pure Internet banks" presents additional borderless competition with traditional banking institutions, sans the "brick and mortar" overhead.6 Moreover, non-traditional banks, though not regulated in the same manner as traditional banks,7 have increasingly ventured into service areas previously dominated by commercial banks.8 Yet, the erstwhile separation of commerce and banking has less to do with tradition, however, than it is attributable to regulatory restrictions.9 In short, administrative standards differ for banks and non-bank competitors, which in turn inhibits the competitiveness of the banks "in areas where the two intersect."10 According to the Department of Justice ("DOJ"), the repeal of interstate banking prohibitions over the last three decades has "erode[ed] banks' monopoly power in 'traditional' products."11 Only a vestige of the traditional regulatory opposition remains to what now appears to be an almost inevitable trend12 "toward a greater blending of banking and commerce."13
Geographic variables must also be prominent on the regulatory agenda. Purveyors of banking products now include numerous non-traditional entities, and the markets for bank products and services and the firms offering them are no longer just locally situated. Increases in the locations and diversity of a market's participants can influence the competitive landscape. Bank mergers enable companies that do not traditionally provide commercial banking services to compete at the local level with commercial banks. For example, consolidations have expanded the geographic scope of credit card giants-which have expansive reach into almost all communities in the nation. When these credit card giants acquire regional banks, such transactions facilitate a broader market for both the targeted bank and the acquirer.
Consolidation in any industry inevitably leads to a discussion that contemplates competitive fairness. The United States Supreme Court took up the issue in 1963. United States v. Philadelphia National Bank, the seminal banking antitrust case, is such a result, applying the Sherman Act of 1890 and the Clayton Act of 1914(14) to commercial banks. The Philadelphia National Bank Court established a long-standing common law bank merger competition analysis, and introduced to the banking antitrust competitive analysis key analytical concepts such as "product or services market" and "relevant geographical market," which became commonplace in the evaluation of probable competitive effects of a proposed merger. …