United States v. Aluminum Co. of America

1964-06-22

Headline: Court blocks Alcoa’s 1959 buyout of Rome, finds the acquisition likely to lessen competition in aluminum electrical conductor markets and orders divestiture to restore competition.

Holding: The Court held that Alcoa’s 1959 acquisition of Rome likely violated Section 7 of the Clayton Act by substantially lessening competition in the aluminum conductor submarket and ordered divestiture to remedy the violation.

Real World Impact:

Orders Alcoa to divest Rome to restore competition.
Protects small independent cable makers from acquisition.
Affects utilities’ choice of overhead conductor suppliers and prices.

Topics: antitrust mergers, electrical wire and cable, market concentration, utility equipment

Summary

Background

Alcoa, a leading maker of aluminum products, acquired Rome Cable Corporation in 1959. The United States sued under Section 7 of the Clayton Act, arguing the purchase could substantially lessen competition in the market for electrical wire and cable used by utilities. At trial the District Court dismissed the suit; the Government appealed and the Supreme Court reviewed the case. Before the merger, Alcoa made about 27.8% of aluminum conductor and 32.5% of bare aluminum conductor in 1958. Rome’s share in 1958 was about 1.3% of aluminum conductor overall, 0.3% of bare aluminum, and 4.7% of insulated aluminum conductor. Copper conductor is the main rival product.

Reasoning

The Court focused on what counts as the relevant product market. It found that aluminum conductor — including both bare and insulated types — is a distinct submarket for Section 7 analysis because aluminum dominates overhead utility lines while copper dominates underground and indoor uses. Insulated aluminum has much lower prices (roughly 50–65% of copper) and strong growth in overhead distribution, making it economically distinct from copper. The industry was already highly concentrated among a few firms. The Court concluded that even adding Rome’s small percentage to Alcoa’s share could reasonably tend to lessen competition, and it relied on past decisions that allow preventing likely anticompetitive effects.

Real world impact

The Supreme Court reversed the District Court, found the merger violative of the law, and ordered divestiture proceedings. That outcome preserves an independent maker like Rome as a competitive force and affects how utilities and fabricators negotiate prices and supply. The ruling required the lower court to carry out steps to unwind the acquisition.

Dissents or concurrances

Justice Stewart (joined by Justices Harlan and Goldberg) dissented, arguing the trial court’s factual findings showed no separate aluminum market and that the Government failed to prove anticompetitive effect; he would have affirmed.