Another Look at Alcoa: Raising Rivals' Costs Does Not Improve the View

THE government monopolization case some fifty years ago against the Aluminum Company of America is well known to antitrust aficionados. Judge Learned Hand declared that Alcoa, by expanding so as to maintain an overwhelming share of the U.S. market for virgin aluminum, had committed the offense of monopolization. For many years now, Judge Hand's standard of antitrust liability has stood condemned. The consensus has been that Alcoa committed no economic wrong. Recently, however, the case has been prominently cited to illustrate a different approach to analyzing supposedly predatory practices-raising rivals' costs (RRC). Proponents of this approach argue that much of antitrust analysis, in fact all of the analysis of exclusion, should be redefined to focus explicitly on whether a firm's transactions raise the costs of its competitors and, thereby, cause prices to rise. While they do not endorse Judge Hand's reasoning, they do believe that the facts of Alcoa demonstrate an array of "exclusionary" practices, including the naked purchase of exclusionary rights. We believe that RRC methodology is seriously flawed as a useful approach to antitrust problem solving. Regardless of how Alcoa is analyzed, however, the facts of the case do not indicate an antitrust violation, assuming that the antitrust laws promote efficiency. We intend to demonstrate that Alcoa deserves its infamy.