Abstract
Toehold (or foothold) acquisitions in potential competition antitrust cases represent an area “on the frontiers of antitrust law.”1 The Carey paper discusses several toehold mergers in the industrial area; my comments include some actual examples of toeholds in the entry-regulated sector of banking in which the Antitrust Division has filed a substantial number of suits.
Research on banking potential competition has been made possible by CUNY Grant R F 1393. The author is also regional economist, Second National Bank Region. The opinions expressed in this paper are those of the author and should in no way be construed to represent those of the Office of the Comptroller of Currency.
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Notes
BOC International Ltd. v. FTC, 1977-1 Trade Cases 71677.
Thomas W. Dunfee and Louis W. Stern, “Potential Competition Theory as an Antimerger Tool Under Section 7 of the Clayton Act: A Decision Model,” 69 Northwestern University Law Review (1975), 852; Carey Paper, p. 11.
A recent effort with a probabilistic model is offered by David P. Baron, “Limit Pricing, Potential Entry and Barriers to Entry,” American Economic Review 63 (1973), 666–674. Joe S. Bain, Industrial Organization 2d. ed. (New York, 1968 ), p. 269.
Douglas Needham, Economic Analysis and Industrial Structure (New York, 1969), p. 109.
United States v . Continental Can Co. et al. 378 U.S. 458 (1964).
Oral Argument in Supreme Court, April 23, 1974, at 28 ( Friedman); the Antitrust Division preferred ten statewide banks in twenty-five years to three to five banks in five years. Conn. App., 1403 ( Clark).
“U.S. Department of Justice Merger Guidelines 1968,” 1 Trade Reg. Rep. 4510, no. 20 (1974), at 688–689.
Paul Schweitzer and Joshua Green, “Greeley in Perspective: What Really Happens When a Bank Holding Company Expands into a Local Market?” 95 Banking Law Journal (1978), 147.FDIC Summary of Deposits in All Commercial and Mutual Savings Banks, June 30, 1979.
1971 Comptroller of the Currency Ann. Rep. 140. Dean Haywood likewise viewed this statutory restriction as arguing against NBC’s entrenchment in Spokane. Marine App., 648.
Marine App ., 1908-1919 (D47). All local markets were tabulated for which there were deposit data for offices of competing banks. In Burien a new bank was opened in 1969, while NBC’s share went from 18.1 to 19.0 percent. In Edmonds no branch breakdown was available for the 1971 calculation. Another tabulation of thirteen local markets showed that NBC’s share declined in eleven markets. The exceptions were Kent, where NBC increased from 7.3 to 18.5 percent, and Walla Walla, where it rose from 5.9 to 6.5 percent. Id. at 1905-1907 (DX 46).
Piper, “Economics of Bank Acquisition by Registered Bank Holding Companies,” Federal Reserve Bank of Boston Reseach Report 48, at 161 (1971); Lawrence G. Goldberg, “Bank Holding Company Acquisitions and Their Impact or Market Shares,” Journal of Money, Credit and Banking, 8 (1976), 127.
Lawrence G. Goldberg, “Conglomerate Mergers and Concentration Ratios,” Review of Economics and Statistics 56 (1974), p. 309.
Brief for U.S . ar 44, 52, Marine. Marine considered the asking price excessive and dropped negotiations. Answering Brief of Appellees at 25, Marine. See also Oral Argument in Supreme Court, April 23, 1974, at 37–38, Marine.
1971 Comptroller of the Currency Ann. Rep. 139. As the condition of American Commercial Bank was satisfactory, the Washington Supervisor of Banking had no reason to make an exception. Intervenor’s Exhibit L. Marine App., 1916 ( McCarthy).
Intervenor’s Exhibit 500(1), Marine, 1918 (letter from Supervisor of Banking McCarthy); id. at 1016 (Selby, testifying about a letter from McCarthy); American Banker, Oct. 26, 1971, p. 23.
First Nat’l. App., 298 (Trautwein). However, the witness was testifying about events in the 1950’s; he left Greeley in 1959. First Nat’l. (D.C.), 1003, 1015. In proceedings to reopen the trial for additional evidence, J. Doyle insisted that Bancorporation would not enter Greeley on any foothold basis. First Nat’l App., 2007.
United States v . First National Bank of Maryland, 310 F. Supp. 183 (1970).
United States v . United Virginia Bankshares, 347 F. Supp. 891 (1972).
United States v . Deposit Guaranty National Bank of Jackson, et al., 373 F. Supp. 1241 (1974).
1974 Comptroller of the Currency Annual Report 74; see also 1974 FDIC Annual Report, pp. 11–13 for Leflore County data.
Merger Guidelines, loc. cit.; Joseph F. Brodley, “Potential Competition Mergers: A Structural Synthesis, ” 87 Yale Law Journal, 83 (1977).
Donald I. Baker, “Banking Competition in the Age of the Computer,” 90 Banking Law Journal 208–211; For the Bank of Fulton County acquisition, see 1973 Board of Governors Annual Report 310.
S.A. Rhoades and A.J. Yeats, “An Analysis of Entry and Expansion Predictions in Bank Acquisition and Merger Cases,” Western Economic Journal 10 (1972), 340.
Federal Reserve Bulletin 58 (1972), 59; Second Supplementary Application Denver U. S. Bancorporation, Colorado Springs National Bank, p. 10.
Federal Reserve Bulletin 58 (1972), 493–494.
Marine, 638. The 1966 share is given in id. at 608, note 2. Pacific’s share was at a peak of 5.1 percent at the end of 1968. Marine App., 1220. The Answering Brief of Appellees at 24 quotes Pacific’s Spokane manager, Robert Hurni, who testified that Pacific had not been able to increase the share of tne market that the predecessor Spokane National Bank had. Marine App. 1103. However,in mid-1964, Spokane National Bank had only 2 percent of the deposits in all of the Spokane banks.
S.A. Rhoades, “The Impact of Foothold Acquisitions on Bank Market Structure,” Antitrust Bulletin, 22 (1977), 119–128; on N.Y. and Va. see Bernard Shull, in Federal Reserve Bank of Chicago Conference on Bank Structure, 1972, p. 39.
Richard A. Posner, Antitrust Law: An Economic Perspective (Chicago, 1976), p. 122. A seven-step procedure in potential competition cases is recommended by Dunfee and Stern, loc. cit., p. 871.
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Klebaner, B.J. (1981). Comments on “The Toehold Acquisition Doctrine”. In: Sirkin, G. (eds) Lexeconics. Social Dimensions of Economics, vol 2. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-8141-6_13
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