United States v. Aluminum Co. of America - 377 U.S. 271 (1964)
U.S. Supreme Court
United States v. Aluminum Co. of America, 377 U.S. 271 (1964)
United States v. Aluminum Co. of America
Argued April 23 1964
Decided June 1, 1964
377 U.S. 271
The United States brought this civil antitrust suit alleging a violation of § 7 of the Clayton Act by Aluminum Company of America's (Alcoa's) 1959 acquisition of the stock and assets of Rome Cable Corporation (Rome), and asking for divestiture. Rome, which manufactured mainly insulated copper products, in 1958 produced 0.3% of the industry production of bare aluminum conductor, 4.7% of insulated aluminum conductor and 1.3% of aluminum conductor (the broader aluminum conductor line consisting of both bare and insulated conductor). Alcoa, which produced no copper conductor, in 1958 produced 32.5% of bare aluminum conductor, 11.6% of insulated aluminum conductor, and 27.8% of aluminum conductor. These products are used almost entirely by electrical utilities for transmission and distribution lines -- overhead lines in recent years consisting of mainly bare aluminum conductor and insulated aluminum conductor; underground lines consisting essentially of insulated copper conductor. The District Court found that bare aluminum conductor is a separate "line of commerce," but held that insulated aluminum conductor is not a line of commerce distinct from its copper counterpart, and, consequently that aluminum conductor generally is not a separate line of commerce. It dismissed the complaint.
1. Aluminum conductor is a submarket and a separate line of commerce for purposes of § 7. Pp. 377 U. S. 274-277.
(a) The degree of competition between insulated aluminum conductor (a component of aluminum conductor) and insulated copper conductor, while enough to justify grouping them in a single product market, does not prevent their division into separate submarkets for § 7 purposes. Brown Shoe Co. v. United States, 370 U. S. 294, followed. P. 377 U. S. 275.
(b) Dividing insulated aluminum conductor and its copper counterpart into separate submarkets is proper, since each has
developed distinctive end uses, and the price differential, the most important practical factor in the trade, keeps them apart. P. 377 U. S. 276.
(c) Bare and insulated aluminum conductor may be combined into one line of commerce, since they are distinct from their copper counterpart in use and price. Pp. 377 U. S. 276-277.
2. The merger violated § 7, and divestiture is proper. Pp. 377 U. S. 277-281.
(a) The purpose of § 7 is to proscribe mergers with a probable anticompetitive effect. P. 377 U. S. 280.
(b) In an oligopolistic industry with a few dominant integrated companies and a small and diminishing group of independents, the prevention of increased concentration is important. Pp. 377 U. S. 278-281.
(c) Rome ranked ninth among all companies and fourth among independents in the aluminum conductor market, and eighth and fourth, respectively, in the insulated aluminum line. Alcoa was the leading producer of aluminum conductor, and third in the insulated aluminum field. Pp. 377 U. S. 278, 377 U. S. 280-281.
(d) The acquisition by Alcoa of Rome, though adding but 1.3% to Alcoa's share of the aluminum conductor market, would, in the framework of this industry, likely result in a substantial reduction of competition. P. 377 U. S. 280.
214 F. Supp. 501, reversed and remanded.