Review of Industrial Organization 16: 151–165, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Bank Mergers and the 1992 Merger Guidelines:
The BankAmerica/Security Paciﬁc Transaction
JANUSZ A. ORDOVER
New York University, New York, NY 10003, U.S.A.
MARGARET E. GUERIN-CALVERT
Principal Economist Incorporated, 1200 New Hampshire Ave., NW, Washington, DC 20036, U.S.A.
Bank mergers raise many important and challenging competition policy issues.
These issues relate to all of the basic elements of merger review as delineated in the
1992 Agencies’ Horizontal Merger Guidelines. Of course, even prior to the release
of the Guidelines, the Department had an extensive experience with reviewing bank
mergers. Nonetheless, the release of the 1992 Merger Guidelines offered a new
impetus for re-assessment of the economic models that were used to examine the
likely competitive effects of bank mergers.
Both of us were especially concerned that even though the Division quite well
understood that bank mergers could – in some cases – cause harm to consumers,
these likely competitive effects were not clearly delineated or set out as an express
analytical framework. We were concerned, for example, that the link between the
reduction in the number of banks in relevant product and geographic markets
and the enhanced risk of collusion required a fully spelled-out assessment of its
relevance to bank mergers rather than a mechanical application of the standard
paradigm. In particular, we wanted to better understand how, given the nature of
the banking business, banks might be able to coordinate their diverse activities.
The Guidelines also raised the possibility of (indeed gave much prominence to) the
Professor of Economics at New York University and Principal, Economists, Inc., Washington
DC, respectively. Meg Guerin-Calvert was Assistant Chief, Economic Regulatory Section and Janusz
Ordover was the Deputy Assistant Attorney General for Economics when the transaction was re-
viewed by the Division. The authors would like to thank Russell Pittman and Bill Comanor for
The letter from the AAG James F. Rill to the Chairman of the Federal Reserve Board, Alan
Greenspan, reporting on the likely competitive effects of the acquisition of First Interstate of Hawaii
by First Hawaiian, dated October 5, 1990, provides ﬁrst extensive discussion of the approach to bank
mergers that was informed by the 1992 Merger Guidelines, which at that time were in the process of
being revised under the energetic leadership of DAAG/Economics, Robert D. Willig.