By Ioana Lungescu
The extremely competitive environment of early modern trade fostered many monopolies, often belonging to different nations, and employing the new financial technologies as they arose. The first truly monopolistic company pioneered would have been the Dutch East India Company (DEIC), formed in 1602. It was unique for two reasons: 1) it was the first large joint-stock company to be formed, out of the consolidation of multiple smaller Indian trading companies, and be issued shares on the Amsterdam Stock Exchange, and 2) it was the first company to be given vast governmental powers, specifically war-time powers, such as the ability to maintain a standing army, build forts, and conduct formal negotiations on behalf of the state in Asian countries. The amount of control the States General of the Netherlands gave up to the DEIC was unprecedented, and this is what allowed the Netherlands to remain competitive and the economic hub of the world in the early half of the 17th century. Their success was so rewarding that the States General renewed the DEIC’s contract in 1623 without imposing a second termination limit. It is from the Netherlands and from the DEIC’s economic fortune that the modern context for the word “monopoly” arises, being that the DEIC faced little competition from other European firms for the commodity market in India at the time, the DEIC set its own terms, contracts, and prices in India, and the DEIC was extremely profitable.
Following this definition, it is analogous that the English East India Company (from here on to be referred to as the East India Company or EIC) was also a monopoly. Looking over the history of the EIC, it was also founded as a joint-stock company, with shares issued by the Royal Exchange, in 1600. Furthermore, in 1670, the EIC was granted a series of five acts giving it the rights to acquire autonomous territory in India, to mint money, to build fortresses, to command troops, to form alliances, to make war and peace, and to exercise civil and criminal jurisdiction in its colonies. This extent of dominion was unprecedented for a merchant company in England, and in Europe. At the same time, majority shareholders in the EIC were members of the British Parliament, especially the House of Lords, which severely entangled the views of the government and those of the company.
East India Company v. Sandys (1684)
Statute of Monopolies
This case makes reference to the Statute of Monopolies, passed in England on May 29, 1623/4. This statute was based on the new invention of patents. It stated that an individual can monopolize an area of industry if they received a patent for that area.
East India Company v. Sandys is one of the most well-documented and monumental cases concerning the East India Company. It is in this trial that the EIC claims it is not a monopoly, considering that England, at the time, holds a stringent anti-monopolistic stance, as per the Statute of Monopolies. However, it is also in this case that one gets a sense of how deeply co-dependent Parliament and EIC are on one another.
Background: Sandys, an independent English merchant, is caught trading in India in areas under contract with the EIC. Because he was trading on land belonging to the company, which was then already funded through government bonds issued by the Bank of England, he was in essence stealing profits from the Crown and thus was liable to forfeiture. Now, Sandys denied ever having been in India or having conducted trade there. He also directly claimed that the EIC was a monopoly and because of England’s anti-monopolistic laws, the patent of the EIC giving it exclusive rights to India was void.
Plaintiff Arguments: In response to Sandys’s accusations, the EIC first responded by demonstrating that their patent (the contract that allowed them to exist and operate) was not void because it had been issued and renewed by several monarchs of England. By this logic, there did not exist any possibility that they were a monopolistic company as the Crown had allowed them to continue conducting business. Further in response to the claim that they were a monopoly, the EIC responded that it was “Natural Justice” for them to conduct trade with India, but also, that they licensed merchants to trade on their behalf in India (“Natural Justice” refers to the European belief held at the time that it was their duty to colonize non-white nations). This was the EIC’s method of showing that there was not just one merchant setting an all-encompassing price and standard in India, but rather multiple people simply working on their behalf.
Ruling: The patent of the EIC was deemed valid in the name of the Crown. Furthermore, in order for Sandys to have a valid case and be protected from forfeiture by the Crown, he would have first admit and then prove that he was in India and conducting business there at the time in question. Due to poor documentation, this would be almost impossible to prove. Given the arguments presented in court, it was difficult to say whether or not the EIC was a monopoly, because it was operated under the patent for the Regulation of Trade and it mainly operated outside the physical jurisdiction of England. In the end, no injunction was granted and the EIC was free to sue Sandys for profiting off their trade zones, however, it is unclear whether forfeiture was ever attempted – there are no further cases listed against Sandys.
Comments: From just this case, it is clearly visible how blurry the lines were when it came to defining “monopoly” in England. It seems that when it profited the king and country, the Crown turned a blind eye to its own Statute of Monopolies. What is of importance here is how close the Judge was to admitting that the EIC was a monopoly, but in the end, he settled for ambiguity, most definitely in order to preserve his position as judge in the High Court of Chancery and good relations with Parliament. But in his ambiguous answer lies the notion that given the evidence presented in East India Company v. Sandys there exists the opportunity to claim that the EIC is a monopoly.
East India Company v. Evans & al (1684)
East India Company v. Evans & al was one of the first cases to be tried with the precedent of East India Company v. Sandys. East India Company v. Evans & al became so influential and important to the lawyers of the EIC because it was the only case to directly tackle the question of the EIC being a monopoly and because it came to no definite conclusion in that regard.
Background: In East India Company v. Evans & al, the EIC accuses a class of merchants of making “leagues” with princes, building forts, and maintaining forces in India, all rights exclusively granted to the EIC under their 1670 contract. The EIC wanted the court to issue a discovery inquiring into what the Defendants traded for in India and how much they ought to pay in consequence.
Defense Argument: Evans and the others pleaded that they were free merchants for England. They presented three English trade statutes:
- Statute 21 Jac.: trade may not be restrained
- Statute 9 Edwardi tertio: all merchants may trade anywhere
- Statute 18 Edw. 3: merchants may trade anywhere not in enmity of the King (India not being in enmity)
Plaintiff Response: The EIC responded that the statutes presented by the merchants were only in relation to home trade, not to foreign trade (where they formed this argument from is unclear – it is quite possible the EIC just said this and it later went uncontradicted by the Crown). They also now brought up their win against Sandys, citing the same arguments as there.
Ruling: The Defendants must answer the discovery bill.
Comments: This ruling confirms the Judge’s, and Parliament’s, unwillingness to rule against the EIC. Even though Evans & al presented legal arguments disproving the EIC’s ability to monopolize trade, the EIC bent Evans & al’s argument to to fit their own needs. In regards to the Statute of Monopolies, the EIC is unable to patent the entire industry of “trade”, therefore they should not have a monopoly over the England-India trade. However, from the Judge’s ruling that Evans & al must disclose to the EIC what they exchanged in India and pay reparations, it becomes clear that the government is unwilling to harm the company.
