Copyright © by Den danske historiske Forening.
Kurt Pedersen & Peter Sørensen
The Failed Slaughterhouse Merger in Denmark 1891: A Cartel Theory Case Study
In 1890-91 there was a concerted effort in Denmark to implement a grand merger of all the country’s pig slaughterhouses, whether co-ops or privately owned. The attempt, as is well known from the literature, was unsuccessful. The creation of a consolidated Danish meatpacker organization had to wait a good hundred years, and by then it was but the crowning achievement of an already victorious co-op movement that had carried through a long series of branch mergers. At the basis of the early attempt were a number of quite convincing arguments on the advantages of cooperation: gains to be made by internal rationalization and cost cuts; the benefits of a united front vis-à-vis the promising British market.
In order to analyse these late nineteenth century events and identify the causes of the negotiations’ breakdown, the present article utilizes cartel theory evolved within the academic field of industrial economics. From the literature on the subject the study draws on sixteen determinants which have been proposed to explain the success or failure of mergers. In the context of the Danish case these determinants are assessed one after the other, and on the basis of the historical sources the study suggests a causal explanation of the breakdown. Among the important analytical themes the following may be emphasized as particularly noteworthy: firstly, the circumstance that there were two main groups involved (co-ops and private firms), both of which were notably heterogeneous; furthermore, the type of considerations taken into account by the leading negotiators; and finally, the planning and course of the negotiations.
With regard to current theory it is especially interesting that the source material provides the basis for a thorough analysis of a failure. As a rule there has been much greater openness in the case of successful mergers and cartels. In the view of the present authors, here is a case where personal and ideological factors took precedence over economically rational considerations – a conclusion that would seem to be of some interest, not the least for current economic theorizing: rationality has its limits.
Translated by Michael Wolfe