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Tuesday, April 24, 2012

United States v. Aluminum Co. of America case brief, 148 F.2d 416 (2d Cir. 1945)

United States v. Aluminum Co. of America Case Summary
148 F.2d 416 (2d Cir. 1945)

Synopsis:
Appeal from a prosecution for violation of the Sherman Act.

Overview:

The United States (P) brought this action against the Aluminum Co. of America (D) and Aluminum Limited (D), a Canadian corporation formed to take over the properties of Aluminum Co. of America (D) outside the United States, for violation of the Sherman Act by the participation of each company in a foreign cartel called the Alliance. A foreign cartel called Alliance, a Swiss corporation, was created by an agreement entered into in 1931 among a French corporation, two German corporations, one Swiss corporation, one British corporation, and Aluminum Limited (D). Aluminum Limited (D) was a Canadian corporation formed to take over properties of the Aluminum Co. of America (D) outside the United States. The original 1931 agreement provided for the issuance of shares to the signatories and a quota of production for each share, the shareholders to be limited to the quantity measured by the number of shares held by each. Alliance was free to sell at any price it chose. No shareholder was to obtain or sell aluminum produced by anyone not a shareholder. Another agreement in 1936 abandoned the system of unconditional quotas and substituted a system of royalties. The shareholders agreed that imports into the United States should be included in the quotas. Thereafter, the United States (P) brought this action against the Aluminum Co. of America (D) and Aluminum Limited (D) for violation of the Sherman Act that prohibits every contract, combination, or other conspiracy in restraint of trade  among the several states or with foreign nations. The district court found that the 1931 and 1936 agreements did not suppress or restrain the exportation of aluminum to the United States (P) and that America (D) was not a party to the Alliance. The United States (P) appealed.

Issue:

May a state impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders?

Rule:
any state may impose liabilities even upon persons not within its allegiance for conduct outside its borders that has consequences within its borders that the state reprehends.

Analysis:

The general words of the Sherman Antitrust Act should not be read without regard to the limitations customarily observed by nations upon the exercise of their powers. Thus. one should not impute to Congress an intent to punish all whom its courts can catch, for conduct that has no consequences within the United States. There may be agreements made beyond the borders of the United States not intended to affect imports or exports that do affect them. Almost any limitation of the supply of goods in Europe, for example, or in South America, may have repercussions in the United States if there is trade between the two. Yet, when one considers the international complications likely to arise from an effort in the United States to treat such agreements as unlawful, it is safe to assume that Congress certainly did not intend the Sherman Antitrust Act to cover them.

Conclusion:

(L. Hand, Swan, and A. Hand, ).) Yes. It is settled law that any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders that the state reprehends. Under the Sherman Antitrust Act, both the 1931 and the 1936 agreements of the Alliance would dearly have been unlawful had they been made within the United States (P); and, though made abroad, both are unlawful if they were intended to affect imports and did affect them. The evidence shows that the shareholders of Alliance intended to restrict imports, thus shifting the burden of proof of whether they in fact restricted imports into the United States to Limited (D). In the first place, a depressant on production, as was encompassed within the 1936 agreement, which applies generally, may be assumed to distribute its effect evenly upon all markets. Again, when the parties in the instant case specifically made the depressant apply to a given market, there is reason to suppose that they expected the effect to be a lessening of what would otherwise have been imported. Since the underlying doctrine of the Sherman Act was that all factors that contribute to determining prices must be kept free to operate unhampered by agreements, this court must conclude that the 1936 agreement violated the Act.

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