The opinion of the court was delivered by: CAFFEY
EDITOR'S NOTE: With the full approval of Judge Caffey, certain portions of the opinion, indicated by asterisks, have been omitted. The omitted portions consist of explanations given by the court of the procedure to be followed in delivering or revising the opinion and of certain colloquy between court and counsel with respect to findings. The matter omitted in no way affects the merit of any of the issues discussed in the opinion.
New York, September 30, 1941
With the explanations given, I believe it will be easy to understand the plan on which table 12 has been made up.
Table 13 contains merely summaries of what has been established by table 12. It can be verified by anybody. I think there is no occasion for additional comment on it.
That, under normal conditions, the ratios between the quantums of stock in the two companies (Alcoa and Aluminium) held by any single group of individuals would not remain stationary was to be anticipated. Again, it is plain that, unless changes in the holding of stock in one company were permissible without an accompanying requirement that like comparable changes be made in the holding by the same individual of stock in the other company, as a practical matter ordinarily the general market for the stock of both companies would be destroyed.
Perhaps enough has been said on the subject. Nevertheless, it may avoid misunderstanding, and certainly may assist in clearness, to inject two further statements (even though that be at the expense of some repetition).
(1) On June 4, 1928, the proportion of stock in Alcoa and in Aluminium held by each stockholder was the same. In the course of the years, however, save in exceptional cases continuance unchanged of any such proportion could not reasonably have been expected; and the record shows numerous individual instances in which the proportions have shifted widely. Illustrations appear on the face of table 12.
It would require extensive investigation to ascertain with precision the many variances which have occurred from time to time in the proportions. Moreover, I do not believe it is essential or would even be helpful to determine definitely what have been all the proportions or their variances.
(2) The part played with respect to the lodging of Alcoa and Aluminium stock with holding corporations, insofar as disclosed by the evidence, will next be described.
There were four such holding corporations. Their names were Aloxite, Ricsar, Coalesced and Ascalot. On September 20, 1937, three of these held Alcoa and Aluminium common stock. The fourth (Ricsar) held none (Exhibit 774, exhibit p. 3722). As previously remarked, all were dissolved, -- in fact fully liquidated, -- in December, 1938 (exhibit p. 3720).
Numbers 2 and 3 of the list of stockholders in table 12 (column A) were children of Richard B. Mellon and numbers 4 and 5, of Andrew W. Mellon (exhibit p. 3729). The fathers named were the two associates of Arthur V. Davis when on June 4, 1928, the holdings of these three stockholders when combined made a majority of the common stock in each company.
Apparently it has been assumed (and perhaps it is true) that stockholders numbered 2, 3, 4 and 5 acquired all or most of their 1937 stock from their fathers, -- though that has not been proved nor does it appear when the holding corporations acquired the stock they held for the children.
Apparently it has also been assumed that from the holdings by the children of common stock of the holding corporations (exhibit p. 3728) the relative shares of the beneficial interests of the children in Alcoa and Aluminium stock in the hands of the holding corporations can be determined. For example, since the two children of Richard B. Mellon each held an equal number of shares of the common stock of Aloxite (exhibit p. 3728), it seems to have been assumed that each likewise was entitled to one half the common stock of Alcoa and of Aluminium shown by schedule A of Exhibit 774 (exhibit p. 3722) which Aloxite held on September 20, 1937. The same method has been applied to determine the beneficial interests of the children in Alcoa and Aluminium stock held by the other holding corporations at that time.
If what results from a computation on the basis just outlined be added to what has already been included in table 12 as having stood in the names of the children in 1937, we get the respective total holdings of Alcoa and Aluminium stock which they personally held or beneficially owned September 20, 1937.
In conformity with the method explained, I have prepared table 12A. As indicated, it is designed to show what the holdings of the Mellon children would have been on September 20, 1937, if by then the holding corporations had already delivered to them the Alcoa and Aluminium stock held for them and is as follows:
Revision of columns D and E of table 12 to show in columns F and G below the total numbers of shares of Aluminium and Alcoa common stock that would have been held on September 20, 1937, by stockholders numbered 2, 3, 4 and 5 in list of stockholders' names, column A of table 12, if (1) the numbers shown in columns D and E of table 12 and (2) the numbers computed from the evidence, on assumptions stated in the note below, to have been held at that time by holding companies for those numbered stockholders, were added together.
A F G
Held in Held in
Stockholders' names Aluminium Alcoa
2. R. K. Mellon 56,363 128,123
3. Sarah M. Scaife 56,250 127,983
4. Ailsa M. Bruce 59,375 1/2 97,500
5. Paul Mellon 56,275 1/2 102,500
NOTE: Numbers of Aluminium and Alcoa common shares held by holding corporations for stockholders numbers 2, 3, 4 and 5 above on September 20, 1937, but not included in columns D and E of table 12, were estimated by (1) taking Aluminium and Alcoa common shares held by holding corporations (Aloxite, Ricsar, Coalesced and Ascalot) from schedule A to Exhibit 774 (exhibit p. 3722) and (2) assuming (exhibit p. 3728) that (a) Aloxite held one half of such stock in its hands each for stockholders numbers 2 and 3 above, (b) Ricsar held no Aluminium or Alcoa common stock, (c) Coalesced held one half of such common stock in its hands each for stockholders numbers 4 and 5 above and (d) Ascalot held all Aluminium and Alcoa common stock in its hands for stockholder number 5.
By comparing tables 12 and 12A it will be observed that the inclusion in table 12A of the beneficially owned Alcoa and Aluminium common stock in the hands of the holding corporations with what had already been incorporated in table 12 does not alter the result already stated in regard to the effect of time on the shifting of stock control of a corporation. On the contrary, it emphasizes and further illustrates that result. The primary purpose of table 12A is to safeguard against confusion or misapprehension.
Nevertheless, it is worthwhile to note the result of substituting table 12A for the 1937 figures in table 12. Thereby we can see with precision the number of holders of Aluminium common stock that would have been necessary on September 20, 1937, in order for their holdings then to constitute a majority if preceding that day the holding corporations had distributed to the Mellon children such of the common stock as was held for them.
It will be recalled that upwards of 338,368 1/2 shares of Aluminium common stock are required to constitute a majority. If tables 12 and 12A were combined in the way I have suggested, the minimum number of the holders of Aluminium common stock to make up a majority would have been eight (being the first eight named in column A of table 12). The total of their holdings would have been 347,354 shares.
There are two features of the situation, however, that should not be overlooked. These are that (1) on September 20, 1937, the eight Aluminium stockholders referred to held 711,550 shares of Alcoa common stock (nearly 25,000 less than a majority) and (2) on January 2, 1939, the eight held only 331,166 shares of Aluminium common stock (more than 7,000 less than a majority).
On the assumption as to 1937 mentioned, a recapitulation shows that the number of holders of Aluminium common stock needed to make a majority was 3 in 1928, 8 in 1937 and 11 in 1939. There is nothing in the evidence to suggest that this number will not steadily increase in size with the passage of time.
Accordingly, on review of all the evidence, I think that it would not support a finding of conspiracy between the stockholders of Alcoa and Aluminium or between either a large or a small group of those stockholders; nor would the evidence warrant a finding in regard to the conduct of the stockholders other than that they left officials of Aluminium a completely free hand in running the business of the company.
If in shaping the transfer of the foreign properties the purpose of Alcoa had been to retain control, then an easy way would have been to adopt the scheme suggested by the Government at the argument. Merely by turning over those properties to an Alcoa subsidiary, the control of all the properties would have remained complete and absolute in the hands of Alcoa.
As one ground for their attempted refutation -- as they insist, standing alone, constituting a complete refutation -- of the proposition of the Government, Alcoa and Aluminium rely on facts which will be presented in the form of several tables.
The first, table 14, is as follows:
Aluminium's and Alcoa's mill costs (in cents per pound) of producing aluminum pig, 1928-1937, computed on two plans.
Section 1. With profits of subsidiaries included:
A B C
Excess of A
Year Aluminium Alcoa over B
1928 11.41 10.64 .77
1929 11.35 10.06 1.29
1930 10.80 9.63 1.17
1931 11.00 9.21 1.79
1932 13.07 10.01 3.06
1933 12.55 10.43 2.12
1934 12.44 11.40 1.04
1935 10.86 10.23 .63
1936 10.11 9.32 .79
1937 9.19 9.15 .04
Section 2. With profits of subsidiaries omitted:
D E F
Excess of D
Year Aluminium Alcoa over E
1928 11.11 9.81 1.30
1929 10.93 9.41 1.52
1930 10.51 8.60 1.91
1931 10.75 8.51 2.24
1932 12.08 9.56 2.52
1933 12.09 10.30 1.79
1934 11.34 11.17 .17
1935 9.68 9.40 .28
1936 8.57 8.09 .48
1937 7.22 7.94 .72 (Less)
This table compares Alcoa's and Aluminium's mill costs of producing aluminum pig from 1928 to 1937. There is some controversy between Alcoa and the Government as to what such costs of Alcoa were. I have, therefore, taken the costs from the Government exhibits and that was acquiesced in by Aluminium. In so far as concerns the figures in the table relating to both Alcoa and Aluminium, counsel do not question their mathematical correctness for use in passing on the issue now under consideration. Their disagreement is only as to the effect to be given to the figures. Details of table 14 will be brought out hereafter.
The second table is 15. This is as follows:
United States taxes on imports of aluminum ingot and fabricated articles 1890-1939.
Years Ingot Sheet Foil Utensils factures
(Cents per pound and per cent ad valorem)
1894-1897 10** 35% 35%
1897-1909 8 13* 45% 45%
1909-1913 7 11* 45% 45%
1913-1922 2 3 1/2* 25% 20%
1922-1930 5 9 35% 11 55% 40%
1930-1939 4 7 40% 8 1/2 40% 45%
(26 Stat. 567; 28 Stat. 509; 30 Stat. 151; 36 Stat. 11; 38 Stat. 114; 42 Stat. 858; 46 Stat. 590, 19 U.S.C.A. § 1001 et seq.)
NOTE: Certain of the foregoing general rates have been modified in recent years by trade agreements. For example, the rate in ingot of Canadian origin was reduced to 3 in November, 1938 (U.S. Executive Agreements Series, No. 149), and the rate on foil of Swiss origin was changed in 1936 to 11 per pound, but not less than 20% nor more than 40% ad valorem (49 Stat., Part 2, 3917).
Table 15 sets out the tariff rates which for many years preceding January 1, 1939, applied to importations into the United States of aluminum and the products therefrom. There is no dispute about the figures. What the table shows is the tariff rates under the customs laws prescribed by the United States for various years from 1890 down to and including 1939.
The rates are in cents per pound or in percentages ad valorem. The table gives the rates in one form or another of the tariff tax on ingot sheet, foil, utensils and other manufactures. We are not much interested manufactures. We are not much interested in any of the figures except those in the last two lines of the table. The next to the last line shows that from 1922 to 1930 -- and we are interested during that period only with the rates from 1928 to 1930 -- the tax on the importation of ingot was 5 cents a pound and the last line shows that for the period of 1930 to 1939 the rate was 4 cents a pound. I shall not go into the rates set out in the table for the other aluminum commodities which are given. As I have said, these are sheet, foil, utensils and other manufactures.
Apparently on their face -- and I think the inference is well-nigh inescapable -- the rates, whether in cents per pound or in percentages ad valorem, were higher on every other type of aluminum importation than on ingot. For example, on sheet they were, as against 5 cents on ingot, 9 cents on sheet and, as against 4 cents on ingot later, they were 7 cents on sheet and so on. The facts in table 15 will be referred to again later.
The third table is 16. It is as follows:
Aluminium's sales of ingot to customers in different countries, 1928-1937.
1928 1929 1930 1931 1932
British Empire 25.0% 15.8% 5.4% 16.9% 24.6%
Italy 14.0 5.1 11.2 26.5 11.6
Total 39.0% 20.9% 16.6% 43.4% 36.2%
China .0% .0% .0% .0% 2.2%
Japan 10.7 5.6 7.6*a*a
Russia 1.4 2.5 19.4 .3 18.2
South and Central
America 1.5 .7 .6 1.7 2.2
All others 7.0 4.8 2.3 8.0 3.2
Total 20.6% 13.6% 29.9% 55.3% 63.7%
France .0% .3% 1.3% .6% .0%
Germany .5 .2 .3 .1 .0
Switzerland 1.6 4.5 4.1 .0 .0
United States 38.3 60.8 47.8 .6 .1
Total 40.4% 65.5% 53.5% 1.3% .1%
1933 1934 1935 1936 1937
British Empire 38.2% 41.5% 35.4% 39.7% 40.6%
Italy 21.3 17.7 13.9 11.0 5.1
Total 59.5% 59.2% 49.3% 50.7% 45.7%
China 4.4% .9% .7% .6% .5%
29.9 31.0 26.3 41.4 42.1
Russia 1.6 .0 .0 .0 .3
South and Central
American 3.3 6.8 3.3 2.0 1.9
All others .8 2.0 2.1 4.3 5.0
Total 40.0% 40.7% 32.4% 48.3% 49.8%
France .0% .0% .0% 1.0% .0%
Germany .0 .0 10.9 .0 1.5
Switzerland .0 .0 7.3 .0 .0
United States .5 .1 .1 .0 3.0
Total .5% .1% 18.3% 1.0% 4.5%
# Aluminum was produced to some extent in Japan commencing in 1934 and in Russia commencing in 1931 (Ex. 985).
This table is a little bit more difficult to understand or to follow than either table 14 or table 15. It is of considerable importance. It gives Aluminium's sales of ingot to its customers in various countries from 1928 to 1937, inclusive, I have divided the countries in which the sales were made by Aluminium into three groups. I designate these as group 1, group 2 and group 3. There is controversy about the grouping; whether it is correct. The contention of Aluminium, which in its brief furnished an arrangement of the figures corresponding very nearly to the arrangement of them in table 16, took the position that the three groups should be these:
1. What it called domestic markets.
2. What it called foreign markets with no domestic producer.
3. Foreign markets having a domestic producer or domestic producers.
As to whether that grouping is correct I shall say nothing at this time. Later the matter will be discussed fully.
You may note, however, that the results arrived at from table 16 as to the averages of Aluminium's sales from 1931 to 1937 were as follows:
(1) The sales into group 1 countries, to which Aluminium referred as domestic markets, were 49.1%;
(2) The like sales into group 2 countries, to which Aluminium referred as foreign markets with no domestic producer, were 47.2%;
(3) The sales into group 3 countries, to which Aluminium referred as foreign markets having a domestic producer or domestic producers, were 3.7%.
The last three figures, of course, make 100 per cent.
I think the bearing of the tables on the controversy here is clear. Nevertheless, I believe their significance can be better appreciated if, before going into details, there be further amplification of the facts showing the positions of Alcoa and Aluminium. Moreover, while there is little or no difference between counsel as to the arithmetical correctness of the figures that are used in the tables, there is vigorous dispute as to whether the computations are made up on correct theories. Because of this difference between the parties it seems to me better to deal with evidence not involving figures before taking up the tables further.
What the accused defendants say, in support of their denial of guilt of the charge with respect to not competing, has been partly set out heretofore; but if my presentation now is to be clear, I must indulge in some repetition. A summary of the statements of Alcoa and Aluminium, in essence, is as follows:
(1) The properties which Aluminium took over on June 4, 1928, -- especially when supplemented, as was then contemplated, by the later additions, -- in and of themselves were very valuable.If properly handled they were capable of development into a unified whole of very much greater value. Nevertheless, they were heterogeneous, incomplete and lacking in many respects. Out of the deficiencies there grew numerous problems.
(2) The largest and by far the most valuable properties were in Canada. Those properties included an alumina plant and two aluminum producing plants; but there were no adequate fabricating plants (pp. 16158-9; 21494-5; 22566-8; 22570; 40365-6). The alumina plant was positively inefficient. One of the aluminum producing plants was at Shawinigan Falls; the other at Arvida. It is important to remember that there were no adequate fabricating plants. That was an obvious handicap to Aluminium of large consequence.
(3) At the time of its organization Aluminium was supplied with sufficient bauxite deposits (located in British Guiana), but for making alumina therefrom it was solely dependent on a so-called dry process plant at Arvida. That was still then in the experimental stage. Ultimately (about 1930) it had to be abandoned and a Bayer process plant was constructed in its stead, -- which was completed in 1936. The dry process plant had proved to be too costly in its production. In addition, it would not eliminate titanium, which was a very objectionable element (pp. 13986-8; 16100-2; 16245-7).
Because it had no satisfactory alumina plant in Canada, from June 4, 1928, onward for several years Aluminium had to procure alumina from elsewhere. Some was made in the United States by Alcoa, by the Bayer process, at Alcoa's East St. Louis plant. The bauxite from which alumina was manufactured for it at East St. Louis was supplied by Aluminium. Some of the alumina that came to Aluminium was procured from Europe.
So also the absence of adequate fabricating facilities of its own in Canada for some years following 1928, before it completed its Bayer process plant, imposed on Aluminium the necessity of procuring much toll rolling. This was done by Alcoa in the United States of aluminum furnished by Aluminium.
(4) In June, 1928, Alcoa turned over to Aluminium very little cash. Aluminium began its career with quite a small working capital. Not only was there absence of cash, but the constituent companies of Aluminium also owed substantial current debts. Among those debts were considerable sums due by the subsidiaries to Alcoa. Again, Aluminium had to look forward to the necessity of meeting what it had engaged to pay for the three companies to be acquired, and agreed to be acquired, from Alcoa which had not been purchased for stock. The total of the payments was large. In round figures the amounts turned out to be: $95,000 for Laate-Foss, a small water power site in Norway; $1,558,000 (which was cost) for Prodotti, where an experiment with leucite to develop from it alumina as a by-product of potash was in progress; and $35,000,000 (that also being cost) for the assets of Alcoa Power Company. The last named sum was for two items: (a) the site at the Lower Development on the Saguenay River, acquired by Alcoa from Mr. Duke in 1925 at a valuation of $17,000,000, and (b) improvements installed on that site by Alcoa, composed of a dam, a power house and power equipment, at an expense of $18,000,000.
(5) Incidentally, it was matter of obvious self-interest for Alcoa to shape its own course with a view to promoting the collection of the debts mentioned. These were what was already owing to Alcoa by Aluminium's subsidiaries and what was to become due in future for the three companies which were to be taken over by it from Alcoa not already paid for in stock. In other words, it was plainly good business for Alcoa, as a creditor of Aluminium, to assist Aluminium to get on its feet, so as to be able to discharge its obligations to Alcoa.
(6) The assets of Aluminium located in the British Empire (chiefly in Canada) were a large proportion of what it had received from Alcoa. In 1932 (the earliest date for which the evidence affords information) they constituted nearly 70 per cent of Aluminium's entire investment. The proportion is still about the same.
(7) As previously said, the properties Aluminium received in 1928 included two reduction plants in Canada. Soon afterwards Aluminium succeeded in exchanging the stock it held in the Spanish aluminum producing company (item 16 of table 10) for the theretofore unacquired balance of the stock of the Italian aluminum producing company (Alluminio Italiano -- item 15 of table 10). Thus Aluminium came into complete ownership of the Italian company and of course ceased to have any interest whatsoever in the Spanish company. The total annual capacity of the Italian company was small. At the time it was 1,500 tons. Later it rose to 3,000 tons.
(8) In 1928 France, Italy and Switzerland imposed and ever since have imposed customs duties on the importation of aluminum. So far as disclosed, the sole abatement in these rates has been by Switzerland and that only on foil. This resulted from a reciprocal agreement between that country and the United States, entered into in 1936. Formerly it was necessary to procure a license from Germany in order to import aluminum into that country. That has been succeeded by a tariff which imposes taxes on imports of aluminum.
(9) Since some time in 1932 Canada has enjoyed the benefits of a preferential tariff system, which is widely prevalent throughout the British Empire. The new tariff system resulted from the so-called Ottawa Conference of 1932. Under the system aluminum and articles made from aluminum produced in Canada are entitled to admission free of duty into the United Kingdom, India and many other parts of the Empire. Non-Empire produced commodities of the same kind must pay an import duty, even when to other parts of the Empire, of 10 per cent.
It is crucial to understand the British Empire situation. Mr. Edward K. Davis made it clear in his annual report for 1932 to Aluminium stockholders. He there said (Exhibit 876, exhibit p. 4097):
"Of particular benefit to companies operating in the British Empire, are the trade agreements between Canada and the United Kingdom, Canada and Australia, Canada and New Zealand, and the United Kingdom and India, made pursuant to the program of the Ottawa Conference of July and August, 1932. With relatively unimportant exceptions, they give our products, made within the British Empire either free entry into these markets or preferential rates of duty over similar products of non-Empire countries. Other Empire trade agreements are in negotiation. The full benefit of the Ottawa trade agreements already made was not felt in 1932 since they were in operation only in the latter part of the year, but we anticipate that substantial benefits will accrue to our business on account of them."
At the trial (pp. 16114-21), on May 1, 1939, Mr. Edward K. Davis testified more fully about the situation. He expressed the view taken by Aluminium as to other countries and as to the British Empire as well. His description, which I accept, is so excellent that I think it worth while to quote from it at length.
"When Aluminium Limited commenced its business, it was not a very strong company; it was short of capital and the management of Aluminium Limited felt that the prospects of building up eventually a substantial business -- a profitable business -- for our group of companies was better in the relatively undeveloped parts of the world, places where the population, although enormous, had not yet reached a stage where they could use as much aluminum per capita as was the fact in the more developed parts of the world.
"The potential sales of aluminum to these undeveloped regions -- these highly populated regions -- looked very promising to us for the long run and we decided to spend our energies there rather than to enter more highly developed markets like the United States. * * *. In the British markets, although it is true that the British Aluminium Company was in operation in 1928, and for many years before, nevertheless we felt that the possibilities of large consumption of aluminum in the British Empire and particularly in the United Kingdom, were very much beyond what the British Aluminium Company was likely to build up to. So that in the United Kingdom we felt, admitting the existence of another company there, that we were not working against very heavy odds.
"In countries like India, China, Japan, in none of which countries at that time was there any production of aluminum, we felt that our efforts to build up a market for ourselves were at least on all fours with everybody else, and we did not admit that we were inferior in ability to get those markets. We believed, and it has since proved to be a fact, that the governments and people in authority in those countries and regions where we chose to develop our business, were quite cordial to the development of our business, and it was helpful and encouraging. In contrasting those instances with the possibility of developing not only a profitable but a permanent business in the United States, we recognized, firstly, that we were outsiders to the United States, and our plants were without exception outside of the United States.We recognized that in order to get into the United States market it required at least one initial step and that is to pay the duty, which in the early days of Aluminium Limited was 5 cents per pound on raw material -- raw aluminum -- later four and now [May 1, 1939] three from Canada, and we realized that to attempt to develop our business in an important way in the United States, even after taking into account these possibilities which I have just mentioned, would involve trying to get customers in a market which so far as aluminum is concerned is probably the best or as well served with respect to aluminum as any part of the world. The diversity of aluminum products in the United States is unequalled anywhere and the location, set-up and organization of the Alcoa has served to make aluminum easily available to everybody in the United States.
"On balancing the advantages and disadvantages and taking fully into account the fact that our plants and organization are foreign to the United States, we decided to spend our efforts in building up a business in the regions in which my company has principally dealt for the past ten years. But at no time have we ever renounced our right to extend our business to any part of the world we choose to, including the United States, France, Germany and Switzerland, and other countries which, like the United States, have a highly developed aluminum business. * * *.
"* * *. According to my judgment, to make anything even approaching a satisfactory job of building up a profitable and permanent market in the United States would have required a great deal of expenditure of money and time. * * *.
"* * * amongst the companies which were acquired by Aluminium Limited, were four or five companies which had been trained and built up to carry on selling operations in countries foreign to the United States, such countries as the Argentine, Brazil, England, Italy, India. The selling organization acquired by Aluminium Limited was distinctly a foreign, non-United States selling organization.* * *.
"* * * sentimentally a company in the British Empire employing British people, using British materials and paying taxes to British dominions enjoys quite a noticeable sentimental preference in the United Kingdom as compared with foreign countries. That is true not only of the trade but of the entire governmental authorities. During the past ten years the sentiment in Great Britain, which is described by the slogan 'Buy British', has been quite a powerful element in enabling British companies to deal successfully as compared with non-British companies in the United Kingdom and elsewhere in the British Empire. * * *.
"* * *. I won't say that the British put the Canadian companies quite on a par with their United Kingdom companies, but they recognize a solidarity.
"Q. But when a Canadian company comes to deal with India, Australia, New Zealand and other places, have you observed some of this sentimental advantage that you speak of? A. Yes, it exists.
"Q. And of course it exists in Canada? A. Yes."
The facts, so far recited, themselves have a direct bearing on the issue under consideration. They also constitute a background for weighing other evidence bearing particularly on the question whether there was an agreement or understanding between Alcoa and Aluminium to fix prices or to restrain imports, such as is alleged in paragraph 74 of the bill.
As I view the matter, not only has the Government failed to establish its charge or to adduce evidence which would justify a finding in its favor on the charge, but the evidence is convincing the other way:
(1) Aluminium, under the guidance of Mr. Edward K. Davis as its president, had clearly in mind all the factors I have mentioned and had in mind everything pertinent except a few things which probably could not be foreseen. These exceptions were fixing the precise amounts of debts and prices of property referred to, exchange of stock of the Spanish company for stock of the Italian company and later tariff changes.
(2) Mr. Davis also forecast the future with remarkable accuracy. He correctly appraised the "Buy British" spirit. In substance, he anticipated the establishment of the preferential tariff system of the British Empire, which was adopted soon after.
(3) He was familiar with the United States tariff system and he appreciated the effect tariff walls in other countries, like France, Switzerland, Italy and Germany, would have on trade.
(4) He believed that the best prospect for the success of his company was to extend its business within the British Empire, where at the time the aluminum business was much undeveloped, and elsewhere outside the British Empire, where previously the aluminum business had been wholly undeveloped or hardly developed at all.
(5) Accepting the facts to be substantially as I have stated them, without agreement (express or implied) between Alcoa and Aluminium, Mr. Edward K. Davis formulated, and under his leadership there has been executed, the plan under which Aluminium has operated ever since June 4, 1928.
I do not mean to imply that Mr. Davis has not had to adopt or to yield to some modifications. I do not mean that he has not sought advice. I am persuaded, however, that the Government has failed to show that he acted in combination with Alcoa or to show that there existed between Alcoa and Aluminium any agreement, expressed or implied, not to compete in each other's markets. This means that I am convinced that no conspiracy between Alcoa and Aluminium, such as the Government alleges in the bill, has been proved.
When Mr. Edward K. Davis began his task, both Canada and the United States were or seemed to be prosperous; but a financial crash followed in 1929. Almost continuously since 1929 business men have been forced to adjust their conduct to the depression which followed the crash. So far as affects the issue of whether there has been a conspiracy between Alcoa and Aluminium, such as is alleged in paragraph 74 of the bill, I am persuaded, however, that there has been no material change in the relations of Aluminium and Alcoa, as conceived by Mr. Edward K. Davis when he made his plan, and that through pursuing the plan he has led his company into its present position.
The Government recognizes that the officials of a manufacturing company are free, without infringement of the Sherman Act, bona fide to determine where, as a matter of good business and in the interest of their principal, its output had best be sold. At least I so construe what was said in the Government's original brief, pages 706-7. There, referring to the markets in which Alcoa and Aluminium had chosen to sell their products, the comment was this:
"if there existed adequate business reasons which would operate to make it unprofitable or undesirable for Alcoa and Aluminium Limited to cultivate each other's markets, the mere fact of their failure to compete standing alone would not be convincing evidence of conspiracy."
I think the statement just quoted is indisputably true. I think also that, on the Government's own test, Aluminium must be acquitted of having violated the Sherman Act by selling in the markets in which it did sell. With quite sufficient "business reasons" and influenced exclusively by those, as I see it, Aluminium's officials, on the facts in evidence, might reasonably have decided that it was undesirable to cultivate the markets which the evidence shows have been cultivated by Alcoa.
The inherent nature of the conduct of these officials did not necessarily, or even probably, embrace or bring about undue restraint of trade. It is relevant, therefore, to consider whether there was intent to accomplish that result. Appalachian Coals, Inc. v. United States, 288 U.S. 344, 360, 361, 372, 53 S. Ct. 471, 77 L. Ed. 825; Apex Hosiery Co. v. Leader, 310 U.S. 469, 500, 501, 60 S. Ct. 982, 84 L. Ed. 1311, 128 A.L.R. 1044. On this issue, in circumstances indistinguishable in effect from those here, the applicable principle is well stated in Montpelier & W.R.R.R. v. United States, 2 Cir., 187 F. 271, 273. There it was said that "no man should be convicted of a crime for giving to a doubtful document an interpretation which an intelligent and honest man might easily adopt." While the Montpelier case dealt with a document, the rule as to the interpretation of facts must be the same.
At this point we might end the discussion on the question in regard to the companies choosing separate markets. Counsel have so earnestly pressed their divergent views as to the material embodied in the tables previously mentioned, however, that I feel they are entitled to have the Court express itself on the subject.
There are facts, condensed in two of the tables, without the consideration of which it would have been difficult and perhaps impossible for the responsible officials intelligently to steer the business courses of Alcoa and Aluminium, respectively, after they were separated on June 4, 1928. Of necessity those facts bore on what it was wise for the companies to do. Table 14 gives the companies' relative costs of producing aluminum. Table 15 gives the tariff rates on imports which had prevailed in the United States from time to time since soon after the organization of Alcoa.
As previously remarked, counsel do not disagree as to the arithmetical correctness of the figures in the tables. They do disagree, however, about the theory on which the first table should be made up and about the significance of the second table.
The accountant who prepared Aluminium's answer to interrogatory 179 thinks the profits of subsidiaries should be included in ascertaining the cost of producing aluminum pig (pp. 14883-6; 14933-8). Section 1 of table 14, which is designed for use in comparing the costs of the two companies, includes those profits. Section 2 eliminates them. As I understand its argument, the second section complies with the view of the Government. However, there is no occasion to determine which section is to be preferred, because I shall use section 2 as the Government prefers.
Ingot is produced by remelting pig. The cost of remelting is one-half cent a pound. The evidence shows, and by their conduct at least counsel have indicated they agree, that the comparative mill costs of the two companies producing pig (fully brought out in the evidence) afford a fair criterion for comparing the mill costs of producing ingot. In consequence, all pig costs have been used and counsel have acquiesced in their use.
Column C of table 14 purports to show that for each year from 1928 to 1937, inclusive, Aluminium's costs of producing pig were greater than those of Alcoa; column F, that for each year except 1937 the costs of Aluminium were greater and that in 1937 they were only .72 of a cent less than the costs of Alcoa. The fact, however, that the cost was less in 1937, -- that is, less by .72 of a cent, -- may be disregarded. This is true because the policy of each company toward trading in the territory in which the other traded had been determined long before then and has been followed ever since it was determined.
As I see it, the significance of section 2 of table 14 is that, when the companies decided on their business courses in regard to where to sell their products, both parties knew that they had to take into account that Aluminium's mill costs of producing aluminum ingot in Canada were greater than those of Alcoa in the United States. We have no way, with precision, of ascertaining how great was the influence of Canadian costs being higher. Nevertheless, the fact must be deemed, in some measure, to have retarded or contributed to retarding the coming of Canadian imports into the United States; especially when, in order to get into the United States, Canadian aluminum had to jump a tariff wall.
The evidence establishes that when aluminum produced in one country is sold in another country and the latter taxes imports, customarily it is, and long has been, sold duty prepaid by the seller. Table 15 shows that from 1928 to 1930, as I have previously called to your attention, the customs tax on imports of ingot into the United States was 5 cents a pound and from 1930 to 1937 was 4 cents a pound. I think it obvious that this tax has also been a factor. Necessarily it has hampered the selling of foreign ingot in the United States, though we cannot say exactly how much. If retardation had not resulted, would not our tariff laws have failed of their purpose and, in consequence, probably their rates have been increased?
This brings us to the discussion of Aluminium's sales of its ingot in various countries, the comparative percentages of which are stated in table 16. The only difference between the parties as to the figures is that in three instances (one in 1928, one in 1930 and one in 1934) there were variances of one-tenth of one per cent in computations. These differences are relatively petty. For that reason they will be ignored as counsel have ignored them, saying in substance that the figures in the tables are arithmetically correct. On the other hand, there has been much controversy as to how the tables should be construed; also as to what bearing the facts have on this case.
Aluminium, as I have previously explained, selected labels for each of the groups in table 16. It would prefer to have group 1 there called "domestic markets"; group 2, "foreign markets with no domestic producer"; and group 3, "foreign markets having a domestic producer."
In seeking to point out the significance of the table Aluminium's argument is as follows:
1928, 1929 and 1930 were within a period when, with the new relation between Alcoa and Aluminium in its initial stage, extraordinary things were happening. It suggests, therefore, that those years be disregarded. When the years 1931 to 1937 were reached, however, it appears that on the average 49.1 per cent (nearly half) of the sales by Aluminium went to markets in countries wherein neither the United States nor any other nation outside of the British Empire and Italy had a tariff advantage or its equivalent; also that an average of 47.2 per cent went to markets in countries having no domestic producer or having no domestic producer for a considerable part of the period and that a very small fraction (on the average 3.7 per cent) went to countries having a domestic producer or more than one such producer.
On the basis of these percentages Aluminium urges that its success is attributable or largely attributable to its having located itself where it could sell to countries wherein it would enjoy tariff protection or a similar preference which would not be accorded to an outsider and wherein it would not encounter a local producer of aluminum who would enjoy a position better than that of itself (that is, Aluminium). Accordingly, as Aluminium says, the table demonstrates that conspiracy cannot properly be deemed the cause of its growth or be deemed to have had any share in bringing about its growth.
The Government has not urged, and I do not believe it could sustain a contention, that, if Aluminium's analysis be correct, room would be left in the evidence for an inference of conspiracy. Hence, it is of great consequence to consider whether the analysis be correct.
The dispute about the table is confined to two points of classification. One relates to the British Empire; the other to Japan.
Aluminium urges that the British Empire in its entirety belongs to group 1 (domestic markets) and that Japan in its entirety belongs in group 2 (foreign markets having no domestic producer). On the other hand, the Government insists that only the part of the British Empire exclusive of the United Kingdom (which the Government says means exclusive of Great Britain and Ireland) should be retained in group 1; also that for the whole period, 1928 to 1937, the United Kingdom and, as I understand, that for the years 1935, 1936 and 1937 Japan should be transferred to group 3 (foreign markets having a domestic producer).
In support of its positions the Government points out, and it is not denied, that within the boundaries of the British Empire in 1928 to 1937 Aluminium produced no ingot except in Canada; while, apparently or impliedly, it urges that in Japan from 1935 to 1937 some ingot was produced by Aluminium and some by others.
Which of the contentions advanced by the litigants is right?
If we were merely faced with an academic debate, turning on words, I think there would be plausibility in an objection to calling the United Kingdom, so far as concerns its geographical relation to Aluminium, a "domestic" market. If the objection be good, however, it seems to me that it would lie equally to the remainder of the British Empire as well as to Italy and that, therefore, the class of domestic markets would have to disappear altogether from the table. I feel also that the difficulty arises wholly, and if not wholly, then certainly in great part, out of the lack of precision which characterizes and is widely prevalent in the English language. Nevertheless, if we discard form and consider substance only, I think it will be clear what Aluminium means by the word "domestic" when used in the phrase "domestic markets" to describe group 1.
In the first place, ever since shortly after the 1932 Ottawa Conference aluminum produced by Aluminium in Canada, without payment of import duty, could be sold in the United Kingdom and generally in other parts of the British Empire, whereas aluminum produced outside of the British Empire, without exception, has had to pay a 10 per cent import tax before it could enter the British Empire. Preceding the adoption of the 10 per cent tax Aluminium could avail of a somewhat similar advantage over a non-British Empire producer, through the practical operation of the "Buy British" slogan.
Moreover, as I see it, the sole purpose of Aluminium in employing the words "domestic markets" was to identify the class of countries into which, on account of a tariff or some equivalent or substitute advantage, commodities belonging immediately or derivatively to Aluminium could go, that was not applicable to commodities belonging to an outsider. Otherwise, why associate Italy with the British Empire?
As matter of substance, it must be recognized that the evidence shows that since shortly after June 4, 1928, through a subsidiary, Aluminium has owned an aluminum producing plant in Italy; also that it could sell its output within the confines of Italy without competition from aluminum produced in any other country unless a tax were first paid on the importation into Italy of the non-Italian produced aluminum.
I conclude, therefore, that for the purpose of the ingot sales table 16 there is no justification for removing from group 1 therein any part of the British Empire percentages.
So far as concerns Japan, I think there are three grounds against removing its 1935-7 production figures from group 2.The first is that Aluminium's determination to adopt its program was made long previous to 1935 and there is no evidence from which, if there were no conspiracy previously, one could be inferred which began in 1935 or thereafter. The second is that, as appears by the table embodied in the Government's April, 1941, supplemental brief at page 37, in the three years, 1935-7, taken as a single period, Aluminium's sales of aluminum in Japan exceeded the total production of aluminum there by all producers combined. The third is that from the evidence it is to be inferred that Aluminium did not produce ingot in Japan, but that the ingot it sold there was imported (p. 16261; Aluminium answer to interrogatory 195, exhibit pp. 191, 205).
The comparison to which I have just referred is set out in table 17, which is as follows:
Comparison (in pounds) of (a) sales of aluminum in Japan by Aluminium with (b) the total production of aluminum in Japan by all producers, 1935-7.
Sales of alumin- Production of alu-
um in Japan by minum in Japan by
Year Aluminium all producers
1935 7,222,325 8,818,400
1936 12,306,408 14,770,820
1937 28,462,784 23,148,300
Total 47,991,517 46,737,520
NOTE: Column A is from Aluminium's answer to interrogatory 166 and includes sales made for the account of the other parties to the Zurich Agreement. The figures in column B are from the Government's supplemental brief, while for the same items the figures (in pounds) in Ex. 985 are 8,806,400 for 1935; 14,750,720 for 1936; and 23,116,800 for 1937 (making a total whose difference from the total in the brief is immaterial).
This table contrasts Aluminium's sales of aluminum in Japan with the total production of aluminum in Japan by everybody from 1935 to 1937.
It will be noted that the total of these sales, which are shown in column A, exceeds the total production, which is stated in column B. Why that is true is not unambiguously clear. I have discovered in the evidence no definite explanation, though of course the indication is plain that there was importation of aluminum into Japan. If the evidence were fully developed on the point, possibly complete information about the sales under the Zurich Agreement (hereafter mentioned) might shed light. Yet it is to be noted that, in table 16 (Aluminium's sales of ingot in different countries) sales for all parties to the Zurich Agreement (1931-7) were included. In order that the two tables relating to the same general subject matter might be considered together and compared, if all the relevant facts had been brought out, it would seem that both should have been made up on the same plan.
It will be noted further that its heading shows that table 16 (Aluminium's sales) concerns only ingot, while as framed the heading of table 17 (comparison of Japan's sales and production) speaks of aluminum. It may be suggested, therefore, that different articles have been compared. I think there should be explanation of why aluminum is employed in the headings of table 17.
The reason for my wording the headings of table 17 as I did is that in its table (April, 1941, brief, p. 37) the Government used the word "aluminum"; but reference to Aluminium's answer to interrogatory 166 shows that the figures in column A actually relate to ingot and alumina, while Exhibit 985 indicates that the figures in column B deal with aluminum (though possibly meaning ingot). Even if, however, the figures in column B include some commodities other than ingot, that would be of advantage to the Government.It, therefore, has no ground of complaint of the tables.
In the way described, I have reached the conclusion that there is no support, save in respects which are wholly immaterial, for the Government's criticism of table 16 (that is, the table of Aluminium's ingot sales in foreign countries).
There is one additional circumstance of weight.Whild I direct attention to it, I am not forced to rely on it for support of the view I take on the present branch of the case.
Apparently the local Japanese company on which the Government chiefly predicates its contention that for the years 1935-7 Japan should be removed from group 2 is Sumitomo. If so, it may be well to note that Aluminium owns half the stock in that company and that company is not shown to produce aluminum, but confessedly is engaged in manufacturing sheet and foil (p. 16261). Indeed, as heretofore said, the inference from the proof seems inescapable that neither Sumitomo nor Aluminium produces or has ever produced aluminum in Japan and that what it fabricated or sold was imported.
Accordingly, I think the evidence does not warrant the removal of Japan from group 2 of table 16.
I believe that a good many additional phases of the facts fortify the views I have expressed about table 16 and its significance, as well as generally about the question of conspiracy between Alcoa and Aluminium subsequent to June 4, 1928. It would unduly prolong my statement, however, if I should undertake to cover all of them. Yet it may be worthwhile to mention a few things which strike me as impressive.
First: When the 1928 transfer occurred, with it went to Aluminium a system of offices and sales agencies, theretofore organized and maintained by Alcoa, in the United Kingdom and sundry other countries outside of the United States. Many of those were continued and additions were installed by Aluminium in the foreign countries where it made sales. On the other hand, Alcoa retained its own numerous offices in the United States. These were strategically located throughout the United States and were well equipped with trained salesmen. On the other hand, Aluminium did not take over from Alcoa, nor has it ever since provided itself with a sales organization in the United States.
Aluminium has had in the United States a single general office, where were stationed a few of its officials; but no one there ever has been engaged in making sales to the general trade in the United States. Moreover, following the 1982 transfer, after Alcoa's sales representatives outside of the United States had passed into the employment of Aluminium, no effort was made by Alcoa to fill their places or to form an alternative type of organization nor has it since supplied itself with sales representation in foreign countries.
In those circumstances it would have been strange if, after June 4, 1928, Aluminium had made large sales in the United States or Alcoa had made large sales in Canada or elsewhere outside of the United States to the general trade. The lack of such sales, therefore, does not justify an inference that absence of sales by each to the markets of the other, respectively, is attributable to agreement between Alcoa and Aluminium to that end.
Second: With the coming in 1937 of the prospect of war in Europe, without having soliciting agents stationed there (i.e., in Europe) to seek orders, Alcoa's sales for shipment to European countries were considerable. In 1937 the amount of those sales, of which there were direct shipments by Alcoa to foreign customers, was 1,875,118 pounds; in 1938 was 12,717,465 pounds; and in 1939 to June 19th was 19,092,459 pounds.
As bearing on Alcoa's intent, it was also shown in evidence that there were sales by Alcoa to its local customers in the United States for shipment abroad, as it was informed in advance and for which it packed the goods in a way indicating their preparation for foreign shipment, of 1,326,465 pounds in 1937; 5,525,424 pounds in 1938; and 5,479,333 pounds in 1939 up to June 19th.
The figures of both types of sales for 1937 total 3,201,583 pounds; for 1938 they total 18,242,889 pounds; and for 1939, January 1 to June 19, they total 24,571,792 pounds.
These sales apparently were made to any foreigner who desired them. They are an indication, at least, that Alcoa either was not, or did not feel that it was, prohibited by agreement from selling aluminum abroad in 1937, 1938 and 1939. If not restrained in those years, there is no basis for inferring that it was so restricted in preceding years.
Third: On approaching the problem in an entirely different way, there seems to me to emerge from the evidence another ground for believing, or at least one which corroborates the belief, that during the period in question there never was an agreement between Alcoa and Aluminium not to compete in each other's markets. This is that the outcome demonstrates that the plan adopted by Mr. Edward K. Davis was of great benefit to Aluminium and probably of greater benefit than any other plan would have been. In retrospect this result appears so clear that I should hesitate to believe that one of his business acumen ever would have hampered himself, or incurred the peril of injury to his company, by abdicating its right to compete in the United States, if, in his judgment, occasion should arise.
What has Aluminium accomplished in the approximate ten to eleven years which have intervened between its organization and the giving of testimony at the trial? The evidence shows a great many things. Some of these are as follows:
(1) In 1928, when formed, Aluminium (including its constituent companies) owed upwards of $25,000,000 (created preceding June 4th) and shortly thereafter contracted other debts to Alcoa. These ran the total to above 33 millions (Exhibit 775). By June 30, 1930, their total had been reduced to 20 millions, for which bonds had been issued in 1928. Omitting obligations incurred for after-acquired property, the total indebtedness of 33 millions has been practically wiped out. At the time testimony about it was taken at the trial, the unpaid balance of $20,000,000 of bonds had been called and Aluminium had set aside the money with which to pay it (pp. 16140-1). It may be safely assumed that this balance has since been actually paid.
(2) The number of Aluminium's employees in 1928 was about 4,000. By 1939 they had increased to between 12,000 and 16,000; that is, to three times or more.
(3) The number of its offices and agencies throughout the territory in which it sold its output has greatly increased. It is difficult for me in precise terms to say how great that increase was, because it was chiefly delineated by manikins on a map.
(4) Its annual production at Arvida had increased from at the rate of 60 million pounds in 1928 to about 150 million pounds in 1938 and had largely increased at Shawinigan Falls, where in 1928 to 1937 the capacity was about 33 million pounds (pp. 14274-5; 14277; 16125-7).
(5) Aluminium now has in Canada a complete system of well integrated plants needed for the operation of an aluminum manufacturing and fabricating company. You will recall that in 1928 the company has two aluminum producing plants and experimental alumina producing plants and very inadequate fabricating plants.
(6) In 1939 Aluminium's business had increased over what it was in 1928 by threefold.
(7) Extracts from Aluminium's consolidated balance sheets for 1932 and 1938 are set out in table 18. This is as follows:
Extracts from Aluminium's year-end balance sheets (round figures).
1930*b 1932 1938
Assets $65,000,000 $68,000,000 $86,000,000
Surplus $ 3,000,000 $19,540,000
Deficit $ 108,000
NOTE: The 1930 figures are from Ex. 388; those for 1932 from Ex. 876; and those for 1938 from Ex. 878. The 1938 surplus consists of $19,000,000 earned surplus and $540,000 capital surplus.
In the first line of this table there are set out at the left, assets; in the second line, surplus; and in the third line, deficit. The round figures are given in three columns. The first is for 1930, the second is for 1932 and the third is for 1938. These are as follows:
Assets: in 1930, $65,000,000; in 1932, $68,000,000; in 1938, $86,000,000;
Surplus: in 1930, $3,000,000; in 1938, $19,540,000;
Deficit: in 1932 of $108,000.
In the circumstances I feel that, on the evidence, it would be little short of preposterous to infer that the failure of Alcoa and Aluminium to sell in substantial quantities in the home territory of the other was attributable to agreement between them not to do so.
The Government has advanced a number of arguments to the contrary. Several, which impress me as typical, will be taken up.
First: It is alleged in paragraph 74 of the bill that the United States is a "logical" market for Aluminium; yet that, instead of selling to customers there, where it is located just next door, Aluminium went to the opposite side of the world to sell in Japan. It is contended that this points to conspiracy between Alcoa and Aluminium.
Sufficient answers are that the Sherman Act does not render it unlawful to be illogical and that it is not the Court's function to say where a litigant shall carry on its business. In the absence of governmental regulations no outsider is authorized to prescribe where business shall be done. On the contrary, the owner of a business is free to exercise his own judgment so long as he does not disregard some prohibition. As has been frequently said, the Act is composed of a mere set of prohibitions. Our sole concern, in the the present branch of the case, is to discover whether one of those has been infringed.
So far as I can see, the record does not contain evidence which would warrant a finding that propinquity should have governed Aluminium. Moreover, when the outcome of Aluminium is taken into account, I believe that it becomes manifest that no one can successfully maintain that the policy of Aluminium officials was wrong or even was a mistake.
Second: It is urged that Aluminium lost by not selling in the United States. To establish this prices of 1936 and 1937 are compared.
The Government arrived at its 1936 result in this way: to ascertain the expense of Aluminium it combined as production costs (at Arvida) 10.795 cents per pound; as tariff duty, 4 cents per pound; and as transmission expense to a United States destination, .79 cents per pound, making a total of 15.585 cents. For Alcoa's price it took the one year's average of prices at actual sales as 18.82 cents. By deducting 15.585 cents from 18.82 cents it computed Aluminium's profit at 3.235 cents per pound.
In 1937 the current production cost at Arvida was the lowest at either Canadian plant during the entire period from 1928 to 1937. By an identical method, using the Arvida production cost, the Government computed the 1937 profit as 5.827 cents (Aluminium's answer to interrogatory 179, p. 29 of the sealed volume; Exhibit 1701).
The Government's method, however, impresses me as faulty. There are several defects. Two will be mentioned. The first is that if Aluminium had sold in the United States as a general practice, obviously it would have been essential that it establish and maintain sales offices and sales agents there. If so, the expense would have had to be deducted before it could have been determined whether it would have earned any profit at all. Not only is the amount of such expense not included, but it is not known. In the second place, the Government rests its computation of Aluminium's cost of selling on Aluminium's answer to interrogatory 179. The interrogatory deals only with cost of production, -- not with sales costs. As was pointed out by the accountant who prepared it, whose testimony is without contradiction (pp. 14877; 14887-91), general overhead expense (p. 36, in item (k) of the sealed answer of Aluminium to interrogatory 182) has been almost entirely omitted and other items of expense of Aluminium's selling in the United States, specified by him, have been omitted from the overhead item carried in the answer to interrogatory 179.
In addition, it is not to be forgotten that our inquiry is whether the facts compel or justify an inference that conspiracy between Alcoa and Aluminium was the cause of Aluminium's refraining from selling generally in the United States. As I see it, there is nothing to show that this was the cause.
The decision of its officials as to whether it would be best for Aluminium to sell, and, therefore, to equip itself to sell generally in the United States involved a long-range view and a comprehensive inquiry. For example, in 1936 and 1937 the import duty on aluminum coming into the United States from Canada was 4 cents a pound. Yet, as the tariff table discloses, the rate once had been 15 cents a pound. If, through a shift in Governmental policy, the United States had gone back to 15 cents a pound (11 cents a pound greater than the 4 cents tariff actually applying) not alone would the so-called 1936 profit of 3.235 cents and the so-called 1937 profit of 5.827 cents a pound have disappeared, but the 15 cents rate would have been absolutely prohibitive.
Third: Aluminium had an office in the United States at Pittsburgh up to 1930. Since then it has had an office in New York City. Mr. Edward K. Davis and, from time to time, one or two others who, while in the service of Alcoa, had had experience in selling, have been stationed at Aluminium's United States office. On this account the Government insists, in effect, that Aluminium has been equipped with an adequate sales force in the United States.
The answers are that the officers referred to had other duties; also that, in order to match an extensive and capable force such as Alcoa used in selling throughout the United States, Aluminium would have needed a fully equipped corps of skilled salesmen, stationed in various places, whose employment on the work would have been constant and would have entailed large expense. In these circumstances the matter for determination by Aluminium officials was whether, as matter of policy and in the interest of Aluminium, it was wise to sell in the United States. An unavoidable incident to deciding the question was to take into account the size and the probable expense of an organization for pushing sales in the United States.
Fourth: The Government calls attention to the fact that in table 16 (Aluminium's ingot sales in different countries) the percentages of Aluminium's sales which went of the United States in 1928, 1929 and 1930 were much larger than in later years. From this it is urged, in substance, that an inference should be drawn that the amount of annual sales snce 1930 has been fixed by agreement, rather than from fair consideration of the merits.
It seems to me, however, that, without even a suspicion of collusion, there is very rational explanation of the course followed by Aluminium. This explanation rests on uncontroverted facts.
In 1928 there were deliveries on commitments outstanding on June 4th. In the two years following there were deliveries on purchases by Alcoa from Aluminium contracted for in 1929. One was for 10,000,000 pounds arranged for in May and the other for 42,000,000 pounds arranged for in October. The delivery suchedules ran well into 1930 (Exhibit 391). As previously indicated, the evidence is quite persuasive that the seller (Aluminium) was satisfied with the terms, because it brought quick money, of which need was pressing; and that the buyer (Alcoa) not only needed the additional supplies, but had a strong motive to assist the seller so as to assure its success.
The Government has also criticized the prices at which the 1929 sales were made. It insists that they were lower than average sales prices at the time in the United States.
In contrasting these average sales prices with the criticized contract prices, however, the Government takes no account of, nor does the evidence afford means of taking precise account of, the quantities and terms involved (including the place or places of deliveries) or their effect. It has been abundantly shown that those omitted features vitally affect prices. Without the missing evidence there can be no fair determination; nor can it even be inferred that there was a conspiracy from contrasting the prices at which large bulk sales were made with the prices at which small retail sales were made.
Disregarding details, however, it is plain that, whether the prices at which Aluminium sold to Alcoa in 1929 were higher or lower than a trier of facts might himself today feel they should have been, at least the difference above or below the Court's present standards would carry no implication that in 1929 there existed an agreement between the seller and the buyer with respect to whether either would sell or would not sell in the market of the other.
Again, as already indicated, the record furnishes ample explanation of the 1929 purchases. At the time Aluminium was low in cash. Alcoa had a vital stake in Aluminium's succeeding. If Aluminium did not succeed the chance of Alcoa Later collecting from Aluminium the sales prices of the three companies which had been included in the 1928 transaction and were later transferred to Aluminium would have been diminished. Nevertheless, even if it be true (though it has not been proved) that in 1929 Alcoa bought from Aluminium more aluminum than it needed, it has not been shown, nor does the record contain sufficient evidence on which to base a finding, that the prices at which the purchases were made were unduly favorable to Alcoa.
Fifth: Mr. Babson of the Baush Company described an incident which he stated occurred in New York City in 1931. He testified that he sought to buy aluminum from Mr. Van Alstyne of Aluminium. At their meeting, according to Mr. Babson, Mr. Van Alstyne refused to sell and said that Alcoa was then the agent of Aluminium for making sales for it (Aluminium) in the United States (pp. 3092; 3132-3). Though accessible, Mr. Van Alstyne was not called as a witness.
On this account the Government urges, in effect, that it be taken as true that in 1931 Alcoa was the agent for Aluminium for making sales in the United States of Aluminium's aluminum. On the contrary, Alcoa and Aluminium insist that the Government has not made out a prima facie case and, hence, that there was no occasion to refute Mr. Babson's statement. For support they rely on Galbraith v. Busch, 267 N.Y. 230, 196 N.E. 36 (see also Lahr v. Tirrill, 274 N.Y. 112, 8 N.E.2d 298).
I do not concur in the position of either side, -- at least in the way I understand and have stated the contentions of the parties.
On the one hand, an unavoidable premise of the Government's argument, as it seems to me, is that by neglect of a party to introduce available testimony of a friendly witness directly contradicting or designed to contradict the version of a conversation given by a witness for his opponent, the conversation as related acquires a kind of sacrosanct quality and is entitled to be accepted by the Court as true. If so, the premise is unsound in principle and flies in the face of court decisions, later mentioned, which govern me.
On the other hand, I do not think I can properly say, in the sense of the expression as used in Galbraith v. Busch, that the Government has failed to make out a prima facie case. At the March, 1941, oral argument on the present issue, as then presented, I was inclined toward the defendants. Further consideration has led me to feel, however, that the facts remove the question from coverage by the rule they invoke. At least, as I think, there is great uncertainty on the point. So also, in view of testimony Aluminium brought out by its cross examination of witnesses put on by others, I should doubt whether the situation, as it affects Aluminium, is so changed as to bring it within Lahr v. Tirrill. In consequence, in search of a solution, I have gone into the authorities from a wholly different angle.
Manifestly, the absence of Mr. Van Alstyne as a witness has not supplied and cannot supply any fact which is not supported by credible substantive evidence separately adduced. Northern Railway Co. v. Page, 274 U.S. 65, 74, 47 S. Ct. 491, 71 L. Ed. 929; Mammoth Oil Co. v. United States, 275 U.S. 13, 52, 48 S. Ct. 1, 72 L. Ed. 137. It is for this reason that I completely reject the Government's theory. On the other hand, it is the duty of the trial judge, along with all the other facts in evidence, to take into account the silence of Mr. Van Alstyne and to determine "the weight to be given" to such silence, United States ex rel. Vajtauer v. Commissioner of Immigration, 273 U.S. 103, 112, 47 S. Ct. 302, 71 L. Ed. 560.As said with respect to a person having an attitude friendly to one side, such as Mr. Van Alstyne must be assumed to have had at least toward Aluminium, his silence would be "a proper subject of comment". Kirby v. Tallmadge, 160 U.S. 379, 383, 16 S. Ct. 349, 350, 40 L. Ed. 463. As also said, it would be "permissible" to infer that he was not in position to deny what had been ascribed to him (northern Railway Co. v. Page, 274 U.S. 65, 74, 47 S. Ct. 491, 71 L. Ed. 929); it would be "persuasive" that, if he had testified, what he said would have been unfavorable (Interstate Circuit v. United States, 306 U.S. 208, 226, 59 S. Ct. 467, 83 L. Ed. 610); and it would be fair argument for the other side. United States v. Cotter, 2 Cir., 60 F.2d 689, 692.
The decisions just referred to completely refute the Government's proposition. Moreover, when the difference in the facts in the case at bar from the facts in the New York cases is kept in mind, it will be clear that there is no material variance between the Federal and the New York cases heretofore cited. Neither the New York courts nor the Federal courts have peremptorily prescribed the weight to be given to testimony which has not been specifically denied. The trial judge determines its weight, just as he determines the weight of other testimony.
I have discovered no case in a court of good standing for its learning that goes so far as to hold that, in circumstances such as those with which we are dealing, a trial judge is deprived of the power or relieved of the obligation to determne the weight of the testimony actually before him. While such testimony cannot lawfully be ignored, yet, as in all other instances, though not directly contradicted, the Court is bound to decide the extent of its credibility.
Accordingly, in order to discharge the responsibility imposed by the controlling decisions, I have reviewed all the relevant evidence bearing on the alleged admission that Alcoa represented Aluminium in making sales of Aluminium's aluminum in the United States. In doing so I have given to the undenied Babson-Van Alstyne conversation the full weight to which I deem it entitled.
When considered in its entirety, the evidence convinces me that Aluminium did not engage or authorize Alcoa to represent it in making sales of Aluminium aluminum in the United States. So to have engaged or authorized Alcoa would have been to do one of the very things which the evidence thoroughly establishes Aluminium was in fact scrupulously careful to avoid. And I may add that, in the circumstances, it is inconceivable that Mr. Van Alstyne would have made a statement such as attributed to him by Mr. Babson.
In reaching the conclusion just stated, I expressly disclaim any intention of accusing or even suspecting Mr. Babson of knowingly telling a falsehood. I mean merely to say that I think he was mistaken and failed either to comprehend or to recollect with accuracy what Mr. Van Alstyne said.
In consequence, I feel that none of the Government's counter-arguments is persuasive and I adhere to the view that failure to trade in each other's markets is not ground for inferring that Alcoa and Aluminium were in conspiracy.
I come now to consider the last ground on which the Government has predicated its contention that there was conspiracy between Alcoa and Aluminium during approximately ten or eleven years subsequent to June 4, 1928. Two grounds have already been discussed at length. If feel, however, that it would be wasteful to go into details about ...