United States v. Alcan Aluminum Ltd.

• Decision Date: 15 January 1985
• Docket Number: Civ. A. No. C 84-1028 L(A).
• Citation: 605 F. Supp. 619
• Parties: UNITED STATES of America, Plaintiff, v. ALCAN ALUMINUM LIMITED, Alcan Aluminum Corporation, and Atlantic Richfield Company, Defendants.
• Court: U.S. District Court — Western District of Kentucky

605 F. Supp. 619

UNITED STATES of America, Plaintiff, v. ALCAN ALUMINUM LIMITED, Alcan Aluminum Corporation, and Atlantic Richfield Company, Defendants.

Civ. A. No. C 84-1028 L(A).

United States District Court, W.D. Kentucky, Louisville Division.

January 15, 1985.

Ronald Meredith, U.S. Atty., Louisville, Ky., Steven C. Douse, U.S. Dept. of Justice, Antitrust Div., Washington, D.C., for plaintiff.

James D. Moyer, Louisville, Ky., Jerome G. Shapiro, Ronald A. Stern, Washington, D.C., Edward E. Clark, Los Angeles, Cal., William E. Jackson, Charles Westland, New York City, Richard W. Pogue, A. Theodore Gardiner, III, Cleveland, Ohio, William E. Swope, Washington, D.C., Sanford Yosowitz, Alcan Alum Corp., Cleveland, Ohio, for defendants.

MEMORANDUM OPINION

ALLEN, Chief Judge.

This action is submitted to the Court upon the motion of the parties to enter a Consent Judgment. It is the Court's duty to review the proposed Consent Judgment, pursuant to 15 U.S.C. § 16(e), which requires in part that before entering any consent judgment proposed by the United States under this section, the Court shall determine that the entry of such judgment is in the public interest.

In 1984 the United States, acting through its Department of Justice, brought this action under Section 7 of the Clayton Act, 15 U.S.C. § 18, challenging the acquisition by Alcan Aluminum Limited (hereinafter "Alcan") of an aluminum rolling mill in Logan County, Kentucky, from Atlantic Richfield Company (hereinafter "ARCO"), which is a domestic corporation engaging primarily in the petroleum business.

In 1977 Alcan acquired Anaconda Aluminum Company (hereinafter Anaconda). Alcan is a Canadian corporation which is the largest producer of aluminum in the world. Its wholly owned subsidiary is Alcan Aluminum Corporation (hereinafter "Alcancorp."), a United States corporation which is the fourth largest manufacturer of aluminum can body stock in the United States. The three largest producers are Aluminum Company of America (hereinafter "Alcoa"), Reynolds Metals Company (hereinafter "Reynolds"), and Kaiser Aluminum and Chemical Corporation (hereinafter "Kaiser").

Arco has recently completed a rolling mill in Logan County, Kentucky, at a total cost of at least $250,000,000. It is the only complete rolling mill built in the United States in the last ten years, and its current capacity of approximately 315,000,000 lbs. is devoted entirely to the production of aluminum can body stock, which represents 14.4 percent of total 1983 shipments. It can be expanded to double its present capacity.

Arco has not engaged in the production of aluminum can body stock. When its proposed sale of its Logan County Plant to Alcan became known, the United States sought, by its complaint in this action, to prohibit the sale on the grounds that it violated Section 7 of the Clayton Act. Subsequent to the filing of the complaint, the parties agreed and have tendered to the Court the Consent Decree, which provides that the Plant shall be owned 60% by Arco and 40% by Alcan. The Consent Decree does, however, allow Alcan to acquire more than a 40% ownership interest in the Logan County Plant if it funds more than 40% of a future capital improvement in which Arco or its successor declines to participate fully.

The Decree also allows either party to finance up to 100% of a future capital improvement, and to have the use of such improvement in proportion to its ownership interest, in the event that the other party does not choose to participate. However, the Decree provides that in that event, Alcan's greater participation in a future capital improvement would not decrease Arco's capital utilization rights in the original facility to which it is entitled by reason of its 60% ownership interest.

The Decree prohibits Arco from selling, leasing or transferring to Alcan any part of its ownership interest in the Logan County Plant during the ten-year term of the Consent Decree. Both Alcan and Arco are prevented by the Consent Decree from transferring their interest in the Plant to any of the three major domestic competitors, Alcoa, Reynolds or Kaiser. Any transfer by Arco of less than all of its interest to any other entity may not be made without the consent of the Department of Justice or the Court.

The Decree also provides that if, within three years of entry of the Final Judgment, Arco sells its interest in the Logan County Plant, and during that period Alcan undertakes a capital improvement of the heavy gauge cold mill production center, in which Arco has failed to acquire up to a 60% interest, the successor to Arco's interest will be accorded the right to purchase up to 60% interest in that improvement. The Decree also provides that the Plant will be operated by an independent management company to be owned 60% by Arco and 40% by Alcan. This proportion will remain constant during the ten-year term of the Decree, regardless of any possible changes in the parties' ownership interest in the Plant, resulting from the disproportionate funding of capital improvements. A majority of the management company's board of directors will be designated by Arco, and each party will designate an independent director. Neither party may offer a position of officer, director or employee to an independent director of the management company.

The Decree requires Arco to set up a separate marketing organization and sell its share of the Plant's output independently of Alcan. It also requires that each party to the joint venture make marketing decisions independently as to the products produced for it at the Logan County Plant.

The Decree also prohibits Alcan and Arco from selling aluminum can body stock to each other, except for temporary shortages or other emergencies, not to exceed 1,000,000 lbs. a year.

The Decree also prohibits Alcan and Arco from communicating with each other, either directly or independently, or through the management company, with regard to competitively sensitive matters, including future production schedules, present or future terms or conditions of sale, sales forecasts, marketing plans, and sales or proposed sales to specific customers.

The only objections to the proposed Consent Decree have emanated from Alcoa and Reynolds. Both companies object to Section IV, Paragraph B 6 of the Consent Judgment. That section reads as follows:

Each party to the joint venture may utilize any unused portion of the other party's capacity by assuming the variable costs, but not the fixed costs, attributable to the added production.

Both Alcoa and Reynolds argue that this section provides a loophole that could subvert the remedial purposes of the Consent Decree.

The Government responded to this charge with the argument that because of financial incentives built into the Decree, the provision is not likely to have any effect at all; and secondly, that if it were to become effective, the risk of subversion of the Decree is more than offset by the economic benefit of achieving greater utilization of the Plant's production capacity. In addition to the objections made by Alcoa, Reynolds argues that there should be a flat prohibition on the exchange of competitively sensitive information.

The authority vested in this Court under the statute is one of insuring that the Government has not breached its duty to the public in consenting to the Consent Decree. The Court is not required to determine whether the Decree is the one that will best serve society, but whether it is "within the reaches of public interest." See United States v. Bechtel Corporation, 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083, 102 S.Ct. 638, 70 L.Ed.2d 617 (1981). See also, United States v. American Telephone and Telegraph Company, 552 F.Supp. 131, 151 (D.C.D.C.1982).

Judge Greene, in United States v. American Tel. and Tel. Co., supra, held that while the court is not as free to exercise its discretion in fashioning a remedy as it would be upon a finding of liability, it does not follow that it must unquestionably accept a consent decree as long as it somehow, and, however inadequately, deals with the antitrust problems implicated in the lawsuit. Id. at 151.

Using the principles stated above as general guidelines, the Court believes that the proposed Decree should be approved, even though it falls short of the remedy that the Court might have imposed had the matter been litigated. Taken as a whole, the Decree provides for the entry of a new competitor, that is, Arco, into the market. Also, of course, the Decree allows Alcan to increase its share of the market in what is a highly concentrated market. These two considerations offset each other to some extent, but the pro-competitive interests advanced outweigh the antitrust competitive interests.

It is true also that the provision that the concerns expressed by Alcoa and Reynolds with regard to Section IV, Paragraph B 6 do touch upon an area that might conceivably subvert the general purposes of the Consent Decree. But here again, that possibly is at least countered to a significant extent by the fact that this provision gives an incentive to Arco to see to it that the production of the Plant is maintained at relatively high levels.

Finally, we think it significant that no consumers of aluminum can body stock have appeared to voice any objections to the proposed Consent Decree, and that the only objections come from companies which have a higher share of the market than the parties to the Decree.

In conclusion, we will sign the Consent Decree tendered by the United States.

FINAL JUDGMENT

Plaintiff, United States of America, having filed its complaint herein on October 5, 1984, and the plaintiff and defendants, by their respective attorneys, having consented to the entry of this final judgment without trial or adjudication of any issue of fact or law herein and without this final judgment constituting any evidence against or an admission by any party with...