Citations
- 233 F. Supp. 718
Full opinion text
MEREDITH, District Judge,
This matter was tried to the Court without a jury and is an action brought by the United States under Section 15 of the Clayton Act, 15 U.S.C. § 25, to enforce Section 7 of the Clayton Act, 15 -g.S.C. § 18.
I1!16 defendants Aluminum Company of America (hereinafter referred to as Alcoa) an make a return on capital. It also px'o-vides a means of promoting the use of aluminum in the building industry. Only Alcoa aluminum is used in these projects-where aluminum is called for. Cupples,. as well as Cupples competitors, has supplied the extruded products to date in these real estate px'ojeets. Cupples could reasonably be expected to supply more-of the aluminum in the future than its competitors because of the ownership of-Cupples by Alcoa. In fact, if a suit was-, not pending it would be reasonable to find that Cupples would get all this business..
Alcoa sells aluminum to jobbers at a. lower pxúce than it sells to fabricators. The evidence is that Alcoa now sells to-Cupples at the same price it sells to other fabricators. Nothing would prevent Alcoa in the future from selling to Cupples-. at jobber prices, which would put Cupples-in an even more advantageous position than other fabricators.
Alcoa through the years has acquired a reputation with architects and builders as a pioneer in new developments. They spend large sums of money to advertise in trade magazines and on television, and in px'omoting expense-free trips to the home office by various persons in the trade, such as architects and buildex'S, to show them new processes. Now, as a subsidiary of Alcoa, this px’estige benefits Cupples. Cupples on its advertising and catalogs promotes itself as . a subsidiary company of Alcoa.
Cupples today is the only aluminum fabricator that is owned by a primary producer, except for Amarlite Company, which was acquired in 1960 by Anaconda Alumiixum Company, the smallest of the primary producers which has only 2.8% of the primary market.
Certain sizes, shapes and patterns for aluminum curtain wall are extruded from dies which are expensive and which are owned by Alcoa. At the present time these dies are made available to all of Alcoa’s customers, including the competitors of Cupples, provided the aluminum is purchased from Alcoa. It would be reasonable to assume this will continue as long as Cupples uses only 16% of the .aluminum in curtain wall because Alcoa ■does not want to lose the other business. But what would Alcoa do when Cupples achieves 40% of the market? Or more than 40% ? Would not Alcoa use its advantages to help Cupples and to thereby help itself? This Court is of the opinion that it would.
Duranodic finish adds a hard coat and ■color which makes aluminum attractive as a curtain wall material. It costs $100,000 or more to establish this process. Cupples is one of the companies licensed by Alcoa to use Duranodic. The Kalcolor licensed by Kaiser is another ■color process which competes with Dura-nodic finish. Because of its cost a small ■company Is not able to install this process. With out color finish on aluminum, .a firm cannot successfully compete in the .■aluminum curtain wall market.
With all of the foregoing facts, what •■are the tests the Court must apply in making a determination of the competitive effect of an acquisition?
In A. G. Spalding & Bros., Inc., v. F. T. C., 301 F.2d 585 (C.A.3d), 1. c. 625, the Court said:
“Under Section 7 of the Clayton Act the Government is not required to show that competition has been or Is being restrained or that monopoly ■exists. The legislation was contrived as a preventive measure to ■eliminate the proscribed activities before they became operative. * *
“ * * * the test of a violation of § 7 is whether, at the time of suit, there is a reasonable probability that the acquisition is likely to result in the condemned restraints. * * * ”
The motive in the acquisition is important. Here the purpose of acquiring 40% of the aluminum curtain wall market has been clearly expressed. In United States v. Paramount Pictures, 334 U.S. 131, 1. c. 174, 68 S.Ct. 915, 1. c. 937, 92 L.Ed. 1260, the Court said:
“ * * * In the opinion of the majority the legality of vertical integration under the Sherman Act turns on (1) the purpose or intent with which it was conceived, or (2) the power it creates and the attendant purpose or intent. * * * ”
In the Brown Shoe case, supra, 370 U.S. at page 344, 82 S.Ct. at page 1534, the Court said:
“ * * * But we cannot fail to recognize Congress’ desire to promote competition through the protection of viable, small, locally owned businesses. Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets. It resolved these competing considerations in favor of decentralization. We must give effect to that decision.”
In Transamerica Corp. v. Board of Governors, 206 F.2d 163, 1. c. 169, the Court said:
“A monopoly involves the power to raise prices or to exclude competition when the monopolist desires to do so. Obviously, under Section 7 it was not necessary for the Board to find that Transamerica has actually achieved monopoly power but merely that the stock acquisitions under attack have brought it measurably closer to that end. For it is the purpose of the Clayton Act to nip monopoly in the bud. Since by definition monopoly involves the power to eliminate competition a lessening of competition is clearly relevant in the determination of the existence of a tendency to monopolize. * * * ”
It seems to this Court, and we so find, that the acquisition of Cupples, the number one fabricator of aluminum curtain wall, with 16.6% of the aluminum curtain wall market, by Alcoa, the number one domestic producer of primary aluminum, with 36.1% of the primary aluminum market, with Alcoa’s avowed purpose to obtain 40% of the aluminum curtain wall market in Cupples, can reasonably be expected to substantially lessen competition or tend to create a monopoly in the fabrication and sale of metal curtain wall and aluminum curtain wall, the relevant lines of commerce within the United States. Thus, we find a violation of Section 7 of the Clayton Act.
In considering the line of commerce of metal curtain wall and aluminum curtain wall, in most instances the metal and aluminum windows are an integral part of the curtain wall system.
The Court is of the opinion on the evidence before it that there is no real or clear distinction between residential primary windows and non-residential primary windows, whether made of aluminum or other metal. The evidence shows that so-called aluminum non-residential primary windows are used in residences and that so-called aluminum residential primary windows are used in high rise apartments and other commercial buildings.
Residential and non-residential windows made of aluminum are both stocked. This may be done by stocking aluminum “sticks”, which may be fabricated into a window by cutting the stick into various lengths, and fastening it together to make the outer frame of the window. Stocking the windows may also be done by keeping in stock the finished windows.
Aluminum and metal primary windows are sold by the fabricator to hardware stores, dealers who deal in lumber or other materials, contractors, builders and a variety of other purchasers. There are no distinct customers. They are not custom-made like curtain wall for a specific building.
Almost every dealer in building' supplies is in the aluminum window business. To get into the business does not require the plant facilities required for curtain wall. This can be accomplished with a small shop, a few tools, and the purchase of aluminum sticks or the finished windows.
The fabrication of aluminum windows can be done with a small outlay of capital and a very few dies. There are no distinct production facilities required for either non-residential windows or residential windows.
As to the lines of commerce of metal non-residential primary windows and aluminum non-residential primary windows, the government has not met its burden of proof.
Alcoa will be ordered to divest itself of the stock of Cupples. Because of the ownership of the Corona, California, plant by Alcoa, which is being operated by Cupples, a further hearing will be held to determine the proper method and the scope of the divestiture.