Mr. KEATING. You mean existing law?

The CHAIRMAN. Proposed.

Mr. BROWNELL. First, I would suggest that considerations of effective enforcement and equity in themselves require that bank acquisitions, like most other business mergers, should be treated not by way of special legislation such as incorporation in the Banking Act, but under the Clayton Act, section 7.

Second, I would say that even if Congress does agree with the Senate Banking Committee's report that bank mergers should be treated, initially at least, by appropriate banking agencies, that such banking legislation should include, just the way it does in respect to bank holding companies, some antitrust savings clause so that there will not be any seeming conflict between the two.

And to make that savings clause effective, in any event, section 7 should be amended to cover the bank-asset acquisitions, as it now does the bank-stock acquisitions.

Why do I urge that section 23 of this Senate-reported omnibus banking bill falls short of the needs for reasonable curbs on bank mergers?

First, it sets up competitive tests for bank mergers which are different from those which apply to other segments and sectors of American business, as I will point out in some detail in a moment. Second, by setting up this special standard, we believe it would dissipate enforcement efforts by decentralizing responsibility for decisions affecting the Clayton Act, section 7, so that some of the decisions would be made by the banking agencies and some by the Department of Justice.

It was my view that both of these objections to section 23 are rooted in firm principles of equitable enforcement and uniform administration of justice.

Let me take them up more in detail now.

First, we believe that the proposed banking legislation prescribed for bank mergers would weaken the standards of section 7 of the Clayton Act because under that bank bill the factor of competition would be only one of numerous considerations to be taken into account by the banking agency that is examining a proposed merger, and also the standard that is set up there in that section 23 of the omnibus banking bill is whether the acquisition may "lessen competition unduly or tend unduly to create a monopoly."

The members of this subcommittee will recognize immediately that this is a novel and a less stringent standard than the one that is specified in section 7 of the Clayton Act.

The CHAIRMAN. It would weaken decidedly present section 7 standards.

Mr. BROWNELL. Very much so.

The CHAIRMAN. How can you speak of a monopoly that is an undue monopoly? If it is a monopoly it is a monopoly, isn't it?

Mr. BROWNELL. The very least you could say is that there would be a period of great uncertainty while the courts were struggling with this new word and trying to figure out what the new standard was that was set up.

The CHAIRMAN. I mean in commonsense how could it be an undue monopoly?

1st is a monopoly it is a monopoly. It can't be qualified, can it? M. BROWNELL. I certainly would have a hard time with a decision

what that means, but it must mean something, and therefore it must be a weaker standard from the standpoint of effective antitrust Enforcement than the one which is in section 7 of the Clayton Act. The CHAIRMAN. Do you know who originated that idea? Mr. BROWNELL. No; I do not.

The first place it has appeared I think is in this omnibus banking bill

Mr. KEATING, Does the word "substantially" appear there?
Mr. BROWNELL No; it does not. It is "unduly."

Mr. KEATING. Is that "unduly" a new word in the law?

Mr. BROWNELL. Yes, it is, and as I say, I think at the very least it would mean a period of great uncertainty here while the courts were trying to figure out what it meant and how it does differ from the Clayton Act standard, and it would be very troublesome to us who believe in the enforcement of section 7 in the nonbanking areas, because this weaker standard that is set up here would undoubtedly be cited by corporations as a standard that should be accepted under Section 7.

The CHAIRMAN. It strikes me that when you say "tend unduly to create a monopoly" that would be very much like saying a man is not unduly dishonest. I cannot understand how they ever could dream of putting those words in juxtaposition.

Mr. BROWNELL. I think that the banking authorities themselves are disturbed about this. I put in my statement here a quotation from Chairman Martin, who says:

We recognize that you have a legal groundwork for substantially lessening competition already in the framework of the law and that it may not be feasible to use unduly lessening competition

So that in support of this novel and what I would call a weaker standard, the Comptroller of the Currency has attempted to show the harshness of section 7 standards in certain bank failure situations.

I would like to come to that point too. In other words, the point has been made that you could not handle the situation of a failing bank if you adopted the standard of section 7 of the Clayton Act. We believe that is not so.

Mr. KEATING. May I interpose a question just so I get this picture? The Comptroller of the Currency favors handling this bank merger business under this omnibus banking bill?

Mr. BROWNELL. Yes, and establishing a new standard which he would interpret, and he could or he might not he is not requiredto consult the Department of Justice to get our views as to what the proper interpretation would be, so that you are going to have the possibility at least of conflicting interpretations right within the Government as to what the merger standards should be, and that is one thing I think this committee would be very, very slow to accept. I think we have all seen in our experience the importance of certainty and clarity in these antitrust standards, and if you have not only two conflicting standards but two conflicting agencies of Governient interpreting those standards, you really are not fair to the bur kama mtunity because it would introduce an element of unych I think would be most unfortunate.

Mr. KEATING. The banking community no doubt cites the Comptroller of the Currency, doesn't it?

Mr. BROWNELL. I suppose that a certain element of them do because there is I am sure some feeling there that they would rather deal just with one agency. But as I come in my statement a little further along here to say, I think we could work out a joint arrangement there so that the two agencies could work in harmony, but our goal would be the interpretation of one effective standard of antitrust enforcement, and that is the standard that is in section 7 of the Clayton Act, which has been on the books now for some time.

People are beginning to understand it and work within it, and it seems most unfortunate to introduce a new uninterpreted standard which would apply only to the banking mergers and not to nonbanking mergers.

Mr. KEATING. You have undoubtedly endeavored to negotiate with the Comptroller of the Currency in an effort to find a meeting of the minds between you?

Mr. BROWNELL. Yes, we have, and we are certainly agreed on the objective that is to be accomplished here. It is only a question of means, and the means that we propose would be that there be just the one standard, and that either the Department of Justice alone, which is the major agency of the Government heretofore which has interpreted these antitrust standards should be the one to pass on it, or if it is deemed more desirable to have the banking agencies at least initially pass on them, let them consult with the Department of Justice and together apply the single standard of section 7 of the Clayton Act.

The CHAIRMAN. I might say to the gentleman from New York that the Independent Bankers Association is in favor of H. R. 2143, also the State supervisory agencies have indicated that they much prefer 2143 than provisions of the Senate so-called omnibus bank bill, because that latter bill would take away a good deal of their supervisory jurisdiction over State banks so that segment of the banking fraternity, I think, would be favorably disposed toward legislation embodied in the bill before us this morning.

Mr. KEATING. Is it the intention to call some of the members of the banking community to testify?

The CHAIRMAN. Yes.

Mr. BROWNELL. If I may interpolate, I think that there is some danger during the current session that they will try to compartmentalize these things too much, let the Banking Committee pass on the banking problems, let the Judiciary Committee pass on merger problems.

Now it is just commonsense that those two come together at some point, and I hope very much that there can be a community of interests and cooperation between the two committees so that this problem will be studied as a whole.

I am very glad that you are going to get some testimony from the banking community here so that you can see the overall picture and work out with the Banking Committee an overall solution to it. There is a danger that this committee, which has a primary responsibility for seeing that the antitrust laws are effective and clear, might do its job and yet find that unknowingly some other committee in the Con

gress had recommended a bill which would impinge very severely on the work which this committee is doing, without your hardly realizing it.

Mr. KEATING. We run into that all the time, Mr. Attorney General. Mr. BROWNELL. I suppose so.

Mr. KEATING. We may have as much difficulty reconciling our views with the Banking Committee as you and the Comptroller have had difficulty.

Mr. BROWNELL. If you can meet that standard of cooperation, I think it will solve this one.

Mr. RODINO. You say, Mr. Attorney General, that there would be at least a period of uncertainty as to the interpretation of lessening of competition unduly; isn't that so!

Mr. BROWNELL. Yes.

Mr. RODINO. Could it be possible that the "substantially" phraseology might result in more effective control than the word "unduly" as eventually interpreted?

Mr. BROWNELL. Reading the hearings before the Senate Banking and Currency Committee on this, discussions that I have seen of it, I believe that it is the intention that putting that word "unduly" in there would mean that fewer proposed mergers would be affected by it. I think it is a weakening of the antitrust standard.

Mr. RODINO. That is your present thinking?

Mr. BROWNELL. Yes.

Mr. KEATING. But in section 7, don't we have the word "substantial"?

Mr. BROWNELL. Yes.

Mr. KEATING. And that is left out, so that there might be some contention certainly that any lessening of competition which was undue would not have to be substantial in order to fall under the ban of this section?

Mr. BROWNELL. It is going to be very troublesome, I think.

Mr. RODINO. Then to pursue that further, Mr. Attorney General, if that were the case-and of course we are dealing with hypotheses right now would you then object to the use of the "undue" terminology if it would result in more effective and stringent control?

Mr. BROWNELL. I think there is such a slight chance of that happening that it would be hardly worth our time to consider it. The whole tenor of the testimony that has been given in support of it indicates to me that a strong effort would be made to say that that is a weakening of the present standard.

I think that the main thing is uniformity. I think it would be a mistake to have two separate standards, whatever they are. For as I understand it, it is the purpose of this subcommittee and the purpose of the Congress that there shall be competition in the banking field that is just as stringent, no more, no less, than that in industry generally.

In other words, it is not comparable to the railroads or something of that sort, where in return for monopoly powers they are given. exemption from the antitrust laws. But as I understand it, the expression of opinion of Congress, at least up to this time, is that the standards of competition in the banking industry shall be no different than they are in industry generally. If that is true, then I think it

would be very unfortunate to have new terminology used without any indication, in the legislative history or otherwise, that the Congress considers it exactly the same in effect and substance as the Clayton Act, section 7.

Mr. KEATING. There is a distinction in kind between banking and say the cloak and suit business.

Banking seems to be somewhat more tinged with the public interest. Mr. BROWNELL. That is right; and that is why it is subject to regulation in certain aspects. I do not say that those other considerations should not be taken into account by the banking agencies when it comes to pass upon a merger or upon an acquisition. But I say that insofar as the antitrust part of this is concerned, the maintenance of effective competition in the area, that that factor should be the same as the factor and standard applying to the rest of industry.

Mr. McCULLOCH. Mr. Chairman, I would like to ask the Attorney General this question: Then if you have come to a firm conclusion that the standards should be the same with respect to prospective mergers

Mr. BROWNELL. Yes.

Mr. McCULLOCH (continuing). Are you at all fearful that those rigid standards may prevent needed mergers at banks in cities, or areas, or communities too small to support a banking institution, which areas and which communities in my opinion now exist?

Mr. BROWNELL. I am not fearful of that, for several reasons. One, I am about to come to in my statement, and that is the question of failing banks. I do not think that there would be any need to worry about that.

Mr. McCULLOCH. I would agree with that.

Mr. BROWNELL. So far as the small communities are concerned, the final decision in any event in the banking area would be left to the appropriate banking agency. And they could take into consideration the special banking considerations which should be involved.

For example, the consideration of the question of whether there is sufficient services there and sufficient assets.

All those things would still be taken into consideration before the final decision was made by the banking agency.

Mr. McCULLOCH. And even though there would be a substantial reduction in competition, that would not prevent the merger in your opinion, if the other factors

Mr. BROWNELL. If the other factors outweight it in the opinion of the appropriate banking agency.

Mr. KEATING. How do you reach that conclusion?

Is there something in section 7 which would give warrant to that, or is it found somewhere else?

Mr. BROWNELL. It would be in the omnibus banking bill.

Mr. KEATING. In other words, even though it did substantially lessen competition, if there were other factors which made the acquisition desirable in order to give the proper service to a small community

Mr. BROWNELL. As a net proposition, yes.

Mr. KEATING (continuing). Would you be able under the omnibus banking bill to permit the merger?

Mr. BROWNELL. That is right, but on the one factor of competition or substantial lessening of competition in which this committee