History - Partners and Partnerships

"Experience ... has proven that this trade, from its very nature cannot be carried on by individuals. A very large capital, or credit, or indeed both, is necessary, and consequently an association of men of wealth to direct, with men of enterprise to act, in one common interest, must be formed on such principles, as that in due time the latter may succeed the former, in continual and progressive succession. Such was the equitable and successful mode adopted by the Merchants from Canada" (Alexander MacKenzie)

In the late 1760s, the British fur trade in North America consisted of 3 well-defined branches: the commerce of Michilimackinac; the trade to the Northwest by way of Grand Portage by Montreal merchants; and the chartered London-based Hudson's Bay Company. While the traders at Mackinac were pushing down into the Illinois country and across the Mississippi, the Montreal merchants and the HBC were extending their commerce into the vast region north west of Lake Superior. With the formation of the NWC, the trade expanded to the Rockies, the Canadian sub-arctic, the Plains, the Northwest coast and the Columbia river.

This wide expansion was notably due to the fact that several Montreal traders decided to pool their interests and capital together for the purpose of creating non-chartered partnerships which would allow each share-holder to invest capital and savor profits. The NWC was initially formed in 1779 as a joint-stock company by a number of independent trading partnerships active in the western trade. It was seen as an effective way of providing an organization for raising capital as well as a lobbying presence within the government, who was not always aware of or eager to fulfill the traders' interests. Throughout its existence, the NWC went through several distinct stages. The first co-partnership of 1779 was followed by the agreements of 1780-82, 1783-87, 1787-1792, 1792-1798, 1798-1802, 1802-1804, and 1804-1821. The NWC's roster changed over the years, but the 1779 group did contribute one lasting mark: the company flag flew for the first time in that year.

The origins and development of the North West Co.

After the conquest of New France by the English in 1763, merchants and fur traders of Scottish and English descent started trading in Montreal, Detroit, and in the Great Lakes area. As a result, intense competition developed among rivals. As the French bourgeoisie was gradually replaced by English-speaking merchants and traders, the fur trade expanded once again into the Northwest. Because every merchant believed in an equal right to trade, the discoverer of a rich area in furs was soon followed by others who would quickly undersell him.

While many traders ruined one another through violent rivalry, some quickly realized the benefits of cooperation. As early as 1765, the fur merchants of Montreal wrote a joint memorial to Governor Murray in which they complained of the regulations imposed on the trade. Although they were unsuccessful in altering all regulations in their favor, many traders stayed together and continued to press for a better organization of the trade. Moreover, temporary combinations to finance trade and travel expeditions arose such as those organized by Todd, McGill and Co. and the Frobishers in 1769. In 1774-5, the arrival of several large expeditions in the Saskatchewan region brought a realization on the part of their organizers that, if they wished to over-power the HBC, it would be useless to compete among themselves.

In November 1775, the city of Montreal surrendered to General Montgomery, leader of an American army which invaded Canada by way of Lake Champlain. The Continental Congress, assembled in Philadelphia, tried to win over the Canadian trading class, composed of the wealthiest and most influential people in the province of Québec. However, the shutting-off of Canada from the world's great fur market as a result of the invasion was causing the ruin of the Montreal traders and merchants, who sent a joint memorial to Congress asking permission to carry on their trade.

In 1779, three years after the return of Montreal to the British and the failed American invasion, it was rumored that the governor of Québec would issue no trading licenses at all on the ground that only by such restrictions could he ensure that no goods would reach the rebelling colonies to the south through contraband. Once again faced with disaster, several Montreal merchants prepared a joint petition to protect their interests. They also became more and more determined to join together in larger trading partnerships. However, not all firms were in favor of partnerships, nor believed that such moves would influence the governor. And so, nine distinct firms became parties to an agreement for 1 year, by virtue of which the trade was rendered common property. Interestingly, their objective was reached and trading licenses were issued on time.

This first "North West Company" agreement of 1779 was divided into 16 shares, and included the following 9 firms: Todd and McGill (2 shares); Benjamin and Joseph Frobisher (2 shares);

McTavish and Co. (2 shares); McGill and Paterson (2 shares)

Holmes and Grant (2 shares), Wadden and Co. (2 shares);

McBeath and Co. (2 shares); Ross and Co. (1 share);

Oakes and Co. (1 share).

In that year trader John Askin, who was at Michilimackinac, referred to the agreement as "the great Company". The name North West Company had also come into use at this time.

However, in the exchange of ideas and experiences the Montrealers pieced together details of the trade in the Canadian Northwest. In the summer of 1780, one item of news topped all other accounts of trade: the superb quality of beaver obtained by Peter Pond in the Athabasca country. But, the move to the Northwest was not immediate as many fur traders had not joined the partnership and competition continued to be ruinous. Upon seeing the success of the 1779 agreement, a new partnership was signed in 1780 for 3 years. However, the original state of competition returned and this second partnership was dropped after 2 years.

Following the American victory over the British, the Treaty of 1783 made things once again difficult for the now separated Montreal traders: as a result of the Revolutionary War, the traders were obliged to recognize the United States of America and feared of what would happen to their trading posts south of the border (Detroit, Michilimackinac, Grand Portage). In October 1783, a third agreement of 5 years was obtained under the name Northwest Company. The merchants of Montreal were again willing to throw capital into a common stock, in consideration of which each individual held a proportionate share of the combined interest. It was divided into 16 shares as each party furnished a proportion of the articles necessary for the trade. The firm of Benjamin Frobisher and Joseph Frobisher, as well as Simon McTavish's firm had the management and owned 3 shares each, with the balance of 10 shares divided among 6 other firms. It was also agreed that Todd, McGill and Paterson would control the Southwest and that McTavish and Frobisher would control the Northwest. Once again, this partnership was not incorporated into a limited liability company. It was rather a "common-law" company, an association of men, agreeing among to carry on the trade together.

Yet other Montreal merchants believed that the destiny of the fur trade was in the area of the Great Lakes and the Missouri river. As a result, many firms remained unattached to the NWC. For instance, Gregory, McLeod and Co. refused to take part in the concern. And so, throughout the Northwest, the ruinous rivalry between independent Montreal-based or Detroit-based traders and the NWC spread alcohol to many Natives to obtain their furs. Competition took on a drastic turn of violence with the murder of trader Peter Ross.

The next course of events was coalition of the rival Montreal firms. Increasingly administered by Simon McTavish, the NWC was joined by rival firms such as Gregory, McLeod and Company in 1787. This partnership was the most important one reached yet, as it brought in new members o0n a 20-share basis and was made to last 5 years. By cooperating among themselves, the Montreal traders sought to forge a monopoly in the lands north west of Lake Superior. The Nor'westers thus became the Montreal-based conduit through which trade goods and credit flowed west and through which furs moved to England. Yet the agreement of 1787 never fully succeeded in banishing competitors in the Great Lakes and beyond, but it did elevate competition to very high levels. Between 1777 and 1790, the number of individual traders licensed to carry goods from Montreal fell by half. As of 1787, the fur trade was no longer run by small traders with a single canoe load of goods.

The XY Company or the New North West Company

In 1794, Jay's Treaty settled the boundary between the United States and British North America. As a result, Montreal access to many western posts and to Lakes Michigan and Superior was interrupted. Important Montreal firms such as Todd, McGill and Co. and Forsyth, Richardson and Co., who had traded from the Grand Portage to the Southwest, were forced to let go of their Canadian character and adopt an American identity or to abandon the southwest trade and transfer their interests to the Northwest. Although the interests of these traders were secured by the fact that the treaty allowed British and American subjects to trade on either side of the international boundary and on the Mississippi, Canadian traders were increasingly in danger from discrimination directed to drive the British from American territory.

In 1795, the NWC was reorganized, as Simon McTavish was placed in charge with his nephew William McGillivray. But, internal disagreement raged on, as the southern traders wished to enter the northern trade. In the end, the firm Todd, McGill and Co. decided to remain in the Southwest trade and did not join the NWC. The equally powerful firm Forsyth, Richardson and Co. found the terms of agreement unacceptable. They, and the firms of Parker, Gerrard, Ogilvy and Co., Phynn, Inglis and Co., and Leith, Jamieson and Co. were not included in the new NWC agreement and thus became serious rivals to McTavish's concern and the dispute of monopoly between the NWC and the HBC. Moreover, many winterers protested against the predominance of the agents. Supported by Alexander Mackenzie, the winterers thought that the agents received a disproportionate share of the profits.

In 1797, the firm Forsyth, Richardson and Co. began organizing the uncommitted partners and a year later, they had formed a partnership with Leith, Jamieson and Co and a group of six other winterers. The firm Parker, Gerrard, Ogilvy and Co. became the principal shareholder of the newly-formed New Northwest Company. This concern, also called XY Company or XYZ Company, was officially formed on 20 October 1798. The likeliest origin for the name "XY" is the fact that its trade bales bore the markings X and Y, following on from the N and W designations of the Northwest Company bales.

As time passed, the incursion of the XY Company into the trading lands of the NWC brought it into a severe competitive conflict with the Nor'westers. By 1800, despite initial difficulties in recruiting voyageurs and clerks, this rival concern was able to carry opposition right into Athabasca. In that year, Alexander Mackenzie joined this concern and from 1800 onward, the XY Company was sometimes called Sir Alexander Mackenzie and Co. In 1802, the trade level of the XY reached a level comparable to that of the NWC. The ensuing competition was ruinous to the traders and the Indians. Increasing amounts of alcohol were used to attract Natives to posts and traders lost money and time trying to spoil, bully and abuse locals and rivals.

In response, the NWC took on a new form and its shares were increased to 46. New partners were admitted and others retired. In 1802, McTavish once again reorganized his company on new lines and enlarged the circle of its operations. The new agreement joined 92 shares and promoted expansion into new areas, such as the Lac St. Jean and Mistassini area as well as in the Mingan seigneury near Québec City. McTavish even attempted to trade in Hudson Bay as two NWC posts were established there, violently defying the HBC's monopoly there.

In the autumn of 1804, NWC operations were commenced with the development of the Missouri trade. By that time however, the bitterness of the XY-NWC rivalry was such that even Mackenzie, who was quite at odds with Simon McTavish, felt that some arrangement should be reached. What changed the destiny of both concerns was the death of McTavish later in the year. This brought Mackenzie back to the NWC and led to a merger of both Montreal-based rivals. Through this new arrangement, the trade of the two concerns was to be handled by an agreement of 100 shares, of which 75 were to go the old concern and 25 to the new. In the process, the NWC got strength from both the McGillivray brothers and Mackenzie, from Phynn, Inglis and Co., from McTavish, Frobisher and Co. and from the powerful Forsyth, Richardson and Co.. As before, the firm of McTavish would manage the majority of the NWC business. With the Old and New Northwest Companies now amalgamated, trading posts were dispersed from the Mauricie and Abitibi regions in Québec to the Athabasca, up the Peace River and to the Rockies.

The final years: 1804-1821

Until 1804, the NWC had always done business with temporary partnerships. The most recent agreement was to run for 18 years, thus eliminating this handicap. In 1806, the firm McTavish, Frobisher and Co. was reorganized, dropping the name of Frobisher, to become McTavish, McGillivray and Company. With Fort Kaministiquia as its new depot since 1803, the NWC sought fierce competition with its British and American rivals. Plans were made to send explorations across the Rockies and to the mouth of the Columbia, where the American Fur Company was feared to establish a trading post. At the same time, William McGillivray, now leading the company after the death of his Uncle Simon McTavish, developed the idea of buying control of the HBC, as McTavish had proposed before.

However, competition raged on as NWC and HBC posts leap-frogged each other to new and unexploited regions. In the summer of 1818, rival posts were surrounded and watched over by sentinels of the opposing company. With many Indians defecting to the HBC, the tide was slowly turning. Further, the competition and rivalry resulting from the Columbia and Red River affairs brought many partners to bankruptcy. By 1820 the NWC was working against the certainty that its partnership agreement could not be renewed on anything like the current terms as a result of internal rivalries. There was a split between the agents and the winterers, and the agents could not even command the loyal support of all the partners. Some, under the lead of Angus Bethune and John McLoughlin, were uneasy at the lengths to which the struggle to uproot the Red River colony had led them and were anxious to bring some economy into their affairs. As the partners met in 1820, all seemed to turn on success in Athabasca, because the trade from there would pay for the expenses of the rivalry. Also, it seemed that only by failure in Athabasca could the HBC be convinced that rivalry in the trade was impossible and that a merger with the HBC must be arranged on NWC terms. Negotiations for a new agreement accelerated and the NWC came very close to take over its British rival.

Suddenly, news came from Montreal to the leaders of the HBC that dissension was felt within the ranks of the NWC. The partnership agreement which held the company together was coming up for renewal in 1822 and it looked like the concern was breaking apart. And so, the HBC, the wintering partners of the NWC and the Montreal agents congregated in London for a final round of talks. On 26 March 1821, William McGillivray, Simon McGillivray and Edward Ellice signed an agreement of union with the Hudson's Bay Company. Despite the fact the name "Northwest Company" was dropped, the Nor'westers brought to this union not only knowledge which had made the fur trade expand, but the entire territory beyond the HBC's monopoly. A major factor in the decision to merge was the high transportation costs shipping through the Great Lakes. After this time, trade goods were shipped through Hudson Bay to the interior and the Montreal-based fur trade was abandoned.

This merger gave the HBC a virtual monopoly of the richest fur-bearing areas in Canada. This monopoly was gradually broken by the fur trading of free traders and the increasing settlement on the Pacific coast and in the Red River district. In 1869, Rupert's Land, the area that the HBC had controlled since its early days, was sold to Canada for £300 000 and the rights of one-twentieth of the land in arable areas. The fur trade continued as settlement increased, and many of the old trading posts became towns or HBC stores.

Conclusion

In the 1740s, as the Montreal-based trade expanded further into the West, increasing amounts of capital were required and a number of larger organizations were formed. Until that time, most of the French traders had been organized as independent partnerships. The new larger groupings were financed by wealthy Montreal traders, some of whom organized small companies to lease trading posts and hire workers to voyage west each spring with trade goods and bring back furs in the fall. The trade goods they used were obtained through other Montreal merchants, some of whom acted as intermediaries in marketing the furs in France.

After 1760, a variety of similar conditions tended to make an ultimate combination of Anglo-Scottish fur trading interests not only desirable but also inevitable. The nature and complexity of the business, the credit basis and the evils of unrestricted competition all contributed toward some sort of cohesion. During the last quarter of the 18th century there was a decided movement in the direction of partnerships and it was during this period that the powerful companies which came to dominate the North American fur trade originated. As the market became filled with merchandise and rival traders, the only solution left to many seemed to lie in some sort of combination which might regulate the flow of goods to the interior. Before the 1770s, the different partnerships embodied either the combination of business interests or the organization of groups of traders in certain areas under exclusive control. It was inevitable, sooner or later, that these 2 principles should be combined in a single organization and this took place with the development of the NWC. However, this never ended competition with rival traders. As such, it can be said that despite the advantages of partnerships, the entire history of the NWC was one of struggle in one form or another, from internal tensions and break-ups, to intense competition with the XY Company, the HBC, the American Fur Company and the always present independent traders.