Why a 1963 bank case should not decide the Paramount/Warner deal

A 63-year-old Supreme Court ruling about two Philadelphia banks is now the central legal weapon in the fight over Paramount’s $110 billion deal to buy Warner Bros. Discovery – a transaction that passed muster with the Justice Department and in every one of the 68 jurisdictions around the world where it was reviewed – but that 12 state attorneys general are suing to block, citing that decades-old case as their guiding precedent.

When, in United States v. Philadelphia National Bank (PNB), the Supreme Court blocked two Philadelphia banks from merging, banking was simple to measure. The product was checking accounts and loans, and the market was one city. The Court set out an arbitrary rule of thumb, deciding that if a merger gives you about 30% of a market, courts will assume it hurts competition. This standard was derived from the static and predictable market of bricks and mortar banking in a local area. But, by making up that 30% threshold, the case created the machinery to answer the question Congress wanted to address – whether a merger would substantially lessen competition. If PNB’s 30% market-share threshold is triggered by the states’ narrow market definition, however, it would create a legal presumption of harm the states are counting on to win, even without proving actual consumer damage.

There is a broad debate over the applicability of PNB to modern anti-trust cases, with many legal scholars finding the application of a........

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