The Limitation of the Vend was a historic price fixing cartel of coal mine owners of north east England. Its principal customers were ships' captains who purchased cargoes of coal and aimed to resell them in other parts of England; but above all in London which, by becoming the planet's first large mineral-fuelled city, had escaped a natural constraint on the growth of urban areas and was a voracious consumer of coal. Often dated 1771–1845, the Limitation of the Vend can be traced back much earlier.
The cartel appears to have operated openly and without concealment, being administered by a well-organised secretariat which could usually detect any significant cheating. It seems participants 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 prolific coalfields, some much closer to the capital, could rarely undercut. This was because the north east mines were near tidal rivers with excellent sea-transport links. Though their conveniently located coal deposits were soon exhausted, they kept up their competitive advantage by investing heavily in innovative deep mining, rail transportation and bulk material handling technologies. The region has been called the Florence of the Industrial Revolution, the Silicon Valley of its day, and the native land of railways.
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 its members 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.
Other names The cartel has also been referred to as the Limitation of the Vends, the Regulation of the Vend(s), the Restriction of Vends, the Committee of Coal Owners of the Rivers Tyne and Wear the Joint Durham and Northumberland Coal Owners Association, the Newcastle Vend, the United Committee of the Northern Coal Trade, and the Coal Trade Office in Newcastle.
The combination: preliminary outline
The Limitation of the Vend was an association of coal mine owners of County Durham and Northumberland.Including what is now Tyne and Wear. 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 to charge, arrived at by taking into account the mine's productive capacity and the qualities of its coals.This section is only a summary; the sources are cited later throughout this article.
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 delivered too much coal, or who charged less than the prescribed price, could be "fined". The fine was calculated by a method laid down in the agreement; the money was to be 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, typically 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 public spaces 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.In a dataset of 532 historical markets, Connor found the Limitation of the Vend was the most durable cartel: .
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 Though histories of the coal industry tend to concentrate on mining, 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".
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.
Sea transport 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 eraWhere carts could move in dry weather only: 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. Seasale 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,The Kent coalfield (Great Britain map, bottom right) was not discovered until 1890. 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.
The coastal shipping trade
To London In general,Some ships were operated by the mine owners themselves, particularly during the French wars of 1793-1815 when shipping was scarce () or during one of the occasional outbreaks of free competition (), but this was not preferred. Sunderland may have been different but it supplied only 8% of the London market: . Some mine owners owned a minority shareholding in a ship: . the north east mines did not ship their coals to London themselves. They sold them to colliers — typically small sailing brigs, later snows and schooners— that loaded in the north east rivers and resold their cargoes in the river Thames or other ports. The sea voyage to London in fair weather typically took 5–6 days.
This coastwise trade, in itself, was highly competitive, because participants were numerous and ships were easily switched into and out of the business. Thus though many ships plied in the coal trade, few specialised in it. East coast colliers have been described as "among the very best sailing vessels in operation anywhere".
A ship might be owned by her captain, a syndicate of investors, or both; the same was true of her cargo.
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 to allow some colliers to transship their cargoes to the new Regent's Canal, which conveniently skirted Regency London's 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 productivity 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:
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)50 Geo. III c.91; renewed as 57 Geo. III c. 30; as 8 Geo. IV c.72; and as . 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, London's first inter-city line (1833), also connected the capital to the much nearer Midland coalfield; this was strongly opposed by the Limitation of the Vend, who regarded it as unfair competition, which in one sense it was.Mine owners in the North had to negotiate wayleaves to pass over intermediate landholdings on their way to the river: these were expensive. The mine owners complained that, in authorising the Birmingham railway, Parliament was expropriating the wayleave rights without compensation, giving users an unfair advantage. See . 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.