[Federal Register Volume 63, Number 195 (Thursday, October 8, 1998)]
[Notices]
[Pages 54158-54160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26976]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States of America vs. Aluminum Company of America and 
Alumax Inc.; Public Comments and Plaintiff's Response

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that the Public Comments and 
Plaintiff's Response have been filed with the United States District 
Court of the District of Columbia in United States v. Aluminum Company 
of America and Alumax, Inc., Civ. Action No. 9801497 (PLF).
    On June 15, 1998, the United States filed a civil antitrust 
Complaint alleging that the proposed acquisition of Alumax Inc. 
(``Alumax'') by Aluminum Company of America (``Alcoa'') would violate 
Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint alleged that 
Alumax and Alcoa are the two largest of the three producers of aluminum 
cast plate (``cast plate'') in the world. Alcoa's proposed acquisition 
of Alumax would have combined under single ownership almost 90% of the 
cast plate manufacturing business in the world. As a result, the 
proposed acquisition would substantially lessen competition in the 
manufacture and sale of cast plate world wide in violation of Section 7 
of the Clayton Act.
    Public comment was invited within the statutory 60-day comment 
period. The one comment received, and the response thereto, is hereby 
published in the Federal Register and filed with the Court. Copies of 
these materials may be obtained on request and payment of a copying 
fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h) (``Tunney Act''), the 
United States hereby responds to the single public comment received 
regarding the proposed Final Judgment in this case.

[[Page 54159]]

I

Background

    On June 15, 1998, the United States Department of Justice (``the 
Department'') filed the Complaint in this matter. The Compliant alleges 
that the proposed acquisition of Alumax Inc. (``Alumax'') by Aluminum 
Company of America (``Alcoa'') would violate Section 7 of the Clayton 
Act, 15 U.S.C. 18. The Complaint alleges that Alumax and Alcoa are the 
two largest of the three producers of aluminum cast plate (``cast 
plate'') in the world. Alcoa's proposed acquisition of Alumax would 
have combined under single ownership almost 90% of the cast plate 
manufacturing business in the world. As a result, the proposed 
acquisition would substantially lessen competition in the manufacture 
and sale of cast plate world wide in violation of Section 7 of the 
Clayton Act. 15 U.S.C. 18.
    Simultaneously with the filing of the Complaint, the plaintiff 
filed the proposed Final Judgment and a Stipulation signed by all the 
parties that allows for entry of the Final Judgment following 
compliance with the Tunney Act. A Competitive Impact Statement 
(``CIS'') was also filed, and subsequently published in the Federal 
Register on July 1, 1998. The CIS explains in detail the provisions of 
the proposed Final Judgment, the nature and purposes of these 
proceedings, and the transaction giving rise to the alleged violation.
    As the Complaint and the CIS explained, the merger as originally 
proposed was likely to reduce or eliminate competition between Alcoa 
and Alumax in the worldwide market for production and sale of aluminum 
cast plate (``cast plate''). Alcoa and Alumax are the two largest of 
three firms that compete in this market. The proposed Final Judgment is 
intended to prevent the expected lessening of competition the merger 
could cause in that market.
    As a remedy to competitive harm in the cast plate market, the 
Department and Alcoa and Alumax agreed to a divestiture of Alcoa's 
division that manufactures and sells cast plate. This divestiture is 
intended to protect consumers by ensuring continued vigorous 
competition among three firms in the market.
    The 60-day comment period for public comments expired on August 30, 
1998. As of September 11, 1998, plaintiff had received comments from 
one person.\1\ The comment came from General Motors Corporation 
(``General Motors''), a self-described worldwide consumer of aluminum 
products.
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    \1\ The comment is attached. The Department plans to publish 
promptly the comment and this response in the Federal Register. The 
Department will provide the Court with a certificate of compliance 
with the requirements of the Tunney Act and file a motion for entry 
of final judgment once publication takes place.
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II

Response to the Public Comment

    General Motors believes that the Department's decision to allow the 
Alcoa/Alumax transaction to go forward subject only to the divestiture 
of Alcoa's cast plate division was based on an overly narrow view of 
competition. General Motors believes that the Department should have 
challenged the transaction's competitive impact on a product market it 
calls ``integrated aluminum production,'' i.e., all aspects of Alcoa 
and Alumax's aluminum businesses, including mining, refining, smelting, 
hot rolling, cold rolling, extruding, forging, casting and other 
processes. General Motors claims that Alcoa now owns, as a result of 
its acquisition of Alumax, a dominant share of the assets used for 
integrated aluminum production all around the world. General Motors is 
concerned that consumers will suffer at the hands of Alcoa's dominance, 
which will not be curbed by the other worldwide aluminum producers.
    The Department of Justice Antitrust Division's review of mergers is 
governed by the Clayton and Sherman Acts, judicial precedent, and the 
Horizontal Merger Guidelines issued jointly by the Department and the 
Federal Trade Commission in 1992 (and slightly revised in 1997). The 
first step is defining a relevant product and geographic market. In its 
investigation into the many different aspects of the two companies' 
aluminum businesses, the Department determined that what General Motors 
calls integrated aluminum production actually consists of numerous 
separate product markets with varying geographic dimensions--some are 
local, some are worldwide. The Department then assessed the competitive 
implications of the loss of an independent Alumax in those markets in 
which the merging firms actually compete with each other. After a 
thorough investigation, the Department determined that the only product 
market adversely affected by the proposed acquisition was the worldwide 
manufacture and sale of cast plate. Accordingly, the Department brought 
its case on that basis, and obtained as relief a divestiture designed 
to remedy the competitive harm posed by the proposed acquisition in 
that market.

III

The Legal Standard Governing the Court's Public Interest Determination

    Once the United States moves for entry of the proposed Final 
Judgment, the Tunney Act directs the Court to determine whether entry 
of the proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e). In making that determination, the ``court's function is not to 
determine whether the resulting array of rights and liabilities is one 
that will best serve society, but only to confirm that the resulting 
settlement is within the reaches of the public interest.'' United 
States v. Western Elec. Co., 993 F.2d at 1576.\2\ The Court should 
evaluate the relief set forth in the proposed Final Judgment and should 
enter the Judgment if it falls within the government's ``rather broad 
discretion to settle with the defendant within the reaches of the 
public interest.'' Microsoft, 56 F.3d at 1461; accord United States v. 
Associated Milk Producers, 534 F.2d 113, 117-18 (8th Cir. 1976), cert. 
denied, 429 U.S. 940 (1976).
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    \2\ The Western Electric decision concerned a consensual 
modification of an existing antitrust decree. The Court of Appeals 
assumed that the Tunney Act was applicable.
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    Because it argues for a different case than the one that the 
Department brought, and does not address the relief ordered by the 
proposed Final Judgment, General Motors' comment raises issues not 
relevant to this Tunney Act proceeding. The Tunney Act does not 
contemplate a judicial reevaluation of the government's determination 
of which violations to allege in the Complaint. The government's 
decision not to bring a particular case based on the facts and law 
before it at a particular time, like any other decision not to 
prosecute, ``involves a complicated balancing of a number of factors 
which are peculiarly within [the government's] expertise.'' Heckler v. 
Chaney, 470 U.S. 821, 831 (1985). Thus, the Court may not look beyond 
the Complaint `'to evaluate claims that the government did not make and 
to inquire as to why they were not made.'' United States v. Microsoft, 
56 F.3d 1448, 1459 (D.C. Cir. 1995); see also Milk Producers, 534 F.3d 
at 117-18.
    Simarily, the government has wide discretion within the reaches of 
the public interest to resolve potential litigation. E.G., Western 
Elec., 993 F.2d at 1577; AT&T, 552 F. Supp. at 1521. The Supreme Court 
has recognized that a government antitrust consent decree is

[[Page 54160]]

a contract between the parties to settle their disputes and 
differences, United States v. ITT Continental Baking Co., 420 U.S. 223, 
235-38 (1975); United States v. ITT Continental Baking Co., 420 U.S. 
223, 235-38 (1975); United States v. Armour & Co., 402 U.S. 673, 681-82 
(1971), ``and normally embodies a compromise; in exchange for the 
saving of cost and elimination of risk, the parties each give up 
something they might have won had they proceeded with the litigation.'' 
Armour, 402 U.S. at 681. This Judgment has the virtue of bringing the 
public certain benefits and protection without the uncertainty and 
expense of protracted litigation. Id; Microsoft, 56 F.3d at 1459.
    Finally, the entry of a governmental antitrust decree forecloses no 
private party from seeking and obtaining approriate antitrust remedies. 
Thus, defendants will remain liable for any illegal acts, and any 
private party may challenge such conduct if and when appropriate. If 
the commenting party has a basis for suing the defendants, it may do 
so. The legal precedent discussed above holds that the scope of a 
Tunney Act proceeding is limited to whether entry of this particular 
proposed Final Judgment, agree to by the parties as settlement of this 
case, is in the public interest.

IV

Conclusion

    After careful consideration of the comment, the plaintiff concludes 
that entry of the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violation alleged in the Complaint 
and is in the public interest. The Plaintiff has moved the Court to 
enter the proposed Final Judgment after the public comment and this 
Response has been published in the Federal Register, as 15 U.S.C. 16(d) 
requires.

    Dated this 22nd day of September, 1998.

        Respectfully submitted,
Nina B. Hale,
Andrew K. Rosa,
U.S. Department of Agriculture, Antitrust Division, 325 7th Street, NW, 
suite 500, Washington, DC 20530, (202) 307-6351.

Certificate of Service

    I, Mary Ethel Kabisch, hereby certify that, on September 22, 1998, 
I caused the foregoing document to be served on defendants Alumax Inc. 
and Aluminum Company of America by having a copy mailed, first-class, 
postage prepaid, to:
David Gelfand,
Cleary, Gottlieb, Steen & Hamilton, 2000 Pennsylvania Avenue, NW., 
Suite 9000, Washington, DC 20006-1801
D. Stuart Meiklejohn,
Sullivan & Cromwell, 125 Broad Street, 28th floor, New York, New York 
10004-2498

Mary Ethel Kabisch

Statement of General Motors Corporation

    General Motors Corporation (``GM''), speaking as a major worldwide 
consumer of aluminum products in many and varied alloys, shapes and 
forms would like to express its disappointment in the decision by the 
Antitrust Division of the U.S. Department of Justice to allow the 
Alcoa/Alumax transaction to proceed with only minimal divestitures as 
outlined in the Federal Register notice published on July 1, 1998 at 63 
FR 35946. The investigation and conclusions reached seemed to have 
focused on the pieces while ignoring the whole. It seems misguided and 
harmful to the aluminum consumer to simply evaluate the micro picture 
of certain aluminum industry products without considering the macro 
picture of aluminum production and how one producer, through asset 
control, can have undue influence on this overall market.
    Integrated aluminum production is an extremely capital intensive 
process. This process includes mining, refining, smelting, hot rolling, 
cold rolling, extruding, forging and other processes. Alcoa today 
clearly dominates the mining of bauxite and refining of aluminum. With 
the purchase of Alumax, Alcoa adds significant smelting, hot line, cold 
mill, and extrusion assets to their already very impressive asset 
portfolio. Conversely, with the downsizing of two major global 
competitors such as Reynolds most recently and Kaiser several years 
ago, the Big Four in aluminum is quickly becoming the Big One (Alcoa) 
and the Smaller One (Alcan). Further, Alcoa's purchase of Alumax on the 
heels of their acquisition of government controlled facilities in 
Spain, Italy and Hungary accentuates their position of global dominance 
in every major aluminum producing area of the world.
    Our concern is the same concern that every aluminum consumer should 
consider: Too many critical assets controlled by one producer, the same 
producer instrumental in the April, 1994 Memorandum of Understanding. 
All aluminum consumers must remember the MOU, a systematic global 
scheme to cut production that resulted in 100% price increases in 
primary aluminum within nine short months of the agreement.
    GM recognizes that industry consolidation and corporate integration 
are not always bad for the consumer. They can lead to reduced costs and 
efficiencies that benefit the consumer in the form of lower prices. The 
consumer realizes those lower prices, however, provided there is still 
adequate current competition or the probability of new entry. 
Unfortunately, the cost of entry for integrated aluminum production is 
staggering. History taught us that lesson many years ago as Alcoa 
reigned supreme as one of the last and most successful corporate 
monopolies in North America.
    Most importantly, GM sees no long-term benefits from this merger, 
either for itself or for the future customers of GM cars and trucks. 
Whether alone or through the joint research effort known as the 
Partnership for a New Generation of Vehicles, GM would like to continue 
to work closely with a fully competitive aluminum industry on increased 
usage of aluminum in our vehicles. This most recent glaring example of 
competitive base dilution appears deleterious to those efforts and will 
force GM to re-evaluate aluminum's role as a primary metal of choice in 
GM's future.

[FR Doc. 98-26976 Filed 10-7-98; 8:45 am]
BILLING CODE 4915-00-M