Alcoa Forest

Small behind his vast bench in Manhattan's slick new U. S. courthouse, Federal Judge Francis Gordon Caffey last week peered down upon an important gathering. There was grey-haired Arthur Vining Davis, for 29 years president or chairman of huge Aluminum Co. of America. There was stocky Thurman Wesley Arnold, law professor lately made Assistant Attorney General in charge of trustbusting. Conferring occasionally with Mr. Davis was redhaired, big-boned William Watson Smith, Alcoa's trial lawyer for some 25 years. Conferring occasionally with Mr. Arnold was spry, young Walter Lyman Rice, only ten years out of Harvard Law but already a potent trustbuster. It was he and James Lawrence Fly who broke the Sugar Institute in 1933. Big as was that case, Lawyer Rice last week had a bigger one, probably the most important anti-trust suit the U. S. Government has ever brought. Its express object: to break up $236,000,000 Alcoa into several separate entities.

As Lawyer Rice rose to make his opening remarks, Judge Caffey interrupted: "May I inject the remark that I am most helped by statements which omit the trees and show me the forest."

Forest. As Mr. Rice showed it, Alcoa's management ever since the company was founded in 1888 as Pittsburgh Reduction Co. has been dominated by one idea: to control every last sale of aluminum in the U. S. Its success, claimed the prosecutor, is indicated by the fact that a $100 share in the company in 1890 has by now yielded a par value of $8,760, that some $100,000,000 has been paid in cash dividends in the past 48 years, that Alcoa admittedly controls 100% of the virgin aluminum production in the U. S., that everyone in the trade considers Alcoa a monopoly. In short, said Walter Rice: "If there is in this whole United States a single industry in which there is a 100% monopoly it is the aluminum industry."

Trees, Some 8% of the earth's crust is made of aluminum (an ingredient of all clay), but only a small portion of it is extractable. A 24-square-mile area in Arkansas is the chief U. S. source of bauxite, from which aluminum is commercially derived. Mr. Rice says Alcoa controls 19? square miles of this supply, and also has vast foreign holdings. U. S. aluminum is made under the Hall and the Bradley processes. Alcoa got ownership of both patents around the turn of the century; then, realizing that when the patents expired it would no longer have its monopoly, began buying up power, tremendous amounts of which are needed in making aluminum. A sample arrangement, according to Lawyer Rice, was that with Niagara Falls Hydraulic Power & Manufacturing Co. by which it agreed not to sell power to anyone making aluminum except Alcoa; cryolite, too, is needed and Pennsylvania Salt Manufacturing Co. had a monopoly there, so Alcoa made a contract with Pennsylvania Salt.

By 1912 these and various other operations began to achieve a certain notoriety and the Department of Justice brought the first anti-trust action against Alcoa. It resulted in a consent decree by which the company agreed to cancel its monopolistic contracts and to stop such practices in future. Since then Alcoa has been investigated several times by the Federal Trade Commission, twice by the Department of Justice. Alcoa has usually come out with a clean bill of health.

In 1933, soon after Homer Stille Cummings became Attorney General, his department again started gunning for Alcoa. As a private lawyer, Mr. Cummings had lost a court skirmish with the aluminum company; hardly had he moved to Washington when the Government accused old Andrew Mellon of tax evasion, his chief company of monopoly. Because his. R. B. Mellon's and Chairman Davis' families own 51% of Alcoa's stock, Andrew Mellon, though dead now, was listed as a defendant last week. Actual suit in this anti-trust case was brought by Homer Cummings more than a year ago (TIME, May 3, 1937). Alcoa fought it with an injunction by a Pittsburgh judge on the ground that the monopoly accusation had been settled by the 1912 consent decree. It took a U. S. Supreme Court decision and a set of minor court skirmishes to get Alcoa finally to court in Manhattan last week for the main show. Nonetheless, Alcoa asserts it has not delayed unnecessarily, that it is eager for the trial, all issues of which it says have been amply aired and settled by previous investigations and trials.

Where the case is likely to produce new angles is on the theme of aluminum imports. Walter Rice claims that Alcoa actually belongs to the European aluminum cartel through affiliation with a Canadian corporation named Aluminum Ltd. He maintains, that Alcoa allows a small flow of imports (6% in 1937) to disguise the absolute monopoly, that more imports are prevented by astute pressure abroad through Aluminum Ltd. Said Mr. Rice in court last week: "There never were interlocking directorates or officers of the two corporations. That would have been too open. But in 1928 the stockholders of the two companies were identical and today they are almost identical. Arthur V. Davis, chairman of Aluminum Co., is a brother of Edward K. Davis, president of Aluminum, Ltd."

Beginning Alcoa's defense this week. Lawyer Smith retorted: "I marvel at a government that can charge in 104 paragraphs that we have never done any honest thing in our 50 years of existence. We do deny every charge made by the Government regarding malevolent intent. . . ."

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