Emerging Trends in the Delivery of Financial Services May Lead to Changes in Antitrust Analysis

Financial Services Law

What Happened

On September 1, 2020, the Department of Justice’s Antitrust Division (the Division) announced that it is seeking public comment on whether revisions should be made to its 1995 Bank Merger Competitive Review Guidelines (the Banking Guidelines) or its competitive analysis of bank mergers more generally. These guidelines have largely focused on market share, market concentration thresholds and other market-based conditions, but have not been modified to reflect modern trends in the delivery of financial services. The Division uses the Banking Guidelines as part of its initial review of bank merger applications. This review is intended to identify merger transactions that do not have significantly adverse effects on competition and to allow them to proceed expeditiously. Although bank regulatory agencies perform their own antitrust review of merger transactions, the Division conducts a concurrent competitive review.

If a transaction raises potential concerns, the Division can open an investigation applying the same framework used for other industries based on its 2010 Horizontal Merger Guidelines (the 2010 Guidelines). While the Federal Trade Commission and the Division revised their horizontal merger guidelines more recently, the Banking Guidelines have remained largely unchanged since 1995, despite vast changes in the financial services industry.  

The Division is asking for comment in several key areas, including the following.

Product and Geographic Markets

  • In addition to (i) retail banking products and services, (ii) small-business banking products and services, and (iii) middle-market banking products and services, should the Division review additional products in its antitrust analysis?
  • Should the Division screen bank merger applications beyond the Federal Reserve Board-defined geographic markets and/or county-level markets?
  • Should geographic markets for consumer and small-business products and services still be considered local?

Rural Versus Urban Markets

  • How can the Division properly assess different dynamics in urban versus rural markets?
  • Should the Division apply different screening criteria and HHI (Herfindahl-Hirschman Index) thresholds for rural versus urban markets?

Nontraditional Banks

  • Does the Division appropriately weigh online deposits, credit unions and thrifts?
  • Should the Division include online and other nontraditional banks in assessing competitive effects of a merger transaction?

HHI Thresholds

  • Should the screening thresholds in the Banking Guidelines be updated to reflect the HHI thresholds in the 2010 Guidelines?

General Guidance

  • Does the banking industry need more clarity on how the Division applies the Banking Guidelines to its anticompetitive investigations?
  • Is it useful to have banking-specific merger review guidance beyond the 2010 Guidelines?

Why it Matters

The Division’s solicitation of public comments on how to approach its antitrust review in the context of bank mergers reflects the rapidly changing nature of how financial services are being delivered. Technology is disrupting legacy financial models, and the competitive elements the Division has historically used to assess the impact of corporate combinations may not adequately reflect the impact of these combinations on consumers. Public comments must be received no later than October 1, 2020.

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