During the nineteenth and early twentieth centuries, the global production and trade in cotton-textiles was dominated by Lancashire. It was “the leading industry of its day.” Footnote 1 The data supporting this claim are convincing: by 1913 the United Kingdom owned approximately 40 percent and 30 percent, respectively, of the world’s spindles and power looms. Footnote 2 Between 1910 and 1913, the United Kingdom accounted for 70 percent of world trade in cotton textiles. To place the latter figure into context, the UK’s share of world trade in these products exceeded those of Europe, the United States, and India, by a factor of 3.5, 16.6, and 74, respectively. Footnote 3
High levels of vertical and horizontal specialization were a defining characteristic of the industry. Before the mid-nineteenth century, vertically integrated spinning and weaving firms predominated. Footnote 4 However, by 1911, 77 percent of spinning capacity and 65 percent of weaving capacity were controlled by specialist spinning and specialist weaving firms, respectively. Footnote 5 Within each of the principal stages of cotton-textile production, there existed a plethora of firms. In total, approximately two thousand firms were engaged in spinning and weaving in the years immediately preceding World War I. Competition within the industry as a whole was vividly described by Barnard and Hugh Ellinger as being “without cohesion, without nucleus, loose, higgledy-piggledy, rushing hither and thither, jostling, chasing, fighting.” Footnote 6 The separation of spinning and weaving was complemented by geographic concentration. In broad terms, spinning and weaving were highly concentrated in, respectively, the south and southwest and north and northeast of Lancashire. Footnote 7
Unsurprisingly, perhaps, much of the historiography on the Lancashire cotton-textile industry has focused on the relationship between structure and performance. Particular attention has been devoted to whether the industry’s structure impeded technological choice and productivity. This has also been the subject of Anglo-American comparisons, particularly the role of labor relations on productivity and employment practices and the extent to which differences in firm structure (specialized or vertically integrated) affected financial performance. Footnote 8
In contrast, the role of merchants has been comparatively neglected; no clear consensus has emerged about the impact of these agents on the Lancashire cotton-textile industry. Steven Broadberry and Andrew Marrison, for example, have argued that merchants “played a key part” in the creation of external economies that underpinned the industry. Footnote 9 Their econometric analysis quantified the views of contemporaries, such as Elijah Helm, for whom “there [was] no mercantile organisation in the world which [was] so capable of widespread, efficient, and economical distribution.” Footnote 10 Other commentators have been less favorable in their assessment of merchants. One report stated that merchants had “made mass production of any particular line almost impossible,” and that “the interests of the merchants are often different from those of the manufacturers, for it may pay the former to push foreign goods at the expense of the latter.” Footnote 11
The purpose of this article is to reassess the contribution of merchants to the international dominance of the Lancashire industry. Unlike the previous studies detailed above, our examination focuses on two institutional developments—the establishment of the Manchester Testing House (1895) and the introduction of a uniform contract (1897)—in which textile merchants belonging to the Manchester Chamber of Commerce (MCC) played a pivotal role. We argue that such institutional innovations are examples of the ways the merchants sought solutions to endemic contractual problems that confronted the industry in the late nineteenth century. Our focus is on the nefarious practice of “short-reeling” of cotton yarn, whereby yarn counts were deliberately and systematically misrepresented. Footnote 12 This practice undermined the genuine yarn trade and, consequently, the cloth trade, which the Lancashire merchants dominated internationally. To improve governance, they introduced the two institutional solutions that were tantamount to developing a quasi-legal system: private standards established through cooperative agreements, which were legally enforceable. Such institutions are unusual for manufactures, being more characteristic of organized commodity markets. Footnote 13
The role of merchants in the standardization of quality and setting rules of contractual exchange has been recognized in the broader historical literature. Simon Ville has argued that merchants, through associations, provided strong structural and cultural properties to markets, thereby strengthening them. Footnote 14 Craig Pirrong has shown how merchants, via commodity exchanges, governed contractual relations through commodity measurements, standardization, and contract enforcement. Footnote 15 Similarly, Kenneth Lipartito demonstrated how an efficient market for cotton depended on rules enforced through the New York Cotton Exchange that involved, inter alia, stamping out the circulation of false and unreliable information to reduce information asymmetry. Footnote 16 Other disciplines have similarly studied the role of merchants in regulating international trade in commodities, standardizing product quality, developing and enforcing contracts, and generally improving governance when exchange occurred between “actors in a value chain having only partial knowledge of the product and its related production methods.” Footnote 17 In other words, the agency for developing contract rules often lies with the intermediaries rather than the producers or end-buyers in a commodity chain: in our case, Manchester merchants developed the rules for the sale of yarn. Footnote 18
The relationship between contracts and exchange is fundamental to the operation of markets. According to Alessandro Stanziani, a mainspring for the evolution of capitalist economies was the tension between national institutions, global dynamics, and local products; Footnote 19 for example, how to determine a market price that ensures accurate correspondence between price and quality? One response was to define the quality characteristics of a product. This solution, however, was not always successful because market participants might not share the same perspective on the price–quality nexus and, in any case, there may exist several definitions of “quality.” Footnote 20 The chambers of commerce (and other certifying bodies) resolved this conflict by developing benchmark standards. This, in turn, facilitated product standardization: the characteristics of the product do not vary through time. Other benefits that ensued from standards-certification included a reduction in the costs of negotiation and inspection and a reduction in uncertainty. Stanziani’s analysis focused on commodities such as alcohol, cooking oil, oats, rye, and wheat, and he concluded that detailed product–quality definitions were not necessary in other markets. Although the establishment of certifying bodies was more characteristic of market trade in primary products, the evidence presented in this article shows that quality certification was practiced in cotton textiles.
In the same vein, this article complements and extends historical analysis of governance in the supply chain. A substantial literature has documented the quality-control issues that can arise when producers are “separated” from distributors and merchants. Alcoholic beverages have featured prominently in these analyses. In the wine trade, James Simpson has demonstrated that merchants helped undermine the repute of famous Chateau, such as Lafite and Marguax, by selling “inferior” wines from earlier vintages; they also opposed implementation of Appellation d’Origine regulations, which restricted their ability to blend wine from different regions and to market the composite product as “Bordeaux.” Wine growers unsuccessfully attempted to wrestle back control from merchants; by the early twentieth century, most commodity chains in the French wine trade failed to provide “accurate information that would enable consumers to discriminate between differences in quality.” Footnote 21 Similarly, Paul Duguid has examined the advertising campaigns of merchants representing growers in the Douro and Porto regions, which had the effect of ceding more authority to earlier points in the supply chain—and subordinating merchants’ names. Footnote 22
In contrast to the above studies, merchants in the Lancashire textile industry remained of paramount importance during the industry’s rapid growth before 1914. Few manufacturers marketed their products under their own brands. One estimate indicates that by the early 1920s, there existed no more than eight publicly quoted companies and eighteen private companies that had developed their own marketing activities. Footnote 23 Many of these—for example, Sir Elkanah Armitage, Barlow & Jones, Ashton Brothers, Horrockses Crewdson & Co., and Tootal Broadhurst & Lee—were established in the nineteenth and early twentieth centuries. Nonetheless, even for these companies and other famous integrated concerns, such as John Rylands & Sons, the Latin American market for textiles was still controlled by merchants. Footnote 24 Consequently, merchants’ trademarks and brands prevailed in the sale of cotton-textiles. Indeed, some of the biggest merchants in this industry owned substantial numbers of trademarks: Ralli Brothers, owned three thousand marks; William Graham & Co. and G & R Dewhurst owned over one thousand marks each. Many other merchants owned in excess of five hundred marks. Footnote 25 The dominance of merchants’ brands meant they could not be insensible to the quality of yarn and cloth supplied in the “upstream” stages of production: failure to supply products that met expected quality would have damaged their own reputation, not those of the manufacturers. For Stanley Chapman, “competition among spinners and weavers guaranteed cheapness, while the merchants’ insistence on perfection and exact adaption to particular consumers’ wants was a guarantee of quality.” Footnote 26 We argue that merchants, operating through the MCC, effected standardization of products via the introduction of a uniform contract, which defined appropriate trade descriptions. This initiative was supported by the establishment of the Manchester Testing House, the decisions of which were accepted as a means to settle trade disputes without recourse to the courts. We recognize that the growth of specialist merchants facilitated vertical specialization within the industry. Nevertheless, in contradistinction to previous analyses of these agents, we argue that their role in developing better governance within the supply chain has not received the attention it warrants.
We contend that deconstructing how institutions counteract the pernicious effects of competition is crucial to improving an understanding of the governance of market-based exchanges. Institutions do matter, but so too do the complementarities between different institutions, both public and private. Footnote 27 We show how civic actors (merchants) established private institutions when state regulation proved inadequate for market governance. Our research also contributes to the understanding of different forms of market governance, especially those that operate at the boundary of state and civil society. Footnote 28 Under certain conditions, such as those we study, competition without cooperation may prove inadequate to foster stronger governance. Nevertheless, cooperation could be unequal and does not imply consensus, just as standardization is often fraught with politics, negotiations, and compromise. Footnote 29 The lesson from this case study should be that competitive- or market-based exchange does not by itself imply robust governance. Market exchanges are based on rules, but how these rules emerge is still largely unclear. Footnote 30
This article is based on a detailed examination of archival sources of key industry associations, including the MCC, the Master Cotton Spinners Associations, and various parliamentary reports and other official publications. It is organized as follows. Section Two briefly explains the importance of merchants in the Lancashire cotton-textile industry and the functioning of the MCC, which was the principle institution through which merchants aired their grievances. It further outlines the problems generated by “false measurements” that the merchants experienced. Section Three examines the legislative landscape and why Manchester merchants considered it inadequate to resolve the issues of product quality. Section Four details the historical context in which uniform contracting and the centralized testing for quality emerged through merchant intervention. Section Five examines the legacy of this intervention, and Section Six concludes.
Merchants in the Lancashire Cotton-Textile Industry
It is well established that the Lancashire cotton-textile industry benefitted from rapidly expanding export markets for most of the nineteenth century and up to 1914. Footnote 31 Table 1 shows the broad patterns of export trade during this period, from which the following trends are apparent. First, yarn exports were substantial throughout our period. Second, yarn, as a percentage of total cotton-textile exports, declined from the 1890s, which was a continuing trend that began in the 1870s. Footnote 32 There is no doubt that India was, by far, Lancashire’s biggest export market in the late nineteenth century, accounting for almost 40 percent, on average, of cloth exports (by volume) between 1880 and 1913. The comparable figures for Latin America and the Far East (China and Hong Kong) are 8 percent and 10 percent, respectively. In contrast, Lancashire exported more yarn to continental Europe as compared to India.
Table 1 Yarn and cloth exports by volume, 1880–1913
Source: Robson, Cotton Industry in Britain, Statistics (A), Table 1, 331.
Notes:
1. Volume denotes pound weight (millions).
2. Values in Columns 2, 3, and 4 refer to annual averages.
3. Robson assumed an average weight of 5.5 yards per 1 pound for piece goods/cloth.
The production and marketing of yarn and cloth were coordinated by a multitude of specialist merchants at each stage of production. In the early stages of the industry’s development, spinners and manufacturers employed their own agents to sell their products. Wright Armitage, a Manchester-based manufacturer, used family members to sell its cloth in the United States; McConnell & Kennedy, one of the most famous Manchester spinners, corresponded with business partners in Egypt, India, and Poland. Some merchants, such as Gregs, successfully became mill owners by the late eighteenth century. Footnote 33 However, from the early to mid-nineteenth century, yarn spinners and manufacturers began to rely on specialist merchants for distribution and retailing. Footnote 34 Estimates indicate that there were approximately one thousand merchants in the industry between 1911 and 1931. Footnote 35 This number conceals considerable specialization among this group. Yarn agents acted as intermediaries between spinners and manufacturers; it appears that they purchased approximately 50 percent of the yarn sold on the Manchester Royal Exchange. Footnote 36 Merchants were responsible for converting cloth into the final product to suit the requirements of their particular customers. Converting involved bleaching, dyeing, printing, and the processing of cloth into specific garments (handkerchiefs, household linens, shirts, underclothing). Most merchants were engaged in the export trade, but a few, such as J & N Phillips, I & J Cooper and S & J Watts, specialized in the home trade. Footnote 37 In addition, merchants also played a crucial role in disseminating market information: “The industry looks to [merchants] to maintain contact with markets … to push the sales of its products in these markets and to bring back knowledge of what the consumer needs.” Footnote 38
Foreign merchants featured prominently in the Lancashire textile trade. One of the most famous (and largest) firms, the Greek Ralli Brothers, was established in Manchester by 1828; by 1865, through a series of interlocking partnerships, they were operating in fifteen centers across Europe, India, and the Middle East. Footnote 39 Subsequently, other Greek houses joined Ralli Brothers, including Rodocanachi, Sons & Co., Rocca Brothers, and Cassavetti Brothers & Co. It was stated of the Cababé Brothers, who began in Manchester in 1840, that they had almost a monopoly in the trade with Syria. The number of Greek merchants based in Manchester grew rapidly, and by 1870 they exceeded the number of German houses. According to Stanley Chapman, the principal reasons for the success of Greek merchants was “that they succeeded in finding new markets for cotton piece goods in a part of the world where British representation was weak.” Footnote 40 In addition, Greek merchants acted as a conduit for other merchants operating in particular ports, such as in Beirut, and they developed reciprocal trading relationships between Britain and the Middle East. By the mid-nineteenth century, Ralli Brothers were establishing a “massive mercantile operation” in India; together with another leading Greek merchant house (Spartali & Lascardi), they were probably the largest merchants operating in the United Kingdom, surpassed only by the Rothschilds. Footnote 41 However, for other export markets, such as Latin America, it appears that British merchants, such as Hugo Dallas, were prominent. Footnote 42 By the end of the nineteenth century, there were about 150 Middle Eastern merchant houses based in Manchester, further consolidating Lancashire’s links with this region. Footnote 43
The MCC was the principal institution representing cotton-textile merchants. It began as the Commercial Society, founded in 1794, and its stated objectives included efforts “to resist and prevent … the depredations committed on mercantile property in foreign parts, detect swindlers, expose chicanes and persons void of principle and honour in their dealings.” Footnote 44 In 1820, the Commercial Society was reconstituted as the MCC. Merchants engaged in the Lancashire cotton-textile trade were the single most important group belonging to the MCC. Members engaged in the Lancashire cotton industry (in any capacity) accounted for 73 percent and 61 percent of total membership in 1860 and 1900, respectively. Within this textile cohort, members who were only merchants comprised 45 percent and 48 percent, respectively, of the “textile” membership, and 33 percent and 29 percent, respectively, of the MCC’s total membership in these years. Footnote 45 Given the importance of textile interests within the MCC, and especially the prominence of merchants, it is unsurprising that, in common with other chambers, the MCC lobbied actively on behalf of its members when common interests were threatened. For example, Sven Beckert has demonstrated that this chamber was involved in efforts to reduce tariffs, it opposed the emigration of artisans, and it played a key role in the agitation to secure Indian cotton during the American Civil War. Footnote 46 Beckert emphasizes that merchants were acutely aware of the need for a sound legal infrastructure, backed by the state, to safeguard their activities:
Trade ultimately depended on a legal infrastructure devised and enforced by states. Unsurprisingly, merchants spent much of their political energy on trying to strengthen this legal order and make it conform to their interests. … Conventions, although agreed upon by merchants themselves, needed enforceable rules, and merchants understood that no single actor was as efficient in enforcing those rules as the state. Footnote 47
We argue that this statement is only partly correct. The British government enacted the Merchandise Marks Acts in an attempt to eradicate, or at least minimize, fraudulent activity across various industrial sectors. As we demonstrate below, however, the MCC perceived weaknesses in this legislation; it was particularly aggrieved that these acts only applied to falsely marked yarn. The acts did not specify that yarn had to be spun to a uniform length when sold in the open market. This subtle distinction created a serious lacuna for “genuine trading.” As far as the merchants were concerned, the legal infrastructure only partially addressed their concerns. A fundamental impasse existed between trade understanding of yarn and cloth measurements and those specified in the Merchandise Marks Acts. For the same reason, discussed later, attempts by the MCC to ensure alignment between Indian and British legislation was only partially successful. We explain this issue in more detail in the context of the trade problems generated by false lengths.
Cotton yarn was sold by weight, but the “count” denoted its fineness or quality. A count indicated the number of hanks—each of 840 yards—of yarn needed to make a weight of one pound. Thus, a count of 100s meant that 100 hanks (totaling 84,000 yards) made up one pound. Higher counts indicated lighter, finer, and more expensive yarn, whereas lower counts were heavier, coarser, and cheaper. The count of yarn determined its subsequent manufacture: coarse-medium yarns were used to produce a range of products that included belting, cleaning cloths, heavy sheeting, ropes, and sailcloth. Fine yarns were processed into cambrics, handkerchiefs, lace, and muslins. Footnote 48 Short-reeling exploited this relationship. For example, a contract for 100s might be specified, but the yarn delivered was in hanks of only 820 yards (totaling 82,000 yards). To make good the deficiency in weight, coarser (heavier) yarn was actually supplied. In other words, the weight of yarn delivered was correct but not its composition. Other instances of misrepresenting the true count included increasing the thickness of cardboard backing when transporting the yarn to make up the weight deficiency. Manchester firms were clearly identified as the principal culprits: “goods which were marked 100 yards did not measure 50; those marked 150 yards only measured 70 or 80.” Footnote 49 Short-reeling was not unique to the Lancashire industry, but its prevalence was greater and more persistent compared to other UK textile regions. In Yorkshire, the formation of an “association for suppressing the practice of false marking or labelling of goods for sale” by the Huddersfield Chamber of Commerce effectively led to the disappearance of the practice of short-reeling from the woollen industry. Footnote 50 The Leeds Chamber of Commerce also supported the eradication of stamping false lengths. Footnote 51 Nevertheless, short-reeling was potentially far more damaging to the Lancashire cotton-textile industry because of the sheer volume of its exports. From 1890 to 1913, exports of cotton cloth and yarn exceeded those composed of wool by a factor of 32 and 4,300, respectively. Over the same period, exports of cotton yarn exceeded those of thread by a factor of 8.5. Footnote 52
Contemporaries claimed that the industry’s structure provided an incentive to short-reel and that specialized spinners deliberately short-reeled the yarn that was then knowingly purchased by merchants. Footnote 53 The financial rewards generated from slight discrepancies between reported and actual counts were enormous. James Lees, managing director of both Crompton & Co. and Wood End Mills, reported that his mills produced 80,000 pounds weight of 12s every week, and to mark these as 14s would yield £2,000 per annum profit if the price difference between these counts was just half a farthing. Footnote 54 Some merchants instructed bleaching companies “to make-up and mark the lengths of white piece goods in ways which are at least of doubtful legality.” Footnote 55
The insidious effects of short-reeling within Manchester were exacerbated by similar practices abroad. The MCC complained about Austro-Hungarian firms selling short-reeled yarn in Continental Europe. The chamber vociferously objected to Austrian short-reeled yarn exported to Romania, Bulgaria, Serbia, and Turkey, and it urged the Foreign Office to encourage these countries to introduce appropriate legislation. Footnote 56 Complaints regarding short-reeling in international markets emerged in the 1880s, and reached a crescendo in the following decade. Footnote 57 Merchants complained that short-reeling by foreign spinners “acted to the detriment of full reeled English spun yarn,” and that such practices “defraud the buyer and consumer, to the great disadvantage of all honest traders.” By 1892 the chamber was demanding “an international agreement [and] legislation to [end] fraudulent trading induced by improper competition.” Footnote 58
Contemporaneous with short-reeling was the practice of falsely stamping piece goods. A dedicated committee—comprising representatives of prominent merchants and manufacturers such as G & R Dewhurst, Ralli Brothers, and Tootal Broadhurst & Lee—was established in 1886 to investigate “the frequent complaints arising, principally in India, of the false marking of piece goods [imported into] that country from Lancashire.” Footnote 59 To ensure a higher standard of commercial morality within Manchester, the committee recommended that all cotton piece goods exported to India be plainly marked with the length of each piece in imperial yards; the average length of the pieces of any lot had to conform with the indicated length; and each piece could deviate from the indicated length by only a small discrepancy equivalent to 0.7 percent. Footnote 60 The MCC also instructed customs officials in Calcutta and the Bengal Chamber of Commerce about the “proper methods to be observed in determining the widths of cotton piece goods, when such widths are stamped upon the ‘face-plait’ of the goods.” Footnote 61 The MCC took a dim view of traders who employed “false folding” methods for cloth sold in Egypt and Nigeria, making the cloth appear longer than it actually was. Footnote 62
By the late nineteenth century, Lancashire merchants became increasingly concerned about the marketability of their textiles in foreign markets. Issues surrounding product quality featured prominently. “Quality” in this context was distinct from “bad spinning.” Footnote 63 For the merchants, maintaining quality meant standardization and measurement uniformity of yarn and piece-goods in terms of counts or lengths. By controlling quality in this manner, merchants sought to strengthen governance within the textile industry. Their actions must be situated within the scope and limitations of existing state regulation at the time.
Merchandise Marks Legislation in the United Kingdom and Abroad
Short-reeling was viewed as part of a more general problem of accurate “labeling and marking” of merchandise rather than as a weights and measures issue of “false measurement.” The Merchandise Marks Act 1862 introduced legislation criminalizing false indications of quantity. Footnote 64 However, in the Lancashire industry, no prosecutions involving short-reeling were effected before 1888 because there was no universal custom for marking yarn or cloth: marks might refer to either quantity or quality, as noted above. In addition, the act required proof of intent to defraud, which was a difficult task if spinners indicated that the yarn supplied did not contain hanks of 840 yards. Footnote 65 The effect of moisture on yarn was recognized as problematic. It was estimated that the amount of moisture contained in yarn in the spinning room varied from 3.5 percent to 7.5 percent. Stocks of yarn containing a high level of moisture would be affected by mildew, especially if it was exported to warmer climates. If very damp yarn was reeled in the full glare of the sun and then weighed, a totally erroneous indication of count was generated. Moreover, inherent variation in length during spinning meant that the reported “count” was not exact and this variation depended on the counts spun. For bleached yarns, the variation could be 8.5 percent. Footnote 66 Given these difficulties, the problem of marking short-lengths persisted. Footnote 67
To a large extent, the Merchandise Marks Act of 1887 remedied many of the weaknesses in the 1862 act. The 1887 act stipulated that persons who applied a false trade description to products, “unless he proves that he acted without intent to defraud,” was guilty of an offense and could be imprisoned for up to two years (with hard labor) or fined £20. Footnote 68 A Select Committee appointed to review the workings of the former act reported on its benefits. Footnote 69 However, as far as the Lancashire cotton-textile industry was concerned, major deficiencies remained. The president of the MCC, George Lord, testified to collusion on short-lengths involving Lancashire spinners, Manchester merchants, and Indian dealers. In Lord’s opinion, collusion meant it was impossible to obtain sufficient evidence to instigate a successful prosecution under the 1887 act. Footnote 70
Dissatisfied with the 1887 act, the MCC established its own investigation in 1888, which revealed that the practice of marking “short-length” was particularly acute in “bundle yarns.” Footnote 71 This inquiry revealed further problems in the application of the Merchandise Marks Act of 1887. Much depended on how the courts interpreted this act; without clarity, it was impossible for the merchants to establish how this act affected existing practices in Lancashire. Footnote 72 Because the Merchandise Marks Acts were criminal statutes, there was no opportunity to “test the water” by instigating a “friendly” civil test case. Footnote 73 The MCC was concerned that although the standard practice in Lancashire was to reel hanks of 840 yards, the Merchandise Marks Act of 1887 “does not limit spinners to this mode of reeling, but allows them full liberty to reel and tie up in any way which is not calculated to deceive.” Footnote 74 In the absence of deception, the 1887 act prevented Manchester merchants from instigating legal action even when hanks contained less than 840 yards. Short-reeling was first introduced to deceive customers but had “become so general that the practice had ceased to be dishonest.” Footnote 75 Others claimed that the practice was especially damaging to the reputation of Manchester’s cotton merchants because it represented a double fraud in terms of quantity and quality. Footnote 76
Two high-profile cases on short-reeling indicated the scale of fraud practiced by certain unscrupulous spinners and merchants after the 1887 act. In 1888, M/s. Pemberton, a Lancashire-based spinner, charged Greenhalgh & Sons with falsely supplying 60s yarn in hanks of 570 yards, the total fraud in the transaction amounting to 81,000 yards. The plaintiffs referred to the Select Committee evidence (discussed above): if a spinner could make an extra £2000 per annum by selling 12s as 14s, just imagine the profits to be earned by selling yarn in hanks of 570 instead of 840 yards. The defendants were also accused of supplying the Manchester merchant Messrs G. and A. Ananiadi with the spurious yarn; the latter were able to sell this yarn at a price that was below the production costs of genuine 60s. This then threatened to destroy the genuine trade in this yarn. M/s. Pemberton stated:
They wanted a conviction, and they wanted to put an end to those dishonest practices. If the case was given the publicity which he anticipated it would have, because it was a case which was watched with the greatest interest by the mercantile societies in Manchester … and wherever cotton spinning was carried on, it would achieve that end. Footnote 77
The defendant was found guilty, fined £4, ordered to pay £120 in costs, and required to furnish information that would allow an action to be brought against Ananiadi. Footnote 78 Subsequently, in 1889, Ananiadi was convicted of causing bundles of yarn containing 45 hanks to the pound (weight) to be made up as 60 hanks and marking these bundles with “60” to indicate the count of yarn contained in the bundle. According to Lewis Boyd Sebastian, a prominent British authority on merchandise marks, these practices represented a double fraud:
[T]he yarn was made to appear to be of a finer quality than it really was, and the hank, instead of containing its normal number of yards, viz., 840, contained only about 630 yards, and was, in fact, a spurious hank. Consequently, there was a misrepresentation both as to the length and the fineness of the yarn. Footnote 79
Despite such convictions, the MCC remained skeptical of the Merchandise Marks Acts. Convictions were secured in the above cases precisely because the yarn was falsely described. The MCC was adamant that selling hanks of yarn that were less than 840 yards was wrong per se, not just when they were falsely described: merchants were not satisfied merely by punishing false descriptions. They sought to standardize the hank of 840 yards throughout the industry and to punish anyone who provided hanks less than this standard, even if they were accurately and legally described. In 1891 the MCC appointed a special committee to investigate whether current modes of reeling and the making-up of single yarns conflicted with the Merchandise Marks Act of 1887. This committee examined a sample of short-reeled yarn and found it to be “calculated to materially injure the spinning trade of this country.” However, more evidence was required for a criminal prosecution. Letters from merchants stated, “[I]t was well known and capable of proof that large quantities of yarn are being reeled in short lengths of 600 to 700 yards per hank for shipment to the continent to the injury of legitimate trade.” Footnote 80 The law remained unclear about the standard for establishing short-reeling, and it required an expensive legal process and sympathetic courts to establish that deliberate fraud had occurred when hanks did not contain 840 yards. In 1892, in an attempt to prevent intentional departures from 840 yards, the MCC issued a statement: a hank of 840 yards of single cotton yarn was a recognized trade description; deviations from 840 yards were in breach of the Merchandise Marks Act of 1887. Footnote 81
However, the views of the MCC conflicted with the Merchandise Marks Act of 1887, and, as we show later, it became imperative that the chamber sought an industry-wide agreement that a hank was, in fact, 840 yards. Section 18 of the Merchandise Marks Act of 1887 stated: “Where, at the passing of this Act, a trade description is lawfully and generally applied to goods … the provisions of this Act with respect to false trade descriptions shall not apply.” In other words, it was lawful to supply hanks of less than 840 yards, provided this was indicated. The dilemma posed by this practice, however, was that it prevented a consensus being reached on what constituted a “standard hank,” and it had the potential to undermine the competitiveness of firms, which only supplied hanks of 840 yards.
In any case, as a purely domestic statute, the Merchandise Marks Act of 1887 was incapable of preventing short-reeling in Austro-Hungary or, indeed, anywhere outside Britain. This created a tenuous position as far as Manchester merchants were concerned. No gain could be achieved if misrepresentation was eradicated in Lancashire but permitted to continue abroad. The inequity of this situation was forcefully communicated by the MCC in a memorandum to the Foreign Office, in which it was indicated:
The Merchandise Marks Act, 1887, has not been followed by similar legislation in competing cotton-spinning countries abroad. [There is] loss of business in English yarns through the preference given to Austrian spinnings, in consequence of these being “short-reeled”… the disability thus imposed upon English spinners and merchants should be represented … with a view to inducing the Roumanian Government to prohibit the importation into their country of yarns reeled at less standard length than 840 yards to the hank. Footnote 82
This begs the question: How successful was the MCC in its petitioning of the British government to encourage Bulgaria, Romania, Serbia, and Turkey to enact legislation preventing the import of yarns in hanks that were less than 840 yards? This question occupied the MCC throughout the early 1890s, but without a solution. Footnote 83 The Serbian government published a notice in their Official Gazette, but admitted “it was unlikely [they] would take any further steps in the matter.” Footnote 84 Government officials in Romania stated they did not “possess any means of preventing the importation into Roumania of cotton yarns … not coming up to the length required by English law,” and “the state both of the intelligence and education of the Customs officials was too low to permit of the proper working of any law which might require the Customs to discriminate between true and falsely reeled yarn.” Footnote 85 Before 1913, Turkey does not appear to have introduced legislation comparable to the British Merchandise Marks Act of 1887. Footnote 86 The petitioning of individual foreign governments to prohibit the import of short-reeled yarns from Austria was the only course of action available to the MCC because there did not exist a global framework preventing unfair competition. Footnote 87
The MCC was more successful in exerting pressure on the Indian government. Footnote 88 Manchester merchants were particularly concerned with misrepresentation of textile products exported to India because of the size of the Indian market and because the British Merchandise Marks Act of 1887 did not initially apply to India. Exacerbating matters, there was no legal standard of “yard” in India. Footnote 89 The MCC emphasized the need for corresponding merchandise mark legislation to be introduced in India because “satisfactory and effectual means cannot be taken here to put an end to the present system of incorrect stamping,” so it petitioned the Indian government accordingly. Footnote 90 Manchester’s campaign coincided with growing dissatisfaction about the ineffectiveness of domestic legislation among India’s cotton industrialists. The chairmen of the chambers of commerce in Bengal, Bombay, and Madras, and the Millowners Association in Bombay, expressed their support for an Indian version of the UK’s Merchandise Marks Act of 1887. Indian industrialists recognized that many of the practices they wanted criminalized were identical to those practiced in Britain before 1887. The chamber of commerce in Karachi stated that it was desirable that an act be introduced, “making the false stamping of lengths and the false stamping of quantities punishable”; and a leading editorial stated that “the great bulk of mercantile opinion in India is in favour of early legislation, and this is certainly the view of the mercantile community in Great Britain who are interested in Indian trade.” Footnote 91 Without corresponding legislation in India, the MCC recognized that the operation of the British Merchandise Marks Act of 1887 would have the unintended consequence of encouraging continental European spinners to export textiles with false description of length to India, further undermining Lancashire’s competitiveness. Footnote 92
In 1889 the Indian Merchandise Marks Act was passed. Footnote 93 Many of its provisions were similar to those of the British Act of 1887; for example, the definition of “trade description” and “false trade description.” The Indian Act made additional provision for the identification and testing of trade descriptions featuring prominently in the textile trade. Footnote 94 At least in the early years of its operation, the Indian Act was especially effective in the detection of falsely marked textiles imported to India. Comparing 1890–1891 with 1891–1892, the total number of seizures by the Indian customs authorities was 1,133 and 894, respectively, of which 59 percent and 56 percent, respectively, were under the provisions governing false stamping of lengths on textiles. Footnote 95 Manchester cotton merchants recognized that the Indian Merchandise Marks Act of 1889 had been beneficial: it cured the deceptive marking of grey bundle yarn and it eradicated the ambiguous stamping of cloth by requiring every piece to be stamped with its actual length. Footnote 96
The Indian Act also provided for “limits of variation as regards number, quantity, measure, gauge or weight.” Footnote 97 In 1890 the Indian government established a special committee to determine this latitude. Footnote 98 However, a clear consensus proved difficult to reach. The special committee recommended that the variation on grey yarns should be 5 percent either way. The Bombay Millowners Association recommended that the permissible variation on grey yarns should be 10 percent, 7.5 percent, and 5 percent, on all yarns under 16s, 16s–30s, and greater than 30s, respectively. Recognizing that such variation could not be applied to all types of yarn, for example bleached or unbleached, the committee recommended that acceptable variation as regards count and length should be the same as grey yarns, but variation in weight would be permissible for dyed yarns. Footnote 99 Further consultation resulted in the Calcutta Notification, which specified that the only acceptable trade description applied to dyed yarns was that denoting length in which the hank was 840 yards, from which only slight variation of 2.5 percent was permitted. Footnote 100 In other words, because dyeing and bleaching caused unavoidable “shrinkage” in the “grey” yarn, it was permissible to stamp the original (pre-processed) count on the treated yarn, provided the length of a hank was no less than 819 yards. The MCC fully approved this policy. Footnote 101
However, the treatment of dyed or bleached yarns proved problematic because of differences in trade practice between spinners in Manchester and Glasgow. For example stamping “60s made up as 40s dyed” indicated a conflict between the length and weight of yarn, which was unacceptable under the new Indian legislation. Because dyeing altered the count of the yarn originally supplied, which trade description should the authorities use when determining whether a trade description was false? Should it be the original yarn count prior to dyeing or the count after dyeing? Footnote 102 A fissure developed between Lancashire- and Glasgow-based exporters, who held opposing views both on trade practices and on short-reeling. According to Manchester merchants, the most honest way of denominating all dyed yarns was that it should conform throughout to the original grey counts: “Manchester firms have stipulated for many years that … the counts of coloured yarn … are the counts of the yarn in the grey state, and not what the yarn counts in its dyed condition.” Footnote 103 The Glasgow firms considered this to be an unworkable proposition, claiming that their existing practice of sending “net weight” yarns to India was in concord with the new legislation. They claimed that “if an attempt is made to demand a description at some former period of [an article’s] existence, which cannot be proved or disproved, the door is thereby opened for misrepresentation, deception and fraud.” Footnote 104
To find a solution, Manchester merchants and the Scottish Turkey-Red Dyers Association met in Carlisle in 1898. The meeting did not arrive at a way of resolving the two opposing positions: stating the original grey counts or stamping the “new” count of the dyed yarn. It resulted ultimately in the former instigating unsuccessful legal action against the latter. Footnote 105 Despite intervention by the Board of Trade, this matter was never satisfactorily resolved before 1914, and Manchester merchants continued to complain about the export of short-reeled yarn from Glasgow to India and Singapore. Footnote 106
The preceding discussion has indicated that the legal infrastructure devised by national governments was only partly successful in addressing the concerns of the MCC: the standard hank of 840 yards remained elusive to monitor or enforce. Merchants were compelled to adopt a different strategy: convince Lancashire spinning firms to adopt this standard and to agree on the rules to enforce it. At stake was not just an issue of eliminating false description; also at stake was a deeper, more fundamental issue: Could parties to a contract reliably establish if a breach of contract had occurred if a hank contained less than 840 yards?
Uniform Contracting and Testing for Quality
By the early 1890s, merchants were keen to regulate the trading of yarn in Manchester by introducing uniform contracting rules; the MCC promulgated these in December 1896. Footnote 107 As may be expected, the contract addressed a range of issues affecting the terms of exchange, including strikes, lockouts, and compensation when a delivery of yarn was rejected because of concerns about its “quality.” Footnote 108 For our purposes, the key provisions of the uniform contract were:
The number of hanks in a bundle, taking 840 yards to the hank, must indicate the counts of the yarns. (Article 4)
In case of dispute as to counts, length, weight or condition, the yarn shall be tested by and according to the rules of the Manchester Testing House, and its certificates shall be binding on both parties. (Article 5)
In case of dispute the decision whether a delivery may or may not be rejected, and what damages shall be paid for breach of contract, shall be left to the Tribunal of Arbitration. (Rule 14) Footnote 109
Here, the interests of some of the spinning firms coincided with the merchants. The Federation of Master Cotton Spinners Association (FMCSA), in fact, collaborated with the MCC to introduce the uniform contract rules in 1895. Footnote 110 Spinning firms had recognized the need to remedy the “laxity of the present system of contracts for the sale and purchase of yarn.” This was especially the case with Oldham spinners, who depended more on yarn exports than other regions such as Bolton. Footnote 111 The FMCSA had unsuccessfully tried to introduce a standard “basis of contract” between 1893 and 1894. Oldham firms reckoned that successful standardization of contracts required “an agreement [between] not only spinners, but also manufacturers, merchants, and others interested in the subject.” Footnote 112 However, the series of cotton strikes in the 1890s forced this topic to the background.
Meanwhile, the MCC initiated its own campaign to develop such a contract that was “acceptable to buyers and sellers, [that it] should be framed and recommended for general use in the home and foreign yarn trade.” Footnote 113 Determining the wording and content of the contract required that the MCC collaborate with representatives of the major employers’ associations to achieve consensus on the length of yarn in a hank, the contingencies that might lead to breach of contract, and the establishment of an impartial and authoritative means to resolve disputes. Footnote 114
The introduction of the uniform contract was a necessary but insufficient condition for regulating the Lancashire yarn trade: the establishment of the Manchester Testing House was the other key component because it provided impartial and authoritative tests of disputed yarn quality. In addition, as we discuss below, the Testing House became increasingly involved in the testing of cloth, a crucial feature as exports of this product grew rapidly after 1900.
Initially, there was considerable opposition to the Testing House. William Tattersall (of the FMCSA) claimed there was “no desire expressed for such a house,” and that there would be considerable difficulties in its operation. Footnote 115 Nonetheless, the MCC was adamant that an independent facility for verifying the accuracy of statements on length and weight of textiles was vital:
The Yarn Sectional Committee is of opinion that arbitration cannot be satisfactorily carried out without accurate and impartial authority for the testing of raw materials, yarns and textiles. [We] take the necessary steps for the establishment of a Testing Room. Footnote 116
The Testing House was established in 1895 in collaboration with the Manchester City Council. Individual members of the MCC agreed to contribute £25 to cover any deficit that might be incurred by the establishment of this facility. Footnote 117 A manager was appointed for the new unit, and The Manchester Guardian was soon reporting that the activities of the Testing House “fully justify the action of the Chamber of Commerce in undertaking this new and important branch of work.” Footnote 118
The activities of the Testing House increased rapidly; the number of samples submitted for examination nearly quadrupled in the decade preceding World War I (Table 2). Alfred Rée, the chairman of the Testing House, claimed in 1932, “Originally instituted as a convenience for local firms [samples are now sent to the Testing House] not only from firms in Lancashire but from many parts of the world.” Footnote 119 The number of samples tested by the Testing House had increased to more than 27,000 per annum in 1930, up from about 2,700 in 1900. Based on these tests, the institution would issue “statements of opinion” certifying the relative quality of samples of yarn or cloth, the causes of defects arising in manufacture, and whether disputed goods constituted fair marketable standards. Footnote 120 It was, at the time, an almost unique institution: the linen-testing house in Belfast and the wool-testing house in Bradford, although older, were much smaller in comparison. Footnote 121
Table 2 Manchester Testing House: Samples tested, 1899–1914
Source: Calculated from GMCRO, MCC, M8/4/28, Testing House Management Committee Reports, 1899–1919.
Note: Total samples refer to the sum of yarn, textiles, chemicals, and produce.
Testing House rules required samples to be supplied for analysis: a minimum of one pound (weight) for moisture and count tests. Certificates issued by the Testing House referred only to the samples submitted, not the bulk from which they were taken. Footnote 122 For bundle yarns, testing to determine the moisture in a sample required comparison of the total moisture in the sample to its “absolutely dry weight.” Other tests compared the count determined “in condition received,” without correction for moisture, with the “count in correct condition” after appropriate allowance had been made for moisture. In some cases, the Testing House was unable to provide an exact analysis of count. For example, it was difficult to state with exact accuracy the count of grey yarn prior to dyeing or bleaching. Tests could also authoritatively determine the count of yarn after it had been woven into cloth. Footnote 123
The “scientific basis” of the Testing House rules reflected the increasing use of more sophisticated and systematic sampling techniques for ascertaining quality measurements in British industry. Footnote 124 The centralization of such measurements with the Testing House, on the basis of which quality certificates were issued, limited the extent of measurements required to adjudicate disputes. It eliminated duplicative measurements and projected an aura of scientific testing in resolving disputes regarding quality standards. More important, the rulings of the Testing House were legally enforceable in the courts, as we show in the following section.
The Legacy of Merchant Intervention
The legacy of merchant intervention is best understood as an attempt at quality control within the supply chain. The Testing House and uniform contract established centralized facilities for the testing of quality. Although within a couple of decades other rival testing facilities would emerge to compete with the MCC’s Testing House, the notion of centralized testing was definitively established within this industry. Concomitantly, the legality of the uniform contract was unequivocally established, both within the arbitration proceedings of the MCC and in the broader legal framework. The standards that the merchants sought to impose were upheld in the few, albeit landmark, legal cases that were decided following the introduction of the uniform contract in 1897. Further, the “internal” arbitration of disputes involving quality became more firmly established in this period. Footnote 125 The role of merchants in controlling this arbitration process remained contentious even in the early decades of the twentieth century. Such differences brought into sharper focus the questions: Who was ultimately responsible for the control of quality of the manufactured product? Was it the producers who spun the yarn or weaved the cloth or was it the merchants who owned the trademarks that were applied to these products? The producers had begun asserting greater control over quality, especially toward the end of our period, through research on cotton fibers (inputs) and on processes. Even so, the influence of merchants on what constituted marketable quality remained substantial, especially in export markets. Ultimately, notions of quality, standards to enforce it, and its control along the supply chain had to be reconstituted or reevaluated as the textile industry experienced structural shifts: exports of cloth became significantly more important as compared to yarn between 1895 and 1914. We examine these issues below.
The uniform contract received a mixed response from spinners: Oldham firms adopted them enthusiastically, as did the FMCSA. However, other spinners associations did not support the uniform contract rules. Burnley argued that its members would insist on “full and regular counts” without the assistance of uniform contracts; “every spinner and buyer could ignore the contract form and make any contract they chose.” Footnote 126 Bolton thought the sheer diversity of markets to which its yarns were sent would render a uniform contract worthless, as well as unnecessarily causing friction between buyer and seller. Footnote 127 The Blackburn Chamber of Commerce and the North and North East Lancashire Cotton Spinners’ Associations also declined to adopt uniform contracts. Footnote 128 The likely proportion of yarn covered by uniform contracts in this period was about 40 percent, being the proportion of spindles or spinning capacity covered by the FMCSA and the Oldham Master Cotton Spinners Association. Footnote 129
Nonetheless, there was a rapid growth in centralized testing between 1899 Footnote 130 and 1914: samples of yarns and textiles tested increased by threefold, whereas revenues from testing increased more than tenfold (see Table 2). Textile samples accounted for over 80 percent of the Testing House’s total activity. Testing of yarn amounted to between one-fifth and one-third of all samples tested. In fact, the high demand for the testing of cloth, in addition to the demand for yarn testing, surprised the MCC. Footnote 131
It is apparent from Tables 1 and 2 that the growth in the activities of the Testing House was closely aligned to the industry’s international expansion in this period. This can be illustrated through the problem of maximum permissible standards of moisture (regain) in textiles. The 1875 International Congress for the Establishment of Uniform System of Numbering Yarn, held in Turin, Italy, was the first to attempt to fix moisture standards for international trade in yarn. That congress specified that the maximum “regain” on cotton textiles was 8.5 percent. However, Manchester merchants did not accept this standard. Determining the true regain for yarn was problematic for a variety of reasons. The first issue was that the regain of 8.5 percent was misleading because it only applied if the yarn was “absolutely dry.” In addition, this regain was calculated using an “average condition of the air,” but in spinning mills, the amount of moisture varied between 3.5 percent and 7.5 percent. Footnote 132 In these circumstances, the MCC considered it impossible to set a “true” standard, so consequently the activities of the Testing House were crucial to adjudicating on these differences.
Notwithstanding partial acceptance of the uniform contracting rules, the MCC could settle disputes involving quality of yarn or cloth on the basis of its testing facilities, particularly because its tribunal was a “properly constituted court” under the Arbitration Act of 1889. Footnote 133 In addition, the voluntary nature of the uniform contract did not prevent such contracts from being legally enforceable in arbitration or courts of law. The case of Atkinson & Co. v. Emmott is illustrative here because both parties transacted on the Manchester Royal Exchange. After the contract was signed, the market price of yarn declined and the defendant refused to take delivery of the yarn. As the terms of the contract were governed by the uniform contract rules, as stated in the contract, judgment was entered in favor of the plaintiffs. In Pearl Mill Co. v. Smith & Forrest (1907), Judge Bradbury stated, “The practical effect [of the case] on the evidence before him, was to fix on spinners the standard of moisture fixed by the Manchester Testing-house … and if spinners desired to depart from [the standard] they must do so in their written contracts.” Footnote 134 The directors of the MCC received this judgment with considerable satisfaction. Footnote 135
The activities of the Testing House and the Tribunal of Arbitration were not immune from criticism. In 1905 a Manchester textile agent claimed “nobody in Manchester would take any notice of a Testing House Report; that the place consisted of a parcel of boys; and that the Testing House could not test correctly, or within 20%.” Footnote 136 Similarly, an anonymous letter, penned under the pseudonym “Merchant,” was published in the Manchester Guardian that specifically criticized the competence of the Testing House to determine the true count of yarn from cloth samples: “I think it is nothing short of a public scandal that after an existence of fifteen years they have not yet discovered a reliable method of obtaining the counts of yarn in cloth.” Footnote 137 In the latter case, the complainant, Charles Duckworth, agreed to participate in a further trial in which the count of yarn would be determined prior to and after weaving. Three types of cloth were analyzed; it was reported that the average difference between the count prior to weaving and after its conversion into cloth was just 1.6 percent. The MCC reported that “no further action be taken, as the above mentioned test confirmed the reliability of the system of testing.” Footnote 138 Prior to 1914, we can find only one other reported complaint involving the determination of yarn counts from cloth, and the MCC was able to firmly rebuke the complaint because all yarns had slight natural variation. Footnote 139
The Tribunal of Arbitration, which was set up as a “merchant’s court,” also attracted some measure of criticism. With “merchants acting as judges,” some considered it a “dangerous experiment” to exclude legal assistance to parties involved in the dispute. Footnote 140 The absence of legal representation was not strictly true, as the MCC claimed that solicitors were allowed presence at tribunal hearings. The real issue was the secrecy surrounding its proceedings. A member of the MCC complained that even “ordinary information such as the number and nature of disputes and names of arbitrators, which should be on records of the Chamber is denied to its members.” Footnote 141 The MCC responded to this complaint by stating, “[I]t would defeat the object for which the Tribunal of Arbitration was formed if greater publicity were given to the proceedings.” Footnote 142
Testing House reports formed a crucial part of the tribunal’s (and the MCC’s) efforts to minimize disputes arising from short reeling. When Elijah Helm wrote to the Bombay Chamber of Commerce about a sample of 20s count that turned out to be counts of 17.9s, he enclosed the Testing House “certificate of examination” as evidence. The test showed that the samples had lengths of 720 yards, 743 yards, 681 yards, and 712 yards, rather than the hank of 840 yards. Footnote 143 In 1910 the tribunal claimed that, as “usual, the most frequent class of cases [were those with] questions [regarding] whether goods supplied are or are not in accordance with the contract of sale, and whether they are to be rejected or accepted, with or without an allowance.” Footnote 144 Other representative results from reports issued by the Testing House are shown in Table 3. Even though by 1914 the tribunal reported that there were “fewer cases in which quality of condition of goods sold came into question,” this was more a reflection of the decline in the disputes referred to the tribunal for that year. Footnote 145
Table 3 Examples of cases investigated by the Manchester Testing House
Sources: GMCRO, MCC, M8/4/32, Minutes of the Yarn Section, 5 July 1897; M8/4/34, Minutes of the Yarn Conference held at Carlisle, 9 March 1898 (letter dated 25 April, 1899); M8/4/32, Minutes of the Yarn Section, 4 April 1898, 4 May 1898; M8/4/28, Testing House Management Committee, Joint Meeting of the Yarn and Testing House Sections, 26 February 1902.
Notes: a. Column 2 refers to the merchants who reported the fraud.
b As discussed in the text, the “standard” hank for grey yarns was 840 yards; the maximum permissible “shrinkage” for dyed yarns was 2.5 percent of 840 yards, which equates to 819 yards.
c Shortfall is expressed as the percentage difference between reported and actual length, in yards. In some cases, the actual length of yarn (not count) is reported.
Overall, apart from some specific (and isolated) complaints involving the assessment of yarn counts in cloth, the activities of the Testing House were favorably received. The Times reported in 1913 that this institution had “admirably served the needs of the industry on the practical side,” and it acknowledged the “cutting-edge” analysis of the Testing House in determining yarn counts from cloth. Footnote 146 The MCC reported that cotton manufacturers were intending to establish a similar facility in Boston, Massachusetts. Footnote 147 American manufacturers claimed “analysis of testing of textile fibres is rapidly becoming more necessary,” and cited the activities of the Manchester Testing House as an example of “advances in scientific examination.” Footnote 148 It is also apparent that certificates issued by the Testing House attesting to the particular attributes of samples were deployed in the advertising strategies of firms (Figure 1). This practice was not condoned by the MCC because it could undermine its impartiality, and it remains uncertain whether the MCC had the legal power to prevent such advertisements. Footnote 149
Figure 1 Sunresista advertisement.
© The British Library Board. LOU.LD 167.
The yarn spinners and other manufacturers had an uneasy relationship with the merchants on the issue of uniform contracting and the Testing House facilities. In 1916 the wartime government approached the Lancashire manufacturers with a proposal to set up a research and testing facility independent of the MCC, and many prominent manufacturers supported this initiative, including J. W. McConnel, H. P. Greg, W. Lawrence Balls, and Kenneth Lee. The discussions culminated in the establishment of the British Cotton Industry Research Association in 1919, rechristened shortly thereafter as the Shirley Institute. It offered yarn-testing facilities to rival those of the MCC’s Testing House. Footnote 150 This development was of great concern to the merchants, and in later years the MCC reported that the work of the Shirley Institute “was affecting the progress and position of the Testing House,” and that it needed to “watch with care any developments which might prove detrimental to the progress and position of the Testing House.” Footnote 151 Even though this competing facility set up by the manufacturers was some years in the future, the MCC had recognized this threat as early as 1907. The Testing House Report for 1906 stated that the decrease in the number of yarn tests was because “certain firms have found it worthwhile to establish their own testing departments, and thus to withdraw some of their support from the Testing House.” Footnote 152 Greg and Co. had a well-established testing room by the 1920s, wherein they would conduct their own tests on yarn bought from specialized spinning firms, a legacy of their decision to discontinue spinning their own yarn in 1894. Footnote 153
Conclusions
The case of merchant intervention in the Lancashire textile industry has broader significance beyond contributing to the considerable literature on this industry. This significance relates to how historians should study standards, law, institutions, and historical markets. Philip Scranton and Patrick Fridenson have stressed the importance to business historians of investigating standards in which we not only glimpse the agency of historical actors but also the outcome of contending interests at play. Footnote 154 This article has examined the efforts of Manchester merchants to enforce their standards along the supply chain to regulate what they considered to be the nefarious practice of short measurements in yarn and cloth products. That they were only partially successful in our period does not diminish the significance of their influence on the textile industry. They sought to control product quality through standardization in an industry that had already gained a reputation for extreme product specialization. Merchant intervention acted as an integrating influence within an industry made of disintegrated modes of production and distribution; Peter Gibbon terms this as “loosely filamented relationships lacking integration and hierarchy.” Footnote 155 Our case study demonstrates how such “merchant-driven” supply chains were historically able to enforce quality standards, which, although challenging, were achievable without vertical integration. Existing historical studies have hitherto explored such issues in primary products. We contribute to the literature by exposing how this was true in important manufacturing sectors, such as textiles, as well.
Significantly, the article brings into focus the issue of how conflicting interests shape the standards and notions of quality that eventually dominate an industry. The state-of-the-art understanding of standard recognizes that standardization is a political process. Footnote 156 Our case study especially highlights how the competition for control of the supply chains was an integral aspect of establishing standards. Footnote 157 Disentangling the standardization process requires closer attention to competing interests vying for control of the supply chain: competition not just between firms in a horizontal relationship but also between firms in a vertical relationship within supply chains. In our case study, merchants invested considerable resources in imposing standards, as it gave them control over product quality. Simultaneously, manufacturers attempted to retain flexibility in production—and thereby control over quality—by not enforcing too rigid a standard for yarn or cloth length. At stake was the choice of (1) a restrictive but easy-to-monitor and “one-size-fits-all” standard that potentially stifled innovation, or (2) multiple “competing” standards that potentially increased the costs of monitoring and compliance but provided manufacturers with the flexibility required in a highly competitive environment. The Lancashire textile industry grappled with such issues during the latter half of the nineteenth century. Footnote 158 This issue was substantially, but not conclusively, resolved by the end of our period.
The article further highlights the institutional conflicts surrounding standardization. Standards exhibit characteristics of public goods, which does not preclude their origins as privately set standards; conversely, the adoption of publicly set standards need not imply mandatory compliance. Footnote 159 Are publicly set but compulsory standards more effective in controlling product quality, as compared to standards that are privately set but whose adoption is voluntary and depends on customs prevalent within the trade? Merchants grappled with these issues throughout the period we study. Differences in accepted norms within the trade generated discord between textile firms in terms of what constituted illegal deviation from product standards. This is evidenced by the conflict between Manchester merchants and producer firms in Lancashire, Glasgow, and elsewhere in Europe and India. Such conflicting notions of acceptable (or de facto) standards show the limitations of national statutes to resolve the specific problems affecting the yarn trade. The national and international legislative environment governing misleading trade descriptions was insufficient to maintain confidence in market transactions. The fundamental disjuncture between legislation and accepted trade use of terms was an important reason for this. The problems of obtaining sufficient evidence to satisfy the specific requirements of the Merchandise Marks Act of 1887 meant prosecutions were limited. Charles Bailey, who was employed by Ralli Brothers, claimed that the nominal damages awarded in successful litigation deterred many from instituting legal action. Footnote 160 As we have shown, such instances exposed the limitations of state legislation.
Merchant intervention in the form of uniform contracts and centralized testing facilities aided the arbitration of disputes and mitigated the limitations of state legislation. This system effectively introduced a “private legal system” that allowed the merchants to “internalize” the governance and control of product quality. Footnote 161 The emergence of such a quasi-legal system was not unique to the trade in textile manufactures, but it was very unusual for a manufactured commodity—usually these institutions are evident in markets involving primary commodities in this period. Our contribution to the state-of-the-art is to substantially highlight the significance of such private legal systems in Britain, and the manner in which such institutions operated at the boundary of civic and state society. Study of such institutions will allow historians to further develop a more nuanced and grounded understanding of commercial and economic institutions, rather than just the binary of “absence or presence” of legal institutions to promote governance.
This article additionally addresses more fundamental questions about the evolution of capitalism and market governance during the Victorian period. Paul Johnson has argued, “The ways in which market structures were constructed in Victorian Britain is only indistinctly glimpsed in the literature.” Footnote 162 He further stressed that economists have tended to reify and simplify the market, assuming away the contestable and conditional nature of economic exchange. For example, the transaction-cost view describing market exchanges relegates the issue of quality, standardization, and contract enforcement to “market-based governance”; that is, repeated transactions in a competitive setting. Footnote 163 Historians, too, have largely ignored the institutional processes by which market structures were created in nineteenth-century Britain. Footnote 164 The lack of both economic and historical understanding of markets as social spaces in which groups with diverse interests contend with each other to specify the rules of exchange has resulted in a lopsided understanding of how market governance functioned.
In this article, we have responded to Paul Johnson’s call to pay greater attention to the institutional process through which rules of market exchange develop. We glimpse the conditional and contestable nature of market exchange and how rival groups sought more direct means to govern it. We see how they attempted to develop solutions to transactional issues—standardizing product quality—internally within the industry and to overcome the limitations of state legislation (e.g., the Merchandise Marks Acts). However, competition was also accompanied by cooperation between firms that fiercely competed for markets and resources: competition and cooperation are two sides of the same industrial coin. Competition threatened quality debasement, which necessitated some degree of cooperation on quality standards. As Robin Pearson has noted, in commercial relations trust has to be laboriously constructed, even if it is innately present in the culture of contracting parties or in which a legal framework exists to encourage it. Footnote 165 People not only rely on the general concepts of trust and reputation but also on specific dealings with other individuals. Footnote 166 In other words, market governance is based not only on general institutional arrangements (e.g., standards, legislation) but also on specific organizational arrangements (e.g., quality testing, dispute resolution mechanisms) that characterize an industry. In the Lancashire industry, generic notions of trust, reputation, and repeated interaction could no longer achieve governance. Arthur Redford shows how merchants claimed that methods to “shame the fraudulent” remained largely unsuccessful after around 1860. Footnote 167 Institutions such as the MCC dealt with both strategic manipulations by dishonest firms and honest disputes that arose in the course of exchange. Such institutions were key organizational forms in an industry where the “visible hand” of vertically integrated organizations accounted for a small percentage of capacity. They were “gap-filling” in a highly specialized industry, just as business groups or integrated firms were when markets were thin. Footnote 168 Many nineteenth-century firms in Lancashire spun yarns while some others “spun a yarn.” The market functioned because this industry was able to agree on standards and institutions to overcome the weaknesses of market-based exchange that state legislation could not.
