Dumping, tariffs and cartel formation in Germany

In order to prevail over the British Bessemer works’ advantages with regard to raw materials and freight, the German works were obliged to make some considerable price concessions in their export markets compared with their home market. Until 1 January 1877 the latter was still being protected by a customs duty of 20 marks per ton of steel rails, over and above freight costs. This is why, starting in 1874, different prices were set for the internal and external markets, as shown in Table 14.

Once such a lavish price differential beyond the scope of the different freight costs got through to the consumer, it was immediately assumed that suppliers were restricting competition on the home market. Successful dumping, as practised during the 1870s by the German Bessemer works, can, in the event of overcapacity, only function on the basis of cartels or cartel-like agreements. Such agreements concerning iron rails had existed between the Rhineland- Westphalian works since the 1850s. In the case of Bessemer rails, firm arrangements had existed since 1868 at the latest between the Bochumer Verein, the Horder Verein and Krupp. At the time, however, these three works did not face serious competition in Prussia. Orders were divided in a ratio of half for Krupp and a quarter each for Bochum and Horde until December 1869. As was already usual with these kinds of products, whenever tenders were submitted each works in turn would be ‘protected’ by the others, which would give higher estimates.