¹ Rey, Patrick and Tirole, Jean, “The Logic of Vertical Restraints,” American Economic Review 76 (Dec. 1986): 921Google Scholar.

² Martin, Stephen, “Vertical Restraints,” in Advanced Industrial Economics (Oxford, 2nd. ed., 2002), ch. 13, 420–44Google Scholar, offers a good account of the current state of the subject.

³ Mathewson, G. Frank and Winter, Ralph A., “An Economic Theory of Vertical Restraints,” RAND Journal of Economics 15 (Spring 1984): 27CrossRefGoogle Scholar; also Vickers, John and Waterson, Michael, “Vertical Relationships: An Introduction,” Journal of Industrial Economics 39 (Sept. 1991): 445CrossRefGoogle Scholar.

⁴ Tan, Guofu, The Economic Theory of Vertical Restraints (Competition Bureau, Canada, 2001), 3Google Scholar.

⁵ This is true of Chandler, who believed that the appearance of managerial capitalism during the second half of the nineteenth century led to the development of companies, especially those in the growing new industrial sectors, which required integrated distribution. See Chandler, Alfred D. Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990, 28–31)Google Scholar. In other cases, however, the decision to integrate vertically was prompted by defensive motives, such as the desire to prevent the entry of other manufacturers into the market or to ensure an adequate supply of materials. See Chandler, Scale and Scope, 37–38.

⁶ Economic literature presents the reduction of transaction costs as the most important factor in the decision to integrate vertically. These costs are determined by several factors: bounded rationality, in which human beings' ability to pose and solve complex problems is limited; opportunism, which characterizes relations between organizations; asset specificity, or the relative lack of transferability of assets intended for one use to other uses; uncertainty; and frequency of transactions. If vertical integration leads to the reduction or elimination of these costs, companies will be strongly motivated to implement it. See Williamson, Oliver E., The Economic Institutions of Capitalism (New York, 1985, ch. 2)Google Scholar. In contrast to this economic literature, the less rational explanation of vertical integration suggests that this matter should be viewed in terms of market power, since the aim of companies that integrate is to create, consolidate, or extend monopoly power. See Comanor, Williams S., “Vertical Mergers, Market Power, and the Antitrust Laws,” American Economic Review 57 (May 1967): 254–65Google Scholar.

⁷ Note the absence of references to the subject in the articles contained in volumes 2 and 3 of Boyns, Trevor, ed., The Steel Industry (London and New York, 1997)Google Scholar for the case of the British steel industry or in the now-classic study by Hogan, William T., Economic History of the Iron and Steel Industry in the United States, 5 vols. (Lexington, Mass., 1971)Google Scholar.

⁸ See Wengenroth, Ulrich, Enterprise and Technology: The German and British Steel Industries, 1847–1914 (Cambridge, U.K., 1993)CrossRefGoogle Scholar; Lamoreaux, Naomi, The Great Merger Movement in American Business, 1895–1904 (Cambridge, U.K., 1988)Google Scholar; Barbezat, Daniel, “International Cooperation and Domestic Cartel Control: The International Steel Cartel, 1926–1938,” Journal of Economic History 50, no. 2 (1990): 436–38CrossRefGoogle Scholar; and Tolliday, Steven, Business, Banking, and Politics: The Case of British Steel, 1918–1939 (Cambridge, Mass., 1987)Google Scholar. On upstream integration (which has attracted more attention by researchers than downstream integration), see Mancke, Richard B., “Iron Ore and Steel: A Case Study of Economic Causes and Consequences of Vertical Integration,” Journal of Industrial Economics 20 (1972): 220–29CrossRefGoogle Scholar; and Mullin, Joseph C. and Mullin, Wallace P., “United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?” Journal of Law, Economics, and Organisation 13, no. 1 (1997): 74–100CrossRefGoogle Scholar. The Spanish case is analyzed in Houpt, Stefan, “Competir en los mercados internacionales: Altos Hornos de Vizcaya, 1882–1936,” Revista de Historia Económica 21, no. 2 (2003): 335–71CrossRefGoogle Scholar.

⁹ Burn, Duncan L., The Economic History of Steel Making, 1867–1939: A Study in Competition (Cambridge, 1940), 291Google Scholar.

¹⁰ Burnham, Thomas H. and Hoskins, George O., Iron and Steel in Britain, 1870–1930 (London, 1943), 205Google Scholar.

¹¹ Burn, Economic History of Steelmaking, 227; Burnham and Hoskins, Iron and Steel, 210; Minchinton, Walter E., The British Tinplate Industry: A History (Oxford, 1957), 81Google Scholar; Birch, Alan, The Economic History of the British Iron and Steel Industry, 1784–1879 (London, 1967), 237Google Scholar.

¹² Skelton, H. J., Economics of Iron and Steel (London, 2nd ed., 1924), 539–46, 554–57Google Scholar.

¹³ Minchinton, British Tinplate Industry, 151; Tolliday, Business, Banking, and Politics, 130–31.

¹⁴ Burnham and Hoskins, Iron and Steel, 211.

¹⁵ Carr, James and Taplin, Walter, History of the British Steel Industry (Oxford, 1962), 394, 582Google Scholar. There are no studies of these associations, nor is there any reference to them in the National Register of Archives.

¹⁶ McCallum, Ernest D., The Iron and Steel Industry in the United States: A Study in Industrial Organisation (London, 1931), 309Google Scholar.

¹⁷ Daugherty, Carroll R., de Chazeau, Melvin G., and Stratton, Samuel S., The Economics of the Iron and Steel Industry, vol. 1 (New York, 1937), 46–47Google Scholar.

¹⁸ McCallum, Iron and Steel, 196. J. T. Ryerson and Son had warehouses in Chicago, Buffalo, Cambridge (Mass.), Cincinnati, Cleveland, Detroit, Jersey City, Philadelphia, and St. Louis.

¹⁹ Chandler, Scale and Scope, 31.

²⁰ Added to the risks of getting involved in the distribution business, downstream integration would have required making a substantial investment in building and maintaining warehouses suitable for storing iron and hiring specialized personnel. It would also have required tying up capital in the product.

²¹ On the Spanish steel industry and firms, see: Portilla, Manuel González, La siderurgia vasca, 1880–1901: Nuevas tecnologías, empresarios y política económica (Bilbao, 1985)Google Scholar; Girona, Manuel, Minería y siderurgia en Sagunto, 1900–1936 (Valencia, 1998)Google Scholar; Alonso, Eduardo, Erro, Carmen, and Arana, Ignacio, Santa Ana de Bolueta, 1841–1998: Renovación y supervivencia en la siderurgia vizcaína (Bilbao, 1998)Google Scholar; Sáez, Miguel Ángel, Álava en la siderurgia moderna española: San Pedro de Araya, 1847–1935 (Álava, 1999)Google Scholar; Ojeda, Germán, Duro Felguera: Historia de una gran empresa industrial (Oviedo, 2000)Google Scholar; Cava, María Jesús, Basconia SA., 1892–1969: Historia, tecnología y empresa (Bilbao, 2000)Google Scholar.

²² Pinedo, Emiliano Fernández de, “La industria siderúrgica, la minería y la flota vizcaína a finales del siglo XIX: Unas puntualizaciones,” in Mineros, Sindicalismo y Política (Oviedo, 1987), 149–77Google Scholar. In 1900 the figures were 18,000 metric tons (t) and 8 percent, respectively.

²³ Nadal, Jordi, El fracaso de la revolución industrial en España, 1814–1913 (Barcelona, 1975), 185Google Scholar; and Balbín, Pedro Fraile, Industrialización y grupos de presión: La economía política de la protección en Españia, 1900–1950 (Madrid, 1991), 208Google Scholar.

²⁴ On the difficulties faced by independent manufacturers from 1907 on, see García, Miguel Ángel Sáez, “El mercado español de hierros comerciales: El caso de San Pedro de Araya, 1867–1925,” Revista de Historia Industrial 15 (1999): 11–40Google Scholar.

²⁵ “Proyecto de escritura de convenio,” Madrid, 16 Dec. 1906Google Scholar, article 7, sections b and c. Archive of the Unión de Almacenistas de Hierro, henceforth UAH, in the University of Seville.

²⁶ My translation here and throughout. The thirty-three who signed the agreement were joined by a further twenty-three during the first four months of 1911.

²⁷ In 1911 the UAH compiled a list of “non-associated wholesalers and large-scale consumers,” who would be given special discounts. There were 747 clients on this list, based in 391 localities throughout Spain. Buyers would have to pay for the iron acquired within a maximum period of ninety days.

²⁸ Report read and approved during the UAH general assembly held in Madrid on 18 and 19 Nov. 1912.

²⁹ Double marginalization occurs when manufacturers and distributors independently decide both the prices at which the former sell their products to the latter and the prices that distributors charge the final customers, producing a total profit for the two parties that is less than they would gain if both coordinated their prices. Most critically, double marginalization allows distributors to appropriate a higher share of the industry profit.

³⁰ To obtain a rough idea of the economic significance that rebates had for manufacturers, I compared the amount of net profits of the most important company of the cartel, AHV, with the amount in rebates CS paid to wholesalers of the UAH. The result is that discounts amounted to a maximum of 18 percent of the total net profits of AHV in 1917. This percentage fell to 8 percent in 1918 (after the first of the two reductions mentioned) and to 4 percent in 1922 (following the second reduction in the discount percentage), contributing to the improvement of the balance sheets of factories in a crucial period for them.

³¹ Fraile Balbín, Economía política de la protección, 121.

³² de Pinedo, Emiliano Fernández, “Beneficios, salarios y nivel de vida obrero en una gran empresa siderúrgica vasca, Altos Hornos de Vizcaya (1902–1927): Una primera aproximación,” Revista de Historia Industrial 1 (1992): 151Google Scholar.

³³ The departure of Moreday Gijón took place, according to the managing director of AHV, because the company could not increase its tonnage in beams by 50 percent and thus was unable to meet the demand imposed by CSM. See minutes, Actas del Consejo de Administración (ACA), of the AHV for 12 Dec. 1927.

³⁴ But not until the continued presence of Duro-Felguera and of the Sociedad Anónima (S.A.) José María Quijano had been assured; their membership in CS had been hanging by a thread because of disputes with AHV about the future of CS. See ACA of AHV, 12, 20 Dec. 1927.

³⁵ General Assembly of the UAH held in Madrid on 20 and 21 Jan. 1928.

³⁶ Minutes of ACA (30 Nov. 1925) and of the Comisión Delegada del Consejo de Administración (CDCA) (12 Dec. 1925) of AHV.

³⁷ I use the term “threatened” because it is the one used in the minutes for both meetings cited in note 36.

³⁸ Stock would have been between 25 percent and 40 percent of annual consumption. This means that a wholesaler who consumed 1,200 t a year would always be required to have stock of between 3001 and 480 t.

³⁹ The establishment of vertical restraints enabled manufacturers to avoid having to invest in building and maintaining warehouses, freed them from expenditures for stock and personnel, and saved them from having to recoup losses resulting from breaches of contract with clients caused by interruptions in supply.

⁴⁰ The three most important wholesalers bought from CS 10, 8, and 6 percent of the total purchased from UAH in 1911; twenty-eight wholesalers each purchased less than 1 percent; and 44 percent of wholesalers handled less than 2 percent. In 1926, the three largest wholesalers consumed 14, 8, and 8 percent of the total produced by the UAH; twenty-five wholesalers purchased less than 1 percent each; and forty companies each bought less 2 percent.

⁴¹ See Rust, Michael J., “Business and Politics in the Third Republic: The Comité des Forges and the French Steel Industry, 1896–1914” (Ph.D. diss., Princeton University, 1973)Google Scholar; Desgranges, Pierre, Le comptoire Sidèrurgique de France: Les comptoires de vente de la sidèrurgique française des origines à 1940 (París, 1976)Google Scholar; and Barbezat, Daniel, “The Comptoire Sidèrurgique de France, 1930–1939,” Business History Review 70 (1996): 517–40CrossRefGoogle Scholar.

⁴² According to Fraile, who uses a percentage of the total capital as a reference, the four largest iron and steel companies in France and Spain totaled 34 and 96 percent, respectively, during the 1930s (Economía política de la protección, 132).

⁴³ Minutes of the CDCA of AHV, 3 Feb. 1928.

⁴⁴ Cabana, Francesc, Can Torras dels ferros: Siderurgia i contraccions metalliques a Catalunya (Barcelona, 1987), 116–19Google Scholar.

⁴⁵ Fábrica de Mieres, Report, 1935–1938.

⁴⁶ Carreras, Estadísticas, 226. These data coincide with the figures in the new series presented by García, Miguel Ángel Sáez in Nadal, Jordì, ed., Atlas de la industrialización española, 1750–2000 (Barcelona, 2003)Google Scholar.

⁴⁷ Fernández de Pinedo, “Beneficios,” 150; and Tafunell, Xavier, Los beneficios empresariales en Españia (1880–1981): Elaboración de una serie anual (Madrid, 1996), 100Google Scholar.

⁴⁸ Average annual production of iron and steel was 285,000 t in 1907–11 and 270,000 t in 1918–22; the average annual consumption of merchant iron and steel was 137,000 t and 124,0001, respectively.

⁴⁹ Warren, Kenneth, Big Steel: The First Century of the United States Steel Corporation, 1901–2001 (Pittsburgh, 2001), ch. 3.CrossRefGoogle Scholar