has such a deep interest, I would say that the standard there should be exactly the same as the standard under section 7 of the Clayton Act applying to industry generally, and that if you set up a weaker, paler standard there, you are not only going to have this period of uncertainty to which I referred, but you are also going to have a tendency to have industry generally try and have that new, weaker standard applied in the industrial area generally. I think that it would lead perhaps to a breakdown of a standard which I think it is very important to maintain. Mr. McCULLOCH. Mr. Chairman, in this connection, I would like to say that I completely agree with the statement in the report of this committee under date of July 26, 1955, the year before last, Report No. 1417, and I quote this sentence that I would like to have in the record at this point: The committee recognizes that in some circumstances a transaction may not be contrary to the policy of the antitrust laws even though it may lessen competition. Mr. HOLTZMAN. Will you yield at that point? Wouldn't the word "unduly" seem to better apply to that situation than "substantial"? The CHAIRMAN. It might be well to read the balance of that. The CHAIRMAN. This is a report on the bill which passed the House, which apparently bore my name in the last Congress. Mr. MALETZ. Continuing the reading of Report No. 1417 on H. R. 5948: In the International Shoe Company case (280 U. S. 291) the Supreme Court held that where the concern acquired is "a corporation with resources so depleted and the prospect of rehabilitation so remote that it faced the grave probability of business failure *** the purchase of its capital stock by a competitor (there being no other prospective purchaser), not with a purpose to lessen competition, but to facilitate the accumulated business of the purchaser and with the effect of mitigating seriously injurious consequences otherwise probable *** does not substantially lessen competition or restrain commerce within the intent of the Clayton Act." On the same principle, the acquisition by a bank of the assets of another bank should not be precluded where otherwise there would be a reasonable probability of the ultimate failure of the acquired bank or where, because of inadequate The CHAIRMAN. You are reading the report, not the decision? Mr. MALETZ. I am reading the report, Mr. Chairman [continuing] because of inadequate management, the acquired bank's prospects for survival seem dim. In addition to the acquisition of a bank which otherwise would be faced with the possibility of failure, there are other circumstances in which, from a banking standpoint, the acquisition of a bank by another bank may be desirable, as, for example, where the acquisition is the most practicable means of dealing with a problem bank having inadequate capital or unsound assets or where the acquired bank has no adequate provision for management succession. Also, where several banks in a small town are compelled by an overbanked situation to resort to unsound competitive practices which may eventually have an adverse effect upon the condition of the banks, the merger of two or more of the banks may well be in the public interest. The same principle applies where there are not adequate banking facilities. These various situations are illustrative of the circumstances where the consummation of the transaction would not be contrary to the public interest. In view of the fact that the Clayton Act has always used the words "substantially to lessen competition," the committee thinks it preferable not to change this language by substituting the word "unduly." At the same time, the committee believes that the present bill should not be interpreted as prohibiting bank mergers in situations such as those described. The CHAIRMAN. I think that covers it pretty well. Mr. BROWNELL. Yes, I agree with that statement which the committee made last year, and I would like to just add this: I would say the chief objective of the Antitrust Division of the Department of Justice over the past few years has been to bring certainty and clarity to the antitrust laws. We believe that the overwhelming segment of business wants to comply with the antitrust laws, realize their significance to the success of the competitive enterprise system, and therefore we are bending every effort to see to it that the law and the administration of the law is made just as clear as possible. The report of the so-called Attorney General's Committee To Study the Antitrust Laws I think was a tremendous step forward in that area, and I believe this committee has at various times expressed its agreement with that point of view. The one area where there is considerable uncertainty is this area of merger statute. The CHAIRMAN. As to the controversy that developed between your department on the one hand, and the Comptroller of the Currency and the FDIC, on the other, I would like to ask you 1 or 2 questions. You agree that the bills before us embody the President's recommendations? Mr. BROWNELL. Yes. The CHAIRMAN. And the recommendations appeared on two distinct occasions, in January 1956 and in January 1957, is that correct? Mr. BROWNELL. That is correct. The CHAIRMAN. Are you aware that the Comptroller of the Currency, who is under the jurisdiction of the Secretary of the Treasury, and the Federal Deposit Insurance Corporation, each one of these agencies is opposed to this legislation. Mr. BROWNELL. This means of achieving the objective, that is correct. The CHAIRMAN. And they are opposed notwithstanding the President's recommendation? Mr. BROWNELL. That is the way I interpret the President's recommendation, to be in accord with the view that was taken by this committee last year, and which is set forth in these two bills that we are considering this morning. The CHAIRMAN. Despite the President's recommendation these two agencies still persist in their opposition to this legislation? Mr. BROWNELL. I think that is a fair statement. The CHAIRMAN. Is it not their position that all bank mergers should be subject to advance approval by the Federal bank supervisory agency, which is granting or withholding approval would have to take into consideration a number of factors including among other things whether the effect may be unduly to lessen competition or tend unduly to create monopoly? That is true; isn't it? Mr. BROWNELL. Yes. The CHAIRMAN. That is their point of view? Mr. BROWNELL. Yes, although I think in fairness to them I should state that they believe they are in accord with the objectives which the President set forth in his message, and they believe that the machinery that they favor, the means of accomplishing this objective would be just as effective. I think it is a disagreement there, and I would not want to imply that they feel that they are departing from the President's recommendations. Mr. KEATING. They should ask the President. The CHAIRMAN. Let's see what the President said. The President said in his state of the Union message or in the Economic Report of 1956 as follows: Toward this end, the following revisions of antitrust legislation are recommended: First, all firms of significant size that are engaging in interstate commerce and plan to merge should be required to give advance notice of the proposed merger to the antitrust agencies, and to supply the information needed to assess its probable impact on competition. Second and this is important Federal regulation should be extended to all mergers of banking institutions. Mr. KEATING. They are extending it. The President does not tell us whether he likes "unduly" better than "substantial." The CHAIRMAN. No, but he made reference to mergers in business engaged in interstate commerce which should be required to give notice to the antitrust agencies in case of a proposed merger. His recommendations were to revise and change the antitrust laws so as to broaden their coverage. It now covers nonbank corporations where the assets are acquired, and does not cover banks where assets are acquired. Therefore, when he says that he wants to expand the antitrust laws, he wants to cover asset acquisitions by banks. Mr. KEATING. But he uses "unduly." This is the President of the United States in the next sentence which you did not read: Combined with the requirement for advance notice, this extension of the law would give the Government an opportunity to prevent mergers that are likely to result in undue restraint of banking competition. In other words, the President is strong for that "undue" business. The CHAIRMAN. Then I hate to say this: The present Attorney General before us is doing something inconsistent with what the President asks. Mr. HOLTZMAN. He is doing something unduly, would you say that? The CHAIRMAN. Now let's go further. In his 1957 recommendation the President said: The Congress is urged to take favorable action on these proposals: A series of interrelated measures would strengthen the Government's ability to deal specifically with mergers. Requirement of advance notification of proposd mergers that are likely to have a significant effect on competition; extension of Federal regulation to cover bank mergers by asset as well as by stock acquisition; application of the Clayton Act to mergers where either party is in interstate commerce; and authorization of the Federal Trade Commission, in merger cases, where it believes violation is likely, to seek a preliminary injunction. And he prefaces all this by saying: To perform their purpose fully, the antitrust laws require not only vigorous enforcement but adaptation to changing economic conditions. So I think the implication is clear, and the Attorney General I am sure has caught the implication properly, that the President wants the present law as it now exists, to cover banking mergers where assets are acquired. I think you agree with that, do you not, Mr. Attorney General? Mr. BROWNELL. Yes, I do, but I do not want to imply by that there is any lack of good faith on the people who take the other interpretation as to the best means of doing this. I think they feel that their method will carry out the President's objective, and do it just as effectively as the one which we favor. Mr. McCULLOCH. Mr. Attorney General-excuse me, sir. The CHAIRMAN. And they take that position notwithstanding the President's recommendation? Mr. BROWNELL. Within the full light of it. Mr. KEATING. They are acting in accordance with the President. The CHAIRMAN. I ask the Attorney General, they take that position despite your interpretation of the President's recommendation? Mr. BROWNELL. Yes. It is a bona fide dispute as to what is the most effective means to accomplish an objective as to which we are all in agreement. The CHAIRMAN. Correct. As you testified I think before, that the proposal these two agencies favor, would provide that in passing on a bank merger the Federal banking agency may request the opinion of the Attorney General. That is correct, isn't it? Mr. BROWNELL. Yes. The CHAIRMAN. In recommending against extension of antitrust legislation to cover bank mergers accomplished by asset acquisitions, aren't the Comptroller of the Currency and the FDIC really running counter to the President's recommendations? Mr. BROWNELL. They do not think so. The CHAIRMAN. As a matter of fact, isn't it correct that the proposal now appearing in section 23 of chapter 6, title III of the Senate Banking and Currency Committee print of the Financial Institutions Act of 1957, the so-called omnibus banking bill, was drafted by and transmitted to the Congress by the Secretary of the Treasury? Mr. BROWNELL. That I would not know. The CHAIRMAN. Is that your understanding? That appears in the Senate hearings on page 84. Will counsel read that, please? Mr. BROWNELL. I do not dispute it at all, Mr. Chairman. I just did not happen to know that history of it. The CHAIRMAN. We might get that in the record at this point. Mr. MALETZ. Mr. Chairman, at page 29 of the hearings before the Subcommittee on Antitrust and Monopoly of the Committee on the Judiciary, 84th Congress, 2d session, pursuant to Senate Resolution 170 on S. 3341 and other bills, the following statement is made, in referring to a provision which is now section 23 of the omnibus bill: Proposed legislation to the same effect was transmitted to the Senate and House on May 17, 1956, by a letter from the Acting Secretary of the Treasury, which enclosed a letter from the Director of the Bureau of the Budget stating that this proposed legislation is in accord with the program of the President of the United States. Then, Mr. Chairman, at the bottom of page 83, Mr. Gidney, Comptroller of the Currency, testifying before the Senate Antitrust Subcommittee, stated as follows: In closing I should like to earnestly recommend that this committee give very careful consideration to the recommendation that the desired result should be achieved by amending statutes in the manner recommended by the Treasury Department, Federal Reserve FDIC rather than amending the Clayton Act. We believe that this would be adequate protection to the public interest and in the best interests of maintaining a sound and public banking system. Continuing Mr. Gidney's testimony: The following is the text of the proposed bill to amend section 18 (c) of the Federal Deposit Insurance Corporation Act which has been transmitted to the Congress and there follows the text of the bill which is now section 23. The CHAIRMAN. Was your advice asked by the Secretary of the Treasury or the Comptroller of the Currency in preparing the draft of section 23? Mr. BROWNELL. We have had a number of conferences with the banking officials and the Treasury officials with relation to this whole problem, and I think there was some feeling on their part at the beginning at least that we thought that the Antitrust Division of the Department of Justice should be the sole judge as to whether or not the bank merger should be approved. I think we have pretty well dispelled that impression now. We do not seek to have, and have not at any time sought to have, the Antitrust Division pass on the question of whether or not the Federal Government should approve the bank merger. We believe that should be done as it always has been, by the appropriate banking agency. But when it comes to this one factor of whether or not there is a substantial lessening of competition, this much we believe to be our duty to state just as forcefully to the committee as we can. That is that there should be one standard, and that there should be one agency which interprets that standard. Otherwise you are going to get into a morass of conflicting interpretation, conflicting standards which will, I am quite confident, have the effect of weakening antitrust enforcement not only in the banking area but generally. The CHAIRMAN. And you are now registering disapproval of the plan of the Comptroller of Currency, the Secretary of the Treasury, and the FDIC in that regard, because it would result in a decentralized arrangement? Mr. BROWNELL. My first proposal would be to have this handled under this standard setup in section 7 of the Clayton Act exclusively, but in a moment I will come to a proposal which I think would come very close to setting up a workable arrangement between the banking agencies and the Department of Justice which would carry out everything that we have in mind and still leave them the power which they believe that they should have. The CHAIRMAN. You will pardon a few questions before we get to that? |