Sean Heather Sean Heather
Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce
Bill Hulse Bill Hulse
Senior Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce


June 27, 2023


In a recent speech, Assistant Attorney General Jonathan Kanter explained that changes in the banking sector could affect the Department of Justice’s (DOJ’s) analysis of bank mergers. Delivered on the sixtieth anniversary of the Supreme Court’s seminal antitrust banking case, United States v. Philadelphia National Bank (1963), Mr. Kanter advocated for an increase in merger scrutiny based on ambiguous criteria and unfounded concerns about concentration levels, both of which should give pause to those who support evidence-based merger view.

Mr. Kanter’s speech focused heavily on corporate consolidation. At the outset, Mr. Kanter praised Philadelphia National Bank’s concern with bank consolidation and endorsement of structural presumptions against mergers that increase consolidation beyond certain thresholds. Mr. Kanter then critiqued DOJ’s current Bank Merger Guidelines, issued in 1995, noting correctly that the banking sector has changed dramatically since then. Finally, Mr. Kanter relayed that DOJ is “modernizing” merger review based on “the full range of competitive factors” and “today’s market realities,” while declining to provide any timeline as to whether or when DOJ will update its Guidelines for the public.

In focusing on consolidation, Mr. Kanter failed to appreciate the many ways in which competition has increased since the mid-1990s, much less the early 1960s. Although Mr. Kanter acknowledged the “popularization of interstate banking, financial conglomeration, online and mobile banking, and the digital transformation of our economy,” he failed to recognize that these trends have led to explosive growth in competition from online banks, credit unions, and other financing and payment options for consumers and businesses. As the Chamber has described, one report found that the consumer credit market “has seen new entrants, innovative products, aggregate growth, reinvention of incumbents … the hallmarks of competitive markets.” Another study found that bank output was “supercompetitive” and that fees declined from 1984-2016.

In any event, and contrary to Mr. Kanter’s assumptions, the U.S. economy is not becoming more concentrated. In an exhaustive analysis of all available census data from the past two decades – data that was unavailable for most prior studies – a recent study found that many aspects of the banking and finance sectors have become less concentrated since 2002. In particular, the Commercial Banking, Credit Card Issuing, and Consumer Lending sectors all have experienced declining concentration. Competition has increased across the economy as companies have used online tools to become more efficient and expand their reach across the country.

Furthermore, and in direct refutation of another key assumption, numerous studies have found that bank concentration does not impair competition. Concentration levels are calculated based on total deposits, which are “at best loosely correlated with the various financial services that banks and thrifts provide. Because banks can readily reallocate funds from one purpose to another—for example, from business finance to consumer credit or from mortgages to auto loans—their ability to compete for consumers is not tied tightly to their total assets.” Ease of entry also ameliorates concerns about concentration levels; one report found that, “In sectors where competitors can increase capacity quickly, as is the case in consumer credit, concentration exaggerates the significance of large firms and underestimates the importance of small firms. Dominant lenders cannot raise rates and count on small competitors to empty their inventory of loans.”

Perhaps of greatest concern, Mr. Kanter’s speech ignored the many ways in which mergers can promote competition – and financial stability. In comments addressing some recent bank failures, Treasury Secretary Janet Yellen acknowledged that “more consolidation in the banking industry could be healthy.” Secretary Yellen pointed out that, “We have more banks, relatively speaking, in the United States than almost any country of which I’m aware.”

Likewise, studies have found that mergers can increase competition and financial stability. After a merger, the combined institution can have a stronger and broader capital base and liquidity position, more financial resources to improve customer products, and more resources to invest, particularly in lower-income communities. Larger institutions have more resources to protect consumer data, to defend against cyberattacks, and to make technology investments to provide their customers with the digital and other services that they want and expect.

Indeed, during the administration of President Clinton, the Antitrust Division itself recognized that bank mergers can improve efficiency which, in turn, can lead to lower costs and better products for consumers:

The great majority of bank mergers do not cause antitrust concerns, and the Antitrust Division is quite cognizant of that fact. … To the extent that a bank merger allows the merging firms to achieve significant economies of scale or scope, consumers may benefit from lower costs and/or improved services.

Finally, Mr. Kanter’s speech failed to provide meaningful guidance. Mr. Kanter again promoted standardless “market realities” as a way to evaluate proposed transactions. By expressing concern about “the extent to which a transaction threatens to entrench power of the most dominant banks,” he again toyed with the idea that “big is bad,” even if “big” enhances financial stability and helps consumers. And by again expressing disdain for divestments, he again expressed a reluctance to accept narrow remedies that would resolve any genuine competitive concerns.

Instead of subjecting proposed transactions to ambiguous scrutiny, DOJ could best support competition in financial markets by using its competition advocacy tools to advance deregulatory policy conversations that would allow more companies to compete. Government policies typically create the largest barriers to competition in banking via licensing restrictions, prudential requirements, prescriptive consumer protection regulations, and federally administered financing. By working to lower these barriers, DOJ could enhance competition and better protect consumers.

About the authors

Sean Heather

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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Bill Hulse

Bill Hulse

Hulse oversees the day-to-day efforts of CCMC including policy development, advocacy, and communications.

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