Halfway Mark

On the morning of June 1, 1938, black-robed Federal Judge Francis Gordon Caffey looked down from his huge bench in Manhattan's gleaming new U. S. courthouse upon a bank of lawyers. Standing at the flat, mahogany counsel table with a sheaf of notes, earnest, tousle-headed Walter Lyman Rice, trust-busting Special Assistant to the U. S. Attorney General, was ready to give his opening outline of a lawsuit to dissolve $253,000,000 Aluminum Co. of America as a monopoly in restraint of trade.

Judge Caffey put in a word first. Said he: "May I inject the remark that I am most helped by statements which omit the trees and show me the forest."

Since that day, more than a year ago, the new courthouse has begun to dull with a patina of smoke and weather, the Sixth Avenue Elevated has been torn down, the "World of Tomorrow" on Flushing Meadows has grown up into a World's Fair. But Judge Caffey is still hearing the same lawsuit, still looking down upon the same bank of lawyers. On June 1, a year to the day from the opening of the case, the U. S. rested. Last week, Alcoa launched its defense.

In the Government's case many a tree had been shown Judge Caffey in 18,331 pages of evidence taken in court. Out of these many trees, the Government's smart young men tried to make a forest by presenting a 291-page brief, for Judge Caffey to digest while the defense was in process. He needed a good digestion. With 159 court days behind it, the Alcoa case was last week already the longest trust-busting suit in U. S. history. Only comparable suits in duration and importance were the 50-day prosecution of the Sugar Institute in 1933, the 120-day prosecution which resulted in the dissolution of the old Standard Oil Co. in 1911, and the 31-day prosecution which resulted in breaking up the tobacco trust the same year.

The Alcoa suit's long-distance mark for consecutive testimony was set last spring by Edward K. Davis, publicity-shy president of Aluminium Limited of Canada. Younger brother (59) of Alcoa's Board Chairman Arthur Vining Davis, Mr. Davis held the stand for six and a half weeks while the Government went after him hammer & tongs trying to show that Aluminium Ltd. is not a separate, independent corporation, but an international stooge set up by Alcoa. When he was finally excused, Harvardman Davis was glad to get back to his 400-acre estate on Cape Cod, where he raises fine flowers and succulent vegetables, works a few hours a day in his office between frequent trips to Montreal to handle affairs of Aluminium Ltd.

One of the big trees in the Federal forest is the contention that when Arthur Vining Davis organized Aluminium Ltd. in 1928, he had no intention of making it a competitor of Alcoa. What he did want, the Government said, was to reach through Aluminium Ltd. into the world aluminum cartel and share international trade with Swiss, German, French and British aluminum monopolies on a nice, friendly basis, with an ugly throat-cutting all laid out for any upstart competitors.

Chief contentions in the Government's case which Alcoa set out last week to rebut:

>After its creation, Aluminium Ltd. took over 33 foreign subsidiaries of Alcoa and thus became Alcoa's foreign department. Aluminium Ltd.'s stock is virtually all held by Alcoa stockholders, and the companies are as close as Mike and Ike. As of 1933, 51%, of the common stock of both companies was held by Andrew Mellon, R. B. Mellon, Arthur Vining Davis. Both firms have the same lawyers and accountants. Aluminium Ltd. sells aluminum to Alcoa below the market price. Alcoa fabricates for Aluminium Ltd. below cost and ships the products direct to customers of the Canadian company.

> Aluminium Ltd. refuses to sell in the U. S. market and Alcoa and its subsidiaries stay out of the European market. In 1937 Aluminium Ltd. produced aluminum at a cost of 8.943-c- a pound and could have sold it for 13.443^ but refused to go into the U. S. market where the metal sold for 20.08-c-.

> From its organization in 1888 (as the $20,000 Pittsburgh Reduction Co.), Alcoa has had a near monopoly of U. S. bauxite (most of which comes from a 24-mile-square area in Arkansas), has through the years tied up many an electric utility company, by exclusive contract, to prevent other aluminum companies from getting power.

> Competitors who planned to start in the aluminum business were bought out or frozen out. The late James Buchanan Duke (tobacco) got $25,000,000 worth of the Alcoa stock in 1925 for his power project on Canada's Saguenay River, and decided not to go into the aluminum business on his own hook as he had planned. Ten years before, a French company was bought out at "a demonstrably excessive price" to keep it out of the U. S. trade. Since formation of the latest cartel in 1931, U. S. imports of raw aluminum have been minuscule--in 1937 less than 6% of the total consumed. This is to give the appearance of competition in a market which is actually closed.

With the Government's half of the story thus told, Alcoa began its tale. Its first witness: its 72-year-old board chairman, Arthur Vining Davis, who when he was graduated from Amherst in 1888 went straight to a job with Alcoa's corporate predecessor (Pittsburgh Reduction Co.), then just getting under way. At $60 a month, Salesman Davis peddled pots and pans, later became a front-office man, and for the past 29 years has been either board chairman or president.

As Alcoa's first witness he made a general denial of the Government's case, insisted that Alcoa has entered into no monopolistic plots. Alcoa, the defense will contend, does not control the scrap aluminum trade nor foreign imports, does not control copper, stainless steel, and magnesium, which are aluminum's chief competitors; what control it has of the aluminum market it has come by honestly, through development or purchase. This was also Alcoa's defense in a five-year Federal Trade Commission inquiry which ended successfully for Alcoa in 1930.

This file is automatically generated by a robot program, so reader's discretion is required.