148 F.2d 416, 443-444 (C.A.2 1945)
Alcoa was incorporated in Pennsylvania on September 18, 1888, as the Pittsburgh Reduction Company and later changed its name in 1907.1
Through assignment of the Hall patent in 1889 and the Bradley patent in 1892, Alcoa secured a legal monopoly on virgin ingot manufacture that lasted until the patents expired in 1906 and 1909 respectively.2 Beginning in 1895, Alcoa obtained water power through contracts that restricted the power companies from supplying others for aluminum manufacture.3 It also participated in successive cartels with foreign aluminum producers that limited imports into the United States.4 In 1912 the United States brought suit against Alcoa, resulting in a consent decree that enjoined several restrictive covenants.5
From 1909 onward Alcoa remained the only domestic producer of virgin ingot.6 Its share of virgin ingot available for sale in the United States exceeded 90 percent for most years after 1912 and averaged over 90 percent from 1934 to 1938.7 Alcoa expanded its production capacity from two plants producing less than 42 million pounds in 1912 to five plants producing approximately 327 million pounds by 1934.8
In 1928 Alcoa transferred its foreign properties to a newly formed Canadian corporation, Aluminum Limited, whose shares were distributed to Alcoa's shareholders.9 Limited later joined with foreign producers in the Alliance cartel agreements of 1931 and 1936 that established production quotas and royalties for aluminum.10 Alcoa also engaged in a price squeeze on aluminum sheet from 1925 to 1932 by maintaining high ingot prices and low sheet prices that left little margin for independent sheet rollers.11 The complaint in this action was filed on April 23, 1937.12 Trial took place from June 1, 1938, to August 14, 1940, producing over 40,000 pages of testimony.13 The district court delivered its opinion in 1941, filed findings in 1942, and entered judgment dismissing the complaint on July 23, 1942.14 The Supreme Court referred the appeal to the Second Circuit on June 12, 1944, because a quorum of qualified justices was lacking.15
Whether Alcoa monopolized the market in virgin aluminum ingot?16
Section 2 of the Sherman Act reaches monopolies that are deliberately preserved through persistent expansion rather than thrust upon the firm by accident or superior efficiency alone.17 Monopoly power exists when a firm controls a dominant share of the market such that it can set prices or exclude competitors without effective restraint from rivals.18
Yes. Alcoa held over ninety percent of the virgin ingot available for sale in the United States for most years after 1912 and averaged over ninety percent from 1934 to 1938, remaining the sole domestic producer throughout the period.19 It maintained this position by expanding capacity from two plants producing less than forty-two million pounds in 1912 to five plants producing approximately three hundred twenty-seven million pounds by 1934, thereby anticipating and meeting every increase in demand before competitors could enter.20
Alcoa's control constituted unlawful monopolization under section 2 because the power was deliberately preserved through persistent expansion rather than thrust upon the firm by accident or superior efficiency alone.21
Whether Alcoa engaged in unlawful practices such as the price squeeze ancillary to the establishment of its monopoly?22
Practices that extend or exploit monopoly power, such as maintaining high ingot prices while setting low fabricated-product prices that leave independent fabricators without a reasonable margin, violate the Sherman Act when they are undertaken after the firm has notice of their exclusionary effect.23 Preemption of supplies or power sites is not unlawful if undertaken in good faith to meet anticipated future needs rather than to block rivals.24
Yes. Alcoa engaged in a price squeeze on aluminum sheet from 1925 to 1932 by holding ingot prices high enough that the spread between ingot cost and sheet selling price left independent rollers with an average profit of only eighty-four cents per pound on coiled sheet.25 In thirty-one of one hundred twelve instances the spread was zero or negative.26 This practice continued after complaints put Alcoa on notice and ended only when the Department of Justice began its investigation.27
The preemption of bauxite and water-power sites was not shown to be exclusionary because the district court credited the testimony that the purchases served legitimate future needs.28
The price squeeze constituted an unlawful exercise of monopoly power, but the preemption charges were properly rejected on the facts found below.29
Whether Limited and Alcoa were in an unlawful conspiracy or, if not, whether Limited was guilty of a conspiracy with foreign producers?30
An agreement among competitors to allocate production quotas and impose royalties on excess output restrains trade under section 1 of the Sherman Act when the agreement is intended to affect and does affect United States imports.31 Common ownership or overlapping shareholders between two corporations does not automatically impute liability from one to the other absent proof that the controlling group acted as a single body with authority to bind both entities.32
No. Alcoa was not a party to the Alliance because the separation of foreign properties to Limited in 1928 and the subsequent independence of management prevented imputation of the Alliance to Alcoa despite overlapping shareholders.33 Yes. The 1936 Alliance agreement deliberately included imports into the United States within the quota system and royalty schedule, satisfying the intent element.34 The burden then shifted to Limited to show the quotas had no actual effect on imports.35
Limited failed to carry that burden, rendering the agreement unlawful.36
Whether the judgment should be reversed and the case remanded for consideration of remedies in light of changed industry conditions?39
Remedies for monopolization and cartel violations must be tailored to current market conditions rather than to conditions existing at the close of evidence.40 Dissolution is appropriate only when necessary to restore competition and should await disposition of government-owned plants under the Surplus Property Act so that the court can assess the resulting industry structure.41
Yes. The case must be remanded for further proceedings.42 Alcoa must be enjoined from resuming the price squeeze and from any future cartel participation affecting United States imports.43 Limited must be enjoined from renewing quota agreements that restrict imports.44 No dissolution order can be entered until the district court determines the post-war structure after the Surplus Property Board disposes of the government plants leased to Alcoa. The enormous wartime expansion has rendered the 1940 market position obsolete.