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September 30, 1941;

ALUMINUM CO. OF AMERICA et al. (Part 2 of 3)

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

CAFFEY, District Judge.

 The Packard lawyer had two conversations with Mr. Arthur V. Davis. One was in 1922 and the other was in 1933 (pp. 16827-38; 16856-9; 16864-6; 16880-97; 16905-8; Exhibit 921). In neither was purchase of aluminum from Alcoa more than casually mentioned. The only reference to the subject I discover in the evidence is that the Packard lawyer said he asked Mr. Davis to use his influence to procure licenses for two outside manufacturers (Ray Day and Sterling) and Mr. Davis replied that he considered it unreasonable to request that licenses be granted to piston manufacturers who were not buying aluminum from Alcoa but from foreign sources and thereby give them the result of all the research work of Alcoa (pp. 16832; 16866). In fact, the Packard Company apparently did not buy pistons from Alcoa, but procured them from Bohn and Aluminum Industries (p. 16867).

 United Engine complained that Alcoa refused it a license to manufacture aluminum alloy pistons (pp. 17371; 28935; 30219; 30233). Even if so, however, that would have denied United Engine no right. On the contrary, it would have been merely the exercise by Alcoa of a right conferred on it by the patent law.

 The testimony of the representative of United Engine was chiefly about Alcoa's claim against it of patent infringement and litigation over the matter. When on the stand, in substance that representative said that Alcoa's representatives had conceded that its purpose was to exclude United from manufacturing aluminum castings or aluminum pistons (p. 17371). This was denied by Alcoa witnesses (pp. 28831-2; 28842-4; 28893-4; 28941-4; 30216-23; 30234; 30276; 30298-319; 30326-29A; Exhibits 941-942 and 1502-4); but even the admission of the truth of the charge would not sustain the contention of the Government. If Alcoa did what United asserts, it would have amounted to no more than saying that Alcoa insisted the patents of itself and the Cleveland trust had priority over United Patents and that United was infringing.

 What the representatives of three concerns engaged in manufacturing aluminum pistons said was supplemented by the testimony of the chief engineer of the H. H. Franklin Manufacturing Company. In substance, he said that a representative of Aluminum Manufactures refused to sell metal with which Franklin could manufacture its own pistons (pp. 3206-7). This was denied (pp. 35546-7); but even if what the Franklin representative says took place, so far as affects the branch of the case now under consideration it would not have amounted to a violation of the Sherman Act by Alcoa, much less an offense alleged in the bill.

 It may be noted that the expiration of many of the piston patents now held by the Cleveland trustee has been disregarded; also that no attention has been given to the problem of whether sufficient live patents are still held by the trustee or by Alcoa to enable them to interfere with the manufacture of aluminum pistons by unlicensed concerns.

 If Alcoa employed patents of which it was the owner or exclusive licensee to effect a monopolization of the subject matter of the patents, precisely as pointed out in the discussion of the Hall patents, that (as I believe) would not entitle the Government to complain under the Sherman Act. Right to enjoy such a monopolization is one of the very things that the Congress itself expressly granted in 1790 and continuously since has granted by statute to patent holders. It would be wasteful of time, therefore, to go over all the evidence relied on by Alcoa to support its denial of any such intent as was alleged by the Government.

 My conclusions, therefore, are as follows:

 1. The percentage of aluminum pistons manufactured or sold by Alcoa and its licensees has not been proved.

 2. It has not been shown that Alcoa employed a piston patent to further the sale of aluminum.

 3. So long as the Piston Patent Estate is unassalied, and by virtue of exemption from attack must be treated for the purposes of this case as lawful, what Alcoa has done with respect to the production and sale of pistons must be deemed within the protection of patents of which it is owner or licensee.

 I hold, therefore, that no violation of the Sherman Act growing out of anything relating to pistons has been established.

 (8) Extrusions and Structural Shapes

 We come now to the eighth monopolization charge. This concerns extrustions and structural shapes.

 In paragraph 49 the bill charges that Alcoa produces and sells virtually 100 per cent of the extruded and structural shapes made of aluminum or aluminum alloys moving in interstate commerce.

 The evidence shows that Alcoa produces all the large rolled structural shapes made in the United States out of aluminum or aluminum alloys. For this purpose it built a mill at Massena, New York, about 1930. That was done at a cost of $3,000,000. It is the only mill in the world used exclusively for that purpose. It was erected before any business was acquired for it and it has been a success. The large rolled shapes it produces are for use on bridges, railroad cars, street cars, trucks, buses and the like.

 Outside of on those large rolled shapes (i.e., on smaller shapes made by extrusions) Alcoa has four competitors. These are the Bohn Aluminum & Brass Corporation, the Reynolds Metals Company, the Revere Brass & Copper Company and Extruded Metals, Inc. The competition is keen between the four named and Alcoa, and all the competitors are successful.

 Structural shapes can be made from foreign or from domestic primary aluminum or from secondary aluminum or from aluminum scrap. They compete also with like products made from steel and from other metals. In addition, steel companies can roll aluminum shapes on their own structural mills (pp. 33524-5).

 I have prepared table 7, which is as follows:

 TABLE 7 Alcoa's share of sales (pounds) of extrusions by four companies, 1934-8 A B C Year Alcoa Bohn Revere 1934 4,137,906 241,849 183,944 1935 5,546,041 391,103 178,216 1936 9,607,575 1,012,923 271,946 1937 12,094,364 1,930,984 1,037,459 1938 6,962,648 1,636,699 302,161 Total 38,348,534 5,213,558 1,973,726 D E F Alcoa's Total Percentage (A B of Total Year Reynolds C D) (A / E) 1934 4,563,699 90.67% 1935 6,115,360 90.69 1936 10,892,444 88.20 1937 35,000 15,097,807 80.11 1938 88,300 8,989,808 77.45 Total 123,300 45,659,118 83.99

 This table is a collection of statistics, with a computation, to show Alcoa's share of the sales (in pounds) of extrusions by four companies in 1934 to 1938.

 The four companies are the ones to which I have previously referred, namely, Alcoa, Bohn, Revere and Reynolds. The years in the first column to the left are 1934 to 1938, inclusive. There is a column for each of the four companies I have mentioned. There is then a total for each year of all four companies. In the final column to the right, column F, there is a computation of Alcoa's percentage of the total. This is obtained by dividing the total of Alcoa, column A, by the total of all the companies in column E. The result of the computation is that it is shown that in 1934 Alcoa's percentage of the total was 90.67 per cent and in 1938 that Alcoa's percentage of the total was 77.45 per cent.

 You will notice that Extruded Metals is not included in the table. This is because that company started in 1939. When you examine the table you will see also that Alcoa's relative percentage was approximately the same in 1934 and 1935 and has declined each year since.

 Reynolds has in process an increase of its capacity to two million pounds a year. The greatest quantity of production of Reynolds shown in this table was for 1938 and was 88,300 pounds. Extruded Metals, which began operations in March, 1939, for the year ending in February, 1940, fabricated over one million pounds of extrusions (pp. 17711-13; 28599-600; 28606). And you will recall that I stated heretofore that no fugures are included in the table for Extruded Metals.

 With respect to the matter of extrusions and structural shapes, therefore, I conclude this: Save with respect to what was said above about large structural shapes rolled at the Massena mill (pp. 33304-5; 33523-5), no allegation of the charge has been proved. Neither what was said about the large shapes produced at the Massena mill, nor anything else charged or proved with respect to structural shapes made from aluminum, states or establishes an offense committed by Alcoa.

 (9) Foil

 We come now to the ninth monopolization charge. This is as to foil.

 Paragraph 50 of the bill (pp. 26829; 34965) alleges that Alcoa is the largest producer and seller of aluminum foil which moves in interstate commerce in this country. Even if that were so, however, for reasons previously assigned in the course of the discussion of virgin aluminum, what is alleged about foil, without more, would not state a violation of the Sherman Act; but the evidence does not show that the charge is true.

 Alcoa, Reynolds Metals Company and Johnston Tin Foil & Metal Company produce and sell aluminum foil in the United States. Several other concerns sell aluminum foil in the United States -- how many is not made clear, although apparently all of them import and it is uncertain if any of them manufacture (pp. 28314-6; 33291-2; 33641-4; 35827; 35834; 35840; 35843-5; 35849). The United States producers and the importers are in active competition with each other.

 As noted at the foot of Exhibit 1627, the figures concerning production and sale of foil by Reynolds are incomplete. Yet, despite substantial omissions (pp. 34939-77), the Reynolds sales for 1935 to 1939 shown on the books totalled 27,859,642 pounds as against Alcoa's total sales for the same years of 26,663,218 pounds; and for the year 1939 alone the sales of Reynolds on the same basis exceeded those of Alcoa by approximately 800,000 pounds (Exhibit 1627; Alcoa's answer to interrogatory 11(r); Exhibit 1642, exhibit p. 6961). In its application to the Reconstruction Finance Corporation in 1940 for financial assistance, which was laid before this Court near the close of the taking of testimony, Reynolds described itself as "the largest and most dominant factor in the foil industry" (Exhibit 1800, exhibit p. 7442).

 Certain of the Reynolds books (showing its sales) were lost by flood. If estimates of sales by Reynolds for those years were taken into account, it is pretty clear that there would be quite a substantial enhancement of the amount by which Reynolds has exceeded Alcoa in sales of foil for the past few years (pp. 34966; 34972-4).

 In addition, in the period of 1930 to 1939 Johnston's aluminum foil production totalled nearly five million pounds. The growth of the company's annual production has been very considerable and for the major part the annual increase has been steady (Exhibit 1470; pp. 28268-9).

 As between itself, Reynolds and Johnston, th percentage of aluminum foil produced by Alcoa fell from 62.39 per cent in 1933 to 44.3 per cent in 1939. In other words, while Reynolds and Johnston have gone up, Alcoa has gone down.

 In direct and active competition with aluminum foil are two things: (1) Many articles manufactured in the United States from other metals and materials serve, and are sold for, some of the identical purposes for which aluminum foil is used. (2) Imported aluminum foil usually sells at a lower price than domestic foil (p. 22675).

 The imports of foil from Switzerland are large and increasing. These have increased particularly since a reciprocal agreement was made between Switzerland and the United States in January, 1936. This agreement reduced the tariff rates on aluminum foil. The diversity and extent of the competition has been very great (pp. 12663-5; 22675-8; 28263-9; 28289-307; 28314-21; 28402-3; 33292-3; 35822-59; 40275-6; Exhibit 457, exhibit pp. 2749, 2753 and 2755. See also Exhibits 1791 and 1792 for identification, pp. 40275-8).

 My conclusion is that not alone is the charge against Alcoa unproved, but that it is affirmatively and indisputably established that with respect to foil Alcoa has committed no violation of law.

 (10) Miscellaneous Fabricated Articles

 This brings us to the tenth monopolization charge. That relates to miscellaneous fabricated articles. A number, which are minor, are mentioned in paragraphs 7, 9, 49, 50 and 53 of the bill.These are bronze powder, wire, rods, bars, tubing, nuts, bolts, bottle seals, caps and similar articles.

 What is said in paragraphs 7 and 9 is merely descriptive. It charges no offense.

 In paragraph 49 it is alleged that Alcoa produces and sells virtually 100 per cent of the wire, rods, bars and tubing made of aluminum which move in domestic interstate commerce. In paragraph 50 it is alleged that Alcoa is the largest domestic producer of bronze powder moving in interstate commerce. In paragraph 53 the charge is that, by virtue of its 100 per cent monopoly of production and sale of alumina and virgin aluminum, Alcoa has acquired and has maintained monopolistic control of the production and sale of products manufactured therefrom.

 The last mentioned charge is an illustration of what I called attention to yesterday; of the difficulty, arising from the form of pleading in this case, of knowing with accuracy what the Government's charge actually is. The very use of the expression "100 per cent monopoly," when whether any such exists is the subject of inquiry, conveys to me nothing and I do not know what the Government's position is.

 It is obvious that, with respect to a great proportion of the articles under consideration, no cause of action is stated; also that there is doubt whether a cause of action is stated as to any of them. Even though, however, there be some charge which may be treated as good in law, it is not sustained by proof; nor is any one of the charges sustained by proof. Indeed, the evidence is silent as to a good many of the articles and, relatively, none is important or of any considerable volume.

 In so far as my attention has been directed to or I have discovered evidence relating to these matters (whether specifically named or covered by general description), such evidence will be found in the record as follows: As to bronze powder, at pp. 12637-46; 26829; 33293; 34937-8; in Exhibit 704 and Exhibit 1626. As to wire, at pp. 23004; 23009; 23011; 33288; 34521. As to rods, at pp. 21187; 23004; 23010; 24643; 34509-12; 34527; and in Exhibit 1642. As to bars, at pp. 21187; 23004; 23010; and in Exhibit 1642. As to tubing, at pp. 32140-1; and in Exhibit 1642. As to screw machine products, at pp. 34520-3; 34527; and in Exhibit 1642. As to rivets, at p. 23011; and in Exhibit 1642. As to nuts, at p. 34520. As to forgings, at pp. 23004; 23011; 34509; 34511-13; 34520; and in Exhibit 1642.

 I think a cursory reading of the record at the pages I have mentioned, coupled with a reading of the exhibits I have mentioned, will demonstrate that Alcoa has committed no offense with respect to any of the matters which I have included under the heading of miscellaneous fabricated articles.

 (11) Sheet

 We come now to the eleventh monopolization charge. This concerns aluminum sheet.

 Perhaps sheet has been more provocative of controversy at this trial than any other single subject. In order fairly to consider all the issues which have been raised in those controversies, I feel it is quite essential that I go into the evidence at length. On this account I anticipate that we shall probably be engaged for several days on the subject.

 The bill makes five separate sets of charges about sheet. These are contained in paragraphs 47, 48, 53, 83, 92, 93, 98 and 99 of the bill.

 The testimony about sheet is very extensive. A full discussion of it would require a great deal of time. By analysis, however, I think the issues can be brought within rather narrow compass; also that it will be necessary to comment on the relatively few of them which are crucial. As I have previously indicated, and I call it to your attention on account of the statement I have just made, in the findings I shall be prepared to deal with every pertinent question presented by the pleadings.

 Ordinarily up to this point, in entering on the discussion of a new matter, or very soon after I had entered on the discussion, I have set out fully the substance of all the allegations of the bill containing the charges in respect to the subject. Here, however, I have concluded that it will be better to adopt, and perhaps helpful if I adopt, a different procedure. The plan I shall follow will be to take up a single charge at a time, recite the evidence bearing on it, and dispose of it before I go into another charge; and thus in time I shall discuss all the charges contained in the eight paragraphs of the bill of which I have given you the numbers.

 In dealing with the controversy I must consider twelve companies. These are, or have been, engaged in rolling sheet. It is material to have, and to hold in mind, the dates when certain events affecting those companies occurred.

 Alcoa began rolling aluminum sheet in 1895. It was the pioneer in this country. It sought first to induce others to take up that phase of the business, with the view to selling them ingot. This plan, however, failed. Having failed, in order to get a market for its aluminum, or for products therefrom, Alcoa itself took up the rolling of sheet.

 Aside from Alcoa, eleven other companies went into sheet rolling. The names of these, with the dates on which they began that business, were as follows: (1) Goods, in about 1914, with plants at Manitowoc and Two Rivers, Wisconsin. (2) Standard Aluminum Company, in 1913, which had a plant at Two Rivers, Wisconsin. (3) Cleveland Metal Products Company, in 1915, which had a plant at Cleveland, Ohio. (4) United Smelting & Aluminum Company, in 1917, which had a plant at New Haven, Connecticut. (5) Bremer-Waltz Corporation, in 1918, which had a plant at St. Louis, Missouri. (6) Baush Machine Tool Company, then and now chiefly engaged in the machine tool business, which in 1919 established and for a time had an aluminum sheet plant in, or on the edge of, Springfield, Massachusetts, part of the property being in Chicopee, immediately adjacent to Springfield. (7) Aluminum Products Company, in 1920, which has a plant at LaGrange, Illinois. (8) Sheet Aluminum Company, in 1926, which has a plant at Jackson, Michigan. (9) Fairmont Aluminum Company, in 1927, which has a plant at Fairmont, West Virginia. (10) Reynolds Metals Company, in 1931, which has plants at Louisville, Kentucky, Richmond, Virginia, and Farmingdale, Long Island, New York, and may have plants elsewhere, -- established since the close of the taking of evidence in this case, but as to which I have no direct knowledge. (11) Scovill Manufacturing Company, in 1935, which has a plant at Waterbury, Connecticut.

 The eleven companies just mentioned, other than Alcoa itself, are divided into three classes. The first consists of four companies which formerly manufactured and sold sheet, but are no longer in the business. The second consists of three companies which, ever since they were organized, have rolled and still roll sheet, but have themselves exclusively, or almost exclusively, used their own output and have not themselves sold sheet in substantial quantities to the public or to other companies generally. The third consists of four companies which since their organization, or at least for many years past, have rolled and sold, and still roll and sell, sheet to customers generally.

 The companies of the first class, namely, those which are no longer in the sheet business for themselves, are (1) Standard Aluminum Company, which was sold in 1916 to Goods; (2) Bremer-Waltz Corporation, which was sold in 1919 to Goods; (3) Cleveland Metal Products Company (or Aluminum Rolling Mill Company, the two together for the purposes of discussion being treated as a single enterprise and for convenience being called in this discussion the Cleveland Company), which was sold in 1924 to Alcoa; and (4) the Baush Company, which quit manufacturing or selling sheet at some date between 1927 and 1931.

 The companies of the second class, which produce but usually do not sell sheet, are (1) Goods; (2) Aluminum Products; and (3) Scovill.

 The companies of the third class, which have heretofore produced and regularly sold and still produce and regularly sell sheet, are (1) United Smelting; (2) Sheet Aluminum; (3) Fairmont; and (4) Reynolds.

 As I have already indicated, I shall take up the charges separately. I shall state one charge only and then follow with a discussion of the evidence bearing on the issue raised before going on to another charge.

 There are two other charges which are general and in a sense may properly be characterized as preliminary. Those are contained in paragraphs 47 and 48 of the bill.

 I shall begin with the charge in paragraph 47. It is there alleged that Alcoa produces and sells upwards of 90 per cent of aluminum sheet moving in interstate commerce of the United States. This charge is not sustained by the evidence.

 2S and 3S aluminum sheet are referred to by some of though not by all, the witnesses as aluminum sheet or pure aluminum sheet. For commercial purposes the two, that is, 2S and 3S, are practically identical.

 Exhibit 1703 shows that in 1923 Alcoa furnished 95.8 per cent of the 2S and 3S aluminum sheet supplied to the public by sheet rollers in the United States who manufactured and sold such sheet to customers; also that thereafter the proportions furnished by Alcoa (as between itself and competitive sheet sellers) gradually, but very nearly uniformly, decreased annually; and that in each of the years 1938 and 1939 this had fallen below 72 per cent.

 It is to be observed, however, that the figures contained in Exhibit 1703 take no account of sheet produced by companies of the second class (which use their output for their own fabrication of articles from sheet). If they were considered, obviously the 72 per cent would be further reduced. It is clear, therefore, that the charge made by the Government in paragraph 47 of the bill has not been proved.

 In paragraph 48 of the bill it is alleged that Alcoa produces and sells over 95 per cent of the alloys of aluminum moving in interstate commerce of the United States; also that this is commonly called duralumin.

 In support of the charge the Government relies solely (original brief, p. 496) on Exhibit 1730. I think, however, that this exhibit does not support the allegation.

 The charge in the pleading is as to the percentage of "alloys of aluminum" or "hard alloys" which Alcoa produces and sells. Exhibit 1730 gives statistics only as to "sheet" other than 2S and 3S. The commodity covered in the exhibit is specifically stated in the exhibit title to be "Aluminum Alloy Sheet." When so confined it, of course, excludes from the figures used in the exhibit both castings and forgings, as well as some other articles which are in fact "hard alloys" of aluminum. If this be true, then it follows that the exhibit does not embrace figures as to all alloys of aluminum, to which paragraph 48 by its express terms relates. Outside of Exhibit 1730 I discover nothing in the evidence which furnishes, nor does Exhibit 1729 furnish, the information called for by paragraph 48. In consequence, the charge as made is not sustained.

 The difficulty, as I see it and repeat, is this: Paragraph 48 of the bill relates to "alloys of aluminum," commonly known as "hard alloys" or "duralumin." On the other hand, Exhibit 1730 deals with "aluminum alloy sheet other than 2S and 3S."

 We are thus brought to the four companies constituting the first class, which formerly manufactured and sold sheet but are no longer in that business. They are Standard, Bremer-Waltz, the Cleveland Company (i.e., Cleveland Metal Products Company, as previously defined) and Baush. Each will be considered in turn.

 Standard Aluminum Company is not mentioned in the bill. In paragraph 53, however, it is alleged that Alcoa employed its monopolistic control of the production and sale of aluminum sheet and of alloy sheet to exclude others from engaging in competition with it. It is also there alleged that the monopolistic control of Alcoa has had, and will continue to have, the effect of preventing substantial competition which would otherwise have arisen in the production and sale of products manufactured from aluminum. Possibly it was designed to include the Standard transaction in that wide sweeping charge, although it is not mentioned by name. Even though that were not the intention, however, Standard Aluminum Company will be so treated; that is to say, it will be treated as if this charge had been made in regard to the transaction which involves it.

 The Standard mill was built in 1913. It was sold to Goods in 1916, three years later. At the time of the sale Mr. Arthur V. Davis and Mr. Roy Hunt, Alcoa officials, were on the board of directors of Goods. However, there is no evidence that Mr. Davis participated in the purchase. His recollection is that he opposed it (pp. 20862-3); and the evidence shows that Mr. Hunt was not active in the purchase or in the negotiations leading up to it (pp. 22113-5). Indeed, there is no evidence which indicates that either Mr. Davis or Mr. Hunt had any active share in the purchase and none whatsoever which connects Alcoa with the purchase.

 The facts are that Standard was considerably in debt and was being pressed by its bank (pp. 9223; 9225; 9226; 9696; 9698; 19285-6). It seems obvious that it is those conditions which brought about the sale.Alcoa did not promote it. On the other hand, because of the financial distress of Standard, its owners induced Goods to take the property off of their hands (pp. 9229; 9771-2).

 The next year, after the Standard sale, Messrs. Bremer and Waltz, owners of Standard, had the Bremer-Waltz Corporation, which they also owned, build a new aluminum sheet rolling mill at St. Louis (pp. 9232-5). Nothing in the Standard transaction stood in the way of their doing this (pp. 9771-3). The new mill at St. Louis began operation in 1918, but it did not prosper (pp. 9382; 9384; 9387; 9390; 9393-4; 9396-7; 9599-9600; 9702-6; 9773; 9791-9804; 9898-9907; Exhibit 470).On account of its not prospering the owners offered the property to Alcoa, but Alcoa declined to buy it (pp. 9392-3; 9598; 21732-7; 22082). In February, 1919, the next attempt to sell the mill was made. This was to a group who are described by Mr. Waltz in the testimony as the St. Louis Board of Trade. That also failed (pp. 9821-4). Subsequently, in the latter part of 1919, having decided that it needed another mill, Goods bought the St. Louis mill (pp. 9400; 9403; 9595-9602; 9775; 9821-5; 22096; Exhibit 467; Exhibit 471).

 Accordingly, on the evidence thus far without more, Alcoa would be entitled to a complete acquittal on the charges relating to the Standard and St. Louis Mills. But there is additional evidence on the subject.

 In paragraphs 93 and 98 of the bill the allegations with respect to the St. Louis mill, in substance, are as follows: In 1919 Alcoa was a stockholder and was represented on the directorate of Goods. Alcoa shared responsibility for the policies and activities of Goods. The competition of Bremer-Waltz with Alcoa in producing and selling sheet terminated in 1919, when the Bremer-Waltz sheet rolling mill was acquired by Goods. The purpose and effect of the purchase were to eliminate competition with Alcoa.

 Preliminarily it should be observed that here again the pleading consists in part of mere conclusions and so leaves the Court with a problem of trying to ascertain with accuracy what really is the position of the Government on the point.

 What I have stated is the Government's accusation; but so far from Alcoa having influenced Goods to buy the St. Louis mill, the evidence satisfactorily establishes that Alcoa officials who were on the Goods board flatly opposed and advised against the purchase (pp. 19095-6; 21060-32; 21572-72A; 21583; 21735; 22073-7; Exhibit 474, item 5). In this instance, as in many other instances (pointed out elsewhere), the majority of the directors of Goods favored a course which the minority directors disapproved. Yet the majority prevailed and carried through the transaction (pp. 21571-2).

 The negotiator of the sale in behalf of Bremer-Waltz testified unequivocally that Alcoa had nothing to do with it (pp. 9599-9600); also that he personally assented to the sale in which Goods was the purchaser (pp. 9771-2; Exhibit 471). I am persuaded, therefore, that the charge as to the Bremer-Waltz mill is entirely unfounded.

 Because it has been discussed, perhaps a bit of the subsequent history of the mill should be mentioned.

 For a time Goods operated the property at St. Louis, but the results were financially unremunerative. Accordingly, the mill equipment was moved to the two Wisconsin plants of Goods and the St. Louis real estate was sold (p. 22096). None of these things was done on the request or at the suggestion of Alcoa or its officials. It and its officials were without responsibility for any of those things.

 We come next to the Cleveland Metal Products Co. transaction.

 In paragraphs 92 and 98 it is alleged that Cleveland Metal Products Company (called herein the Cleveland Company) was a competitor of Alcoa in the production and sale of aluminum sheet; that in March, 1918, the two companies entered into a contract, pursuant to which the Aluminum Rolling Mill Company (hereinafter called the Mill Company) was organized to purchase and operate the Cleveland Company's mill and that Alcoa purchased 60 per cent of the stock of the Mill Company and obtained control of its management; that the purpose and effect of the contract were to establish Alcoa's monopoly in the production and sale of aluminum sheet by the elimination of the Cleveland Company's competition; that in 1923, pursuant to court order, Alcoa sold to the Cleveland Company the 60 per cent of the Mill Company's stock it owned; that shortly thereafter Alcoa obtained a judgment against the Mill Company for indebtedness and acquired the mill at sheriff's sale; and that competition by the Cleveland Company terminated in 1918 when its mill came under the control of Alcoa.

 Parenthetically it may be remarked that in their original briefs (Government, p. 503; Alcoa, p. 423) both sides said that the ratio of Mill stock taken was two-thirds by Alcoa and one-third by the Cleveland Company (instead of 60 per cent by one and 40 per cent by the other, as alleged in the bill). Though the variance is immaterial, the evidence indicates that the actual proportion was two-thirds and one-third and that will be taken as true.

 The Cleveland Company began operations in 1915. Its plant was good; but, because too small, neither when in the hands of the Cleveland Company nor when in the hands of the Mill Company was it ever able to operate profitably (pp. 19221; 19225; 22077A).

 In 1918, during the first World War, the Government fixed the prices of sheet; or some say fixed the maximum, but it doesn't make any difference which. Thereupon, or shortly previously (in anticipation of the schedule going into effect), the Cleveland Company decided that it could not continue to operate under the newly prescribed scale of prices. Everybody apparently realized that whatever the scale was, whether it was a maximum or not, it would be adopted by all engaged in the industry. The Cleveland Company's president, Mr. Ramsey, so represented to Alcoa and appealed for help, Alcoa at that time being a creditor (pp. 19220-3; 20978; 20981; 21054; 21069; Exhibit 728; Exhibits 463-5 for identification, of which judicial notice is taken, -- these being War Industries Board papers).

 This led to the organization in 1918 of the Aluminum Rolling Mill Company to take over, and it did take over, the Cleveland Company's mill. The stock of the new company was distributed, as I have said, two-thirds to Alcoa and one-third to the Cleveland Company; and $600,000 of fresh money was put in (pp. 19223-5; 21065; 22078; Exhibit 727, item 2, exhibit p. 3558; Exhibit 729, exhibit p. 3574).

 Promptly after the organization of the Mill Company, in the same or the next year, the Federal Trade Commission brought suit assailing the transaction and specifically seeking a court order compelling Alcoa to divest itself of the Mill Company stock (pp. 21065-7; 22079; Exhibit 727, item 1). This resulted in a decision by the Commission adverse to Alcoa, which directed it to abandon the enterprise. An appeal was taken. In 1922 the ruling below was sustained by the Third Circuit Court of Appeals (Aluminum Co. of America v. Federal Trade Comm., 284 F. 401).

 In obedience to the court order which followed, the Mill Company plant was abandoned by Alcoa and it sold its Mill Company stock to the Cleveland Company (pp. 19225-6; 21067). In the meanwhile, the indebtedness to Alcoa for ingot had grown to about $600,000 (pp. 19225-6; 21067-8; 22079; 22082; Exhibit 727, item 2, exhibit pp. 3559-60), -- a sum in excess of the worth of the entire Mill Company assets (Exhibits 737-8). Alcoa brought suit for the amount of its debt, obtained judgment, had execution levied on the property and, in 1924, bought it in at sheriff's sale (pp. 19225-7; 21065; 22082; Exhibits 738-9).

 The Federal Trade Commission thereupon sought a court order to prevent Alcoa from holding the property which it had acquired under the execution sale, but this effort failed (299 F. 361; pp. 19227-8). After it had obtained the property in the way described, Alcoa discontinued operation of the mill and shortly afterwards, as a measure of economy, removed the equipment to some of its other plants (pp. 22079; 22096-7).

 From the recitals it will be observed that the original plan, pursuant to which the Mill Company was created, was formulated by or at the insistence of the Cleveland Company when in a financially failing condition. This called for a division between Alcoa and the Cleveland Company of the benefits. The shares of these were to be measured by the stockholdings; that is, two-thirds to Alcoa and one-third to the Cleveland Company. When, after court proceedings, it had been determined that the plan was not lawful, Alcoa, strictly in pursuance of its legal rights, availed itself of the only remedy open to it, which was by suit to collect the money owing to it.

 There is no evidence which would sustain a finding, or none in my opinion which would sustain a finding, that it was the purpose of Alcoa to drive the Cleveland Company out of business. Rather it appears that its purpose was to conserve its debtor, the Cleveland Company, and in doing so to treat it leniently and, so far as I can see, fairly. When this purpose had been frustrated by litigation, in order to exercise an indisputable right and, if possible, to collect something on a debt Alcoa was compelled to institute an action the consequence of which was its purchase of the property of its debtor at public sale.

 There is failure to prove that the purpose of Alcoa was to limit or to destroy competion. Alcoa went no farther and its conduct carried it no farther than to avail of the provisions of law open to every creditor for the collection of what was justly owing to it.

  Moreover, in a case arising under the Clayton Act, the Supreme Court has held that the purchase of a failing business is not unlawful, for the reason that it does not deprive anyone of the opportunity to compete (International Shoe Co. v. Federal Trade Commission, 280 U.S. 291, 301, 302, 50 S. Ct. 89, 74 L. Ed. 431). It would seem equally that in the case at bar, under the Sherman Act, the acquisition of the Cleveland Company or its property by Alcoa did not constitute a violation, because it did not lessen competition.

  Paragraph 99 of the bill contains charges concerning Baush. These are confined to the period 1924 to 1931. They relate chiefly, if not wholly, to the spread between the prices of virgin aluminum ingot and the prices of aluminum alloy (duralumin) sheet. In substance, the allegations are as follows:

  (1) At the time, as theretofore, Alcoa was and it still is the sole producer of virgin aluminum in the United States. It has fixed prices for the ingot moving in interstate commerce. Aluminum of that kind is indispensable in the manufacture of aluminum alloy sheet. Alcoa also manufactured such a large proportion of the total domestic output of aluminum alloys that it was able to and did establish the prices for all aluminum alloy sheet moving in interstate commerce.

  (2) As Alcoa knew, Baush was then its only competitor in the field of aluminum alloys. Baush had been manufacturing aluminum alloy sheet since 1919 and selling it in interstate commerce. Knowing that any competitor therein would be required, because of Alcoa's control over prices, to purchase virgin aluminum and sell his sheet at prices established by it, Alcoa effected changes in the respective prices of virgin aluminum and of aluminum alloy sheet which so reduced the differentials between those prices that any competitor in the manufacture and sale of aluminum alloy sheet, even though he should roll efficiently and conduct his business efficiently, would be unable to carry on operations without incurring losses destructive of his business.

  (3) The result (as Alcoa intended) was that Baush was obliged to conduct its sheet operations at losses, accumulated over the 1924-1931 period, until Baush was compelled virtually to suspend such production.

  (4) The purpose and effect of the reduction in the differentials mentioned were to eliminate Baush competition and to maintain Alcoa's monopolistic control of said commerce.

  As heretofore indicated, what has been said in the four last preceding subdivisions is a paraphrase of paragraph 99 of the bill. To put the matter still more briefly, however, the essence of the charge is that, by unduly narrowing the spread between the prices of ingot and the prices of duralumin sheet, Alcoa made business unprofitable for Baush and thereby drove Baush out of business.

  It will be observed that the complaint with respect to Baush grows wholly out of what affected duralumin and that the sole alleged misconduct of Alcoa complained of in the bill as having affected duralumin was narrowing the spread between the prices of ingot and the prices of duralumin. Elsewhere that very charge, relating to the spread, will be taken up. In that discussion, where the charge as considered will be stated in a somewhat more comprehensive way, the effect on others, as well as the effect on Baush and other sheet mill owners, will be dealt with. So also the spread between the prices of ingot and the prices of all types of sheet (including 2S and 3S or so-called pure sheet, as well as all kinds of alloy sheet, whether duralumin or 17S or some other kind) will be taken up. In consequence, if at this stage we should treat only the phase of the spread issue that concerns Baush, we should be forced later to indulge in repetition. Accordingly, we might with considerable appropriateness, at the moment, postpone all comment on the charge made in paragraph 99 until we reach the subject of spread generally.

  Nevertheless, there is evidence relating particularly to Baush, and in part wholly to Baush, with respect to the charge that, through unfair competition (apart from the spread), Alcoa drove Baush out of the aluminum business. So also discussion of that special unfair competition charge has been intermingled with discussion of the alleged spread controversy. On that account I deem it proper to take up the excluding charge now in advance of dealing with the general complaint about spread.

  Moreover, there is evidence from which it might well be argued, even though there were an undue narrowing of the spread, that this is not what drove Baush out of the aluminum business (if it was driven out) and that it can be demonstrated by such evidence that there was another identified independent cause which, in and of itself, was sufficient to bring about and did bring about the result and that for the result Alcoa has no responsibility whatever. If that argument can be maintained, then certainly it would be fitting to go into it ahead of consideration in a broad way of the spread question.

  Let it be remembered that the pleading (paragraph 99 of the bill) relates exclusively to the period of 1924 to 1931. It appears, however, that the quantity of sheet rolled by Baush in 1930 and 1931 was quite small (Exhibits 1703, 1729 and 1730). It appears further that in 1928 Baush commenced suit against Alcoa to recover treble damages alleged to have been suffered by it as a result of Alcoa's violation of the Sherman Act; also, as is manifest from the evidence, that, after the beginning of the suit, Baush executive lofficials (who afterwards were witnesses) gave more real attention to accumulating evidence for use in the trial than to the operation of their company's aluminum mill.

  Viewing the evidence as a whole, it is clear that in 1928 Baush had already become far from active in rolling sheet and that the poundage of its production of sheet in 1929 was small. Its maximum production shown by the exhibits referred to was in 1927.Then was the peak. It might with some reason, therefore, be urged that the effort of Baush to produce sheet after 1927 was too small to be regarded as affording any basis for charging responsibility for its diminishing business to Alcoa.

  The contest between Baush and Alcoa was one of the important topics dealt with at the trial. The evidence about it was elaborate. I do not believe, however, that it would be fruitful to assemble or to talk about the whole of it. As I understand, the Government shares this view. I shall, therefore, select instances which seem to me perhaps the best for exploration and elucidation.

  Furthermore, for a reason which will be gone into later, it would be of comparatively little consequence now to determine which participant is right in the controversy involving the conduct of Alcoa and Baush toward each other.

  In its original brief (pp. 535-6) the Government's statement on the subject was as follows:

  "The manner in which Alcoa took sales of both sheet and forgings away from Baush is shown in the following concrete illustrations. In all of them, Alcoa succeeded in taking the business solely by means of underbidding Baush, which is merely another way of saying that Alcoa reduced the spread between ingot and the finished product to such an extent that Baush could not afford to compete."

  Omitting sheet and spread from present consideration, the substance of the Government's express contention is that, by underbidding, Alcoa took away business from Baush and, impliedly, that this misconduct of Alcoa drove or contributed to driving Baush out of the aluminum business.

  I am not sure that underbidding is charged as being an offense or, if so charged, is sufficiently pleaded to state a cause of action; nor am I sure that it is connected with sheet in such a way as appropriately to be brought in for consideration at this point. Nevertheless, it does directly relate to Baush, particularly the Government's contention that Alcoa improperly drove Baush out of the aluminum field. For that reason, as I feel, the subject of underbidding should now be gone into.

  The Government says it is unnecessary for the Court to make final rulings on the merits of the underbidding examples on which it relies. Yet it goes into them. So I think I should go into the same examples. Those described by the Government (original brief, pp. 536-547) are transactions with the Franklin Motor Car Company, the Stutz Motor Car Company, the Hupp Motor Company and the Eastman Kodak Company.

  It is not disputed that Alcoa did compete with Baush, as it has generally competed with others, in the various lines of its business and that the competition was vigorous. The primary issues raised are (1) whether the competition was fair and (2), if not, whether unfairness forced Baush to give up the aluminum business.

  The first batch of evidence the Government relies on relates to connecting rods for automobiles. In connection with those the three automobile companies, as to which evidence was given and which were discussed, are Franklin, Stutz and Hupp. All the charges concerned with connecting rods are of underbidding. On sheet there is no charge of underbidding. That we shall take up when we reach Eastman.

  In 1920 and 1927 H. H. Franklin Manufacturing Company manufactured the Franklin automobile for the Franklin Motor Car Company. The Manufacturing Company (hereinafter called Franklin) purchased the connecting rods used in the automobiles. The Government claims that Alcoa undersold Baush when competing with it in selling these connecting rods to Franklin. Whether, if so, this would show or can show monopolization will not be discussed. Instead, the charge as made will be considered on its facts side alone.

  There are a good many minor disputes between the witnesses as to what was said in conversations. Thse occurred between fifteen and twenty years ago, during the period that Mr. Stellman was chief engineer for Franklin. They relate to dealings of Baush and Alcoa with Franklin. We need not go into more than one of those, however, because only that one has any bearing on the underbidding issue. Indeed, the underbidding question turns wholly on a single transaction. On the facts in that transaction there is no substantial dispute. As indicated, there is no occasion to discuss any other transaction.

  In December, 1926, Alcoa made a written bid (Exhibit 111) to Franklin of 81-1/2 cents per piece (that is, per rod) on 6600 pieces of connecting rods (having an estimated weight of 8250 pounds). Baush made a bid of 86 cents per piece on the same rods (pp. 3263; 3272; 3276-7). The evidence as to the latter bid is entirely oral. No writing concerning it was produced from the Baush files. This is probably because the papers of Baush relating to the aluminum branch of its business were misplaced, lost or destroyed some time after the second trial of its suit against Alcoa. Neither was any writing relating to the bid produced from the files of Franklin. Apparently after it quit business in 1932 or 1933 and their present whereabouts are not known (pp. 3198; 3214; 3286). Nevertheless, the oral testimony indisputably establishes that the Baush bid was 86 cents per piece.

  Each bid was for the whole of the connecting rods. The prices in both bids were per piece. Inasmuch, however, as we have the total number of pieces and the total weight of the rods, it is easy to translate the per piece prices into per pound prices. By computation it is shown that Alcoa's bid of 81-1/2 cents per piece is equivalent to 65.2 cents per pound and Baush's bid of 86 cents per piece is equivalent to 68.8 cents per pound. In other words, the bid of Alcoa was 3.6 cents per pound under the bid of Baush. But so far as concerns the charge of underbidding, there is not a scintilla of evidence establishing or even suggesting or furnishing basis for an inference that in bidding Alcoa went below its own cost of production plus a reasonable profit. However, if we go somewhat into details, it will be even clearer that the evidence affords no foundation for criticizing the conduct of Alcoa.

  Exhibit 1423 contains a long list of the principal aluminum alloys which Alcoa produces and sells or has heretofore produced and sold, with the names of commodities in which the several alloys are commercially available. The list is divided into groups. One of those is group 2. That consists of forged products (all made from aluminum alloys).Included in group 2 are 17S forgings and 25S forgings (Exhibit 1423, exhibit pp. 6477-8). Connecting rods are made from 17S or 25S alloy by forging.

  As far back as 1919, or a bit later, when Baush began production of duralumin (which is a hard alloy of aluminum) and continuing until it quit the aluminum business, 17S corresponded to and was known and accepted in the trade as the commercial equivalent and a competitor of duralumin. Sometime preceding December, 1926, Alcoa established an alloy called 25S (pp. 29550; 29707). This had never been in production of Franklin connecting rods before 1926 and it went on the market that year (pp. 3272; 3440; 3442; 33254; 33257-8). The bid Alcoa submitted to Franklin under date of December 22, 1926, was for connecting rods forged from 25S alloy (p. 3272; Exhibit 111).

  There is no evidence from which it can be determined whether a connecting rod could be forged cheaper from 17S or from 25S. At least there is no evidence on the subject so far as I can discover or has been called to my attention. Moreover, 25S being new at the time, conceivably there may then have been warrant for selling an article made from it cheap, by way of advertisement, or even for selling it at a price below cost, so as to introduce it to the trade and regardless of whether the cost of producing the 25S may have been as much as or more than the cost of producing 17S (pp. 22516-7; 22671-3). However that may be, in the absence of any showing on the point, certainly, as it seems to me, the evidence would not justify a finding that Alcoa sold the 25S connecting rods too low.

  In Exhibit 1423 the chemical composition of every alloy it mentions is stated. A comparison of what is said in the exhibit concerning 17S and 25S will indicate how unlikely it is that the costs of producing these two alloys were the same.

  The percentages of the elements entering into the two are set out in table 8, which is as follows: TABLE 8 17S 25S Copper 4.0% 4.5% Silicon 0.8% Manganese 0.5% 0.8% Magnesium 0.5% Iron plus silicon plus minor impurities 0.9% Iron plus minor impurities 0.6% Aluminum 94.1% 93.3% 100.0% 100.0%

  Table 8 is made up in this way: Out to the left is a list of several metals, the bottom one being aluminum. In the second column, under 17S, there are percentages stated, -- these being for the metals named out at the left. To the right is a column under the heading 25S. There also the percentages are stated for the metals out at the left.

  The metals out at the left are copper, silicon, manganese, magnesium, iron plus silicon plus minor impurities, iron plus minor impurities and aluminum. For copper, under 17S, the percentage is 4%; for 25S 4.5%; for silicon the percentage under 17S is 0 and under 25S it is .8%; for manganese the percentage under 17S is .5% and for 25S it is .8%; for magnesium the percentage under 17S is .5% and under 25S it is 0; for iron plus silicon plus minor impurities under 17S the percentage is .9% and under 25S it is 0; for iron plus minor impurities under 17S the percentage is 0 and under 25S it is .6%; for aluminum, under 17S it is 94.1% and under 25S it is 93.3%; in each instance making the entire total 100% of the composition.

  It will be noted that some of the elements in the alloys are different and that the percentages are different for each one of the elements of which the two sets of alloys are composed. There is no single element the percentages of which are the same for both of the commodities, 17S and 25S. These circumstances emphasize the insufficiency of the evidence to uphold the Government's contention.

  The two bidders were on an equal footing. Each bid, without embarrassment or limitation, was on the precise terms specified by Franklin in the invitation to bid. So far as appears, neither bid was for all-or-none (pp. 3264-5; 3292-5).

  Some former officials of Baush say that if it had gone lower in its bid, it would have lost money; also that in order to make a profit, it would have had to get for its duralumin from 7 to 10 cents per pound more (pp. 3128-30; 3268-71; 3277). If that be true, then three comments seem pertinent:

  1. It was a piece of good fortune for Franklin and other customers wishing to purchase connecting rods to have Alcoa to hold down the price by competing with Baush.

  2. Baush bought practically all its raw aluminum from foreigners. The purchases were almost uniformly at prices below the prices prevailing in the United States for aluminum produced in the United States. From aluminum produced nearly altogether in Europe and imported into the United States from there, Baush manufactured in its own plant the duralumin it used in fabricating the articles (such as connecting rods) which it sold. The fact that the cost of its duralumin was so great that it would have been necessary to sell it from 7 to 10 cents higher than it was sold, in order to earn a profit from sales in competition with Alcoa, strongly corroborates the contention of Alcoa that the cause of the failure of Baush to survive was its relative inefficiency.

  3. New articles (such as connecting rods forged from 25S) frequently could first be sold only in competition with, as well as in displacement of, articles made from other materials (as was true of products from 25S). So also, as previously stated, in the beginning, when necessary in order to introduce them, it was justifiable to sell such articles at prices below cost of production (pp. 22516-7; 22671-3).

  There is no occasion to pursue the matter further. Shortly after December, 1926 (though precisely how long after is not clear), Franklin abandoned aluminum connecting rods and shifted to rods made of steel, which was a competitor of aluminum (pp. 3206; 3215; 3441-3; 22672).

  I think the Government's claim of fault on the part of Alcoa, with respect to the sale of connecting rods to Franklin, has no foundation in the evidence. We, therefore, go on to the facts relating to Stutz connecting rods.

  Preceding the 1926 model Stutz car going on the market, the connecting rods used by Stutz were steel (p. 34562). For the 1926 and 1927 models, more generally called the 1926 and 1927 cars, the connecting rods were of hard aluminum alloy. The controversy in regard to the Stutz Motor Company is about the rods in those cars. Alcoa furnished them for both years, 1926 and 1927.

  Baush and Alcoa made their rods from aluminum alloy; not from sheet. The process was forging. They competed for the Stutz order each year. The negotiations on behalf of Stutz were conducted by its selling agent (Kelly). He testified that the sole reason for the business going to Alcoa was that in both years its prices were lower (p. 34606). The negotiations for Alcoa were carried on by its Indianapolis sales manager (O'Connor) and for Baush mostly by its engineer or sales manager (Calkins), though in September, 1926, its president (Mr. Haskell) was active (pp. 2543-9; 34571-2; 34611).

  The customary procedure among automobile manufacturers in obtaining material for constructing cars, during the period when the connecting rods under consideration were sold by Baush and Alcoa, was substantially as follows: Within the year preceding the date of the model, and usually some months in advance of the articles being needed (the length of time varying with circumstances), purchase inquiries (constituting invitations of quotations) were sent out by the manufacturer. Generally (one witness said nine times out of ten, p. 34621) those desiring to bid sent written replies containing their quotations. Frequently, however, there were also oral negotiations between the parties. Later, when the manufacturer reached a decision, usually it was followed by a formal or informal written contract setting out the terms of the order.

  The practice described was followed in the present instance with respect to rods for the 1926 and the 1927 cars. It will be well to discuss the facts relating to rods for the Stutz 1926 car separately from what I shall say in regard to rods for the Stutz 1927 car.

  For rods to go into the 1926 car, so far as the evidence shows, each bidder submitted but a single quotation. Certainly there was no more than one written bid by either. There were some oral negotiations, but what (if any) quotations were orally discussed does not appear (pp. 34633-6).

  The documentary evidence shows indisputably that the first bid was by Alcoa. On May 27, 1925 (Exhibit 1617), Stutz and on May 29, 1925 (Exhibit 1618), Alcoa confirmed in writing an oral quotation by Alcoa made May 26, 1925, of 98 cents per rod (pp. 34598-602; 34622-3). There is no evidence that Baush made any oral quotation and it was not until August 10, 1925, approximately two and a half months subsequent to the Alcoa quotation, that Baush sent a letter to Stutz containing a quotation. This was $1.06 per rod (Exhibit 68, item 1; pp. 34567; 34623). The quotation of Alcoa therefore was 8 cents lower than that of Baush. It was accepted by contract dated September 28, 1925 (Exhibit 1619).

  So far as disclosed by the evidence, the transaction was merely an ordinary instance of competitive bidding where the low bidder won. There is no evidence from which it can be determined that either quotation was below cost of production, plus a reasonable profit, on the part of the bidder who made it. Nor have I found anything which would justify even a suspicion that either quotation was so low that, if accepted, it would have caused the bidder to lose money; nor does the evidence afford any indication of an attempt or purpose on the part of Alcoa to put Baush out of business; nor have I discovered anything for which the conduct of either party properly could be criticized.

  In its original brief (p. 540), speaking of rods the 1926 car, the Government says that Alcoa took the business "upon the condition that all of the Stutz business for the 1926 model car be given to Alcoa." Is that charge proved? If so, what is the consequence? Before these questions can be answered it is essential that we have the exact facts in mind.

  In its letter of May 27, 1925, concerning receipt in a conversation the previous day of a quotation by Alcoa of 98 cents per rod for the 1926 model rods, Stutz described the quotation as "on 40,000 rods to be supplied to us [Stutz] over a period of 12 months" (Exhibit 1617; pp. 34567-8). In the contract of September 28, 1925, between Stutz and Alcoa, covering rods for the 1926 car, it was provided that "Seller [Alcoa] agrees to furnish and buyer [Stutz] agrees to purchase one year's requirements" and in a covering letter dated October 2, 1925, transmitting to Alcoa a signed copy of the contract, Stutz referred to "our year's requirements" as "40,000 connecting rod aluminum-alloy forgings" (Exhibit 1619; p. 34568). It is, therefore, clear that the contract was for 40,000 rods to be used in the 1926 cars, then believed by the parties to be all Stutz would need in that model.

  Yet it does not follow from the writings, nor so far as I have discovered is there elsewhere in the evidence anything to show, that it was Alcoa who determined that the price quoted by Alcoa should apply to the whole of the connecting rods desired for the year. Much less is there in the extracts quoted, or so far as I have discovered anywhere in the evidence, a showing that Alcoa insisted on or even initiated the suggestion of having all the business; nor is there any foundation whatever for finding, so far as I have discovered, that Alcoa ever indicated that it would refuse to furnish a part unless it got the right to furnish all.

  In addition, even if the negotiation had included an all-or-none feature, manifestly, unless the evidence pins on Alcoa responsibility for introducing it, blame therefor does not rest on its shoulders. Certainly the manufacturer was free -- if it chose, and particularly, with respect to connecting rods, since, as he said, the Stutz purchasing agent preferred (pp. 34623-6; 34636) -- to buy the total requirements of any year from a single supplier. The Sherman Act has interposed no objection. If the manufacturer were free to buy, then surely the Sherman Act did not forbid the supplier to sell.

  The very limit of an inference which could be drawn from the evidence on the point under consideration is that, when asked by Stutz, Alcoa consented to furnish all. Moreover, the preference of the purchasing agent to have all rods for a particular year come from one supplier was based on his view that thereby money was saved for his employer; for example, when there were two sources of supply, it was necessary to furnish each a separate set of dies, handling expense was doubled and there were other duplications of or increases in cost items, as the agent thought and stated (pp. 3295-7; 3445; 34623-5; 34636; Exhibit 68, items, 1, 2 and 4; Exhibit 1617; and Exhibit 1619).

  Is it not probable, therefore, that the purchasing agent himself was responsible for not dividing the order for the 1926 cars?

  Next, the Government says (original brief, p. 540) that "Baush submitted its bids on the basis of receiving a part only of the total Stutz requirements" for the 1926 car. Because I discover nothing else possibly affording support to the argument, I assume that the contention of the Government is based on the use by baush of the words "quantities of not less than 10,000" (Exhibit 68, item 1) in its letter dated August 10, 1925, making a quotation of $1.06 a rod. If so, the foundation for the contention strikes me as very frail and the language seems to me insufficient to convey to Stutz any indication of a wish by Baush to get an order for part of the year's supply. Outside of the words just quoted, there is no showing whatever that Baush desired, or even was willing to take, much less that it made an effort to secure, an order for a portion only of the rods for the 1926 car.

  As will be pointed out later, despite the Stutz purchasing agent's preference to have all rods for a single season from a single supplier, when he was negotiating for the 1927 model rods and Baush expressed a definite desire to have half, the Stutz representative readily yielded, although he yielded only on an express condition. He said that Baush could have part of the 1927 order, provided the price was not in excess of the price Stutz would have to pay for the other half. Perhaps if Baush had conducted its negotiations for the 1926 rods in the same way as was done with respect to the rods for the 1927 car, an order for some of the 1926 rods would have resulted.

  The only other argument by the Government regarding the price of rods preceding July, 1926, grows out of occurrences in which Baush and Stutz were concerned that took place in December, 1925.

  On December 29, 1925, Baush sent a letter to Stutz (Exhibit 68, item 2). This followed a call on the Stutz purchasing agent by the chief engineer or sales manager of Baush, whose name, you will recall, was Calkins (pp. 34568-9). Mr. Calkins said that he could give Stutz lower prices. Mr. Kelly told him "go ahead and submit me [Kelly] a quotation, although at the time we [Stutz] were not able to place any business." The price mentioned in the letter was $1.02 (which was 4 cents lower than Baush had quoted in the previous August for the 1926 rods). The parties disagree as to whether the December, 1925, price was a quotation for the 1926 or for the 1927 models.

  I think the dispute is academic. Yet, in view of the discussion of counsel, I feel that I should comment on the matter.

  The December, 1925, communication preceded by more than six months Stutz sending out purchase inquiries for quotations on rods for the 1927 car (Exhibit 68, item 3; Exhibit 1619; pp. 2793-6; 34567-71; 34582) and was later by three months than the signing of the contract between Stutz and Alcoa for the 1926 car rods.

  The between-season date of the letter may engender some doubt as to which model Baush had in mind, but there is no supplementary evidence which affords an accurate or certain answer. If forced to make a determination, I should lean to the 1926 car. This because of the unlikelihood that as long as six months in advance of the announcement of specifications for the 1927 model any supplier would have attempted to frame a bid in a vacuum. But, as I see it, what is more important, and renders it wasteful to attempt to reach a conclusion, is that the thing referred to as a price in reality was not a quotation at all.

  In the first place, the writer of the letter says that "you [Stutz] may consider the prices which we [Baush] are quoting below [i.e., later in the letter] as tentative" (Exhibit 68, item 2). If tentative, they were no quotation at all; they were useless; nobody could act on them. As I feel, that is tantamount to saying that no price whatever was stated. Indeed, I think the entire letter was utterly without significance, beyond being an effort by a manufacturer to keep in contact with a prospective customer.

  In the second place, the letter includes a request that "when you [Stutz] are actually ready to purchase, you give us [Baush] a regular inquiry for a specified number of forgings with definite dates of delivery." Baush, of course, was familiar with the practice by automobile manufacturers to distribute purchase inquiries near the middle of the year preceding the model year (p. 34569). Specifying, even though under the guise of a request, that before relying on the figure stated, Stutz make further inquiry of Baush, necessarily rendered conditional what is referred to as a price. When made conditional, necessarily it ceased to be a quotation.

  It seems clear in regard to the 1926 model rods, therefore, that there is no warrant for criticizing Alcoa in any of the respects urged by the Government.

  Disregarding Baush's December, 1925, letter to Stutz, as a preliminary to taking up the subject of rods for the 1927 model it should be noted that the first communication next after December, 1925, which so far as the evidence, discloses passed between Stutz and Baush, was dated July 2, 1926; that is, over six months later. This July, 1926, letter was a purchase inquiry. In it Stutz requested from Baush a quotation on rods for the 1927 car (Exhibit 68, item 3) and included a clause as follows:

  "In quoting us [Stutz], kindly base your [Baush's] quotation on from 40,000 to 50,000 pieces, which is estimated as our next year's requirements."

  It is incontrovertible, therefore, that at the inception Stutz made it clear that what was called for was a quotation on its entire requirements for the 1927 car. Stutz, not Alcoa, injected into the negotiation the specification that the quotation be on all (instead of a part only) of the 1927 requirements.

  The purchase inquiry of July 2, 1926, was sent to Baush at Springfield, Massachusetts (Exhibit 68, items 3 and 4). The Stutz purchasing agent made a like inquiry of Alcoa at or about the same time, though he is not sure, he says, whether it was written or oral (pp. 34570-1; 34582). The explanation of his uncertainty seems to be that his office was in Indianapolis, where Alcoa's sales agent for that territory (Mr. O'Connor) was also located, and that the two frequently saw each other (p. 34571).

  On July 8, 1926, Baush responded to the July 2nd inquiry. In the Baush July 8th letter a quotation of 98 cents was made, without any indication that the quantity to which the quotation applied was less than the entire requirements of Stutz for the year (pp. 2796; 34569-70; Exhibit 68, item 4; Exhibit 89).

  From July 8, 1926, onward, through his pressure on Baush and Alcoa, the Stutz purchasing agent played them off against each other. There was nothing new or unusual about using the method employed (pp. 34584-9). By means of it a series of reductions in the quotations by each bidder in turn was obtained (pp. 34582-9; 34609; 34611; Exhibit 68, items 5 and 9; Exhibits 89-94. See also pp. 2787-8).

  As the outcome of the bidding, Baush went to 87 cents (Exhibit 68, item 7; Exhibit 94) or, as the purchasing agent understood but Baush denies, as low as 85 cents per rod (Exhibit 68, items 6 and 8; Exhibit 90) and Alcoa as low as 84 cents per rod (pp. 2542-6; 2553; 34572-7; 34579; 34582-9; 34602; 34607; 34614-6).

  In other words, the final Alcoa quotation was 3 cents, or (as the Stutz purchasing agent thought) 1 cent, below the lowest quotation of Baush. Consequently, the business went to Alcoa as the low bidder.

  In the period from July 8 to August 27, 1926, so far as the evidence discloses, no written communication passed between Baush and Stutz, -- although the inference is plain that there were verbal negotiations during the interim.

  At the beginning of negotiations (on July 2, 1926) for the 1927 car rods the quotation requested by Stutz was for its "next year's requirements" (Exhibit 68, item 3). In the Baush reply, dated July 8, 1926, quoting 98 cents per rod, the inquiry of six days earlier was mentioned. It was also said that the rods would be supplied "in lots of not less than 20,000" (Exhibit 68, item 4); but in a letter to Stutz dated August 27, 1926, Baush made it plain, as I think, that its previous 98 cents quotation had been on all of Stutz's supply of 1927 rods. This letter included a paragraph as follows (Exhibit 68, item 5):

  "We [Baush] understand that your yearly requirements are about 48,000 rods and that these would undoubtedly be released periodically."

  In addition it should be observed that the word that was used by Baush in the July 8 letter (item 4) was "lots" and not "lot." The expression Baush quoted was that rods were to be supplied "in lots" of not less than $20,000. You could not have many lots of 20,000 each in 40,000. It is plain that the minimum on which Baush quoted was 40,000.

  It is important to observe that the August 27th letter of Baush to Stutz was sent from Springfield, Massachusetts. It is difficult to construe its language as meaning other than that the 94 cents quotation therein was for Stutz's total 1927 supply. If that be true, there was never a later quotation which was exclusively for less than the whole; although, as elsewhere pointed out, Baush furnished a quotation for a part which was identical with the quotation for the whole; or, as it can otherwise be put, a time was reached when the Baush quotation was applicable either to the whole or to the half of the 1927 rods.

  The failure of the August 27th letter to express a desire by Baush to bid for less than all the year's requirements is the more significant because it constitutes the second instance in which, without complaint or suggestion with respect to quantity or proportion, Baush had made a written quotation for the whole or apparently for the whole (one of 98 cents and the other of 94 cents) that was not accompanied by a quotation for a part.

  On the very day (August 27, 1926) of Baush sending the 94 cents quotation from Springfield, the Stutz purchasing agent wrote a letter at Indianapolis which was addressed to Baush at Springfield (Exhibit 89). In this letter the writer referred to a recent conversation in his office (that is, at Indianapolis) regarding Baush's 98 cents quotation for rods. The writer also expressed the belief that the Baush representative had "further stated that you [Baush] would meet the price of the Aluminum Company of Amercia, in order to obtain at least 50% of this business."

  I discover in the evidence no dispute about the date of the conversation referred to in the August 27th letter to Baush. I think it may be taken as true, therefore, that the first mention by Baush of a wish for half the 1927 business was oral and that it was not made until shortly preceding August 27, 1926. The identity of the representative of Baush who participated in the Indianapolis conversation has not been definitely shown; nor is it of consequence to know who he was. Nevertheless, the inference is clear that it was Mr. Calkins (who was the chief engineer or sales manager or Baush, p. 34568). He did some traveling out of Springfield for Baush and customarily called on the Stutz purchasing agent at Indianapolis several times a year (pp. 34571; 34609; 34611).

  The last paragraph of the August 27th letter from Stutz to Baush (Exhibit 89) is as follows:

  "We [Stutz] certainly would be glad to enter into negotiations with your company regarding 50% of our business on this part [connecting rod forgings], and would suggest that you write us in detail, at the earliest possible date, regarding this matter."

  From August 27, 1926, when the Stutz letter was sent, down to September 29, 1926, when Alcoa finally accepted the order for the 1927 rods, so far as I can discover Stutz never varied from or did anything inconsistent with the position taken in its August 27th letter. As late as September 13, 1926 (Exhibit 68, item 9), the Baush president showed in his letter of that day to Stutz that he perfectly understood the position of the Stutz selling agent. The September 13th letter says that in a telephone conversation of September 3, 1926, with the Stutz purchasing agent, Baush's president (Mr. Haskell) stated that "we [Baush] would like half the business at the price of our competitor [Alcoa];" but the fact is that Baush never lived up to the condition to which its president had assented. The condition plainly was that for half of the rods furnished by it, Baush would accept the same price as Alcoa; and that was 84 cents. Yet, Baush insisted on having half the order at its own price of 87 cents (Exhibit 68, items 8 and 9; Exhibits 92 and 94).

  At the risk of some repetition, by way of explanation or emphasis I call attention to the three features of the August 27th letter from Stutz to Baush (Exhibit 89), which I think should be clearly understood:

  1. The "part" mentioned in the last paragraph is the rod of Stutz for 1927. Elsewhere it is identified as being in compliance with drawing or blueprint No. 24012 and it is spoken of as No. 24012 (Exhibit 68, item 10, exhibit p. 298).

  2. The Stutz purchasing agent's understanding was, and the letters specifically stated that he understood, that, if Baush obtained half the order, it "would meet the price of the Aluminum Company of America."

  3. The Stutz agent also suggested that Baush write in detail regarding the matter "at the earliest possible date." The evidence, however, discloses no written communication thereafter passing between Baush and Stutz earlier than September 3, 1926 (Exhibit 68, item 6; Exhibit 90).Moreover, the record does not contain, or show that there was ever made, any written answer by Baush to the Stutz letter of August 27, 1926.

  In the correspondence following August 27, 1926, the proposed sale by Baush of half the rods was mentioned a number of times, down to and including September 13, 1926 (Exhibit 68, items 6, 7, 8 and 9; Exhibit 90; Exhibit 93). Although Baush knew that Stutz stood ready to give it (Baush) an order for half the 1927 rods at the same price at which the balance would go to Alcoa, Baush did not accept. On the contrary, on September 4, 1926 (Exhibit 92 coupled with Exhibit 68, items 6, 8 and 9), and again on September 7, 1926 (Exhibit 68, item 7; Exhibit 94), eleven days after Stutz stated its position in the August 27, 1926 letter (Exhibit 89), Baush unequivocally refused to submit a bid for half the rods at a price as low as the quotation of Alcoa (namely 84 cents) or, indeed, lower than 87 cents.

  The matter remained open, pending further negotiations between Stutz and Baush, for about two weeks longer; and not until September 29, 1926, a month after the August 27th letter of Stutz to Baush, was a contract with Alcoa signed by both parties thereto for the whole of the 1927 supply (Exhibits 1620-21).

  The contract between Stutz and Alcoa for the 1927 rods is evidenced by two papers. This is in accord with the method which Alcoa customarily, or at least generally, employed in making its contracts for the sale of commodities.

  A letter dated at Indianapolis September 23, 1926 (Exhibit 1620), was signed by the purchasing agent of Stutz (Kelly) and addressed to Alcoa at the office of its selling agent (O'Connor) in Indianapolis. This purported to set out the terms of the contract between Stutz and Alcoa for the 1927 rods and asked confirmation of the writer's understanding. As the evidence abundantly shows, a field agent like Mr. O'Connor was without authority to close a contract of this kind. His duty was to refer it to Pittsburgh. The authority as to whether to close on behalf of Alcoa was vested exclusively in the Pittsburgh office (pp. 35951-2). Accordingly, Mr. O'Connor sent the Kelly September 23rd letter to Pittsburgh.

  The sales manager of Alcoa received the letter in Pittsburgh on September 29, 1926. On the same day he sent a letter (addressed to Stutz at Indianapolis) in which he qualified the terms of the contract as recited in the Stutz September 23 letter (Exhibit 1620). In substance, the change consisted of releasing Stutz from the portion of its letter which, in the language of the reply letter, "lays upon you [Stutz] the obligation to give us [Alcoa] your entire requirements" (Exhibit 1621). With that exception, the contract, as set out in Exhibit 1620, was accepted by Alcoa.

  The evidence makes it clear that there was active competition between Baush and Alcoa for the 1927 Stutz business. The struggle was continuous through July and August and nearly through September, 1926, -- more than two and one-half months. I am impressed that during the whole of the period the Stutz purchasing agent exercised skill in stimulating competitive bidding. My impression is also that he was impartial as between Baush and Alcoa; that this sole concern was to serve what he regarded as the business interests of Stutz, his own company. It was by means of excitation of the bidding that he obtained a price which was fourteen cents lower than the opening quotation of 98 cents.

  On the other hand, I have found nothing, and my attention has been directed to nothing, in the evidence about the 1927 rods which points to any effort by Alcoa to drive Baush out of business or which points to anything done by either of them except to carry on a clean contest to get the Stutz order.

  In the correspondence with Stutz, Baush stated that its cost of production was more than 87 cents per rod, the lowest price which it conceded it had quoted (Exhibit 68, item 7; Exhibit 94; pp. 2546; 2553A; 34608-9; 34616). On the other hand, the Stutz purchasing agent said that it was familiar experience with him to have sellers make similar claims as a part of their efforts to bolster up their quotations (p. 34628).

  However that may be, there is no actual evidence in the record of what it cost Baush to produce its rods.Likewise, there is no evidence whatever that the 84 cents price at which the contract went to Alcoa was below its cost of production plus a reasonable profit.

  As already indicated, the Stutz purchasing agent and Baush disagreed as to whether Baush ever gave Stutz a quotation as low as 85 cents. As I see it, however, there is no occasion to resolve the controversy. The only feature of the matter worthy of attention is the probability, which suggests itself, that the Stutz agent used what he declared to be Baush's 85 cents bid to drive Alcoa down to an 84 cents bid.

  Different from the situation with respect to the rods for the 1926 car, Baush (shortly previous to August 27, 1926) specifically asked that an order be placed with it for half the rod requirements for the 1927 car (Exhibit 89).

  At some time, -- it does not appear when, -- the Stutz president told the Baush president that "he would be glad to see Baush get some of the business" and told the Stutz purchasing agent that, on account of his personal friendship with the Baush president, he would like the business placed with Baush, "everything being equal" (pp. 2542-3; 2549-51; 34614; 34627-8. See also Exhibit 68, items 12 and 13).

  Whether the intervention of the Stutz president had any influence on the 1927 outcome is not shown. Nevertheless, it is established that the Stutz agent on August 27, 1926, definitely offered to place half the 1927 order with Baush on the single condition that the price be as low as the quotation of its competitor. Inasmuch as Alcoa went down to 84 cents as its last quotation, it would follow that if Baush had accepted the proposition embodied in the Stutz letter of August 27, 1926, Baush would have taken half the business and Alcoa would have taken the remainder for 1927, -- both alike, at the price of 84 cents per rod. But, as we have seen, Baush refused to take half the 1927 order on the condition prescribed by Stutz.

  Even if, preceding the modification and the acceptance, the terms of Exhibit 1620 (when assented to by both parties) would have been in violation of law, it seems to me plain that when (promptly after being informed of the proposed inclusion in the contract of an obligation on Stutz to take all the 1927 rods from Alcoa) the sales manager of Alcoa deleted it, that action by him would have saved Alcoa from guilt of the charge now made by the Government so far as concerns the 1927 rods. But I think the position of Alcoa is even stronger and can be sustained on three grounds:

  1. In the circumstances described, the documents do not show, nor have I discovered evidence elsewhere in the record which would support an inference, that Alcoa conditioned its quotation on getting an order for all the rods.

  2. Preceding the signing of the agreement by either Stutz or Alcoa, Baush had unequivocally refused to furnish any part of the rods at the low quotation (made by Alcoa). Even if the agreement had remained in the form in which it stood when signed by Kelly, it would not have deprived Baush of anything. For that reason no blame can attach to Alcoa for Baush not getting a part of the order.

  3. If Stutz throughout had steadily refused to divide the 1927 order, or if after expressing its willingness to divide the order it had determined to place the whole with one supplier, in the absence (as here) of evidence showing or even tending to show that the price of Alcoa (84 cents) was less than its cost of production plus a reasonable profit or that Alcoa's purpose was to put Baush out of business, there would have been no violation of the Sherman Act.

  Two classes of cases on the subject are pertinent; one class in general terms, the other specific.

  I think that in Federal Trade Commission v. Sinclair Company, 261 U.S. 463, 475, 476, 43 S. Ct. 450, 454, 67 L. Ed. 746, the Supreme Court has laid down the principle I invoke. It was there speaking of the powers of the Federal Trade Commission under the Clayton Act 15 U.S.C.A. § 12 et seq. and the Federal Trade Commission Act 15 U.S.C.A. § 41 et seq.; but what was said seems to me equally applicable to the powers of this Court under the Sherman Act. Of the Commission it was said:

  "It has no general authority to compel competitors to a common level, to interfere with ordinary business methods or to prescribe arbitrary standards for those engaged in the conflict for advantage called competition. The great purpose of both statutes was to advance the public interest by securing fair opportunity for the play of the contending forces ordinarily engendered by an honest desire for gain.And to this end it is essential that those who adventure their time, skill, and capital should have large freedom of action in the conduct of their own affairs."

  So in Federal Trade Commission v. Curtis Co., 260 U.S. 568, 582, 43 S. Ct. 210, 213, 67 L. Ed. 408, it was said:

  "Effective competition requires that traders have large freedom of action when conducting their own affairs. Success alone does not show reprehensible methods, although it may increase or render insuperable the difficulties which rivals must face."

  Likewise, in Locker v. American Tobacco Co., 2 Cir., 218 F. 447, 450, a case under the Sherman Act, the Court said:

  "The laws of trade are not wholly altruistic, they may often be hard and selfish, but it is no part of the duty of courts to attempt to enforce the precepts of the decalogue. In the struggles engendered by fierce competition, losses must occur and injustice may be done, but this is frequently inevitable and cannot be prevented so long as the parties keep within the law."

  The second group of decisions comes from the lower courts. They deal more particularly with the phase of the law which concerns us at the moment.

  One is United States v. Great Western Sugar Co., D.C.Neb., 39 F.2d 149, 151. There Judge Munger said:

  "It would be going far" -- and I inject my own statement, that I think it would be going too far -- "to say that a dealer may not buy or sell at a uniform price that yields him a profit if the only objection is that he has the intention to obtain customers, who would otherwise deal, in interstate commerce, with competitors at a different price."

  Another is American Steel Co. v. American Steel & Wire Co., D.C.Mass., 244 F. 300, 302, dealing with the charge of monopolization under the Sherman Act. I think there Judge Morton stated the line of demarcation correctly and with perfect clarity. He said:

  "The thing forbidden by the statute, * * * is monopolizing or attempting to monopolize. These would usually involve -- and are here alleged to have involved -- many separate acts, each of which, so far as it was part of the monopolizing, or attempt to monopolize, would be forbidden, * * *. The defendant had a perfect right, for instance, so far as the Sherman Act goes, to undersell the plaintiff in ordinary business competition, or for the purpose of putting the plaintiff out of business. It had no right to do so as part of a plan to drive everbody out of the trade in order to obtain a monopoly for itself, * * *."

  On the basis of the opinions from which I have quoted, I think it plain that the facts in the Stutz case show no exclusion of or attempt to exclude Baush from the business in which it was competing with Alcoa nor any wrong to it of any kind done by Alcoa.

  At the trial (pp. 2551-3; 2788-9; 34590-97) the Government argued that, in connection with the 1927 contract, Alcoa was guilty of giving a rebate. In the Government briefs, filed since the trial closed, the claim has not been repeated. I assume, therefore, that the intention was to withdraw the charge. Nevertheless, it has not been expressly disavowed. For this reason I think I should comment on it.

  The facts are that the 1926 contract was for "approximately 40,000 connecting rod aluminum-alloy forgings," spoken of between the parties as 40,000 rods (exhibit 1619, exhibit p. 6924), and that the 1927 contract included a clause which, in substance, provided that the 84 cents price, that is the 1927 contract price for 1927 rods, should apply to rods for use in the 1926 car in excess of the 40,000 (Exhibit 1620).

  The clause on the subject of such excess (consisting of the next to the last paragraph of Exhibit 1620) reads as follows:

  "It is further understood that all rods manufactured for us [Stutz] by your company [Alcoa], over and above the original 40,000 rod contract [Exhibit 1619], which was entered into last Fall [September 28, 1925], the new price of 84 will exist in place of the 98 price now being paid."

  The difference between the 98 cents price for 1926 and the 84 cents price for 1927 only affected the excess (apparently 4,862 rods, Exhibit 68, item 11) above the maximum of 40,000 rods to which the 1926 price applied. Until the 1927 contract was made, no price had been fixed for such excess. It was the 1927 contract which first named a price therefor and that price is what Alcoa charged (Exhibit 68, items 10 and 11).As I feel, it is obvious, therefore, that this did not constitute a rebate.

  Accordingly, I conclude that none of the Government charges with respect to Stutz has been proved.

  As to the Hupp Motor Company transaction the evidence is indefinite and sparse.

  For a time, -- apparently from about 1919 to about 1926 or 1927, -- Baush sold duralumin connecting rods to Hupp; sometimes all and sometimes half the requirements (pp. 3297-8; 3301; 3446-7). For the year following 1926 and 1927 the order went to Alcoa. This was due to the fact that Alcoa's bid was lower (pp. 3301; 3303-4; 3447).

  In the contest, when it lost the order, the bid of Baush was 88 cents (p. 3304). Alcoa's bid is not shown nor have we been told what alloy it used (whether 17S or 25S or some other). Likewise, there is no showing of what was the production cost of either bidder. The only statement relating to the subject was made by an officer of Baush. He said his company believed that the business would not have been satisfactory at a price lower than its bid (p. 3304).

  It follows, for the reasons assigned in discussing Franklin and Stutz, that no violation of law by Alcoa concerning the Hupp business has been shown.

  Three comments, though not requisite, are permissible. They are pertinent, especially because they bring out the looseness of the evidence on the Hupp branch of the controversy:

  1. The weight, shape and size of rods vary from year to year. Changes in any of those respects necessarily affect costs (p. 3443). In 1926 Franklin had a rod weighing 1-1/3 pounds. Baush's bid on it that year was 86 cents (pp. 3262-3; 3272). We have no information about the dimensions or other characteristics of Hupp's 1927 rod, except that it was patented (p. 3449). Consequently, we cannot compare the Hupp and Franklin prices nor can we even guess what price would have been necessary in order to be compensatory to the supplier of the Hupp rod.

  2. Baush, which made its rods under a hammer, could produce only one at a time (p. 3450). Alcoa could produce two and sometimes four at a time (p. 40585). Whether, however, Alcoa had that particular advantage in costs as for back as when Baush lost the bid is not clear.

  3. The treasurer of Baush said that he thought the president of the company was mistaken if he (the president) had testified before the Federal Trade Commission that, following loss of its bid by Baush, Hupp shifted to steel as the material for its rods (pp. 3448-9). We are, therefore, uncertain whether Alcoa furnished rods to Hupp longer than a single year.

  A lot of testimony has been taken about a controversy as to whether, in getting an order from the Eastman Kodak Company, Alcoa was trying to put Baush out of business. Much is rather vague and much is irrelevant. Nevertheless, the issue turns on a single transaction and I believe a decision can be reached which will be based on a few credible and well established facts; but before the problem can be fully comprehended, it is essential that we have as a background an account of the branch of the aluminum business that is involved, -- though it may prove a bit tedious to go over it.

  There are two ways of cold-rolling sheet. One is called the coil method and the other the flat method. It is of considerable consequence which is used. Generally which is used is determined in a particular instance by what qualities the manufacturer is looking for. In the evidence the story of this phase of the matter was best told by Mr. Nagel (pp. 24434-9).

  Coiled sheet rolling is resorted to when a relatively long, narrow piece is desired. The sheet is handled in the form of a coil as soon as it can be coiled (pp. 24435; 24437). On the contrary, flat sheet rolling is resorted to if the manufacturer wants a short wide piece. Such sheet is produced flat in the beginning of the operation and continues flat from start to finish (p. 24435).

  What I have described is the state of the art up to date. Efforts are in progress to improve it.

  When the coiled sheet method is employed, greater reduction per pass is obtained by using, and the only way heretofore or now known to get the advantage of coiled sheet rolling is by using an apparatus which causes what is called back-tension (sometimes spoken of as back-pulling). The advantage of coiled rolling comes from the application of back-tension. The apparatus uncoils the already coiled sheet as it enters the roll and then rerolls it as it comes out of the rolls on the other side (pp. 24437-8).The tension apparatus is not used at all in flat sheet rolling (p. 24438). This is because flat rolled sheet, as manufacturers have heretofore been able to manufacture it, is too short to permit backpulling (pp. 11919-21; 24438).

  By the coiled sheet method the sheet easily may be, and apparently usually is, stretched to between 200 and 600 feet in length; and one instance is mentioned in the evidence where a single piece was drawn out to 1200 feet. On the other hand, by the flat sheet method the average length usually attained in Alcoa's plants is about 15 feet, -- although (when a customer wants it) a considerably greater length can be produced (pp. 24435-6).

  Baush never commercially succeeded in rolling flat sheet of a which greater than 18 inches (pp. 2759-60; 3401-3); but Alcoa has done much better. The limit to 18 inches by Baush is due to the fact that, with the kind of mill and appurtenances Baush had, it could not economically do commercial rolling at a greater width than the 18 inches (p. 3404).

  In the period of 1922 to 1931, with the common alloys, Alcoa produced coiled sheet to approximately 36 inches wide (pp. 24481-3), duralumin coiled sheet to about 20 inches wide (p. 24482), duralumin flat sheet 60 inches wide (p. 24483) and flat sheet of common alloys (2S, 3S, 4S and 52S) over 100 inches wide (pp. 24483-4). Since 1931 the length of all the kinds mentioned, except duralumin coiled sheet, has been further increased by Alcoa (pp. 24482; 24484).

  Another characteristic difference is that a coiled sheet mill operates at considerably greater speed than a flat sheet mill (pp. 11040; 24438-9). While variations in finish and other differences exist, there is no occasion to go into them.

  Normally the making of coiled sheet is cheaper than the making of flat sheet and the coiled sells at a less price (pp. 3357; 11040-1; 11051; 24438; 35516). The cheaper production of coiled sheet occurs where a separate coiled sheet device is used. Baush, however, had no coiled sheet rolls; all its sheet was made, from the beginning stage and throughout the time it was in the aluminum business, of flat sheet rolls. When it desired coiled sheet it took the already manufactured flat sheet and, by using what is known as a coiler, converted it into coiled sheet. But both its coiled sheet and flat sheet were made on the same set of rolls (pp. 2781; 3357; 3478).

  Necessarily, therefore, production of coiled sheet by Baush was more expensive; after using its only equipment to make the more expensive article (normally a flat sheet) it then had to add the expense of converting it into coiled sheet, -- thus further increasing its total expense of production. Manifestly, it follows from its exclusive reliance on a less efficient method that it was handicapped in competing with Alcoa in the sale of coiled sheet.

  So much by way of introduction to the consideration of the controversy over the Eastman business.

  Preceding the transaction in which Eastman gave an order for coiled sheet to Alcoa and none to Baush, both had been included generally among the suppliers patronized by Eastman. Purchases from Alcoa went back to 1913 or earlier (pp. 35503-6; 35956); from Baush back to 1920 (pp. 2557-60) or possibly (as Baush officials remember) to 1919 (pp. 2554; 3227; 3230-1; 3436-7).

  There was a time when Eastman preferred to use flat sheet. So long as that condition existed, some, though the evidence does not disclose what proportion, of the Eastman purchases of flat sheet were made from Baush.

  In June, 1925, however, in a letter to Baush, in substance Eastman stated that it was considering procuring coiled sheet for additional parts; that if it did so, its requirements for flat sheet would be considerably reduced and its requirements for flat sheet would be placed with Baush (p. 3506).

  The evidence does not make certain the year of the occurrence of the transaction around which the controversy under consideration hinges; whether in 1925, 1926 or 1927. The dispute relates to 3S sheet. From the quantity of sales of that kind of sheet by Baush to Eastman in 1925 and its great relative fall-off in 1926 (pp. 2555-7; 2560), I infer that the event was in 1926, -- perhaps pursuant to Eastman's announcement of the new plan in the 1925 letter (pp. 3505-6). But, it is unimportant whether the date was 1925, 1926 or 1927. This is so because the facts are undisputed that, when Eastman changed from 2S and 3S flat sheet to 2S and 3S coiled sheet (which was some time subsequent to 1923, p. 35507) the price Alcoa charged for coiled sheet on the order it got was, according to the recollection of its sales agent, about 5 cents a pound below the price then prevailing for flat sheet (p. 35515). At any rate, the price at which the sale was made to Eastman was the same as that at which Alcoa made sales at the time to its customers generally (pp. 35517-9). The Baush treasurer testified that his company would have lost money if it had met Alcoa's price (pp. 3240-2).

  However, other than the testimony of Alcoa's sales agent just referred to, there is no evidence of what Alcoa's price was; nor is there any showing of what had been Baush's cost of producing coiled sheet; nor is there the slightest basis in the evidence for a finding that Alcoa ever cut prices to Eastman in order to take business from Baush (see p. 35528) or was ever unfair in its competition or made an effort, or had an intention, in connection with any of its Eastman dealings, to put Baush out of business.

  As earlier stated, the question of spread is reserved for later consideration. The Government's argument about spread in connection with the Eastman business has, therefore, been disregarded for the moment.

  The conclusion seems to me inescapable, therefore, that Alcoa must be declared not guilty underbidding to Eastman.

  October 4, 1941

  When I adopted the program of endeavoring to present the questions in this case by subjects, I realized that it had defects. One obvious fault is that if followed, necessarily it will involve repetition. When I take up one subject and in the course of it discuss certain phases of the evidence, that is not enough. When I reach another subject, it frequently happens that the same evidence must be considered in passing on the other subject. Despite its imperfections, however, I have adhered to the plan because it seemed to me more likely that by it I could make a clearer presentation than by some alternative method.

  * * *

  Evidence has been taken as to numerous other individual instances in which the Government claims that Alcoa endeavored to exclude Baush from the Aluminum business. Many of those instance are not included in what I have already said. In the interest of saving time, however, I shall content myself with treating the additions in groups, without going into details about each.

  I think it is true that some of the evidence (if accepted as correct) is capable of being interpreted as at least creating a suspicion of Alcoa, -- though I believe that general matters of that type relate to a rather distant past. Of course, however, suspicion is not enough. Likewise also, in the state of the evidence, in some respects the conduct of Alcoa may have left it open to criticism. Yet such occasions (if any), when after full review of the evidence suspicion remains unremoved or criticisms remain unanswered, at best are merely spasmodic and, even when taken together, do not make out maltreatment of Baush by Alcoa. In none do I regard it as satisfactorily shown by credible evidence that Alcoa has therein been guilty of unfair competition with the purpose of putting or of ever engaging in a contest to put Bauch out of the aluminum business.

  Where the law requires or even encourages competition, the line between what is permitted and what is prohibited is extremely difficult to draw with accuracy. It must be borne in mind that in many instances, under the law, a business man is as much blamed, or deemed open to blame, for under-competing as for over-competing. Nevertheless, if the public is to enjoy, as it is entitled to enjoy, the benefits of competition, then some leeway must be allowed to those actively engaged in opposition to each other before malevolent motives may properly be attributed to them. Compare, for example, Federal Trade Commission v. Sinclair Co., 261 U.S. 463, 474-476, 43 S. Ct. 450, 67 L. Ed. 746.

  As already indicated, so far as concerns individual cases brought into the evidence, I do not think it has been shown that Alcoa crossed the line to the wrong side.

  So also I feel that the reasons I have given justify me in refraining from multiplying instances or extending discussion of particular individual charges against Alcoa of under-selling or of other forms of misconduct affecting Baush. I shall now turn rather to the somewhat more general phases of the issue.

  Alcoa urges that Baush's misfortunes arose largely out of inadequacy in equipment. Baush claims that its plant was well equipped. This raises a question which can be answered only after patient examination of the evidence on the subject.

  In 1919 Baush hired a brass mill and a grey iron foundry. These were located at Chicopee, which is adjacent to and I believe now is a part of Springfield, Massachusetts. The mill and the foundry combined came to be called the metals division and were so referred to at the trial.It will be convenient to continue the use of the name. About half a mile from the metals division and located in the city of Springfield was a machine tools establishment, referred to at the trial as the machine tools division (or the tools division), which Baush was conducting and had conducted since about 1896.

  Before Baush became owner of the mill (that is, the brass mill coupled with which was the grey iron foundry), steps were taken toward converting the mill into a place for carrying on aluminum sheet manufacturing. The plant was substantially completed for the duralumin business about 1923 (p. 2856). From 1919 on, for about two to four years, Baush conducted experiments there. In addition, preceding October, 1921, preparation was in progress to manufacture, and apparently to some extent there was actual manufacture of, duralumin sheet in this plant (pp. 2153-6; 2185-6; 2195-6; 2204-7; 2755-6; 3224; 3226).

  In October, 1921, Baush purchased the metals division plant. This included the machinery and equipment already there (pp. 2752; 2755-7). In the meanwhile the grey iron foundry equipment had been or then was scrapped (p. 2758).

  The plant was acquired by Baush primarily for the purpose of rolling aluminum sheet. While Baush was occupying the metals division premises as a tenant (1919 to 1921), it expended $18,000 (in round figures) on improvements (pp. 2733-4; 2738; 2759-68). Saving that expenditure and the widening of the rolls so that they could commercially roll sheet 18 inches wide, so far as I can discover, up to 1922 there were no substantial improvements over the condition of the mill and equipment as they existed in 1919 (pp. 2759-60) and the value of the total equipment when the mill was acquired (including the improvements from the $18,000 expenditure, but exclusive of the land and the buildings housing the equipment), was $550,000 (p. 2758).

  While the pleading is confined to the years 1924 to 1931, the evidence relating to the mill and changes in it made by Baush, after becoming the owner, begins with a time two years earlier. I shall therefore treat the matter back to 1922.

  During the period 1922 to 1931 the limit of the expenditures by Baush for improvements in its mill, for the manufacture of flat or coiled sheet, was $15,000 and for rim rolls (which are used to shape sheet to a particular form) was $27,000. The total expenditure for such improvements did not exceed $42,000 (pp. 2736-40; 2760-8).

  So far as appears, there were no other improvements for sheet production during the period. There was testimony that the $42,000 expenditure over ten years was inadequate to keep the mill efficient (pp. 18970-1; 21603-9; 24508-27; 40588. See also p. 22140). This evidence does not seem to me unreasonable. On the other hand, during approximately the same period Alcoa's expenditures for improvements in sheet production aggregated $7,500,000 (pp. 18971; 20959-61). At the time, and as time went on, the trade demand for better kinds and greater sizes of sheet constantly grew (pp. 2821; 2856-7; 3403-6; 3451-6; 18970-1).

  The very disparity in the figures, standing alone, would lead one to expect that the sheet business of Baush would suffer from failure to better the facilities for conducting manufacture of the sheet. The figures are the more impressive because, as brought out by the Government, Baush lost money in its metals division every year the division was in existence (pp. 2598-9; 2606-8; 2826-35; 2837-8; 2880; 2883; 3129-30; 3460-7; 23403-4; Exhibit 73, items 1 and 2).

  Again, it is significant that the Baush president conceded that the competition of Alcoa had been fair and clean. What he said is that his complaint in essence was that Alcoa undersold him when he was endeavoring to introduce a new product to the trade. He also said, however, that it is a reasonable anticipation that a manufacturer with superior equipment, through incidental resulting decreased cost of production, will win a competitive test for the sale of his products (pp. 2726-33). I have already called attention to the court decisions which ...

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