The Story of Alcoa: The Enduring Questions of Market Power, Conduct, and Remedy in Monopolization Cases

Abstract

This chapter from the forthcoming Antitrust Stories book deals with United States v. Aluminum Company of America which remains one of the standard chestnuts of American antitrust law. It appears in one form or another in virtually every antitrust law casebook and industrial organization economics textbook. Alcoa represents a lens in which we see what we want to see in the area of unilateral conduct, a reasonably efficient and innovative firm that created an entire industry or an aggressive monopolist preserving its position through a web of carefully constructed entry barriers including exclusive contracts, participation in international cartels, relentless expansion, and complete vertical integration. This chapter reviews the history of aluminum, its commercialization in the late 19th century, the colorful cast of players, and the many legal issues that led to nearly fifty years of government antitrust enforcement efforts against Alcoa. Alcoa became one of the first cases to crystallize thinking about Section 2 of the Sherman Act and the hard questions about how to define a market, what conduct of a monopolist should be prohibited, and what remedy should be imposed to best restore competition, questions that all continue to be debated today.

Keywords: antitrust, monopolization, market definition, remedy, divestiture, effects doctrine, extraterritoriality

JEL Classification: L40, L41, L43, L61, K22