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U.S. Department of Justice Changes Focus on Its Assessment of Bank Mergers

By Sean P. McConnell and Michael S. Zullo
October, 2023
The Banking Law Journal

U.S. Department of Justice Changes Focus on Its Assessment of Bank Mergers

By Sean P. McConnell and Michael S. Zullo
October, 2023
The Banking Law Journal

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Assistant Attorney General Jonathan Kanter recently addressed the Brookings Institute to discuss the 60-year anniversary of a seminal decision by the Supreme Court of the United States concerning bank mergers: United States v. Philadelphia National Bank.

Kanter used the opportunity to announce a new approach by DOJ to its assessment of bank mergers consistent with President Biden’s July 2021 Executive Order on Promoting Competition in the American Economy.[1] The new approach removes predictability from the merger review process and adds uncertainty as to how the Department of Justice (DOJ) will assess competitive harm in bank mergers in a similar fashion to DOJ’s recent withdrawal[2] of support for three policy statements that had permitted certain “safety zones” in the healthcare sector.


Philadelphia National Bank involved a 1961 challenge to the merger of the second and third largest banks in Philadelphia. The Supreme Court held that the merger violated Section 7 of the Clayton Act and, most notably, established that certain changes in market structure and concentration alone can create a presumption that a merger is so likely to substantially lessen competition that it must be enjoined unless the merger parties can establish that the merger is not likely to have anticompetitive effects. Antitrust enforcers and courts consistently rely on this presumption, which shifts the burden to the merging parties to disprove anticompetitive effects. Kanter suggested that the Court “has not since revisited or criticized these holdings, and the basis for the structural presumption in merger review is even stronger today than it was in 1963.”

In the wake of Philadelphia National Bank, Congress established DOJ’s role in enforcing bank mergers through the Bank Merger and Bank Holding Company Acts. The banking agencies assess the competitive effects of a bank merger, and DOJ independently enforces the Clayton Act, which has led to overlapping divestiture obligations under which DOJ may require different or greater divestiture obligations than the banking agencies. DOJ also provides the banking agencies with a nonpublic report articulating competitive factors related to the proposed transaction. Thus, even if the banking agencies approve the merger, DOJ retains authority to challenge the merger in federal court; however, it has not done so since 1990, relying on Letter Agreements for divestitures, in lieu of consent orders employed in other industries.

In 1995, DOJ, the Office of the Comptroller of the Currency and the Federal Reserve Board jointly developed the current Bank Merger Competitive Review Guidelines, which provide important guidance regarding the regulatory review for parties considering a bank merger. The 1995 bank merger guidelines articulated two screens intended “to identify proposed mergers that clearly do not have significant adverse effects on competition.”

Screen A, principally employed by the bank regulatory agencies, analyzed “competition in predefined markets developed by the Federal Reserve” using total deposits as the metric for assessing market shares and concentration.

Screen B, employed by DOJ, focused on narrower geographic markets and only included deposits of commercial banks.

The 1995 guidelines also promoted the use of divestitures to resolve any issues with a proposed bank merger. Indeed, DOJ’s practice has been to resolve any competitive issues with a bank merger through a branch divestiture settlement or letter of agreement before DOJ provides the banking agencies with its competitive factors report.

Each of the principal federal bank regulatory agencies has its own bank merger guidelines or policies, which vary among the agencies, and each agency is considering revisions to those guidelines.[3]


While DOJ still supports the structural presumption from Philadelphia National Bank, it is abandoning the approach articulated in the 1995 bank merger guidelines due to changes in banking competition since that time.

Kanter noted that local market deposit concentration may be inadequate to assess the competitive effects of a modern bank merger given the broader geographic and business scope of current financial institutions. DOJ will not just focus on local deposits and branch overlaps, but will analyze “relevant competition in retail banking, small business banking, and large- and mid-sized business banking... across a wide range of appropriate metrics.”

The identification of relevant markets for (a) retail banking, (b) small business banking, (c) middle market banking and (d) larger corporate banking services is nothing new, as the DOJ has challenged bank mergers based on alleged effects in such markets, and other relevant markets, for decades. However, DOJ will assess the competitive effects on “fees, interest rates, branch locations, product variety, network effects, interoperability, and customer service” in a given bank transaction. This statement suggests less deference to market share screens based on local deposits as a surrogate for the cluster of banking services identified as the relevant market in Philadelphia National Bank, and more attention to potential direct evidence of anticompetitive effects and competitive harm through coordinated effects. Kanter also noted that DOJ will pay more attention to the impact of competition in financial technologies.

Although Kanter noted that DOJ is still working with the Federal Reserve, FDIC and Office of the Comptroller of the Currency on updated bank merger guidelines, he advanced two important considerations DOJ will assess in reviewing a bank merger.

First, DOJ “will closely scrutinize mergers that increase risks associated with coordinated effects and multi-market contacts” and “will also examine the extent to which a transaction threatens to entrench power of the most dominant banks by excluding existing or potential disruptive threats or rivals.”

Second, DOJ will focus on the impact of a particular bank merger on different customer groups to “ensure that customers retain a meaningful choice as to the type of bank with which they do business by recognizing that different segments of customers have different needs and that substitution across different types of banks may be limited.” DOJ will no longer focus on remedies agreements with parties.


  • DOJ is modernizing the approach it has used to assess bank mergers since 1995, shifting its focus from purely local competition with an eye toward “all relevant dimensions of competition.”
  • Banks can no longer rely solely on local branch deposit share “screens” to identify proposed mergers that clearly do not have significant adverse effects on competition for predictability related to the review of a proposed transaction.
  • DOJ will work with bank regulatory agencies to develop data sources to improve competitive analysis in various potentially relevant markets and identify additional factors and theories of competitive harm in assessing bank mergers.
  • DOJ is purporting to focus on providing more detailed competitive factor reports to the principal federal bank regulatory agencies respon- sible for merger review under the Bank Merger Act and the Bank Holding Company Act, reserving its enforcement powers while deem- phasizing its historical practice of using branch divestitures, through letter agreements, to resolve its competitive concerns with certain bank mergers.


Even though DOJ and banking agencies are still considering updated bank merger guidelines, DOJ is changing how it approaches its assessment of bank mergers. Until there is further clarification or guidance from DOJ, this change is likely to lead to unpredictability for parties considering a bank merger. The different factors and theories of competitive harm that DOJ may consider could be extensive.

In the long run, revised bank merger guidelines and identification of additional data sources of focus in analysis may establish a more unified approach to bank merger review among DOJ and the federal bank regulatory agencies.

In the short run, parties to bank mergers must continue to gather and present the same types of data that they have in the past, including local deposit share merger screen data and more detailed competitive analysis where screens indicate further review. They should expect additional questions, data requests and delays as the enforcement policy continues to evolve.


  1. on-promoting-competition-in-the-american-economy/.
  3. For notations on some of the differences between DOJ enforcement policy and that of the Federal Reserve Board, see the 2014 Federal Reserve Board FAQs, at