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United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?

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  • Mullin, Joseph C
  • Mullin, Wallace P
Abstract
This article examines United States Steel Corporation's acquisition by long-term lease of the iron ore properties of the Great Northern Railway. This 1906 transaction, which significantly increased U.S. Steel's already substantial ore holdings, has been characterized by contemporary observers and modern economists as an example of vertical foreclosure. We present qualitative and quantitative evidence to support an alternative view that the lease generated a net efficiency gain as it promoted relationship-specific investment in the exploitation of the ore properties. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Mullin, Joseph C & Mullin, Wallace P, 1997. "United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 74-100, April.
    • Handle: RePEc:oup:jleorg:v:13:y:1997:i:1:p:74-100
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    Cited by:

    1. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    2. Krolikowski, Marcin W. & Adhikari, Hari P. & Malm, James & Sah, Nilesh B., 2017. "Inter-firm linkages and M&A returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 63(C), pages 135-146.
    3. Jaideep Shenoy, 2012. "An Examination of the Efficiency, Foreclosure, and Collusion Rationales for Vertical Takeovers," Management Science, INFORMS, vol. 58(8), pages 1482-1501, August.
    4. Volodymyr Bilotkach & Kai Hüschelrath, 2013. "Airline Alliances, Antitrust Immunity, and Market Foreclosure," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1368-1385, October.
    5. Enghin Atalay & Ali Horta?su & Chad Syverson, 2014. "Vertical Integration and Input Flows," American Economic Review, American Economic Association, vol. 104(4), pages 1120-1148, April.
    6. Michiel Bijlsma & Viktoria Kocsis & Victoria Shestalova & Gijsbert Zwart, 2008. "Vertical foreclosure: a policy framework," CPB Document 157, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Cooper, James C. & Froeb, Luke M. & O'Brien, Dan & Vita, Michael G., 2005. "Vertical antitrust policy as a problem of inference," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 639-664, September.
    8. Marissa Beck & Fiona Scott Morton, 2021. "Evaluating the Evidence on Vertical Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 273-302, September.
    9. Tasneem Chipty, 2001. "Vertical Integration, Market Foreclosure, and Consumer Welfare in the Cable Television Industry," American Economic Review, American Economic Association, vol. 91(3), pages 428-453, June.
    10. Suzuki, Ayako, 2009. "Market foreclosure and vertical merger: A case study of the vertical merger between Turner Broadcasting and Time Warner," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 532-543, July.
    11. Cuellar, Alison Evans & Gertler, Paul J., 2006. "Strategic integration of hospitals and physicians," Journal of Health Economics, Elsevier, vol. 25(1), pages 1-28, January.
    12. Simshauser, Paul & Tian, Yuan & Whish-Wilson, Patrick, 2015. "Vertical integration in energy-only electricity markets," Economic Analysis and Policy, Elsevier, vol. 48(C), pages 35-56.
    13. Fee, C. Edward & Thomas, Shawn, 2004. "Sources of gains in horizontal mergers: evidence from customer, supplier, and rival firms," Journal of Financial Economics, Elsevier, vol. 74(3), pages 423-460, December.

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