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United States v. Citizens & Southern Nat'l Bank, 422 U.S. 86 (1975)

United States v. Citizens & Southern National Bank

No. 73-1933

Argued March 19, 1975

Decided June 17, 1975

422 U.S. 86


To circumvent Georgia's longstanding stringent restrictions on city banks' opening branches in suburban areas, appellee Citizens & Southern National Bank (C&S National) formed a holding company, which then embarked on a program of forming de facto branch banks in Atlanta's suburbs. This program included the holding company's ownership of 5 percent of the stock of each of the suburban banks, ownership of much of the remaining stock by parties friendly to the C&S system of banking entities (hereafter C&S), the suburban banks' use of the C&S logogram and of all C&S's banking services, and close C&S oversight of the suburban banks' operation and governance. In 1970, Georgia amended its banking statutes so as to allow de jure branching upon a county-wide basis. This meant that C&S could now absorb the 5-percent banks as true branches, because Atlanta is contained within the two counties encompassing the suburbs in which the 5-percent banks operated. Consequently C&S applied to the Federal Deposit Insurance Corporation (FDIC) under the Bank Merger Act of 1966 for permission to acquire all the stock of six of the 5-percent banks historically operated as de facto branches or "correspondent associate" banks within the C&S system. The FDIC authorized five of the proposed acquisitions. The Government then brought suit in District Court for injunctive relief, alleging that the five acquisitions would lessen competition in relevant banking markets in violation of § 7 of the Clayton Act, and that the historic de facto branch relations between C&S and the six 5-percent banks constituted unreasonable restraints of trade in violation of § 1 of the Sherman Act. The court rendered judgment for C&S. Three of the 5-percent banks were formed prior to, and three after, July 1, 1966. The "grandfather" provision of the Bank Holding Company Act, 12 U.S.C. § 1849(d), as added by the 1966 amendments, provides that

"[a]ny acquisition, merger, or consolidation of the kind described

Page 422 U. S. 87

in [12 U.S.C. §] 1842(a). . . which was consummated at any time prior or subsequent to May 9, 1956, and as to which no litigation was initiated by the Attorney General prior to July 1, 1966, shall be conclusively presumed not to have been in violation of any antitrust laws other than"

§ 2 of the Sherman Act. Title 12 U.S.C. § 1842(a) makes it unlawful, absent the Federal Reserve Board's prior approval, for bank holding companies to engage in certain transactions, including those tending to create or enlarge holding company control of independent banks.


1. Since the Attorney General took no action by July, 1966, against the three 5-percent banks that were formed prior to that date, the transactions by which these banks became 5-percent banks fall within the terms of the grandfather provision of the Bank Holding Company Act, and therefore the correspondent associate programs in force at these banks are immune from attack under § 1 of the Sherman Act. While C&S's formation of a de facto branch was a unique type of transaction, it may fairly be characterized as an "acquisition, merger, or consolidation of the kind described in [12 U.S.C. §] 1842(a)," and clearly falls within the class of dealings by bank holding companies that Congress intended, in the grandfather provision, to shield from retroactive challenge under the antitrust laws. Pp. 422 U. S. 102-111.

2. In the face of the stringent state restrictions on branching, C&S's program of founding new de facto branches, and maintaining them as such, did not infringe § 1 of the Sherman Act. Pp. 422 U. S. 111-120.

(a) Though the Government contends that the correspondent associate programs encompassed at least a tacit agreement to fix interest rates and service charges so as to make the interrelationships -- to that extent at least -- illegal per se, it cannot be held, in view of the mixed evidence in the record, and of the fact that such programs, as such, were permissible under the Sherman Act, that the District Court clearly erred in finding that the lack of significant price competition flowed not from a tacit agreement, but as an indirect, unintentional, and formally discouraged result of the sharing of expertise and information that was at the heart of the correspondent associate program. Pp. 422 U. S. 112-114.

(b) The Government's alternative contention, that the correspondent associate programs transcending conventional "correspondent" relationships "unreasonably" restrained competition

Page 422 U. S. 88

among the 5-percent banks and between these banks and C&S National, is not persuasive, since, even if the Government had proved that such programs restrained competition among the defendant banks more thoroughly or effectively than would have a conventional correspondent program (which the District Court found not to be the case), that alone would not make out a Sherman Act violation. Pp. 422 U. S. 114-116.

(c) Where C&S has operated the 5-percent banks as de facto branches in direct response to Georgia's historic restrictions on de jure branching, restraints of trade integral to this particular, unusual function are not unreasonable. To characterize the relationships at issue as an unreasonable restraint of trade is to forget that their whole purpose and effect were to defeat a restraint of trade, and by providing new banking options to suburban Atlanta customers, while eliminating no existing options, C&S's de facto branching program has plainly been procompetitive. Pp. 422 U. S. 116-120.

3. The proposed acquisitions will not violate § 7 of the Clayton Act. Pp. 422 U. S. 120-122.

(a) Since C&S's program of founding and maintaining new de facto branches in the face of Georgia's anti-branching law did not violate the Sherman Act, and since the de facto branches that C&S proposes to acquire were all founded ab initio with C&S sponsorship, it follows that the proposed acquisitions will extinguish no present competitive conduct or relationships. P. 422 U. S. 121.

(b) As for future competition, there is no evidence of any realistic prospect that denial of the acquisitions would lead the defendant banks to compete against each other, the Clayton Act being concerned with "probable" effects on competition, not with "ephemeral possibilities." Pp. 422 U. S. 121-122.

372 F.Supp. 616, affirmed.

STEWART, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which DOUGLAS and WHITE, JJ., joined, post, p. 422 U. S. 130.

Page 422 U. S. 89

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