United States v. Aluminum Co. of America

• Decision Date: 02 June 1950
• Parties: UNITED STATES v. ALUMINUM CO. OF AMERICA et al.
• Court: U.S. District Court — Southern District of New York

91 F. Supp. 333

UNITED STATES v. ALUMINUM CO. OF AMERICA et al.

United States District Court S. D. New York.

June 2, 1950.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Leonard J. Emmerglick, Special Assistant to the Attorney General, (J. Fergus Belanger, Norman J. Futor, Walter D. Murphy, all of Washington, D.C.,) for plaintiff.

Smith, Buchanan & Ingersoll, Pittsburgh, Pa., (William Watson Smith, Frank B. Ingersoll, Leon E. Hickman, William K. Unverzagt, all of Pittsburgh 19, Pa., of counsel), Hughes, Hubbard & Ewing, New York City (Charles E. Hughes, Jr., L. Homer Surbeck, New York City, of counsel), for defendants.

KNOX, Chief Judge.

Procedural History and Applicable Law

The procedural history of this litigation — spreading as it does over a period of thirteen years — is such as to entitle it to be designated as a res nova in anti-trust law enforcement. Notwithstanding the antiquity of the action, the issues involved must be determined in accordance with the more recently established anti-trust principles, and not by those that were well recognized in an earlier day. In order to find solutions to the novel questions presented, my first effort must be directed to the ascertainment of the current interpretations of the antitrust statutes as they apply to the facts revealed by this record.

The start of the action was on April 23, 1937, when the Government filed a petition charging defendant, Aluminum Company of America, hereinafter referred to as Alcoa, with monopolizing interstate and foreign commerce, particularly in the manufacture and sale of "virgin" aluminum ingot.

The trial got under way on June 1, 1938, and continued without much interruption until August 14, 1940. Thereafter, on September 30, October 1, 2, 3, 4, 6, 7, 8, 9 and 10, 1941, Judge Caffey delivered his opinion from the bench, finding in all respects for the defendant, 44 F.Supp. 97. On July 23, 1942, he entered judgment, dismissing the complaint on the merits.

The Government appealed to the Supreme Court of the United States but, due to the absence of a qualified quorum in that Court, the case was certified to the Court of Appeals for the Second Circuit, 1944, 322 U.S. 716, 64 S.Ct. 1281, 88 L.Ed. 1557, in which tribunal full appellate review was vested by Act of Congress 58 Stat. 272, Act June 9, 1944, 15 U.S.C.A. § 29.

The Court of Appeals rendered its opinion on March 12, 1945, 2 Cir., 148 F.2d 416. The result below was affirmed in part, and in part reversed. Alcoa, the court held, had exercised an unlawful price "squeeze" in aluminum sheet, 148 F.2d at pages 437-438 — a matter not presently of concern — and also had illegally monopolized the aluminum ingot market within the stricture of Section 2 of the Sherman Act, 15 U.S. C.A. § 2. However, no relief against the latter offense was then decreed.

This was prompted by the uncertainties that then surrounded the post-war aluminum industry, and which were occasioned by the existence of large and important aluminum facilities that had been constructed to meet metal emergencies of the late war, and which were in the ownership of the United States. The Surplus Property Act of 1944, 58 Stat. 765, 50 U.S.C.A.Appendix, § 1611 et seq., directed that these facilities be disposed of in such manner, and with such purpose, as would foster competitive conditions in the aluminum industry of the nation.

Inasmuch as the disposal program, at the time of the decision of the appellate court had not yet been undertaken, the court took the view that the pronouncement of remedial measures should be withheld until such time as would enable this Court to evaluate the effects of the disposal program of the War Assets Administration. In this connection; the court said:

"It is as idle for the plaintiff to assume that dissolution will be proper, as it is for `Alcoa' to assume that it will not be; and it would be particularly fatuous to prepare a plan now, even if we could be sure that eventually some form of dissolution will be proper. Dissolution is not a penalty but a remedy; if the industry will not need it for its protection, it will be a disservice to break up an aggregation which has for so long demonstrated its efficiency. The need for such a remedy will be for the district court in the first instance, and there is a peculiar propriety in our saying nothing to control its decision, because the appeal from any judgment which it may enter, will perhaps be justiciable only by the Supreme Court, if there are then six justices qualified to sit." 148 F.2d at page 446 (emphasis added).

Thereafter, the Court of Appeals expressed itself more specifically. This occurred when a mandamus proceeding instituted by the Government challenged the conformity of the judgment entered by the District Court to the mandate issued by the appellate tribunal. United States v. District Court for S.D.N.Y., 2 Cir., 1948, 171 F.2d 285. The appellate court then spoke as follows:

"* * * the article as a whole conforms with our mandate, in which we tried to make it plain that the final judgment must secure the establishment of those `competitive conditions' which the Anti-Trust Acts, 15 U.S.C.A. § 1 et seq., demand. Dissolution is one remedy which may be necessary to that end; and in any event it will not depend upon the single issue whether `Alcoa' at the time of the judgment shall have a monopoly of the ingot market. On the contrary, it will depend upon what is `Alcoa's' position in the industry at that time: i. e., whether it must be divided into competing units in order to conform with the law. The continuance of the monopoly in ingot aluminum may in the court's judgment be enough to justify dissolution; but its absence will forbid neither dissolution, nor any other remedy." 171 F.2d at 286 (Emphasis supplied).

Thus, the crucial issue before me is the need for a remedy in terms of the existence of competitive conditions conforming to law. In determining the specific criteria applicable to ascertaining this need, one possible standard is whether Alcoa's present situation, notwithstanding all that has happened since 1945, is still violative of the Sherman Act, 15 U.S.C.A. §§ 1-7, 15 note. Another is that competitive conditions, i. e. "effective competition" may not exist even though the Sherman Act were not violated, because of Alcoa's stronger market position in relation to its competitors.

A third alternative rests on the proposition that dissolution decrees, in order to prevent the recurrence of condemned conditions, have reduced offenders to market positions quite below those which might be considered violative of the anti-trust laws. Accordingly, if Alcoa now occupies a market position substantially stronger than that which the largest fraction of the company would have been assigned if dissolution had been ordered immediately following the trial, it would mean that "effective competition" does not presently exist.

It is difficult fully to reconcile the third alternative with the language of the Court of Appeals in 1945. The court then said that dissolution may not be necessary to protect the industry, not that the protection of the industry is only accomplished by the equivalent of dissolution having occurred. Nor does the 1948 opinion suggest that Alcoa must still be in violation of the Sherman Act in order that remedial action be taken against it. The court observed that the absence of monopoly will not necessarily forbid dissolution. Neither of the previous two alternatives are necessarily compatible with Section 4 of the Sherman Act, the purpose of which is to require the district courts to "prevent and restrain such violations" of the Act. Rather, they are simply ad hoc criteria for determining the sole issue which is the existence of "effective competition," which will insure lawful market conditions throughout the foreseeable future.

The precise ingredients of "effective competition" cannot be said to have been a static concept under the Sherman Act. Their applications, as well as their implications, have varied with changes in judicial thought with respect to economic and legal philosophies. Recent precedents, unfortunately, but as is usual, have fallen short of definite specifications as to the requirements of "effective competition." But, by examining the prior law and theory which have evolved in relation to both substantive violations, and the purposes of the remedy under the Sherman Act, it is perhaps possible to formulate a more or less concrete delineation of the standards that should be met in seeking a just decision upon the complicated facts of this case.

In considering the substantive offense of monopolization under Section 2 of the Sherman Act, a marked development in the application of the anti-trust laws has been the diminishing significance attributable to the presence of actually abusive practices in the exercise of a corporation's market power. Courts formerly looked to an overt misuse of a defendant's dominant competitive position as a sine qua non of illegality. But this is no longer true. The more recent authoritative precedents indicate that the mere existence of what is denominated "monopoly power," irrespective of its exercise, may be the focal element that will resolve the outcome of a particular suit.

Thirty years ago, Justice McKenna, in United States v. U. S. Steel Corp., 1920, 251 U.S. 417, 40 S.Ct. 293, 64 L.Ed. 343, 8 A.L.R. 1121, took occasion to say: — "The corporation is undoubtedly of impressive size, and it takes an effort of resolution not to be affected by it or to exaggerate its influence. But we must adhere to the law, and the law does not make mere size an offense, or the existence of unexerted power an offense. It, we repeat, requires overt acts, and trusts to its prohibition of them and its power to repress or punish them. It does not compel competition, nor require all that is possible." 251...