Full opinion text
OPINION AND ORDER DISMISSING COMPLAINT Before POPE, Circuit Judge, SWEIGERT and ZIRPOLI, District Judges. ZIRPOLI, District Judge. Based upon reasonable probabilities arising from the actual and practical realities of the business of banking, as contrasted to possibilities arising from theoretical postulates, this court, on review de novo in the manner directed by the Supreme Court in United States v. First City National Bank of Houston, 386 U.S. 361, 87 S.Ct. 1088, 18 L.Ed.2d 151 (1967), applying the standards prescribed by the Bank Merger Act of 1966 (12 U.S.C. § 1828(c) (5)), concludes that the merger of the defendant banks, Crocker-Anglo National Bank (here referred to as “Crocker”) and Citizens National Bank (here referred to as “Citizens”) was lawful and not in violation of the Bank Merger Act of 1966 (12 U.S.C. § 1828(c)), § 7 of the Clayton Act (15 U.S.C. § 18), or § 1 of the Sherman Act (15 U.S.C. § 1), and in support of this conclusion, finds: 1. That prior to and at the time of the merger, defendant banks were not in actual competition with each other in any economically significant section of the country; 2. That prior to and at the time of the merger, defendant banks were not in substantial potential competition with each other in any economically significant section of the country; 3. That the plaintiff has failed to prove by a preponderance of evidence that but for the merger Crocker would have branched de novo into the Los Angeles metropolitan area or any economically significant banking market in which Citizens operated; 4. That plaintiff has failed to prove by a preponderance of evidence that but for the merger Citizens would have branched de novo into the San Francisco Bay area or any economically significant banking market in which Crocker operated ; 5. That the evidence shows affirmatively that in the instant case there is no reasonable probability that absent the merger Crocker would have established de novo branches in the Los Angeles metropolitan area or that Citizens would have established de novo branches in the San Francisco Bay area; 6. That the merger of defendant banks did not have a substantial adverse effect on actual or potential competition in the business of banking in any economically significant section of the country; 7. That given the desirability of establishing another statewide banking competitor to Bank of America National Trust and Savings Association (hereafter referred to as Bank of America), as conceded by plaintiff, the only economically feasible solution was and is the. present merger; and 8. That even had a substantial lessening of competition occurred as a result of the merger of defendant banks, such anticompetitive effects were clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. HISTORY OF THIS LITIGATION. Before discussing the above stated conclusions of the court and findings in support thereof and such other findings as are appropriate and relevant to the court’s decision, it would be well to review the history of this litigation to date and its relationship to the Bank Merger Act of 1966. Much of this history is set forth in the opinion of this court of October 6, 1966, when it stayed further proceedings in this cause and remanded the same to the Comptroller for further consideration in the manner indicated in the court’s opinion. See United States v. Crocker-Anglo National Bank, 263 F.Supp. 125 (N.D.Calif.1966). We deem that history essential to a better understanding of this final decision on the merits. Rather than rely thereon by reference, the court, for convenience of the reader, and without the use of quotation marks, here repeats much of what it then said, with such modifications as are needed to meet the de novo review directions of the Supreme Court in United States v. First City National Bank of Houston, supra. On May 13, 1963, some 34 days prior to the decision of the United States Supreme Court in United States v. Philadelphia Nat. Bank, 374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.2d 915 (June 17, 1963), the Crocker-Anglo National Bank of San Francisco and Citizens National Bank of Los Angeles applied to the Comptroller of the Currency for permission to merge, under the charter of the former, with the title “Crocker-Citizens National Bank”. After notice and public hearing held July 30 and 31, 1963, and receipt of some 1605 pages of testimony and exhibits, the Comptroller, on September 30, 1963, made a decision approving the proposed merger, subject to certain named conditions, based on his findings, including the finding that the proposed merger would promote the public interest. The approval was to be effective on or after November 1, 1963. On October 8, 1963, this suit was filed attacking the proposed merger as unlawful under § 7 of the Clayton Act, (15 U.S.C. § 18) and § 1 of the Sherman Act, (15 U.S.C. § 1). A certificate under the Expediting Act (15 U.S.C. § 28) was filed and pursuant thereto a three judge court was named and assembled for the purpose of hearing the cause. The Government’s application for a preliminary injunction was denied (United States v. Crocker Anglo Nat. Bank, D.C., 223 F. Supp. 849), and after completion of extensive pretrial proceedings and the making of a pretrial order, the cause came on for trial on the merits. The trial began June 1, 1965 and the taking of testimony was concluded on June 18, 1965, with orders fixing the time' for filing of briefs and proposed findings by the parties. While the court was thus in the process of hearing testimony, on June 11, 1965 the Senate passed, with no opposing vote, its S. 1698, a bill under whose provisions, if enacted, this ease would have become moot, for, as stated in the report accompanying the bill, the bill “would free the banks involved in such suits from further proceedings under the antitrust laws.” Whether it was because of their knowledge of the pendency of this legislation or otherwise, counsel by stipulation postponed the final filing of briefs and proposed findings until shortly before the passage of this proposed legislation, as amended in the House on February 9, 1966. The enactment, designated Public Law 89-356, 80 Stat. 7, was signed by the President on February 21, 1966. The court was thus confronted with a somewhat extraordinary situation in which the law applicable to the case was changed after the testimony had been received and the cause submitted for decision. The measure, as finally enacted, made specific reference to this and other cases similarly situated in § 2(c) thereof, which provides as follows: “Any court having pending before it on or after the date of enactment of this Act any litigation initiated under the antitrust laws by the Attorney General after June 16, 1963, with respect to the merger, consolidation, acquisition of assets, or assumption of liabilities of an insured bank consummated after June 16, 1963, shall apply the substantive rule of law set forth in section 18(c) (5) of the Federal Deposit Insurance Act, as amended by this Act.” The so-called “substantive rule of law set forth in section 18(c) (5)” is stated in the Act as follows: “(5) The responsible agency shall not approve— (A) any proposed merger transaction which would result in a monopoly, or which would be in furtherance of any combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States, or (B) any other proposed merger transaction whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. In every case, the responsible agency shall take into consideration the financial and managerial resources and future prospects of the existing and proposed institutions and the convenience and needs of the community to be served.” That language refers to the tests to be applied, in a case of this type; by the Comptroller of the Currency in passing upon an application for approval of a proposed bank merger. Not only did § 2 (c), quoted above, specifically direct that this court, in respect to this case, “shall apply the substantive rule of law set forth in section 18(c) (5)”, but § 18(c) (7) (B) provided as follows: “In any judicial proceeding attacking a merger transaction approved under paragraph (5) on the ground that the merger transaction alone and of itself constituted a violation of any antitrust laws other than section 2 of the Act of July 2, 1890 (section 2 of the Sherman Anti-Trust Act, 15 U.S.C. 2), the standards applied by the court shall be identical with those that the banking agencies are directed to apply under paragraph (5).” After a special hearing conducted for that purpose, evidence was received and the parties were granted time within which to file further briefs and memoranda expounding their views as to the action which the court should take in the light of the entire testimony and in view of the new enactment. It is the Government’s view that the new statute made no substantial change in the law or standards to be applied in passing upon the issues here presented, The Government puts it thus: “It is, of course, the essential position of the Government * * * that the 1966 amendment to the Bank Merger Act (P.L. 89-356 ; 80 Stat. 7) has not resulted in substantial change in substantive antitrust law or in the standards used by the courts in determining the legality of bank mergers.” Specifically, the Government took the position that the language of § 18(c) (5) referring to “the convenience and needs of the community to be served” is but a reiteration of the “failing company doctrine” long recognized as an integral part of settled antitrust law. We find no difficulty in concluding that the new enactment made substantial changes in the substantive law and in the standards to be applied in this case. Not only the language of the enactment, but its legislative history, is very compelling on this point. As we have noted, both § 2(c) and § 18(c) (7) (B), quoted above, specifically direct the court in this situation to apply the new standards of this Act. (The latter refers to the standards “directed to apply under paragraph 5” and § 2(c) and refers to these as “the substantive rule of law,” set forth in that section.) It would be a bit startling to assume that in making this enactment, over which the congressional committees struggled long and hard, the Congress had turned up with nothing of substance, or had accomplished no change in respect to the law applicable for testing the validity of bank mergers. The legislative history of the Act most emphatically contradicts the position now taken by the Government. The Senate Committee report, which accompanied the introduction of the bill in the Senate, took note of what Congress had contemplated would be the result of the Bank Merger Act of 1960. The Committee stated: “At that time it was clearly expected that the decision of the responsible Federal bank authority, based on its own investigation and on reports on competitive factors from the other two banking agencies and from the Department of Justice, would be final and conclusive. The Attorney General’s report was expected to be advisory only.” The report states that the uncertainty created by the situation resulting from the Philadelphia and the Lexington bank cases (supra, note 1) “is harmful to the banking industry and to its customers. * * * There was unanimous agreement by all the witnesses that the present situation was undesirable and should be changed.” The House Committee report states clearly the intent to make changes in the law as follows: “The intended legal effect of the bill is to modify the foregoing provision in three respects: First, it is intended to make clear that no merger which would violate the anti-monopoly section (sec. 2) of the Sherman Anti-Trust Act may be approved under any circumstances. Second, the bill acknowledges that the general principle of the antitrust laws— that substantially anticompetitive mergers are prohibited—applies to banks, but permits an exception in cases where it is clearly shown that a given merger is so beneficial to the convenience and needs of the community to be served-—-recognizing that effects outside the section of the country involved may be relevant to the capacity of the institution to meet the convenience and needs of the community to be served,—that it would be in the public interest to permit it. Third, the bill provides that this rule of law is to be applied uniformly, in judicial proceedings as well as by the administrative agencies.” The most complete exposition of the congressional view in the process of this enactment is to be found in the remarks of Senator Robertson at the time the bill, as amended to conform to the House Committee report, came back to the Senate. At that time Senator Robertson, ■who was Chairman of the Senate Committee which had charge of the bill and who originally introduced the bill in the Senate, was recommending that the Senate accept the House amendment. No member of Congress had remained in closer touch with the bill’s progress through both houses than Senator Robertson. As he put it: “I have lived with this problem day and night for months. I am convinced that we have a good bill.” What he then had to say expounded at considerable length the ideas which had been expressed by various House members during consideration of the bill in the House. Senator Robertson said unequivocally that the purpose of the bill was to “reverse a decision of the Supreme Court”. He said (Cong.Rec. Feb. 9, 1966, p. 2538): “The bill will end the confusion and controversy which has surrounded the bank merger situation since the ill-advised and unfortunate decisions of the Supreme Court in the Philadelphia and Lexington cases and the district court decision in the New York case which followed those precedents. It will do this by establishing a uniform rule 'for the bank supervisory agencies and the courts to follow in bank merger cases: a rule which takes into account both the competitive factors on which the antitrust laws are based—Tor banks these were written into the Bank Merger Act of 1960—and the convenience and needs of the public to be served by the proposed merged bank.” Referring to the pend-ency of the suit now before us, he said: “It would permit the continuance of proceedings against the three ‘post-Philadelphia’ cases—in Nashville, San Francisco, and St. Louis—where mergers were consummated after that decision, but in these three cases the courts would be directed to follow the new statutory standards laid down in the statute for all mergers to be considered in the future.” And' in a prepared statement, which he incorporated in the record a£ a part of his remarks, he said .of the bill: “It will strike the Philadelphia, Lexington, and New York decisions and opinions from the books.” 4 Perhaps the most conclusive evidence of the fact that this Act alters the previous rules comes from a comparison of the language of this statute with what the Supreme Court said in the Philadelphia case, namely, that a bank merger such as that one “is not saved because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial.” Section 18(c) (5), quoted above, expressly requires a consideration of similar factors thus rejected in Philadelphia. This statute makes a further alteration in the nature of the proceeding now before us. After providing for the time of commencement of an action brought under the antitrust laws arising out of a merger transaction, § 18(e) (7) (A) stipulates: “In any such action, the court shall review de novo the issues presented.” Returning now to the provisions of § 2(e), requiring this court to “apply the substantive rule of law set forth in, § 18(c) (5)”, and to § 18(c) (7) (B) , reciting that in any judicial proceeding attacking a merger transaction approved under paragraph 5, “the standards applied by the court shall be identical with those that the banking agencies áre directed to apply under paragraph (5),” it seems clear that what we are now called upon to do is to review a decision and determination of the Comptroller of the Currency. This requirement that we apply the standards under paragraph 5 presented some difficulty, since the prior decision of the Comptroller of September 30, 1963, was not made under or in the light of the New Bank Merger Act of 1966. It is true that the Comptroller then found that the proposed merger “will promote the public interest”, using the language of the 1960 Act, but his determination did not contain findings covering the precise issues required to be determined by him under the language of § 18(e) (5) quoted above. Under that section it would be incumbent upon the Comptroller to determine whether any anticompetitive effects of the proposed merger were “clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.” We apprehended that an appropriate finding should specify in what respect the transaction would meet the convenience and needs of the community to be served. There is another respect in which the earlier finding of the Comptroller was inadequate and out-dated. His decision of September 30, 1963 antedated the decisions of the Supreme Court in United States v. El Paso Natural Gas Co., 376 U.S. 651, 84 S.Ct. 1044, 12 L.Ed.2d 12, decided April 6, 1964, and United States v. Penn-Olin Chemical Co., 378 U.S. 158, 84 S.Ct. 1710, 12 L.Ed.2d 775, decided June 22, 1964. In those cases the Supreme Court developed, to an extent not previously announced, the doctrine that § 7 of the Clayton Act is designed to preserve not merely present but potential competition in the market in question. This is the doctrine of the application of § 7 to potential competition. The principal argument made by the Government here relates to alleged elimination by the merger of substantial potential competition in the State of California. Since the Act requires this court to proceed in this case in the same manner in which it would have to deal with some future proposed merger, we were of the view that before the court could perform the required function of reviewing the action of the Comptroller, the matter should be remanded for the consideration of the Comptroller under the provisions of the 1966 Act. Plainly enough the Act is designed to set up precise rules under which the validity of proposed bank mergers may be ascertained and determined. The first required step is the application. to the Comptroller of the Currency for written approval of the proposed merger. Upon hearing on such an application, the Comptroller is directed to act upon the considerations set forth in § 18(c) (5) above referred to. Then, as indicated, if an action be brought attacking the merger transaction, it must be brought within a limited time and in any such action “the court shall review de novo the issues presented.” Thus the Act contemplates initial action by the Comptroller, followed by a review at the instance of the Department of Justice. When we first faced the task of complying with these requirements, we were confronted with a difficulty arising out of the fact that the Act provides that this review shall be “de novo”. It will be noted that under par. (5) the Comptroller is charged with ascertaining two sets of facts. The first is whether the effect of the proposed merger transaction “in any section of the country may be substantially to lessen competition”, and the second, whether, having found that there would be anticompetitive effects in the proposed transaction, those effects “are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.” We found no difficulty in reviewing de novo the first of these determinations, for this court has traditionally adjudged whether mergers have anticompetitive effects. But on the problem of reviewing the second determination by the Comptroller, namely, whether the proposed transaction is clearly outweighed in the public interest, and whether it meets the convenience and needs of the community to be served, we were originally of the view that this is a legislative or administrative determination of a type which this court, as a constitutional court, is prohibited from deciding. We found an expression of this view in the words of the Supreme Court in the following quotation from United States. v. Philadelphia Nat. Bank, supra, 374 U.S. at 371, 83 S.Ct. at 1745 which we have italicized: We are clear, however, that a merger the effect of which “may be substantially to lessen competition” is not saved because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial. A value choice of such magnitude is beyond the ordinary limits of, judicial competence, and in any event has been made for us already, by Congress when it enacted the amended § 7. Congress determined to preserve our traditionally competitive economy. This initial difficulty on the problem of reviewing the second determination of the Comptroller, has since been dissipated. It is now established that the previously held view of this court must be modified, for the Supreme Court, in passing upon the very standards here involved in United States v. First City National Bank of Houston, supra 386 U.S. at 369-370, 87 S.Ct. at 1093, said: The courts may find the Comptroller’s reasons persuasive or well nigh conclusive. But it is the court’s judg-t ment, not the Comptroller’s, that finally determines whether the merger is legal. That was the practice prior to the 1966 Act; and we cannot find a purpose on the part of Congress to change the rule. This conclusion does not raise serious constitutional questions by making the courts perform nonjudicial tasks. The “rule of reason”, long prevalent in the antitrust field (see, e. g., Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683), has been administered by the courts. A determination of the effect on competition within the méaning of § 7 of the Clayton Act is a familiar judicial task. The area of “the convenience and needs of the community to be served,” now in focus as part of the defense under the 1966 Act, is related, though perhaps remotely, to the failing-company doctrine, long known to the courts in antitrust merger' cases. United States v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 8 L.Ed.2d 176. The appraisal of competitive factors is grist for the antitrust mill. See, e.g., United States v. Philadelphia National Bank, supra, 374 U.S. 357-367, 83 S.Ct. 1738-1743. The courts are not left at large as planning agencies. The effect on competition is the standard; and it is a familiar one. If the anticompetitive effect is adverse, then it is to be excused only if “the convenience and needs of the community to be served” clearly outweigh it. We see no problems in bringing these standards into the area of judicial competence. There are no constitutional problems here 'not present in the “rule of reason” cases. (Footnotes omitted.) (Italics ours.) Not having had the benefit of the recent above quoted ruling of the Supreme Court and feeling as we did that a determination of “the convenience and needs of the community to be served” was an administrative, rather than a judicial function, we remanded the cause to the Comptroller with directions to proceed to make the determinations called for by the Bank Merger Act of 1966. It is well that we'did so, for as the Supreme Court said in the above quotation, while on review de novo, “it is the court’s judgment, not the Comptroller’s that finally determines whether the merger is legal”, yet, in so determining, “the courts may find the Comptroller’s reasons persuasive or well nigh conclusive.” On remanding the cause to the Comptroller, we suggested that he should make specific findings as to: 1. The competitive situation as to which the merger may have operative effects and particularly whether the merger will have a probable tendency to lessen or do away with competition; and 2. The probable effect of the transaction in meeting the convenience and needs of the community to be served. In this latter connection we suggested that he specify particularly what he finds to be the convenience and needs of the community, what he considers will be the effect of the merger thereon, and how and by what means he weighs these effects as against the anticompetitive effects of the transaction. Finally, in order to avoid any possible necessity for further remand following our review of the Comptroller’s order, he was directed to make findings as to whether, assuming that the merger has the effect upon potential competition which the Government claims, that effect would be clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served. Following the remand and after due notice to all interested parties, including the Attorney General of the United States, the matter was further heard by the Comptroller on November 14, 1966, at which time he not only reviewed the record of the hearing on which he based the findings contained in his decision of September 30, 1963, but also all the material already introduced in evidence before this court in the course of its previous trial and rehearing of this case and additional information available to and presented by the Comptroller in the course of said hearing of November 14, 1966. The hearings of the Comptroller on this merger were probably the most extensive ever held on a bank merger. Had the Attorney General participated, it would have been an adversary proceeding equivalent to that before any administrative agency or the courts. In the extensive findings and conclusions of law filed by the current Comptroller with this court on December 27, 1966, which this court finds from the evidence presented in this case on review de novo to be correct, he reaffirmed the judgment of his predecessor. Further hearings had been held in this court on April 19, 20, and 21, 1966, and following the filing of briefs and a limited hearing on February 3,1967, to consider the findings of the current Comptroller, the cause was ordered submitted. However, because of the pending appeal in the ease of United States v. First City National Bank of Houston, supra, relating to the nature of the review de novo and the burden of proof on “the convenience and needs of the community to be served”, this court deferred any ruling on the merits to await the decision of the Supreme Court, which was entered on March 27, 1967. With the previous history of this litigation and its relationship to the Bank Merger Act of 1966 in mind and behind us, we are prepared to decide this cause on the merits. Before discussing the merits of the issues presented, a review of the history and operations of the defendant banks, the negotiations leading to the merger and the role of Transamerica Corporation therein, and the hard facts as to the nature of the business and banking in California would be helpful. HISTORY AND OPERATIONS OF DEFENDANT BANKS. Defendant Crocker-Anglo National Bank, prior to November 1, 1963, was a banking association organized under the laws of the United States, with its principal place of business at San Francisco, California. Defendant Citizens National Bank, prior to November 1, 1963, was a banking association organized under the laws of the United States, with its principal place of business at Los Angeles, California. Transamerica Corporation (herein referred to as “Transamerica”) is a holding company incorporated under the laws of Delaware, with its principal place of business at San Francisco, California. At the time of the merger Transamerica owned approximately forty-one per cent of the capital stock of Citizens, and, as a result of the merger, it received approximately 12 per cent of the stock of Crocker-Citizens National Bank (herein referred to as “Crocker-Citizens”), the title given to the new bank under the charter of Crocker. Transamerica’s ownership in Citizens, which it voted in its entirety in favor of the merger, was sufficient to give it the power to prevent any merger of Citizens with any other bank. In addition to its holdings in Citizens (now in Crocker-Citizens), Transamerica holds stock in a substantial number of insurance companies, public utilities, industrial corporations and to a limited degree in Western Bancorporation, a holding company with subsidiary banks located throughout the western states, and Bank of America. These latter two holdings made for investment purposes, the court finds to be insufficient to have any appreciable effect on banking operations in any area relevant to this case. Crocker and Citizens were each' engaged in interstate commerce. The merger of Crocker and Citizens was not a merger of necessity because of management problems or earnings, or any of the things that make a merger compelling in that respect. While both were progressive banks with a substantial future as separate institutions and while both were expanding their branching facilities within their respective areas of operation, up to the time of the merger, with the exception of Ventura County, California, where their operations were too minor to adversely affect competition in this presumed local banking market, neither bank had branched into or otherwise made any economically significant entry into the banking market of the other. The evidence, as will be hereinafter disclosed, is clearly insufficient to support a reasonable inference that either intended to, or that it was feasible for either to, enter the market of the other in the reasonably foreseeable future. Crocker-Anglo was chartered in 1870. It was the fifth largest commercial bank in California and sixteenth largest in the United States in terms of deposits. It conducted a general commercial banking and trust business through 124 banking offices located in 29 California counties ranging from the Califomia-Oregon boundary on the north to Santa Barbara County in the south. As of December 28, 1962, Crocker-Anglo had total deposits of about $2,134,002,000, total assets of about $2,360,014,000, and total loans and discounts of about $1,219,050,-000. Citizens was originally incorporated in 1890 under the laws of California; it received a national bank charter in 1901. Citizens was the eighth largest commercial bank in California and forty-third largest in the United States in terms of deposits. It conducted a general commercial banking and trust business through 78 banking offices located in Los Angeles, Orange, San Bernardino, Riverside, and Ventura counties. As of December 28, 1962, it had total deposits of about $713,793,000, total assets of about $791,662,000, and total loans and discounts of about $357,099,000. A map showing the locations of the banking offices of each of the merging banks in California immediately prior to the merger can be found in the court’s opinion in United States v. Crocker-Anglo National Bank, D.C., 223 F.Supp. 849, 851. On February 10, 1956, Crocker First National Bank of San Francisco (herein “Crocker First National”) and Anglo California National Bank (herein “Anglo California”)-Consolidated under the name of Crocker-Anglo National Bank, combining the 47 offices of Anglo California located in 31 communities with the 3 offices of Crocker First located in San Francisco, Oakland and San Mateo. Anglo California also had offices in San Francisco and Oakland. Immediately prior to said consolidation Crocker First National had total deposits of about $430,488,000 and total loans of about $214,201,000, and Anglo California had total deposits of about $844,839,000 and total loans of about $440,461,000. On June 30, 1956, Crocker-Anglo National Bank offices located in San Francisco had 24.8 per cent of the total IPC (individual, partnerships and corporations) demand deposits in that City and County. On June 22,1956, Crocker merged with the First National Bank of Scotia and with the First National Bank in Madera. On September 7, 1956, Crocker merged with Salinas National Bank. On May 29, 1959, Crocker merged with County National Bank and Trust Company of Santa Barbara. On September 25, 1959, Crocker merged with The Bank of Carmel and with The First National Bank of Monterey, and with The First National Bank of Pacific Grove. On June 23, 1961, Crocker merged with the Bank of San Rafael and with the First National Bank in San Ráfael. On November 30, 1959, Citizens merged with the Bank of Whittier and with the First National Bank of Vernon. On December 7, 1962, Citizens merged with the Glendora Commercial and Savings Bank. The nine banks acquired by Crocker from June 1956 to June 1961 had, combined, deposits of about $164,371,000, loans of $79,790,000, and 20 banking offices. The three banks acquired by Citizens from November 1959 to December 1962 had, combined, about $19,977,000 in deposits, $8,880,000 in loans, and 6 banking offices. All of these banks were engaged in interstate commerce. NEGOTIATIONS LEADING TO THE MERGER. The purpose of creating another statewide bank to compete with Bank of America was clearly stated when the subject of the merger of Crocker and Citizens was first proposed. (Tr. 1021). In September 1958, L. O. Ivey, vice chairman of the board of Citizens National Bank and its second largest stockholder, approached Paul Hoover, president of Crocker, with regard to a merger of the two banks for the purpose of forming another statewide institution. (Tr. 1020, line 21-Tr. 1021, line 10; Tr. 1029). L. O. Ivey had no connection with Transamerica. (Tr. 1031). Although the management of Citizens may not have been favorably disposed to this proposal, Ivey interested Transamerica in the negotiations, but they came to an abrupt termination in March 1959, when Transamerica, as the dominant stockholder of Citizens, demanded too high an exchange ratio for the Citizens stock (Tr. 1022, 1029-1030). Although it appeared at this time that there was no possibility of merging Crocker with Citizens and although every reason now urged by plaintiff for entering Los Angeles then existed, Crocker took no steps and made no plans to establish offices in Los Angeles or any of the other southern counties, either by merger or by de novo branching. JUDGE POPE: I would like to ask this question: Was there any time subsequent to 1956 when the officers of '.your organization discussed the problem of establishing branch banks in the Los Angeles area? By that, I mean Los Angeles County, Orange County and vicinity. THE WITNESS: Yes, the subject came up quite frequently, Your Honor, and was cast aside because we just didn’t have the horses, we didn’t have the capital, we just couldn’t do it and we didn’t have the personnel. JUDGE POPE: Was this at a time when you were generally agreed that it would be desirable to enter— THE WITNESS: It was indeed. JUDGE POPE: To enter the Los Angeles area? THE WITNESS: Yes. (Hoover, Tr. 1038, Lines 5-19). In January 1962, two years and nine months later, Paul Hoover and Emmett Solomon, then chairman of the board and president, respectively, of Crocker, called on John R. Beckett, the new president of Transamerica, to discuss the possibility of merger with Citizens. At that time they were informed by Beckett that Transamerica was not interested in such a move, but that if it did because interested, he would so advise Crocker (Solomon, G-337, pp. 109-110). Prior thereto, Transamerica, for reasons relating to the accounting rules of the Securities & Exchange Commission, was interested in owning more than 50 per cent of Citizens, in order that it might thereby substantially increase its earnings (Beckett, Tr. 1908). Subsequently and at the meeting of its board of directors on August 31, 1962, Transamerica, fearing that its 41 per cent holding in Citizens might result in Transamerica voting more than 50 per cent of the stock of Citizens represented at an annual meeting and thereby subject it and all of its subsidiaries wherever located in the world to examination by the Federal Reserve Board at the expense of the company, decided to dispose of its Citizens holdings and instructed Mr. Beckett to see what he could do in this regard (Beckett, Tr. 1910-1913). Pursuant to such instruction in September 1962, Beckett informed Hoover or Solomon or both that Transamerica had decided that it would be interested in a merger because' Transamerica was leaning in the direction of becoming a mutual fund type operation (Solomon, G-337, p. 110; Beckett, Tr. 1913). In response to this, Hoover and Solomon negotiated with Transamerica for the purpose of determining what exchange ratio would be satisfactory to Transamerica in the event a merger was successfully negotiated with Citizens. Transamerica agreed that an exchange ratio of 1.8 shares of Crocker to 1 share of Citizens would be satisfactory to it (Solomon, G-337, pp. 125-126). Transamerica also agreed that it would not interfere with the management of the resulting bank and that it would dispose of its shares in the resulting bank on an orderly basis (Solomon, G-337, pp. 127-128). Transamerica thereafter informed the executive committee of Citizens of Crocker’s proposal and that Transamerica was in favor of it (Britt, G-334, pp. 10-12a). Hoover and Solomon then negotiated with the management of Citizens, not only as to the exchange ratio, but as to all other aspects of the merger agreement which were important to both groups (Britt, G-334, p. 12b; Solomon, G-337, 'pp. 124-125). Included were the composition of the board, adjustment of principal officers, employee benefits, location of directors’ meetings, name of the combined bank, composition of the executive committee, functions of the advisory committees, location of the bank’s headquarters and the multitude of other things, any one of which might have prevented agreement on a merger (Solomon, G-337, pp. 124-127; Clarke, Tr. 1246, line 18-Tr. 1247, line 17). Finally, by a letter from the chairman of the board of directors of Crocker, dated February 6, 1963, Croeker-Anglo offered to merge at an exchange ratio of 1.9 shares of CrockerAnglo to 1 share of Citizens. (Britt, G-334, pp. 22-24). The proposal also contained various provisions relating to the liabilities of the two banks, the composition of the board of directors of the resulting bank, future employment and pensions of employees of both banks (Ct. Exh. 195). In February 1963, the boards of directors of both banks approved the merger in principle and authorized and directed the officers to i.egotiate a definitive agreement. On February 28, 1963, Crocker initiated an examination of Citizens and discovered the possibility of exposure to liability from a certain action pending against Citizens. Being unwilling to assume, through a merger with Citizens, responsibility for that litigation and for related contingent liabilities in connection therewith unless indemnified, Crocker entered into an agreement with Transamerica whereby Transamerica, together with its subsidiaries, agreed to indemnify and save harmless Crocker against any and all liabilities which might arise from that action, to the extent of 60 per cent thereof. Thereafter Crocker confirmed its offer by a letter dated April 1, 1963, from the chairman of its board. In April, the board of directors of each authorized the execution of the formal agreement to merge and it was duly executed (Ct. Exh. 195, “Application for Approval of Merger”, p. 4). On May 3, 1963, the two banks submitted their Application for Approval to Merge under section 18(c) of the Federal Deposit Insurance Act, as amended, 12 U.S.C. § 1828(c), and section 215a of Title 12 U.S.C., to the Comptroller of the Currency (Ct. Exh. 195). Pursuant to notice, the Comptroller of the Currency held a public hearing on the proposed merger on July 30 and 31, 1963. The record developed at the hearing comprises 1,605 pages of testimony and exhibits (BK-A). On September 30, 1963, the Comptroller of the Currency rendered his decision approving the merger subject to the conditions that the board of directors of Transamerica agree: (1) that no more than one director or officer or other representative of Transamerica Corporation will serve as a director of the resulting bank, and (2) that it would dispose of substantially all of its stock holdings in the resulting bank by December 31, 1966. Subsequently, this provision was further changed by putting the stock in a voting trust, over which Transamerica has no control. Transamerica no longer has a director on the combined board, and the percentage of the stock it now holds under the voting trust has been reduced from 12 per cent to 8.8 per cent. The trust, which cannot be altered without approval of the Comptroller, is presumably to remain in effect until Transamerica can make a fair and equitable disposition (sale) of its holdings. The influence of Transamerica on the banking operations of the old Citizens or the new Crocker-Citizens has thus been effectively removed. In his decision approving the merger, the Comptroller found favorably to the banks on all the banking factors involved and also found that the proposed merger would have no adverse effects on competition, that it would not tend toward monopoly, and that it would not violate section 7 of the Clayton Act (BK-A). On October 8, 1963, this action was commenced and the Government moved for a preliminary injunction restraining the consummation of the merger. After hearing, the Government’s motion for a preliminary injunction was denied (United States v. Crocker-Anglo Nat. Bank, 223 F.Supp. 849 (N.D.Calif.1963)), and the merger was consummated on November 1, 1963. The subsequent history of this litigation has already been recited above. THE NATURE OF BANKING IN CALIFORNIA AND THE ECONOMIC MILIEU IN WHICH IT OPERATES. In view of the broad geographic distribution of the operations of the merging banks and their branches in order to better assess and render a balanced judgment on the impact of this merger, a review of the economic milieu in which they operated is imperative. The geographic expanse of California, comprising 158,693 square miles of land with some 800 miles of coastline and an average width of 200 miles, with all the attendant problems created by distance, can best be appreciated if its area is transported to the east coast and overlaid on the eastern seaboard. . When the north-south California axis is placed on the north-south axis of the east coast, the California overlay extends from Boston, Massachusetts on the north to Charleston, South Carolina on the south. Encompassed in this area we will find all the land area of Connecticut, Rhode Island, New Jersey and Delaware and the eastern half of Massachusetts, Pennsylvania, Maryland, Virginia, North Carolina and South Carolina. It would embrace such cities as Boston, New York, New Haven, Wilmington, Philadelphia, Baltimore, Washington, D. C., Richmond, Norfolk, Charlotte, Winston-Salem and Charleston. It has a topography and climate probably unmatched throughout the remainder of the United States for its complexity and variety and thus accounts for the extraordinary expansion, growth and diversity in population, agriculture, business and industry, which for decades have made and continue to cause California to be a substantial capital import state (Saxon, Tr. 2066-2068). This situation, which is recognized by all the parties, is of paramount importance in any consideration of the State of California as a whole as a relevant economic section of the country in which to evaluate the competitive nature of commercial banking (the term used in the Bank Merger Act of 1966 is “the business of banking”). It is also important to the court’s consideration of the convenience and needs of the community to be served. Any attempt to divorce the entire State of California from the national market (as a submarket thereof) in assessing the anticompetitive impact of this merger by the use of concentration figures in commercial banking based upon the number of offices, assets, IPC deposits and loans of California banks alone (as plaintiff would have us do) and without consideration of other financial forces in and out of California which come into play and compete with such banks for the very financial services that may cause the entire state to be a relevant market (as contrasted to those which are basically local) is an oversimplification, an oversimplification which might make the court’s task easier, but which would ignore a substantial and essential part of the picture and would result in a false portrayal of the hard economic facts of banking in this assumed state market. As difficult as the task may be, ours is the obligation to clarify and establish the picture with certainty. THE APPROPRIATE LINE OF COMMERCE TEST. While it is well established that commercial banking, which has as one of its prime characteristics the fact that commercial banks are the only financial institutions that can accept demand deposits, is an appropriate line of commerce within which to measure the anticompetitive effects of a banking merger in local markets, it does not necessarily follow under the 1966 Act that the totality of financial activities carried on by commercial banks and their competition in á statewide market of the magnitude of California or in the national market should be ignored. It is not the view of this court that in such expanded markets commercial banking is the sole line of commerce that the court can or should consider. Hence, what we are about to say, which represents the views of the members of this court, while not essential to the findings herein made and the conclusions herein reached, is, nevertheless, clearly applicable to this case and the substantive standards by which bank mergers are to be tested under the. Bank Merger Act of 1966. In fact, the provisions and terminology of subparagraphs (A) and-(B) of the Bank Merger Act of 1966, § 1828(c) (5) of Title 12 U.S.C., which set forth the substantive standards by which banking mergers are to be judged, suggest to this court that a broader test was intended and now applies. We deem the deliberate omission from the Bank Merger Act of 1966, § 1828(c) (5) (B), of the phrase “in any line of commerce” is not without significance. Plaintiff argues that “it was quite unnecessary, and indeed would have been inappropriate, for the phrase ‘in any line of commerce’ to have been included in so obviously a statute concerned exclusively with banks. To have had it there would have been out of place and would not have made sense”. (Plaintiff’s Supp. Post Reply Brief, p. 12A.) This argument ignores the canons of statutory construction that “ * * the legislative language will be interpreted on the assumption * * * that if change occurs in legislative language, a change was intended in legislative result.” Furthermore, the statute itself answers plaintiff’s argument. Subparagraph 5(A) immediately preceding sub-paragraph 5(B) provides the first substantive test for bank mergers. It is in terms of monopoly. It refers expressly to “the business of banking”. Congress obviously thought it “made sense” and was not “out of place” to use the words “business of banking” when formulating the monopoly test. In the following paragraph Congress just as obviously must have thought it “made sense” to omit those words. This gives all the more credence to Senator Robertson’s statement that Congress intentionally omitted “any line of commerce” (as well as “business of banking”) from subparagraph 5 (B) of the amendment, in order to provide a less stringent test. In his remarks on the floor of the Senate when he presented the amendments of the House of Representatives to S. 1698, the bank merger bill, Senator Robertson said: It will be noted that the prohibitory language is based generally on the terms of section 1 of the Sherman Act and section 7 of the Clayton Act. Section 1 of the Sherman Act (15 U.S.C. § 1) prohibits contracts, combinations, and conspiracies “in restraint of trade or commerce” while section 7 of the Clayton Act (15 U.S.C. § 18), as amended in 1950, prohibits acquisitions “where in any line of commerce in any section of the country the effect may be substantially to lessen competition, or to tend to create a monopoly.” The text of paragraph (B) of the new bill follows the terms of section 1 of the Sherman Act and section 7 of the Clayton Act, with the exception that the reference to “any line of commerce” in the Clayton Act is not carried over into the new bill. In this respect the new bill resembles the Bank Merger Act of 1960, and calls for an appraisal of the overall effects of the merger on competition, weighing increases of competition in one field against decreases in competition in another field. The banking agencies and the courts, in other words, are not intended and are not permitted to select some single, perhaps minor aspect of the banks’ business and to say that, because there is some lessening of competition in this element of the business, the overall effects of the merger—the increase of competition in the entire field of banking and in the broader field of financial institutions which may result from other aspects of the merger—are irrelevant and may not be considered. As the Banking and Currency Committee said in 1959 in reporting out the Bank Merger Act of 1960, we do not want the banking agencies and the courts to say as did Judge Weinfeld in the Bethlehem-Youngstown merger, “If the merger offends the statute in any relevant market then good motives and even demonstrable benefits are irrelevant and afford no defense.” (U. S. A. v. Bethlehem Steel Corp. et al., D.C., 168 F.Supp. 576, 1958; see Senate Report No. 196, 86th Cong., S. 1062, pp. 5-6.) We do not want the court to say, as it did in the Philadelphia case, that a merger which may substantially lessen competition in one line of business in one section of the country “is not saved because, on some ultimate reckoning of social debits and credits, it may be deemed beneficial.” We do not want the court to apply a statute which, in the words of the court in the Philadelphia case, proscribes “anticompetitive mergers, the benign and the malignant alike.” (Hearings on S. 1698, p. 403). In considering whether a proposed merger may lessen competition or tend to create a monopoly or be in restraint of trade, the banking agencies and the courts will, of course, take into consideration all the facts which I have discussed under the question of monopoly —the competition from other financial institutions in one or another part of its business, the competition from other banks and other financial institutions, locally, regionally, nationally and internationally, the inevitable limitations on competition imposed by statute and by regulatory authorities, with respect to entry into the business and with respect to the carrying on of the business. All of these factors must be taken into consideration in weighing the overall anticompetitive effects of the proposed merger. (Cong.Ree. Feb. 9, 1966, p. 2541-2.) And Congressman- Ashley, as house manager for S. 1698, in reporting out his version of that bill, commented on the problem as follows: The Committee recognized that commercial banks face intensive competition from other financial institutions— savings and loan associations, mutual savings banks, insurance companies, finance companies, and so forth. The Committee also recognized that competition between commercial banks and other institutions includes local competition, regional competition, national competition and even international competition for one part or another of the business. To overlook any one of these aspects of competition, or to concentrate on one of them to the exclusion of the others, would be unrealistic and might well diminish, not increase, financial competition. In interpreting the Bank Merger Act of 1966 as it was finally enacted, plaintiff urges the court to listen only to the words of Representative Patman and his associate, Representative Reuss, who, plaintiff proposes “are the principal architects” of the legislation. Yet, anyone reading the legislative history of the Act cannot help but conclude that the language of Senator Robertson and Representative Ashley, more properly defines the scope and intent of the Act. Certain things are clear from the legislative history. The initial bill was offered by Senator Robertson.'""With an amendment by Senator Proxmire it passed the Senate and was offered in the House by Representative Ashley. It was not until after a majority of the House Banking and Currency Committee, in an allegedly “rump” session, had voted to approve the Ashley bill that Representative Patman agreed to let any bill come out of the committee. In reporting the bill which bears his name and which became the Bank Merger Act of 1966, Representative Patman reported to the Congress : Mr. Chairman, if I alone were writing this legislation and proposing it, I certainly would not propose it as it is before us. I would be against it as a matter of principle. (Cong.Ree., Feb. 8, 1966, p. 2357.) We think it reflects no discredit upon Representative Patman if the court, recognizing the limitations of human nature, views his interpretations of this statute with a jaundiced eye. He opposed the bill “in principle” and with all his legendary vigor. What would be more natural than for him to attempt to shave its impact as much as possible when it reached the floor of the House? On the other hand, Senators Robertson and Proxmire had sponsored the legislation in the Senate, as had Representative Ashley in the House. When the House passed the amended bill, Senator Robertson quickly sponsored the House version before the Senate Banking Committee, where it was approved by a 9 to 2 vote. Since the bill was eminently satisfactory to its original sponsors and so distasteful to Representative Patman, is it not to the “winners” that we should turn for an evaluation of the meaning of the statute? COMPETING FINANCIAL INSTITUTIONS OTHER THAN BANKS. The court, having concluded that the intent of Congress in deleting the phrase “line of commerce” from the Bank Merger Act of 1966 was to permit an assessment of the competitive effect of a merger, not in the narrow market consisting solely of commercial banks, but in the wider and more realistic field of all institutions which compete either for the savings or investment dollar or for the extension of credit, now reviews this wider field. It would be appropriate to here also note that students have pointed out that because of the regulations to which banks are subjected, the character of their competition is quite different from that of other nonregulated industries or businesses and explains in part the reasons which prompted the 1966 amendments to the Bank Merger Act. The following uncontroverted data, contained in the record and appropriately cited by exhibit number, demonstrates the extent to which competition exists in the State of California between banks and various other financial institutions. The information is based upon a hypothetical statewide market and demonstrates the insignificance of Crocker-Citizens’ share of the savings and credits throughout the state. (a) In 1962, California savings amounted to $46,057,807,000, only 27.-12 per cent of which were held by commercial banks and only 2.63 per cent of which were held by Crocker and Citizens (BK-E-27): (000 omitted) Commercial Banks (IPC time deposits) $12,493,031 Savings and Loan Associations (Savings Capital) 13,400,000 U. S. Savings Bonds (Redemption value of bonds held by individuals) 4.644.000 Credit Unions (Share capital and member deposits) 814,463 Postal Savings (Balance to credit of depositors) 32,137 Life Insurance Reserves 9,646,176 Mutual Investment Funds (Market value of net assets) 2.279.000 U. S. Government Marketable Securities With Maturity Within 1 Year from Date of Issue 2.749.000 As of December 28, 1962, Crocker and Citizens combined held only 2.63 per cent of the total (BK-E-27). (b) As of January 1962, commercial banks held only 10.01 per cent of California farm mortgage loans: (000 omitted) All Operating Banks $ 138,604 Life Insurance Companies 208,760 Federal Land Banks 187,167 Farmers Home Administration 9,555 Individuals and Others 840,000 Total $ 1,384,086 As of the closest available date, Crocker and Citizens together held only 1.34 per cent of California farm mortgage loans (BKE-28). (c) As of January 1962, total California agricultural loans amounted to $2,184,790,000, only 33.4 per cent of which were held by operating banks: (000 omitted) All Operating Banks $ 730,396 Life Insurance Companies 208,760 Federal Land Banks 187,167 Banks for Cooperatives 92,303 Farmers Home Administration 15,802 Rural Electrification Administration 35,020 Production Credit Associations 75,342 Individuals and Others 840,000 As of the closest available date, Crocker and Citizens combined held only 2.77 per cent of California agricultural loans (BK-E-29). (d) As of 1962, California mortgage debt on non-farm real estate amounted to $32,150,162,000, only 18.6 per cent of which was held by commercial banks: (000 omitted) Commercial Banks $ 5,978,775 Mutual Savings Banks 2,196,000 Savings and Loan Associations 13,941,000 Life Insurance Companies 5,634,387 Others 4,400,000 As of the same date, Crocker and Citizens held only 1.80 per cent of that total (BK-Er31). (e) In 1962, commercial banks held only 32.74 per cent of the total California business loans and credit outstanding. The $21,276,-061,000 total amount of such loans and credit was held as follows: (000 omitted) Commercial Banks $ 6,945,861 Commercial and Finance Company Paper 598,800 Small Business Administration 76,600 Finance Companies 1,111,700 Life Insurance Companies 2,064,400 Savings and Loan Associations 588,700 Trade Credit 9,830,000 Crocker and Citizens held 2.85 per cent of that total (BK-E-33). (f) In 1962, commercial banks held only 44.36 per cent of California’s $7,101,896,000 installment and non-installment consumer credit: (000 omitted) Commercial Banks (Installment credit and single payment loans) $ 3,150,596 Other Financial Institutions (Single payment loans) 87,500 Sales Finance Companies 1,219,400 Credit Unions 497,300 Consumer Finance Companies 379,900 Others—Installment Credit 160,000 Retail Outlets (Installment credit and charge accounts) 1,156,600 Credit Cards 51,200 Service Credit 399,400 Crocker and Citizens had 5.56 per cent of that total (BK-E-35). The financial institutions which compete with commercial banks are located in every part of the State of California: (a) The Morris Plan Company has 47 offices in 46 communities located in every area of the state. Its eight San Francisco Bay area offices include at least one in each of the five counties which plaintiff claims to be the relevant local market, and its 12 offices in the Los Angeles metropolitan area include three in Orange County and nine in Los Angeles County. As of December 31, 1955, it had total assets of $115,067,049 and total loans of $116,913,051 (BK-GGG, pp. 1-2). (b) As of December 3