More about the 1871 Ontario Salt Case
While this case is mentioned in The Salt Man, following are more details
Frustrated at the government’s continued lack of support for their industry, in June 1871, several salt manufacturers in Huron County formed a cartel called the Canadian Salt Association. The goal of the Association was to benefit the salt producers’ community by stabilizing the price of salt and uniting against American competitors who continued to benefit from the protective U.S. tariff on imported Canadian salt.
With the cartel, all salt would be bought and sold by trustees appointed by the Association. The trustees immediately raised prices from one dollar and twenty-three cents to one dollar and fifty-five cents a barrel. This led to grumbling by customers, but the cartel believed the price increase was necessary for the industry to survive.
The biggest flaw in the cartel’s plan was that each member had a different cost structure, making it difficult to agree on a common price. While places like Goderich had the cheapest labour and harbours, places like Seaforth and Clinton had less expensive fuel and were closer to major markets like Toronto.
In October, Alexander Armitage and Samuel McCaughey, on behalf of the Merchant’s Salt Works in Seaforth, attempted to withdraw from the cartel. In turn, the Canadian Salt Association sued them in Ontario’s Court of Chancery for an injunction to stop them from selling their salt through any means other than through the cartel. The case became known as Ontario Salt.
The Merchant’s two main arguments against the Association were that the agreement was against public policy on monopolies and that it was an undue restraint on trade. These arguments were shot down, with the ruling made that the Association was not a monopoly because companies who belonged to it were not the only ones engaged in salt making in Ontario, and Ontario was still importing a lot of salt. The court determined the salt agreement actually benefited the public because an inspector guaranteed the quality of the salt, and the amalgamation decreased the cost of production.
The judgement also determined the Association was not an undue restraint on trade because it did not restrict the production or sale of salt. With the cartel, all salt was sold through trustees whose duty was to sell it in the interests of all, equally. A contract to charge the same prices was not an improper restraint of trade.
The judgement in Ontario Salt recognized that protectionism was legitimate and that Canadian salt makers had the right to form a cartel to battle the contemptible behaviour of salt companies in the United States that were depreciating the price of salt by flooding the market with salt sold at giveaway prices.
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