User:Ttocserp/Limitation of the Vend



The Limitation of the Vend was a cartel of coal mine owners of north east England. Its purpose was to allocate market shares and prevent mutual price competition. The immediate buyers in this market were ships' captains who aimed to resell their cargoes in other parts of England; but chiefly in London which, by becoming the planet's first mineral-fuelled city, had escaped a natural constraint on the growth of urban areas and was a voracious consumer. Often dated 1771-1845, the Limitation of the Vend can be traced back much earlier.

The cartel operated openly and without concealment, being supervised by a well-organised secretariat which could detect any significant cheating. It seems members thought their cartel was not strictly legal, but were convinced it was morally justified all the same. Never successfully prosecuted by the law, they were investigated at least five times by Parliament, twice at their own instigation. Some of its most powerful members were women.

Despite their relatively high prices, the cartel's coals captured nearly the whole of the lucrative London market. Other coalfields, though productive and closer to the capital, could not undercut them. This was because the north east mines were near tidal rivers with excellent sea-transport links. The conveniently-located coal deposits were soon exhausted; even so, the north east kept up its competitive advantage: by investing heavily in innovative deep mining and rail transportation technologies. The region has been called the native land of railways, and the Silicon Valley of its day.

The Limitation of the Vend has left meticulous records; hence scholars can study the behaviour of a real cartel in cliometric detail. To what extent it really enjoyed monopoly profits is still debated, however. Unlike most price-fixing business combinations, which soon collapse e.g. because members start cheating, the Limitation maintained itself for an exceptionally long time, albeit with occasional outbreaks of cut throat competition, being perhaps the most durable cartel that has ever existed. It has been described as one of the most fascinating problems in economic history.

Names
The Limitation of the Vend was also known as the Limitation of the Vends, the Regulation of the Vend(s), the Joint Durham and Northumberland Coal Owners Association, and the Newcastle Vend.

The combination: preliminary outline
The Limitation of the Vend was an association of coal mine owners of County Durham and Northumberland. At yearly intervals its members negotiated an agreement. It laid down each mine's share of the market for the coming year and the lowest prices it was allowed charge, which depended on its productive capacity and the qualities of its coals.

A committee kept a close eye on the London coal market and decided the total sale ("issue") allowed for the coming month (later, fortnight). No mine was to load ships in excess of its allocation or sell below its list price.

An efficient secretariat kept accounts and could usually tell if there was significant cheating. Members who exceeded their allocations, or who sold at less than the prescribed price, could be "fined". The fine was calculated by a method laid down in the agreement; the money was paid over for the benefit of members who had sold less than their quotas.

Coals sold to local consumers, or for export to foreign countries, were free of the cartel, and cheap. The agreement applied to coals sold to ships in the coastwise trade only. Most of those vessels, which were often moored in the rivers Tyne or Wear, or later, the Tees, were bound for London. Such was the volume of the London trade that a modest tax on it paid for the rebuilding of the city after the 1666 Great Fire, including St Paul's Cathedral and the 51 Wren churches. The coastwise trade became proverbial in the English language.

There was nothing to stop members from resigning and offering their coals to ships at keener prices in any amount. Moreover, mines had conflicting aims and interests. The most productive mines wanted large quotas and vends, and lenient fines for those who exceeded them. The least productive mines wanted higher prices, smaller vends for everybody, and tougher fines. Thus, possibly no mine was happy with the terms and conditions eventually agreed. Despite all this, the members did usually keep to the agreement, and negotiate next year's. This went on for nearly 75 years; arguably, for much longer. It may have been the most durable cartel that has existed.

Since most cartels, even stable cartels, last only a small fraction of that time — most commonly, about 4 years — then collapse e.g. through cheating, the problem in economics is to explain the length and stability of the Limitation of the Vend. In 1941 Austin Robinson called it one of the most fascinating unsolved problems in economic history.

The north east coalfield and its geographical advantage
Histories of the coal industry tend to concentrate on mining, but much of it had to do with transport. "The remarkable point [is] that it became economically feasible to move such large amounts of a heavy and bulky material over comparatively long distances. In this respect the coasting trade is of the utmost significance".

Sea transport
There were rich coal deposits in several parts of Great Britain, some much nearer to London, but the north east coalfield of County Durham and Northumberland — often simply called the Great Northern Coalfield — had a competitive advantage. The advantage was the low cost of sea transport to the London consumer.

Until modern road surfaces were developed it was much cheaper to send bulky cargoes by water. According to various estimates, the price of coal if taken by the roads of the era doubled within five or ten miles of the pit-head, hence soon became unaffordable. But the north east coalfield was intersected by navigable rivers that flowed into the North Sea, only 300 miles away from London's river Thames.

A recent estimate is that in 1750 it would have been about 65 times cheaper to send coal to London by sea than by road. Sea-sale collieries were near enough to the tideway (tidal rivers) to do so; landsale collieries had to be content with the local market.

Other coalfields did send coal to London by sea, but the voyages were longer. Already in the 17th century small amounts of Pembrokeshire culm (good for hothouses) and Scotch great coal (for warming noblemen's mansions) were burnt in the neighbourhood of London, though they were expensive.

To London
In general, the north east mines did not ship their coals to London themselves. They sold them to colliers — typically small sailing brigs — that loaded in the north east rivers and resold their cargoes in the river Thames or other ports. This coastwise trade, in itself, was highly competitive, because participants were numerous and ships were easily switched into and out of the business. East coast colliers have been described as "among the very best sailing vessels in operation anywhere".

By 1800, there were 600 colliers in the London trade alone, shipping an annual 1.35 million tons. They caused severe congestion in the Pool of London and in 1829 it was decided that no more than 250 should be allowed there at the same time. In 1820 the Limehouse Basin was dug for colliers to transship their cargoes to the new Regent's Canal, which conveniently skirted the built up area.

This coastal trade was the largest branch of the British shipping industry by volume; and it had some political leverage. The North Sea voyages were hazardous (in one extreme case, 200 ships were lost at the same time), especially on voyages to supply the winter coal market. In wartime, enemy privateers tried to seize them; hence they were armed, or painted with fake gun-ports. It was believed the trade bred tougher and more skilful seamen; it was called a "nursery" for the Royal Navy and was even said to account for England's naval supremacy.

Other destinations
Although most ships in the coastwise trade sailed for London, a substantial proportion, particularly if departing from Sunderland, delivered to other places. Colliers were strongly built with flat bottoms, and small ones could trade from beaches for example.

Turn-around
A collier's profitability depended on how many voyages a year she could achieve — eight was considered not bad — and was affected by her turn-around time in the ports. Explained Simon Ville: "Colliers arriving in the Tyne would drop anchor at Shields. The master travelled across land to Newcastle to order a cargo of coal. Coal was transported from the pit head to the river side and loaded into small keel boats. The keelmen sailed to Shields and discharged the cargo into the waiting ship. This process would be repeated using several keel boats until the vessel was fully loaded. This was expensive and time-consuming ..."

If the master wanted the best grades of coals e.g. Wallsend (which sold better in London, but were harder to procure) the delay was greater. This could happen because the best mines had used up their monthly quotas. "No more could be supplied till the commencement of the ensuing month; and detentions of this kind, as your Committee have reason to believe, frequently occurred", Parliament was told. It was hard for the master to make the right buying decision not least because prices in London fluctuated tremendously.

Since ships lost money by being kept waiting — which might happen on purpose if they had offended the cartel — in 1811 the shipping industry procured an Act of Parliament (the Turn Act) by which colliers in the Tyne waiting for a load had to be served strictly in turn, no ship being allowed to jump the queue. Thus, refusing to sell a ship coal was a breach of the law. The cartel admitted they evaded the law by demanding steep prices instead of refusing point blank.

Sea versus rail
The London and Birmingham Railway, which connected London to the much nearer Midland coalfield (1833), was strongly opposed by the Limitation of the Vend, who regarded it as unfair competition, which in one sense it was. As it turned out, however, very little coal came to London by rail during the cartel's lifetime. Even in 1845 it carried a minuscule 8,377 tons. In that year coastal shipping conveyed 3,177,321 tons from the north east, and 163,994 tons from Scotland, Yorkshire or Wales. Even canals carried 60,310 tons.

Textbooks on 19th-century national transport history devote little attention to coastal shipping; overwhelmingly, they concentrate on railways. Yet, until about 1910, more ton-miles of British goods were moved by coastal shipping than by all the public railways combined. A long-distance railway required heavy investment in infrastructure; a coasting business, practically none. Steamships were much faster than freight trains, which averaged 2 miles in an hour, if that. Sailers, even if at the mercy of the winds, were usefully conveyed by the tides, and consumed no fuel. There was even a type that could be crewed by two men and a boy.

Potential competitors
Despite its advantage, the north east coalfield was exposed to potential competition. Robert C. Allen found that coal markets in Great Britain were highly integrated i.e. there were no opportunities for arbitrage between different regions. Though other coalfields did not send very much coal to the capital before 1860, that was partly because the cartel was careful not to push its prices too high.

For example, tramways and canals were built, eventually, that connected the South Wales coalfield to the sea; it was still sending coal to London by sea in the 1950s. So were the Scottish ports of Leith and Methil, as were Yorkshire's Goole and Hull. The Grand Junction Canal (1800) connected the midlands coalfield to London. That the Limitation opposed such canals shows they were a credible threat to its business. "Easy access to navigable water was an immense economic asset, and one fiercely defended".

The north east mine owners knew that, if they set their cartel prices too high, it would stimulate competition from other regions, and they behaved accordingly. Their chairman admitted it to the House of Lords in 1830:"Q. The Price as now fixed at Newcastle is a high a Price as can be supported, without letting into the Market other Coals which compete with them? A. I feel perfectly confident of that."

In 1828 they had made the mistake of fixing the prices too high, and as a result "we found a great Influx of Coals from other Parts of the Kingdom, from Wales, from Scotland, from Yorkshire and Stockton..." (At that time Stockton was not in the cartel.) "We endeavour to keep the Prices at a Point a little below what the Consumer can get the same Article for elsewhere".

Elaine S. Tan found that these potential competitors, just by existing, set a cap on the prices the Limitation could safely impose. Many "fringe" mines in these regions, being near the surface, required very little investment, and could be exploited opportunistically. There were rural workers who mined coal on a casual basis. Small traders in those regions — grocers and drapers — invested the small sums required.

The consumers
Early modern towns were fuelled by firewood and, since the supply was limited by the annual plant photosynthesis cycle and what could be grown locally, they could not grow beyond a certain size. London, by pioneering the switch from organic firewood to mineral coal, was the first city that escaped this Malthusian trap, and grew to unprecedentedly, overtaking Beijing by c. 1800. The first city to be illuminated by gaslight, it was a voracious consumer of many grades of coal.

Mining
Over-optimistic speculators were tempted to invest their capital in the coal-mining industry, attracted by the success of what was only a lucky minority.

Spectacular cases
Some families made large fortunes in the north east coalfield: for example the Londonderrys who, unlike most owners of coal-bearing lands, were in the mining business themselves. The headstrong Charles Vane, 3rd Marquess of Londonderry, unable to touch his wife's vast capital without the consent of her trustees, borrowed riskily and founded Seaham Harbour, the coalfield's first sea port. After his death she, Frances Vane, Marchioness of Londonderry, managed the business herself. According to Benjamin Disraeli, she had been a society hostess who, having brains, sought excitement. She found it on the shores of the North Sea, "surrounded by her collieries and her blast furnaces and her railroads and the unceasing telegraphs, with a port hewn out of the solid rock, screw steamers and four thousand pitmen under her control". Disraeli said she had a regular office "and here she transacts, with innumerable agents, immense business".

Perhaps the most spectacular example, however, was William Russell who took a lease on the prodigious Wallsend Colliery and made at least £50 million in present-day money, buying himself Brancepeth Castle and a parliamentary pocket borough.

The norm
However, to invest in the industry was not necessarily a wise decision, or even a rational one. Chicago economic historian John U. Nef, in his The Rise of the British Coal Industry, said the business was, in Adam Smith's words, "a lottery, in which the prizes do not compensate the blanks". It could become a ruinous addiction, like treasure hunting.

"History seems to show that coal mining almost invariably attracts more capital than can be profitably invested, and that this capital remains in the industry, in apparent defiance of the rules laid down by the classical economists, even when the return on it is lower than that received by adventurers in other industries. * * * Experience shows that mine owners continue to work their pits, even at a loss, when the market is already glutted with coal."

Reliable quantitative accounts are not available before about 1850, when it appears the net return on capital in coal mining in Britain was about 5%, little more than could have been got by lending the money safely in mortgages. Yet the industry was so risky that it was not possible to obtain fire insurance.

The town clerk of Newcastle told the House of Commons (1800) that although Wallsend colliery made "outrageous profit", and two or three others made "large" profits, on the whole it was not a sound investment."I have lived my whole life in a Coal Mine country. I have possessed the means, and have had frequent opportunities offered me, of adventuring in speculations of that nature; I have ever declined doing so upon this principle, that the average profits resulting from those adventures were inadequate to the employment of so much capital as they required, and to the risk attending them."

To like effect wrote economist William Stanley Jevons: "That in some cases prodigious profits are made, as in the case of the original Wallsend mine, is well known. But this cannot usually be the case, otherwise the wide areas of land yet known to contain untouched seams of coal of the finest qualities, would at once be broken up by speculators, who are never wanting. That deep mines are so deliberately opened is a sufficient proof that the highest prices obtained are, taking all mining risks and charges into account, only an average equivalent for the capital invested."

Mineral leasing
In Britain, unlike other Western European countries, mineral deposits belonged, not to the State, but to the owner of the soil. With time, owners of coal-bearing land, instead of mining it themselves, tended to lease the mineral rights to entrepreneurs. These landowners — in County Durham the Church was the largest — were content to receive a fixed rent plus royalties on the tonnage. They avoided the risks, but got what was a modest return for the exploitation of a wasting asset. Clark and Jacks from a sample of 203 coal leases found that the average royalty on a ton of coal was only 10% of the pithead price.

"In contrast, in the modern world the mineral rent paid for some oil reserves in the Middle East is close to the whole of the wellhead price. That is why there were so few coal millionaires in eighteenth and nineteenth century England, in contrast to the oil billionaires of today."

North east coalfield: investment in technology
The coalfield kept up its competitive advantage even after its easily accessible deposits had been exhausted. The industry was created, not "by landowners, but by a Newcastle merchant oligarchy that lacked neither capital nor ability". By the eighteenth century the Northumberland and Durham coalfield was the largest and most technically advanced in the world. It has been said that Newcastle was "the Florence of the Industrial Revolution"; "the north-east was the Silicon Valley of its day".

Deep mining
Already maybe by 1600 (but at the latest, 1700) not only had the surface outcrops of coal been worked out, but so had the shallower underground seams where a mine could be drained easily by opening an adit and letting the water run further downhill. Deep mining became necessary, which brought a host of problems. "In 1700 the deepest mines were already about 300 feet [100 m]. By the 1750s they reached 600 feet. By the 1820s some pits reached nearly 900 feet underground". In 1828 two thirds of the mines were more than 300 foot deep, one third more than 600.

Depth and winning
Winning coal is making it accessible for extraction, and in this district it required heavy investment with no guarantee of a return. In The Coal-Mines of the North of England (1846) David T. Ansted, professor of geology at King's College London, wrote:

"The depth of the sinkings is enormous, being rarely less than 150 fathoms [275 m], and sometimes upwards of 300. The competition amongst the various proprietors is very great, and the expense of sinking such deep shafts, often through untried ground and with a vast body of water pouring from quicksands, is so enormous, that there seems no hope of adding very considerably to the number of shafts in each mine" which made for severe ventilation problems.

If the shaft-sinking struck water-bearing sands it could become a serious emergency. In sinking the shaft for Murton Colliery (1838) a torrent of nearly 10,000 gallons (45 tons) of water a minute rushed in, and had to be pumped up 540 feet (165 metres) to the surface, requiring the combined power of 39 steam-engine boilers, before workmen could safely tub off the shaft with cast iron.

Pumping and lifting
The main problem was seepage water in the mines, however. In deep mines it was necessary to pump it up, which required a source of power. A common misunderstanding is that mines were pumped by horse power until steam engines were invented. They sometimes were, but hydraulic power was more effective than either. For this to work, though, a large catchment area was needed to collect enough run-off water to drive the wheels (called coal mills); the necessity favoured large landholdings. By 1800 mine ownership in the north east was much more concentrated than in other parts of England. Even so, the region was one of the first to adopt the Newcomen steam engine, and it installed many, some for pumping water to waterwheels.


 * 1)  Horse-driven cog and rung winding machine. Early machines could be built by local millwrights.  "In the Walker colliery in 1765, the deepest mine at that point at 600 feet, coal was lifted from the mine by a gin powered by 8 horses".  At that depth the rope weighed more than the load of coal.
 * 2)  Coal mill.  For driving mine pumps, these water-powered prime movers were more effective than early steam engines and much more so than horses (Beamish Colliery: T.H. Hair, 1844, Views of the Collieries of Northumberland and Durham ).
 * 3)  Pumping engine at Friar's Goose Colliery, Gateshead (Hair, Views).  Deep mining required heavy investment.
 * 4)  John Smeaton's water gin, Long Benton Colliery, 1777.  Early steam engines were too jerky to drive the winding gear, so they pumped water to overshot wheels, which turned it smoothly.  (Wellcome Collection: J. Farey, eng. Lowry)

Ventilation
The mines being deep and the coal bituminous, explosive gas became a serious problem, and until 1815 had to be dealt with by improved ventilation alone since miners had no practical way of illuminating their work except by the light of a naked flame. The method of getting coal in this district was pillar and stall mining, in which the mineral is extracted by cutting a grid of intersecting passageways, leaving thick pillars of coal to support the roof. Besides yielding coal, those passageways were essential for ventilation because, if they were obstructed — even in abandoned sidings — explosive pockets of gas might accumulate and endanger the whole mine; this was appreciated by 1760. Thus, until safety lamps were introduced (see below), a third if not one half of the coal could not be extracted, but had to be left as part of the mine's structure.

Ventilation was achieved by heating air in a furnace and letting it rise in the upcast shaft, thus creating a strong vertical current. A system of closing doors, called coursing, directed the airflow in a sinuous path through all parts of the mine; but since the pathway might easily be 30 miles long, the current was sluggish, and became dangerously contaminated. An important breakthrough was to divide the air into many parallel currents. Called splitting, it was devised by John Buddle at the Hebburn colliery, and it greatly improved the air's freshness and intensity. A dumb drift allowed potentially explosive air to escape without dangerously feeding the furnace fire.

Illumination
The north east was responsible for introducing the first practical safety lamps. Following the Felling mine disaster of 1812, the Society in Sunderland for Preventing Accidents in Coal Mines, in which John Buddle was influential, encouraged investigators to tackle the problem of explosions. Three of these, William Reid Clanny, George Stephenson and Humphry Davy, independently came up with safety lamps, converging on a solution where the flame was shielded by a gauze. They were in use by 1816. The term "safety" was relative, since the lamps were dangerous if incautiously used.

Nevertheless they produced "an entire revolution" in mining.

"It was now no longer necessary [said Nicholas Wood] to preserve the ventilation so as to render all parts of the workings safe with naked lights. Pillars could be removed to any extent so far as ventilation was concerned... Collieries which had been partially worked and abandoned for years as unworkable to any further extent, and in which about one third of the coal was left, were then reopened, and the entire pillars removed." Millions of tons of 'lost' coal were recovered.

Other
The new methods brought new challenges. Removing some coal pillars put extra stress on the rest, which were gradually crushed by the weight of the roof; or the floor buckled. A condition called creep or crush developed, which slowly spread as a chain reaction through the district, damaging the coal and, once started, very difficult to stop. John Buddle, regarded as the greatest mining engineer of his day, solved the problem by inventing panel working, which is still used. The district is divided into panels, isolated by barrier pillars which are wide enough to support the roof and prevent creep. Interior pillars may then be robbed out.



Rail transport technology
The north east has been described as the native land of railways. "From about 1620 to 1820 the northern coal-field was the theatre of experiments which culminated in the formation of the Stockton and Darlington Railway". Even George Stephenson's standard gauge, now used from America to China, originated from the rail separation used at his employer the Killingworth Colliery, Northumberland. These early railways were used for carrying coal from mine to tideway, and most were less than five miles long. By 1800 there were perhaps 150 miles of line in Tyneside alone. They originated as follows.

As mines were sunk further and further from the rivers, they confronted the problem of getting their coals from the pithead to the tideway without incurring ruinous expense. A horse can pull much more on a very even surface. Mines invested in waggonways, at first nothing more than parallel wooden rails on sleepers upon which horses could draw trucks. Metal wheels, internally flanged as now, were in use by 1774. Rails were surfaced with iron strips to reduce wear, then cast solid; laid on edge instead of flat; then made of malleable iron. Brakes were improved, hence waggons could be run together as trains. Sometimes gravity was substituted for horse power (self-acting inclined planes: the downward force of the loaded waggons pulled the "empties" up the hill again). Where need be, stationary steam engines pulled cables (1808). Eventually steam engines moved themselves. North-easterners discovered that locomotives could get enough traction from their friction against the rails. Not the world's first public railway, but the first commercially successful one, the 25-mile Stockton and Darlington, carried coals to a hitherto inaccessible river: the Tees.


 * 1)  A 1774 drawing by Gabriel Jars of the French Academy of Sciences shows that early Newcastle waggonways had many of the characteristics of modern railways, including metal wheels with internal flanges, rails laid across sleepers, braking, twin tracks and even turntables.  (Detail: Notice unequal wheels to counter downhill tipping.) By 1795 improvements in braking allowed multiple waggons to be taken downhill as a set — or train.
 * 2)  Horse-traction was quite adequate for most of these waggonways, which on the outward journey ran chiefly downhill under gravity.  The dandy waggon, an 1826 George Stephenson invention, rested and fed the horse during the gravity runs.  The horse knew to trot after the train and jump aboard, which it did avidly.  Horse railways continued until 1907.
 * 3)  Coal waggons (right, in distance) descend an inclined plane by gravity to waiting keelboats on the River Wear.  An endless cable (not visible) returns the empties.  Left foreground, Pemberton Main Colliery, Sunderland.
 * 4)  The world's oldest railway arch: Causey Arch, 1726.  The Tanfield Railway, originally a horse-drawn waggonway, used this bridge on its way to a staith on the river Tyne; it was still supporting coal traffic in 1964.
 * 5)  A coal waggon is lowered directly onto a Tyne collier, Wallsend.  The invention cut out the keelboats while saving breakage of coal, which reduced its value.  Underneath, an inclined spout shows the older system.  To this staith waggons were sent from Wallsend Colliery down a half-mile inclined plane.  (Illustration from Hair, 1844.)


 * 1)  Blenkinsop's rack and pinion engine, described as the first actually useful locomotive.
 * 2)  Early locomotives with their weight and vibrations soon broke the rails.  Stephenson realised that locomotive and track design had to be integrated.  In one model his steam-filled cylinders were arranged to act as shock absorbers ("steam springs"). Notice the "fish belly" rail pattern.
 * 3)  Stockton and Darlington Railway Locomotive No.1, 'Locomotion' (R. Wake, 1883, oil on canvas, National Railway Museum/Science & Society Picture Library)

Although steam locomotives revolutionised transportation everywhere, they originated in efforts to carry coal cheaply from mine to first customer.

Rationale
For many Londoners the Limitation of Vend was "an infamous combination for extorting exorbitant prices".

The mine owners did not see it that way. They conducted the Limitation openly and without concealment, were never successfully prosecuted by the law, and seem to have thought they were only defending themselves against an evil peculiar to their industry, namely irrational price slumps as will now be described. They told Parliament they were combining to keep up the price of their product like workmen combined to keep up the price of their labour, and were as justified.

Paradoxically, in a heavily invested mining industry under free competition, a slackening in the demand for coal can cause production to rise instead of falling. American economist Francis Walker, describing the origins of the coal mining cartels of Imperial Germany (where cartels, far from being illegal, were upheld by the law), explained it thus: "The prosperous years attract new investments of capital when profits are tempting, owing to decreasing costs and advancing prices, and when the lean years come, and prices fall, the hard times instead leading to a reduction of a output (which would increase costs) lead to an increase of production which, of course, only aggravates the fall in prices and the general difficulty."

"The reason is that under a system of free competition no one mine can afford to limit its output — it would simply be playing into the hands of its rivals. Production must go on in order to pay some (even if an inadequate) return on the capital which is invested and which can not be withdrawn. Hence each mine tries to produce the greatest possible amount, hoping to gain something by increased cheapness of production," knowing it will depress the price further, but accepting it as the lesser evil.

The resulting glut may instigate cutthroat competition ruinous to all.

The northeast coal mine owners themselves, asked why they did not compete, answered that coal-owners (unlike other industrial producers) could not be relied upon to stop producing when prices fell below the remunerative point. "Generally speaking, mines after they are once won must either continue to be wrought and kept a current-going colliery, or they must be forever abandoned. It is a work of the greatest difficulty, in many cases amounting to impossibility, to recover mines which have been abandoned."

If there had been shallow seams of coal, they could have been accessed or left alone according to the demand. The problem was the deep measures. A decision had to be made whether to incur the cost of sinking deep shafts and installing pumping equipment, steam engines, etc. Once incurred, however, it was a sunk investment. "Having the capacity, each producer naturally wishes to make use of it every month in the year; and it requires a high degree of self-denial or a very close agreement to insure forbearance."

Closing marginal mines
An alternative to "close agreement" might have been to allow free competition and let the weaker members go out business. The 18th century intellectual Elizabeth Montagu, a shrewd businesswoman who owned mines in the north east and was herself a member of the Limitation of the Vend, described a situation in which the cartel was threatening to break down: "The coal trade is at present in great confusion, some of the rich want to ruin the poor ones and so pull the price of coal so low that many will lose and where they have not a capital must give up after a while." She disapproved of such "cunning devices" even though she was one of the rich members who would have survived.

Confronted by slackening demand, cartel members like Elizabeth Montagu wanted to share the pain equally. The "cunning" members wanted to drive the weakest pits out of business. .

Possibly, however, those that survived might have ended up with even greater market power, or so the Limitation's representatives told Parliament in 1830:"If, from the above-mentioned Causes, the inferior Collieries were ruined, and expelled from the Trade, the Supply would then be entirely in the Command of a few large Capitalists, who would be able to enhance the Price, and controul the Market, to an infinitely greater Extent than can now be accomplished"

in which case "the natural effect would have been, that those Collieries that survived the shock would have raised the price to have remunerated themselves for the loss they sustained."

Legal cartels
A hundred years later, when Parliament regulated the privately owned British coal industry of the 1930s — with its surplus capacity and threatening unemployment — it introduced a cartel scheme with minimum prices and quotas. It has been argued that it kept the less efficient collieries open. Had the mines been in social ownership e.g. had they been nationalised under a National Coal Board, as they eventually were, conceivably it might still have made sense to limit production across the board while the downturn lasted, instead of closing the least efficient pits.

Today, cartels have "a very bad reputation" and, since 1945 under U.S. influence, have been banned in principle in many countries. They were even represented as a Nazi instrument for world domination. Attitudes were not always so. "Before 1945 most decision-makers in the West believed that cartels were generally beneficial". Before World War II cartels were the norm in the European coal mining industry. In imperial Germany, coal extraction in the Ruhr was almost completely cartelised; one study found it did not affect productive efficiency.

The Treaty of the European Coal and Steel Community (1951), a forerunner of the European Union, though it forbade cartels by Article 65.1, in effect tolerated them by Article 65.2 if they were deemed to improve efficiency — which in practice meant that "the High Authority gradually accepted cartels as temporary devices, authorized in times of penury".

Even in the U.S., where competition law hardly ever tolerates price fixing arrangements, the American Supreme Court in one case allowed a scheme in which 107 Appalachian coal mines sold all their output to a joint agency (which set the prices). The scheme, which took place during the Great Depression, and was preceded by a history of exceptional coalfield violence, was said to be justified by better efficiency.

Mergers
In 1847 the London Northumberland and Durham Coal Company proposed to buy up the north east collieries: existing owners would become shareholders in the new company in proportion to the value of their properties. Thus, instead of a cartel between multiple owners, there would have been a single owner or monopoly. The proposal was strongly opposed by Lord Londonderry and fell through. (In economic terms, the scheme would have reversed an accident of history: the coalfield going into multiple ownership when Church lands were privatised during the English Reformation.)

Modern competition law has had to develop rules about mergers since they can achieve the same anti-competitive effects as a cartel. The dangers were virtually unconsidered in 18th and 19th century England, which like other countries at that time lacked a comprehensive competition law. In the event, something like that did happen, because — by marriage, inheritance or otherwise — two of the mine-owning families (the Londonderries and the Durhams, see below) acquired so much property that they could afford to defy the cartel.

Free trade criticisms
A trenchant critic of the cartel was George Richardson Porter, staunch free trader, chief statistician at the Board of Trade, and brother-in-law of economist David Ricardo. For Porter (The Progress of the Nation, 1843), the Limitation amounted to a virtual tax on the coal-consuming public, one that no government would have dared to impose, and more harmful than a real tax, for two reasons.

First, the cartel misallocated resources by creating artificially large collieries which were then underused. Investors sank more pits, erected more steam engines, built more miners' cottages, and committed to pay mineral royalties on much more land than was really required. They did it to qualify for larger quotas. Thus (he claimed), in order to get a colliery that was allowed to sell 25,000 waggon loads to the British market, they built one that could produce 100,000.

Secondly, in order to make some use of this spare capacity, they exported as much coal to foreign countries as possible at whatever price they could get, since the cartel did not apply to these. "By this means the finest kinds of coal which are used in London, at a cost to the consumer of about 30s. per ton, may be had in the distant market of St. Petersburg for 15s. to 16s., or little more than half the London price". Nut coal, perfectly good for steam engines, was practically given away, so that in effect the British manufacturer was subsidising his foreign competitors.

Criticisms by modern economists are mentioned below.

Jevons and his paradox
In The Coal Question (1865) the economist William Stanley Jevons argued that, although perhaps the Limitation of the Vend had increased the price of some grades of the product, the real problem was not expensive coal, but its prodigious use — in short, resource depletion.

His contention, now called Jevons' Paradox, was that cheaper coals (or, their more efficient use) meant greater demand for the fuel, and thus, quicker exhaustion of Britain's coal reserves. "To disperse so lavishly the cream of our mineral wealth is to be spendthrifts of our capital — to part with that which will never come back", he said.

Among other considerations, Jevons wrote of obligations owed to future generations and of "compensating posterity for our present lavish use of cheap coal".

Needless waste and pollution
In his 1863 presidential address to the British Association for the Advancement of Science, Sir William Armstrong said:"In warming houses we consume in our open fires about five times as much coal as will produce the same heating effect when burnt in a close and properly constructed stove." The money wasted, which effectively went up the chimney, exceeded the annual income tax.

In 1871 a Parliamentary committee reported that large amounts of coal were being wasted through being burned in inefficient boilers. It was exacerbating the pollution of towns. Manufacturers had little incentive to address the problem, fundamentally because coal was so cheap. A recent study has found that the negative externalities included not only the negative impact on the quality of life but on employment and population growth.

Appraisal
In 1800 a British Parliamentary committee thought the Limitation of the Vend should be done away with. It "might at any time enable [the coal industry] to enhance the price of an article of such necessity, to the oppression and danger of the public".. By the 1830s, however, Parliament thought the best solution was to encourage competition from other coalfields: see below, Parliamentary enquiries.

The cartel: antecedents, origins and expansion
The Limitation of the Vend is often dated between 1771 and 1845, but the coal mine owners of the region had long been accustomed to act collectively to regulate output and prices.

The Hostmen of Newcastle
The Hostmen of Newcastle upon Tyne was a fraternity that claimed the legal monopoly of exporting coals from the river Tyne to any town in England. The monopoly existed in 1600 and probably much earlier, and continued to be asserted until nearly 1740.

The Hostmen began in medieval Newcastle as a small group of householders whose function was to entertain visiting merchants, and see they behaved themselves. As a fringe benefit, the Hostmen acquired the customary right of selling them coal and grindstones, two Newcastle commodities no other trading company had yet appropriated.

In the Tudor era, however, circumstances combined to transform their modest privilege. The Church lands confiscated in the English Reformation included some coal-rich fields in the north east, which passed into private hands. The export trade to London burgeoned. The government of Elizabeth I — which, like many early modern governments, struggled to raise revenues — routinely sold monopolies. The government saw the advantage of imposing a tax on the Newcastle coal export trade, the problem being to collect it.

The government solved the problem by granting the Hostmen the exclusive right to supply coal to other towns; in exchange for this, the Hostmen were made responsible for seeing the tax was paid. The Hostmen were incorporated as a company or guild by royal charter in 1600.

The Hostmen's monopoly was effective for a long time. In 1662 the town authorised them to seize coals (apparently, without a court order) vended by non-members and laid aboard ship, which they often did, even as late as 1720. It is known they used their monopoly powers to fix prices, despite complaints.

The legality of monopolies was strongly debated in England and as a concession Parliament passed the Statute of Monopolies 1623 which declared them void. However it contained exceptions and one concerned the Hostmen. The wording (reproduced in this note) was open to interpretation so that, although the Hostmen continued to exercise the monopoly well into the 18th century, they gradually gave up trying to, abandoning all pretence by 1740.

The Hostmen's Company still exists as a formal institution, and its records were published as a book in 1901. In the list of members, wrote the editor, were "the leading men in north of England mercantile life for the last three hundred years". It included"the Jenisons, afterwards Counts Jenison-Walworth in Germany; the Vanes and the Tempests; the Liddells, now represented by the Earl of Ravensworth; the Grays and Ellisons, now represented by Lord Northbourne; the Whites and Ridleys, now represented by Viscount Ridley; and the Scotts, now represented by the Earl of Eldon."

The Grand Alliance, and its downfall
After them came the Grand Allies (1726), "the most powerful partnership that the coal trade has known" which apportioned quantities to be worked; "but more important, from the point of view of maintaining the monopoly, they joined to prevent the opening of new collieries by buying up of land, royalties and wayleaves. Any coal property which they could not directly get hold of they proposed to block off from an outlet to the river". There is evidence that the powerful mine owners had a "contract" (really, a gentlemen's agreement) to limit production and fix minimum prices. Their most visible achievement was the Tanfield Railway (above) by which they cooperatively got access to the relatively distant river Tyne.

However, their market power eventually collapsed because of rising competition from coal mines near the river Wear and new Tyneside mines below bridge. Also, technological advance and the development of a banking system made it easier for new mines to enter the business. The Grand Allies continued to exist, however.

The Tyne and the Wear combine
The Limitation of the Vend is often dated from 1771 when the mine owners of both the Tyne and the Wear combined. It differed from previous versions in that it did not even pretend to have legal powers to keep out competitors, whether by town regulations, government grants, or the ownership of strategic lands. "No longer was it possible to erect substantial barriers to the entry of new competition". The system depended on widespread consensus.

It seems there was no regulation at all between about 1750 to 1770, possibly because sales were expanding and prices were rising. But it appears to have led to over-investment, and excess capacity. The regulation was resumed around 1771.

Hermann Levy thought the new cartel originated in bitter competition between newly discovered mines and the old ones. Typically the old mines were located near the river Tyne, above bridge, where seagoing ships could not go. Their owners — the Ravensworth, Strathmore and Wortley families i.e. the Grand Allies — had secured all the best lands, or so they had thought. To their dismay they found they had burdened themselves with "long and costly leases", for better mines were found elsewhere.

Deep mining technology won new, rich seams of best coal; furthermore, in locations favourable for transport. They were below bridge on the Tyne, and so could load coal directly onto the ships; or they were on the river Wear, whose keelboats used an early form of containerisation.

To compete with the new mines on quality, the old mines resorted to a "blameable" practice. They screened their coals through a grid, selling the large, valuable lumps and rejecting the small coals, which had to be burned as waste, (It can be seen in the Fiery mine at night illustration, on the right.) "The waste was so enormous that the labourers were directed from time to time to set fire to the heaps accumulated ... After lasting some years, both parties became weary; they found it prudentially wise to unite in interest, to equalise the price, to regulate the transmission from each colliery."

"Hence their union became a direct monopoly; it was agreed that the market should be fed, and not glutted".

The natural Wear was shallow, and inferior as a coal-shipping river, but its harbour commission was a progressive authority, willing to invest in improvements, unlike its Tyne counterpart, which was apathetic. By 1770 the Wear navigation had been much improved, it could take bigger ships, and the tonnage shipped coastwise had risen from 40% to 60% of the Tyne's.

Thus the Limitation of the Vend, to work, needed the cooperation of the owners of the mines adjacent both rivers, and this was obtained by assigning quotas: at first Tyneside got 60%, Wearside 40%. Later, the rivers wrangled over their shares: it was to prove a source of instability.

The river Tees and its ports
Unlike its northern sisters, the river Tees was not on the coalfield. The nearest mines were in the Auckland district of south Durham, and were rudimentary land-sale collieries, sending their produce to local consumers by road, even pack-mule. The cost of a ton of coal doubled between Bishop Auckland and Darlington, and trebled by Stockton-on-Tees, where it might be better to import it by sea. The Stockton and Darlington Railway was promoted (1818) to carry this local coal traffic more efficiently and make a modest profit. Since Stockton was an unsatisfactory port — the navigation from river to sea was poor — the railway's Quaker promoters thought an export trade was a distant dream. The Limitation of the Vend did not even bother to oppose the railway effectively in Parliament. They were to regret it.

Christopher Tennant, a Stockton merchant, had a different vision. He appreciated that, if a good deep water port could be made, it should be possible to supply it by rail, hence tap the lucrative London market. He promoted the rival Clarence Railway for the purpose. Powerful members of the Limitation of the Vend strongly opposed it in Parliament on environmental grounds, at first successfully, saying the locomotives would be a public nuisance (May 1825). Shortly afterwards, the Stockton and Darlington realised they could have a profitable coal export trade after all. It was so successful that the directors decided to build a suspension bridge across the Tees to Middlesbrough (pop. 150), where a better port could be made. The cartel tried to deny the railway the necessary parliamentary sanction and bitterly opposed the scheme in the House of Lords. "The coal-owners of the Tyne and Wear, who had been caught napping in 1821, were now wide awake to the danger of the Tees competition, and they banded their forces together to prevent the continuation of the railway to deep water. Having themselves to pay heavy wayleave rents, they contended that the legislature, in sanctioning a public railroad for the conveyance of coals, was virtually giving a bonus to their rivals in trade by relieving them from the difficulty of bargaining with the landowners for a right of passage through their property and by rendering unnecessary the investment of capital in waggonways." Nevertheless, the scheme passed. This was "the real break-through". New mines, attracted by the export trade, adopted modern technology, found a seam of excellent household coal, and the area boomed; population grew. The Tees competed with the Tyne and Wear. Later, a still better port was constructed at Hartlepool and served by the Clarence and a third railway.

In 1834, by which time the Tees' coastwise exports were overtaking the Wear's, the Limitation of the Vend persuaded the mines of south Durham to join the cartel.

$$Complete statistics are not available, but in 1830-31 some 281,960 tons of coal were carried over the bridge to the staithes.

There were also large amounts produced for local consumption e.g. by the iron and steel industry or (after the export tax was reduced) for export to foreign countries.

Northumbrian coal ports join
Mines in the River Blyth area were the first to build waggonways for the sea-sale of coal — in 1605 — but shipments were always comparatively low. The river was not a good natural port. "At low Water the Sea, at the opening of the Creek, may be safely passed on horseback" wrote Daniel Defoe (1769). In 1814 it was still shallow, with a hard bed and dangerous rocks at the entrance. Improvements were considered, but rarely carried out; a proper harbour was not constructed until 1854. Even so, the Blyth shipped enough coal coastwise to be invited to join the cartel in 1834.

In contrast the modest Seaton Burn ("dry at Low-water Mark", according to Defoe), attracted investment from the Delaval family, Seaton Sluice being the first gated dock in the region. When the sluice was opened at low tide twice daily, water rushed out and "scoured the Bed of the Haven clean" (1676). In 1758 a new colliery was opened at the nearby village of Hartley and a 900 foot (300 m) long harbour entrance was cut through solid rock ("looked upon as one of the greatest engineering feats of the day"), providing a navigable depth of 11-14 feet, and enabling ships to leave the harbour fully laden. Coal could be laden directly aboard through spouts. So rapid was the turnaround that vessels could make 10 London sailings a year. In 1777 the little harbour exported 81,300 tons of coal, even though its produce was unsuitable for household use, being sold for industrial purposes. Despite this, its mines (like those of the Blyth and Tees) were invited to joint the cartel in 1834.

Seaham Harbour
In 1821 Lord Londonderry, who was being advised by John Buddle, bought 2,000 acres of cheap farmland at Seaham, then a small settlement on the rocky coast a few miles south of Sunderland. The two men were informed that here was an opportunity to create a private sea port, much better for shipping coals than the river Wear. It would operate in all weathers (the Wear and the Tyne could freeze up, or be shut in by easterly winds); it would be less congested; and it would avoid the Wear keelboats and their exorbitant charges.

A 5.8 mile railway, driven by stationary and locomotive steam engines, was built simultaneously. It conveyed coals from Rainton to Seaham. To build the port a conical pinnacle of rock weighing thousands of tons had to be blasted into the air. Londonderry persisted for years while running heavily into debt, but eventually the port began to ship coal in 1831, catering not only for the Londonderry mines but for other new pits sunk through the Magnesian Limestone at Monkwearmouth, Seaton and Murton.

Lord Londonderry was now so powerful a member of the cartel that, were he to oppose it, it would collapse; but that was much later. In 1838 a ship's captain told the House of Commons what happened to him at Seaham for flouting the Limitation's rules: "I had been a good customer at Seaham, and I went over to Seaham; and Mr Spence, the agent to the Marquis, held out his hand before I got to him; he said, "It is no use your coming here, Mr Young; we will not load you; you may compel them to load you in Newcastle by the turn, but we will not load you here"."

The changes summarised
The Limitation of the Vend, therefore, from 1771 to 1845 was obliged to adapt itself to those technical and spatial changes, and a background of events such as the American war, the wars with France ("the major features of which were the fear of invasion, the threat of privateers, the adoption of the convoy system, the depredations of the press-gangs and the restriction of markets for coal"), the coming of the railway age and the Reform Act 1832.

$$Prob. including Hartley and Seaton Sluice.

In relative terms the London export trade became of less importance as time went by, because increasing quantities were consumed by local industry. Thus by 1867 Tees-side alone produced about a million tons of pig iron, equal to the entire output of the U.S.A.

Governance
Each river had its own governance and administration; their systems were not the same and, except for the Tyne, details are rather sketchy. The Tyne had many mine owners, so it was not practical to have frequent general meetings. General policy was decided at an annual meeting where prices were fixed and colliery proportions ("the Basis") agreed; each colliery had one vote. It was specified that the agreement did not enter into force unless and until every mine owner signed up. A printed set of detailed rules for 1835 was put before Parliament.

The owners appointed representatives, who elected a committee; it administered the system on a day to day basis. On the Wear, mines were larger, owners few; this small group constituted the Wear committee without need for delegation. The Tyne committee met at Newcastle, the Wear committee at Chester-le-Street, the Tees committee apparently at Stockton.

The committees also met jointly and were called the United Committee. The main business was to decide the issue or quantities of coals to be supplied to the coastwise trade next month. (As explained the object was to keep London prices high but not so high as to provoke competition from other coalfields.) Thus, the monthly vend, allowed to each individual mine, was arrived at on the Basis already agreed. Later, it was fixed fortnightly instead of monthly.

If there were disputes between the rivers the United Committee tried to resolve them by consensus, failing which the system broke down and there might be a "fighting trade", which everybody dreaded. In 1829 the Tyne and the Wear agreed to resolve their disputes by a system of arbitration and in 1834 the Tees, Hartley and Blyth joined in.

Summarised Elaine S. Tan:"It had a centralized and professional monitoring infrastructure made up of about 30 to 40 representatives, with a common office and a secretary. These met to determine ... quotas for each mine and inspected monthly output, the amount of which had to be sworn before a magistrate. They also forfeited deposits and imposed fines on collieries that exceed their quotas. Transacted prices for each mine were available to all cartel members; together with limited points of shipment, and verification of output levels with data from customs houses and sale points, opportunities to cheat were reduced further."

Records
Anti-trust scholar John M. Connor wrote: "This so-called Newcastle Vend kept meticulous price archives and became among the first cartels to be studied by modern scholars who were interested in applying quantitative methods to price-fixing conduct. The availability of detailed purchase records has permitted sophisticated econometric modeling of the London coal cartels".

Quotas
Quotas were the main point of argument since each mine wanted a better share of the vend. At first quotas were settled by discussion and consensus, each mine trying to persuade the meeting that it could produce more and better coal and should be allowed to do so. After 1829 more objective criteria were adopted and inspectors looked at factors such as royalties payable, number of pits, their depths, shaft widths, inclination of seam, distance to water, and so on.

Prices
There was much less contention over prices since, once quotas had been fixed, and the producers of the best coals had named their prices for the coming year, the others could estimate how much to discount their inferior varieties. Since a mine wanted to sell all of its quota, but not too cheaply, there was no point in fixing its price too high or too low.

Prices were listed and could not be changed until next year; however, a mine that had made a genuine miscalculation and found it could not sell its quota was usually allowed an adjustment by the committee.

It should be noted that the prices charged to ships in the northeast, being fixed for the year, did not fluctuate seasonally, whereas prices in London could fluctuate a great deal, even day by day, since they depended on demand, supply and the weather.

Legality
The north east coal cartel existed over a period of history when societal and legal attitudes to restraints on trade were fluctuating. The courts never pronounced on the Limitation of the Vend's legality. In particular it was never explicitly decided that it — or any specific cartel, for that matter — was a criminal conspiracy at common law attracting a prison sentence, although there was certainly a strand of legal opinion to that effect. The common law as understood in England and America shared much the same uncertainty until the 1890s, when they diverged; in America, the Sherman Act presaged an aggressive pursuit of cartels, but in England the courts established that, although a cartel is a void contract that will not be enforced, it is not a tort or a crime at common law.

However in 1710 Parliament passed "An act to dissolve the present, and prevent the future combination of coal-owners, lightermen, masters of ships, and others, to advance [raise] the price of coals, in prejudice of the navigation, trade, and manufactures of this kingdom, and for the further encouragement of the coal-trade". The Act prescribed substantial fines for violations, though not jail sentences. In that era an Act of Parliament was only half the story since, unless a jury felt conduct was wrongful, it was unlikely to convict.

In 1795 one Errington, who had inherited a share in a mine in North Shields, but discovered its produce was selling poorly, for which he blamed the cartel, deposed witnesses and launched a prosecution against six individuals who (he said) were the Tyne Committee. They were indicted, not for breaching the 1710 Act, but as a criminal conspiracy; presumably, so they might receive a jail sentence. The proceedings were transferred from Newcastle to York for jury prejudice. The case never came on for trial. As was common at that time, it was a private prosecution; the prosecutor told Parliament he had lost enthusiasm.

It seems the cartel was believed to be illegal in the locality itself, though morally justified. The town clerk of Newcastle told Parliament: "I saw a body of men, highly respectable in situation, and highly responsible in character, entering into a measure, without attempt of disguise or concealment, which, in my humble judgement, was not strictly legal."

From their conduct it would seem the Limitation thought they ran little danger of a being convicted by a jury, but knew it was no use going to law to enforce their cartel's rules.

Enforcement
It was to the interest of each mine to be seen to be complying with the cartel's regulations, since it encouraged the others to behave likewise. Mutual compliance was more likely if mine owners believed significant cheating was difficult or impossible.

As to that, explained William J. Hausman:"Enforcement mechanisms (crucial for success) varied in their particulars over the years, but by far the most important component of enforcement was the availability of information. The points of shipment were few enough that it was impossible for any large-scale cheating to go undetected, although chiseling and overmeasure were always possible."

Through points of shipment
The points of shipment were staiths, similar to waterside piers; from thence coals were transferred to keels (sailing barges), which carried them downriver to waiting colliers. A keel was marked with nails to denote government-certified loadlines; thus loaded, it carried a definite weight of coal;; further weighing was unnecessary. Later, and increasingly, staiths were located below bridge and loaded the seagoing ships directly through spouts.

A class of businessmen called fitters was responsible for getting the coal from staith to ship and seeing everybody got paid. When a ship's master wanted to buy coal he approached a fitter, who was an agent representing one or more mines. Fitters owned the keels and paid the keelmen for their services. The fitter personally guaranteed that the shipowners were reliable payers and that the promised coal was up to the specified quality. Furthermore the fitter cleared the shipments through Customs and saw to the paperwork, without which the cargoes could not be imported into London. When business was complete he presented his bill to the ship's master.

The reason coal had to be cleared through Customs was that, until 1831, there was a heavy internal tariff on coal exported coastwise from the northeast. Indeed the fitters were the successors of the medieval Hostmen: the men who were given trading privileges in exchange for seeing that the government tax was paid. After 1831 coal still had to be customs cleared since (until 1850) there were duties to pay on its export to foreign countries.

To gather intelligence the Committee sent agents round to the "staithmen" and required them to deliver accounts; they had to appear before a magistrate and swear to their truth. The Customs figures were supplied to the Committee, who also received reports of sales from their agents in London.

Through shipping
In 1827 the Tyne Committee resolved to charge an extra 10 shillings per chaldron — a punitive rate — to any ship found to be dealing with blacklisted mines. It seems this scheme did not work very well, however.

Through the coal factors of London
Factors were a class of London businessmen who acted as agents for the ships and negotiated the sale of their cargoes on the Coal Exchange, London. They handled the paperwork to clear the coals through customs, without which they could not be unloaded in the Thames.

Although the evidence is unclear it appears that from 1834 the Limitation of the Vend

Sanctions
Mines that exceeded their sales quotas were not necessarily cheating, if they did it openly and accepted the consequences. A system of fines was instituted, the monies to be paid over for the benefit of the mines who undersold their quotas. When the fines were found to be too low — i.e. that it was worth breaching the quota and paying the fine — it was decided to increase them steeply in future, and to deduct the oversale from the mine's next monthly quota.

The cartel's chairman told Parliament the fines were rarely collected in practice, since conciliation prevailed. According to Paul M. Sweezy a stronger deterrent than fining was peer disapproval.

Cheating
An obvious way to sell under list price was to give a ship a hidden discount, either as a secret cash payment to her owners, or as a kickback to the captain. It is unlikely this kind of cheating was very widespread. Generally, the purpose of price cutting is to increase sales, but there is little point if sales volumes are capped anyway, as they were. Members who could not sell all of their quota owing to a genuine mistake in fixing their annual price were given sympathetic treatment, see above, and had no need to cheat.

Another obvious dodge was to give ships extra weight. However as explained above the loading of ships was usually done in plain sight of everyone. Even when it was not (as where coals were delivered directly on board through spouts), there were the Customs authorities to think of. Until 1831 the coastwise coal trade was taxed quite heavily and ships could not clear the harbour without making a customs declaration and getting the required paperwork. Customs officials were entitled to inspect the loading. The paperwork had to be produced to the Customs authorities in London. In any case the quantities unloaded in London were officially measured or weighed and published on the Coal Exchange, though corruption was certainly possible.

Still another way to cheat might be to sell coals to a ship bound for foreign parts - this trade was free of the cartel, of course — which would then divert to London or other English port. But until 1831 coal exports to other countries were heavily, indeed prohibitively, taxed. After that, it would have required outright smuggling to sell in London coals cleared for foreign ports.

On occasions cooperation ceased and a "fighting trade" broke out in the industry. It was not because of cheating, but because powerful members stopped cooperating.

Disruptive personalities
Two colourful personalities, Lord Londonderry and Lord Durham, were powerful members of the cartel. They were social and political rivals and mutually jealous, which made common action on Wearside difficult.

Autocratic and abrasive — they are described in this note — both men were major public figures in their own right. Heads of major coal mining families on Wearside, "they alone possessed the power to bludgeon the trade into submission by forcing a period of free, or 'fighting' trade". They were less interested in the long-term future of the cartel than in securing larger quotas for themselves, and keeping out interlopers. Cashflow problems afflicted both, encouraging short-term thinking.

About 1825 a third major player emerged: the Hetton Coal Company. Formed of a partnership of numerous investors, it was more like a modern joint stock company than a traditional mine owner. It had the resources to withstand Lords Londonderry and Durham, if not to equal them, and the animus to do it.


 * 1)  Charles Stewart, 3rd Marquess of Londonderry, right-wing Tory; "the bravest soldier in the British army", notorious womaniser, "arch villain of the north-east coal trade" (Thomas Phillips, 1812: National Portrait Gallery, London)
 * 2)  Colliery of the Hetton Coal Company, one of the first to be capitalised on modern lines, willing and able to take huge risks — and whose management hated Lord Londonderry
 * 3)  John Lambton, 1st Earl of Durham, ("Radical Jack"), "haughty and disdainful", insomniac, opium addict, liable to mood swings (Thomas Phillips, 1819: National Portrait Gallery)

The Hetton Coal Company's adviser was an attorney called Arthur Mowbray who had cause to dislike Lord Londonderry. Mowbray got together the syndicate of investors who became the Hetton Coal Company. They were regarded as upstarts and outsiders (one of them was a famous prizefighter looking to invest his winnings). In an immensely risky enterprise, the Hetton Company bought a large landholding in a part of the east Durham coalfield where geologists — of the calibre of Adam Sedgwick and William Buckland — had doubted good coal would ever be found. They sank a 900 foot (300 m) shaft through quicksands and struck rich seams of the very best coal. They had their own railway connecting to the river Wear, the first in the world to be designed for steam power alone.

The Hetton Coal Company now demanded a quota to equal Durham's and Londonderry's, which the two men bitterly resisted. John Buddle writing to Lord Londonderry said about the interlopers:"I consider the Hetton Co. just now, as a pack of madmen, with swords in their hands slashing about them on all sides ... A[rthu]r [Mowbray] ... will never stop until he involves the whole Coal mining interest of this country in one general ruin."Lord Durham was heard to say "There was no sacrifice he was not prepared to make" to ruin the Hetton Company if they tried to force a bigger quota. It led to the "fighting trade" of 1829 (below). Another consequence was that, inspired by the Hetton Coal Company's success, fifteen other major collieries were opened in the same area, each wanting a share of the issue. There were "more pigs than teats in the trade", wrote Buddle.

The "fighting trade": outbreaks of free competition
The cartel broke down and did not operate for a period in 1800; possibly in 1812 and 1814; February 1819 to February 1821; September 1824 to July 1825, January 1828 to August 1829; and November 1832 to March 1834.. Sweezy wrote about two periods particularly:

1829
In 1828 there were disputes between the Tyne and the Wear over quotas; they featured Lords Londonderry and Durham. Unable to resolve them, the United Committee declared the trade open on January 24, 1829. During the ensuing fighting trade the price of best coals in London fell from 40 to 30 shillings per unit. The dispute dragged on until 31 August when the regulation was renewed. To reduce disputes in future an arbitration system was instituted, with appeals.

1833-34
A miner's strike disrupted the regulation, hitting the Tyne harder than the Wear; hence the Wear greatly exceeded its quota. Also the the strike-bound mines were meant to be supported by those in work, but there was disagreement over the details. Lord Londonderry, who had refused to sign the agreement for 1832, refused to chip in on the strike fund. His behaviour was resented. The Hetton Coal Company refused to sign the agreement until it was sorted out. The London price of best Wallsend fell from 21s. 9d. per unit to 15s. 6d., the lowest ever. The Tees mines, not part of the cartel, were doing well. Eventually the long fighting trade disposed everyone to find a solution. The Limitation was resumed on March 1, 1834. The revived cartel now included the Tees.

Abuses in London
In reality the prices Londoners paid for their coals were affected by two cartels, the Limitation of the Vend in the north east, the other a buyer's cartel in London itself. Each cartel had an incentive to deflect blame by casting it on the other.

The London coal trade by 1830 has been described as "a veritable Augean stable of fraud and abuse". Few branches were free of corruption, generally tending to increase the price to consumers.

Principle
While the vendors' cartel in the north east was accused of overcharging its customers, the buyers' cartel in London was accused of undercharging its suppliers. Although this form of market abuse gets less publicity, the economic theory, according to John M. Connor, is well established:

"If buyers are small enough in number and sufficiently cooperative, they may be able to form oligopsonies that can force down the prices of common inputs below the prices that would have reigned in a more competitive procurement market. In other words, powerful buyers can undercharge their input suppliers."When the savings are not passed on to consumers this conduct may be harmful, just as overcharging would be, because "industry output contracts from the level that would be seen in purely competitive or noncooperative oligopsonistic procurement markets and allocative inefficiency is created" Put otherwise, the more the London cartel forced down the price of coal aboard ships in the Thames, the less attractive it was to sink new coal mines in the northeast and keep existing mines open.

Perpetration
When a collier arrived in the river Thames it looked for a mooring, which took time because the port was highly congested. A fleet of river barges, known as lighters, relieved it of its cargo. The owners of these lighters were wholesale coal merchants who bought the coals direct from the ships. At times, they were few enough in number to be able to manipulate the prices paid. "The mine owners themselves were in the position of having to pay premiums, 'kickbacks', to the London dealers in order to assure that ships would be unloaded expeditiously". High coal prices paid by London consumers might have to do with the lightermen's cartel.

Coal-whippers
Coal whippers referred to gangs of men who unloaded the colliers waiting in the Thames, typically in Wapping, into barges. Usually a gang consisted of nine men. Four, who worked down in the ship's hold, filled a basket. Four men on deck climbed a ladder and threw their weight onto a rope that went round a pulley; this jerked or whipped the basket from hold to deck. The foreman swung the basket into a chute, which delivered it to an adjoining barge. The work was demanding: on a busy day a gang would raise 98 tons of coal, the rope men climbing a cumulative distance of $$ vertical miles.

Until 1843, when Parliament stopped the abuse, the gangs were kept by publicans who contracted the labour to ship's captains. The men's chances of getting employment depended on how much they drank at the pub. According to Henry Mayhew, when it came to collecting their pay they sometimes found they were actually in debt. Also according to him, the publicans were often related to the shipowners; the leading coal merchants were shipowners who kept their ships back to keep up the price of coals.

Metage
The abuses did not stop there. In London, until 1831, instead of coal being sold by weight it was sold by volume. The unit of volume was the London chaldron which was a heaped measure and so lent itself to interpretation. There was also an incentive to break coal into smaller pieces to increase the volume.

In an effort to prevent cheating, all measurements were performed by public officials, called sea-meters if they measured from ship to barge, or land-meters if they measured standard quantities into sacks on the quayside. The sea meters were paid by the ship's masters, so had an incentive to collude by exaggerating the measure. In the illustration of coal-whippers, the official by the chute is a sea-meter, though by that date they had gone over to measuring by weight. The land meters were paid fixed wages by the City of London but could (and did) hold down other jobs — many kept pubs or shops — and there were complaints of absenteeism, drunkenness, carelessness and irregular measurements. It appears that by bending the rules a merchant could deliver a fourth less than expected.

Parliamentary enquiries
Six times a parliamentary Select Committee held an rnquiry into the Limitation of the Vend, receiving evidence and documentation. Two of the enquiries — 1829 and 1830 — were instigated by the mine owners themselves, probably to draw attention to the inefficient and fraudulent conduct of the London end of the trade.

Gustav Cohn
xxx

Hermann Levy
xxx

John Ulric Nef
xxx

Paul M. Sweezy
Paul Sweezy was the only author to write a full-length book on the north east coal cartel. His 1938 Monopoly and Competition in the English Coal Trade 1550-1860 was derived from his Harvard PhD thesis. A Marxist, Sweezy said his interest "was first aroused by a study of Marx's brilliant investigations imto 'the law of motion of the capitalist system'".

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