Aug

27

Herbert Dow, the Monopoly Breaker
By Dr. Burton W. Folsom
The Mackinac Center for Public Policy

Above all, Dow was stubborn and hated being bluffed by a bully. When Jacobsohn stormed out of his office, Dow continued to sell bromine to countries from England to Japan. Before long, the Bromkonvention went on a rampage: It poured bromine into America at 15 cents a pound, well below its fixed price of 49 cents, and also below Dow’s 36 cent price.

The imaginative Dow worked out a daring strategy. He had his agent in New York discreetly buy hundreds of thousands of pounds of German bromine at the cartel’s 15 cent price. Then Dow repackaged the German product and sold it in Europe—including Germany!—at 27 cents a pound. "When this 15-cent price was made over here," Dow said, "instead of meeting it, we pulled out of the American market altogether and used all our production to supply the foreign demand. This, as we afterward learned, was not what they anticipated we would do."

Indeed, the Germans were befuddled. They expected to run Dow out of business; and this they thought they were doing. But why was U. S. demand for bromine so high? And where was this flow of cheap bromine into Europe coming from? Was one of the Bromkonvention members cheating and selling bromine in Europe below the fixed price? Powerful tensions surfaced from within the Bromkonvention. According to Dow, "the German producers got into trouble among themselves as to who was to supply the goods for the American market…."

The confused Germans kept cutting U. S. prices—first to 12 cents and then to 10.5 cents a pound. Dow meanwhile kept buying the stuff and reselling it in Europe for 27 cents. Even when the Bromkonvention finally caught on to what Dow was doing, it wasn’t sure how to respond. As Dow said, "We are absolute dictators of the situation." He also wrote, "One result of this fight has been to give us a standing all over the world… We are in a much stronger position than we ever were…"


Comments

Name

Email

Website

Speak your mind

Archives

Resources & Links

Search