The 1945 Alcoa case is one of many economically perverse antitrust rulings from the era before the embrace of the consumer-welfare standard.
Editor, Wall Street Journal
1211 6th Ave.
New York, NY 10036Editor:
You correctly describe the DOJ’s new antitrust assault on Google as punishing that company for its success at pleasing consumers (“Punishing Google for Its Search Success,” Nov. 25). Alas, such perverse use of antitrust is nothing new. Before WWII the government sued to break-up Alcoa. In the 1945 final ruling in the case, Judge Learned Hand sided with the government, insisting that Alcoa violated the Sherman Antitrust Act by being especially energetic and diligent at satisfying consumers. As justification for finding Alcoa in violation of the law, the eminent jurist wrote:
True, it [Alcoa] stimulated demand and opened new uses for the metal, but not without making sure that it could supply what it had evoked. There is no dispute as to this; “Alcoa” avows it as evidence of the skill, energy and initiative with which it has always conducted its business; as a reason why, having won its way by fair means, it should be commended, and not dismembered…. It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.
The message to businesses was as perverse as it was detrimental to the competitive process: To avoid antitrust prosecution, help your competitors by harming your customers.
A great advantage of the consumer-welfare standard that was embraced by the courts starting in the late 1970s, and that has largely guided antitrust enforcement actions from Reagan until Biden, is that it avoids economically destructive rulings such as Alcoa. Let’s hope that the end of the Biden administration also brings an end to the effort to scuttle the consumer-welfare standard.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
