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TRUSTS , in See also:Economics. The word " trusts," as used here, includes all those aggregations of See also:capital engaged in productive See also:industry that, by virtue• of their See also:industrial strength, have or are supposed to have some monopolistic See also:power. Legal mono-polies, as such, and natural monopolies are excluded, although it is frequently true that the trusts are aided by and sometimes See also:control natural monopolies. Trusts are here considered to be identical with the so-called " capitalistic monopolies." As " trusts " started in See also:America, the subject will be considered here first from the point of view of See also:American experience. While it is probably true that trusts are a product of See also:evolution, it is desirable to analyse and explain that conception in some detail if we are to understand their industrial significance. Competition, especially among See also:industries managed on a See also:great See also:scale, often makes See also:modern business unprofitable. Commercial men have been thus compelled in some way to modify former methods of doing business. So See also:long as most industries were run on a small scale, the See also:differences in the ability and the facilities of the various competitors were so great that only those at the See also:lower end of the scale of excellence were forced out of the business—this to the See also:general See also:advantage of industrial society. The great See also:mass of producers remained vigorously competing with one another, some making larger, others smaller profits, but all except a few at the lower margin making at least a living. Under modern business conditions competitors are often, relatively speaking, few in number, of substantially equal ability, and controlling substantially equal facilities for managing the business economically. Consequently, in such circumstances, modern competition differs greatly from that See also:form which was See also:familiar to the earlier economists. Among competitors of such great resources, the struggle may last long after the business has become unprofitable to all before any will fail. Among competitors so nearly equal in strength, the entire industry may be very seriously injured by competition before enough are forced out to affect materially the severity of the competition. The dictum of See also:Stephenson, that " where See also:combination is possible, competition is impossible," has a much wider application now than in the See also:early days of See also:railways. The modern facilities for the transportation of goods, for the rapid trans-See also:mission of intelligence by fast See also:mail, and especially for the instantaneous See also:exchange of See also:information by the See also:telegraph and See also:telephone, have made it possible to See also:manage easily a large business, however widely separated its different See also:plants or establishments maybe. In the See also:middle of the loth See also:century or thereabouts, on See also:account of the lack of these facilities, management of such institutions would often have been impossible. Many of the advantages of combinations are entirely dependent upon these modern facilities, and on that account these facilities may be said to be an occasion, if not a cause, of the trusts. If the product of an industry is of such a nature that its quality is substantially See also:uniform and can be readily tested by Two Kinds purchasers, especially if the goods are such that of See also:Trust they are ordinarily sold in large quantities, the Industries. competition between See also:rival establishments must almost of See also:necessity be a competition in See also:price. See also:Sugar refining, oil refining, the distilling of See also:spirits, the manufacture of See also:salt, are such industries. The See also:standard quality is readily tested, and the manufacturer who can offer the standard product at the lowest price effects a See also:sale. Industries manufacturing comparatively inexpensive articles for the See also:retail See also:trade, put them up in packages which become well known to customers; and those industries whose goods are sold under brands or trade-marks, or in some other form so that they are familiar to buyers, afford an example of competition of an entirely different See also:kind. When the reputation of a certain See also:brand of goods of this nature becomes established, consumers make no further efforts to test its quality, and the retail price often becomes a customary price. If a manufacturer of such goods finds his trade injured by a rival, his most effective means of competition will often be, not a lowering of the price, but an increase of the outlay on advertising. See also:Soap, See also:baking-See also:powder, photographic cameras for general use, and of See also:late years certain brands of See also:coffee, patent See also:medicine, and other drugs of similar nature, are examples of this class. Those industries in which the competition becomes a See also:matter of cutting of prices can by combination remove rivals from the See also: If different manufacturing establishments, scattered through-out the See also:country, are brought under one management, it will be possible for orders for goods to be received at one central See also:office, and then to be distributed to the federated establishments, so that goods can be despatched to customers in each case from the nearest See also:establishment. In this way See also:freight expenses may be very greatly lessened, See also:cross freights over the same territory being substantially eliminated. A single establishment supplying all of its customers would often be compelled to deliver much longer distances at greatly increased expense. 4. The entire profit of an establishment frequently depends upon the skill of the manager. When many different establishments are organized into one, it is possible to select the most skilful manager of all and to put him in See also:charge of the combination, thus securing in many cases, if the trust includes practically all of the establishments in the entire industry, the ablest manager in the country for them all. It is of course true that as an establishment increases in See also:size, or as a combination increases the number of its branches, especially if they are widely scattered, it becomes impossible for the manager to give his See also:personal supervision to the details of management of each institution. An executive officer of the highest skill, however, will so select his subordinates, so See also:direct their See also:work, and so infuse into them his own spirit, that, under careful inspection, comparatively little will be" lost from his inability to be See also:present personally in each See also:separate establishment. In the larger combinations frequent reports, often daily, are made from each concern, giving in detail the quantity of the output, the quality of the goods, the exact cost of the different processes of manufacture; so that it is possible to compare continually each of them with all of the others ; to detect the See also:special weakness of each, and in this way to remedy any slight defects in any one establishment, and to bring all nearly up to the highest level of productive capacity. 5. Each business manager is likely to have some special excellence in his methods of management. One will be particularly skilful in the technique of manufacturing; another in the organization of the business; a third in selling goods, and so on. By combining many establishments into one, it is possible so to distribute this managerial skill that each See also:superintendent will be given the See also:department for which he is peculiarly fitted, and the whole establishment will thus get the benefit, not merely of the best executive ability at the See also:head, but also of the best managing skill at the head of each separate department. In many cases it is probable that as much is saved in this way as in any other.
6. Besides this See also:distribution of skill of the managers, it is sometimes equally beneficial to distribute the various products of the combination among the different plants. For example, in the manufacture of hoop and See also:bar See also:iron the products are turned out in great varieties of size, probably from seventy-five to a hundred. Wholesale dealers in sending their orders to the See also:mills are likely to See also:call for from ten to fifty different kinds. If these orders go to an establishment which has but one large See also: If customers can buy all of the various kinds of related goods in one establishment, much of their time and energy will be saved. Some of the larger combinations, therefore, in order to make this saving for their customers and thus to be sure of retaining their orders, add to their plant facilities for making products which a smaller establishment could hardly manufacture. For example, the Distilling See also:Company of America, which controls probably 90'% of the entire product of See also:corn spirits, found it to its advantage to add to its plant several See also:rye distilleries, and to See also:purchase a number of the leading brands of whiskies for consumption as beverages, in order that they might See also:supply the needs along different lines of practically all dealers in spirits and whiskies, in this way saving for themselves many customers who otherwise might have been lost. 8. The See also:mere size of an establishment and its ability to supply at any time on See also:short See also:notice any order, however large, gives it also an advantage in retaining See also:custom. A concern that controls only from 5 to to % of the entire output of a country in any special See also:line of goods might at times find it impossible to supply goods promptly. Large customers who might thus be embarrassed are more ready to See also:deal regularly with an establishment controlling 75 to 90% of the output, if they can in this way be sure of having their orders attended to promptly. It is stated that the American Sugar Refining Company on this account has been able to secure, with consider-able regularity, one-sixteenth of a cent a See also:pound more on its refined sugars than the See also:independent refiners, the latter being frequently compelled to cut their prices to that extent in order to make sales. 9. Owing to the fact that the introduction of goods into new markets, especially into See also:foreign markets, is a matter of time, See also:expenditure of energy, and of See also:money, the large establishment with great capital has in this particular also a decided advantage. The Standard Oil Company, and American See also:Tobacco Company, and other similar establishments, have thus been able to open up new markets in See also:Europe, in See also:Japan, See also:China and other portions of the Far See also:East more readily by far than individual producers along those lines could have done. This stimulus to the foreign trade acts also beneficially to the domestic trade, inasmuch as the exportation of part of the product tends to keep prices somewhat higher at See also:home, and as the added demand for the raw material influences its price, thus creates a demand for labour along many lines.
io. The combination also frequently saves for its stockholders considerable sums from its wiser dealing with credits, and this in a way also that is beneficial to the entire business community. When competition is very severe among different establishments, the managers, in order to increase their sales, will not infrequently See also: The removal of the tariff would not destroy the combination unless it destroyed the industry at the same time; but, on the other hand, the removal of a protective tariff might very easily prevent the abuses of exorbitant prices which might be exacted by a combination protected by the tariff. 2. It is doubtless true that combinations have a good many times been encouraged by special discriminating rates of freight granted by the railways or other transportation agencies. There is, of course, a certain economic advantage to the railways in having goods despatched in large quantities by consigners who are able to supply their own cars, loading and unloading facilities, &c. See also:Rail-ways on that account often prefer to deal with large firms, and, other things being equal, are willing to give them some special rates. These concerns also are likely to have rather better 'credit than the smaller ones, so that dealing with them ensures prompt pay and cheaper collection of accounts. The competition among the different railways also for the freights which an important customer can furnish leads to cutting of the rates in their favour. These special rates, however, whether justified from the business point of view or not, are beyond any question from the social point of view, often a very See also:grave injury. A manufacturer who receives these special favours can build up a business substantially monopolistic in its extent, whereas his rival of equal or even of greater ability, and equally skilful as a manufacturer, would be ruined if he did not receive like rates. The injustice of such discriminations and their evil effects on the community have been recognized by legislatures and courts in America, and they are practically universally for-bidden. It remains beyond question true that they are, notwithstanding, very frequently granted. In See also:recent years in the See also:United States there can be little question that the formation of the great combinations has been much promotion. encouraged by the opportunities, which promoters were able to seize, of making for themselves large profits. The See also:movement towards combination was so fully recognized and the advantages in many cases so palpable, that a well-informed and skilful See also:promoter was often able to persuade a large proportion of the manufacturers in some special industry to combine. In preparing the See also:plan for such combination, the promoter has in many cases seen to it that he himself first bought the properties which he could very shortly turn over to the combination at high rates of profit; or else he has been able to persuade the new See also:corporation to issue large amounts of stock, of which considerable proportions were given to him in return for his services. It has been true in many cases that these securities have been speculative in nature, but nevertheless the promoter has often reaped in this way large rewards. The possibility of this profit has doubtless stimulated his activity in urging the combinations. Associated with the promoter in the organization of these combinations have usually been bankers or other financiers who stood ready, for an amount of stock or other promised profit Uadersufficiently large to compensate them for their See also:risk, The writer. to furnish to the combinations See also:cash sufficient to start the business and to provide other needed capital. Usually the form of underwriting employed has been this: A promoter engaged in the formation of a combination and needing a certain fixed sum in cash, would make an arrangement with a See also:bank to sell to it at a price agreed upon such portions of a named amount of stock as were not disposed of to other customers before a certain fixed date. For example, the bank might agree to furnish one million dollars in cash (200,000) in return for say four millions of stock (800,000), or to purchase itself at a fixed price all the See also:remainder of the 4,000,000 stock unsold at the date agreed upon, the bank itself to become the sales See also:agent. In those circumstances the bank would naturally use its best endeavours to sell the four millions of stock to other customers at the price agreed upon, say twenty-five dollars, or 5, per See also:share. So far as it failed of disposing of the entire amount, it would take the remainder itself. For taking these risks, naturally the bank has almost invariably asked a very high See also:commission, and not infrequently it has been asserted that the managers of the See also:banks have been given a special See also:bonus for themselves privately, in addition to the rates of profits granted the bank. These large amounts of stock that are paid to the promoter and the financier for the purpose of bringing about the organization of a large trust, lead, of course, to what is called over- Tbe Basis of capitalization. What the proper basis of capitalization ca luaus. for a manufacturing industry should be, is a matter that See also:lion. cannot perhaps easily be determined by a definite prin- ciple which shall be applicable in every case. The See also:laws that have been most strict on the subject See also:attempt to limit the capitalization to the " actual cash value " of the business, by that being understood at times simply the cost of the plant itself with the See also:running cash capital needed. On the other hand, most business men think that it is a wiser plan, and on the whole equally just, to capitalize a business on the basis of its earning capacity, regardless of what the plant may have cost. When, as has been frequently the case of late years, in addition to this cash value of the plant and the cash itself which may have been paid in, large sums of stock are issued also for properties which may be in themselves highly over-valued, and for the services of the promoter, the financier and others, we can see that the capitalization must be far above what may ordinarily be considered a paying basis. On the other hand, if the See also:element of See also:monopoly enters into the business to any noteworthy extent, the prices of the product may be kept so high that See also:fair dividends may be paid even on this high capitalization. That the tendency towards increasing the capital has been very strong there can be no question, and a See also:penalty is See also:apt to' be paid for this somewhat reckless financiering. As soon as a slight depression in business comes, so that it is perfectly evident not merely that dividends cannot be paid on the common stock, but that in all See also:probability both the deferred stock and the bonds, if any have been issued, will also have to go without See also:interest, it may be necessary to reorganize many of these combinations and to start them anew on a much lower capitalization. When the See also:person organizing the combination is himself an active business See also:man, and has the intention of himself directing the affairs of the combination, another The element besides that of personal profit very fre- Industrial quently enters into the problem. Most strong maDager men like to take responsibility and to be dominant in affairs. When, owing to the advantages of combination that have been enumerated above, the prospect of a virtual monopoly seems certain, provided due skill in management is exercised, it is natural that the manager should wish to bring about the combination in order that he may himself have the See also:satisfaction of being in substantially See also:absolute control of the entire industry in a country, or possibly even in the See also:world. The ambition thus to dominate in a great industry is akin to that of a statesman, and there can be little question that this See also:pride of power and the See also:desire to control the destinies of others has been a more or less conscious element in the formation of many of the most successful and most skilfully managed combinations. 1. The form of combination which has ordinarily been first adopted has been some kind of agreement with reference The Forms to maintaining prices, or to paying See also:wages, or to of come dividing the territory for the distribution of the bination. product, or similar questions. Experience has shown that, generally speaking, such agreements are not likely to be kept in good faith for a long See also:period. 2. In order to make the combination more permanent in its nature, the form of the trust, technically so called, was adopted. Under this form of combination, the stockholders of the various constituent companies of the trust See also:place their stock in the hands of a small See also:board of trustees, giving to these trustees an irrevocable power of See also:attorney to See also:vote the stock as they see See also:fit, or in accordance with specific instructions given at the beginning. The See also:title to the stock itself remains in the See also:original holder, with the right to sell or See also:pledge or dispose of it as he See also:sees fit, but without the power of recalling his right to vote. In return for this stock thus deposited with the trustees, the trustees have ordinarily issued trust certificates, which are in themselves negotiable and take the place of the stock. Inasmuch as the holding of the voting power of the See also:majority of the stock of each of the different constituent companies gave to the trustees absolute power of See also:election of See also:directors, and consequently the power of guiding harmoniously the affairs of all of the plant entering into the combination regardless of the will of the stockholders, the United States courts held that the corporations entering into such an agreement had gone beyond their See also:powers, and that such a trust was illegal. Owing chiefly to these hostile decisions of the courts, this form of trust was abandoned, and new forms, which still, however, leave the power of unified direction in the hands of a few men, were adopted. 3. After the trusts were declared illegal, it was usual, when a combination was formed, to organize a new corporation which bought all of the properties of the constituent members of the trust. These constituent companies then dissolved, and the one great corporation owning all of the properties remained. 4. The form that now seems to be much in favour approaches in its general nature more closely to that of the original trust. Under this form a corporation is organized for the special purpose of buying and owning all, or a controlling share, of the See also:stocks of each one of the constituent companies. The separate companies are then managed technically independently, the dividends of the separate corporations are all paid to the See also:parent corporation as the stockholder owning all of the stocks, and these dividends are the source of profits of the new corporation. The See also:officers in this parent corporation, of course, vote the stocks of the separate companies, and thus absolutely control. From the savings which it is possible for the combinations to make, it would seem possible for them to pay higher rates The Trust of wages to those remaining in their employment and wages, than it was possible for the constituent companies to do. In certain instances, especially when the combination has first been made, wages have been increased. On the whole, however, it is probable that as yet the wage-earners have succeeded in getting an increase of wages in circumstances substantially similar to those under which their wages would be increased by single corporations. An increase of wages comes only through pressure on their part. Under a prosperous condition of industry it is possible, without materially lowering profits, to increase the wages. Certain classes of employes, especially superintendents and commercial travellers, are less needed by the combinations, and consequently the See also:total sum of wages paid to these classes by the combination is less than that formerly paid by the constituent companies. On the other hand, the number of employes of these classes being less than before, the See also:average wage has, in certain cases at least, been increased. Owing to the fact that competitive selling is in certain cases largely done away with, it has in some, perhaps in many, cases been possible for fewer travelling salesmen, of less skill and with lower wages, to do thework than before the combination, so that not merely has the total expense been lessened, but also the average See also:salary paid to those retained in the business. In case of disputes arising between the combination and the operatives, the position of the combination is stronger than that of an individual corporation. It is possible to See also:close one or two See also:works where troubles have arisen, and to See also:transfer orders to the other works without any material injury to the business, provided the closing of the one or two establishments is not for too long a period. Such instances have occurred. On the other hand, labour organizations are also rapidly increasing in strength, and their leaders are of the See also:opinion that within a comparatively short time they will be so thoroughly organized in See also:ali of the See also:chief industries that a strike can be instituted and supported not merely in one or two establishments, but throughout the entire industry. Whenever this condition of affairs shall have been reached, the employes will be substantially on an equality with their employers in such cases of conflict, so that the advantage now resting with the combination will be largely removed. In certain industries this condition seems already to have been reached. From the See also:sources of savings that were enumerated before, it is evident that it would be possible for a combination either to increase the prices paid for raw materials, or to lower the prices of its finished products. Experience, how- Price 8' ever, seems to show beyond question that whenever the combinations are powerful enough to secure a monopolistic control it has usually been the policy to increase the prices above those which obtained during the period of competition preceding the formation of the combination. Inasmuch, however, as an attempt to increase prices to any great extent, so as to secure very high profits, would certainly result in tempting new capital into the field, it has been the general experience that prices have either been increased only comparatively little after the combination was formed, or else that competition entering the field has comparatively soon forced a lowering of prices to substantially the former competitive rates. It should be noted, however, that inasmuch as combinations have very frequently been formed only after a period of competition so fierce that practically all the competitors were running at a loss, it is hardly just to speak of a combination placing its prices above " competitive rates " unless one defines what is meant exactly by that expression. Whenever they have put their prices above the competitive rates existing just before the combination, it may mean that they have put their prices back to rates that will allow See also:medium profits instead of losses, and not above rates that would be normal in the case of small competitors. It will have been noted from what has been said that the excellences of the combination consist largely in the savings that have already been enumerated. The evils are: Legislative (r) The losses to investors through the acts of the Remedies. promoters and financiers at the time of the organiza- tion of the combinations, and through the See also:speculation in the stocks which is at times carried on by the directors of the combinations themselves. (2) The losses to the wage-earners from the power that sometimes exists of forcing wages rather lower than it would be possible for a single corporation or manufacturer to do, and also from the See also:discharge of certain classes of employes whose services are no longer needed, such as commercial travellers. It should be remarked of the latter case, however, that the injury is a personal one to those men that are discharged, but that it results in a saving to the community, and, therefore, presumably to the wage-earning class as a whole in the long run. (3) A further injury at times to the consumer arises, as has been suggested, from the increase in price. Other evils come through the power that is sometimes exercised by combinations in the corruption of legislatures; in the control over industries of such a nature that it tends to destroy the spirit of individual activity and See also:independence on the part of many persons who would otherwise enter business independently; and evils also come through the increased force of any improper or dishonourable business practices, since this added force for evil is given to any combination by virtue of its greater See also:influence in the community. It is not intended to convey the impression that managers of combinations are less moral than other business men, but merely that whenever they are dishonourable in their practices the influence reaches more widely. The chief remedies for these evils enumerated would seem to be more rigid laws with reference to the methods of See also:incorporation and to the responsibility of directors to stockholders and to the public. This can perhaps best be brought about through greater publicity in both of these directions, probably under the inspection of See also:government officials. The other line of remedies would seem to be the removal of special favours granted to these combinations either by the government or by railways or other bodies so situated that they can distribute favours to the larger combinations. The movement towards consolidation of industries in the United States began to be noticeable soon after the See also:Civil See also:War The (1861-65), but it had not reached noteworthy Movement proportions, excepting in connection with the rail-Towards ways, until within the last twenty years of the consoitda• 19th century. During the later years many See also:con-
solidations were made, the largest number during the years 1898-r9oo. From what has been said earlier, it is evident that certain classes of industries, especially those that require the investment of fixed capital to large amounts, are especially adapted for combination. Very little tendency towards consolidation is found in the farming industry, and, relatively speaking, little in industries that require the investment of but small capital. It is perhaps, however, not too much to say that in nearly all lines of industry which from their nature are adapted for consolidation combinations more or less See also:firm have been made during the last few years. It is probable that as time passes we shall have many of these combinations reorganized, and that in many lines of industry there will be further consolidation of present combinations.
Experience has shown that when combinations are made in industries that from their nature do not seem well suited for consolidation, failure follows. In many individual instances corporation lawyers, who have had much practice in forming combinations, advise their clients in lines of business especially fitted for competition not to enter a combination, but to remain independent, assuring them that an individual is able to compete in such lines of industry with any combination, however large. Such See also:advice, of course, would not he given were the industry one which was well adapted for consolidation.
Great See also:Britain.—The tendency towards consolidation has been
for several years very noticeable in Great Britain, although the
form has been rather that of a See also:pool or See also:ring than that
See also:European
Experience. of a trust or of a single large corporation. In the Experience.
See also:coal and milling industries there have been agreements; and, particularly in See also:London and other distributing centres, these selling combinations have been able at times to control the market. This has also been true with reference to certain kinds of provisions, such as the See also: Of late years there has been a marked tendency towards the formation of large corporations that buy up a very large pro-portion of competing manufacturing plant, and in this way secure at least a temporary monopoly of the market. The Salt See also:Union was formed along these lines, but this has not proved successful, owing probably to the fact that new sources of supply were discovered. The See also:dyeing industries in See also:Bradford and in See also:Yorkshire have been consolidated, so that in certain respects they have an absolute monopoly of the business, and in most directions of over 90% of it. The See also:calico printers, the See also:fine See also:cotton spinners, the See also:thread manufacturers, the bleachers, and others connected with the cotton manufacturing industries in Great Britain, have nearly all been brought together into large corporations which control from 90% upwards of the entire business. Similar combinations in See also:cement, See also:wall-See also:paper, soap, tobacco and other trades have been formed. Most of these large corporations have 'been in existence for such a short time that one cannot yetjudge accurately regarding their permanent success. Many of them seem to have been over-capitalized and their dividends have not always met shareholders' anticipations. There has been no active popular movement against consolidation in See also:England, and the government has passed no laws opposed to it. See also:Parliament, however, has passed stringent amendments to the Companies Acts, changes enforcing publicity regarding the organization of all limited liability companies and their methods of management. The amended See also:law is expected to prevent most of the abuses of the combinations. See also:Germany.—Germany seems to be peculiarly the home of combinations so far as Europe is concerned. In 1897 Liefmann, See also:writing regarding combinations in Germany, was able to mention combinations which were See also:international in their See also:scope in See also:forty-one different branches of industry. Of combinations that were confined to Germany alone he mentioned 345, although many of them were in the same line of industry; for example, he found 8o combinations in different branches of the iron industry, 82 in the chemical industries, 38 in the textiles, and so on. Of that number he thought that definite information could be secured, but he was of the opinion that very many more of less importance existed, and had excluded from his reckoning all of those that were purely See also:local, as for example those among the breweries in the different cities, as well as those among firms engaged merely in trade. The form of combination in Germany is ordinarily that merely of contracts among independent establishments (Cartels, Kartells) regulating the amount of output for each, and in certain cases also the prices. As in See also:Austria and in See also:France, a central selling See also:bureau for all the members of the combination is frequently found. The most successful combinations have been those among the coal-miners in western Germany and the four or five in the leading branches of iron manufacture, also in western Germany. Others of somewhat similar See also:rank have been organized, one, for example, in the sugar industry, which includes both refiners and producers, and another among the manufacturers of spirits. The former, following that among the See also:Austrian sugar manufacturers, is somewhat See also:peculiar in that the refiners See also:guarantee to the producers of raw sugar a fixed price for their output so far as the sugar is intended for the home market, the refiners expecting to recoup themselves from the consumers through the monopolistic power which they possess. The law does not seem to be hostile to these combinations. Contracts that are immoral in their nature are, of course, non-enforceable. But the courts have, on the whole, not taken an attitude inimical to the larger combinations, and the government seems at times to have been inclined to favour them. In one or two cases where the government is itself a producer, as of soda, it is a member of a combination. Indeed, a Prussian See also:minister in a speech in the Landtag has expressed himself favourably regarding the coal and iron combinations. The facts seem to show that the coal combination, at any rate, has used its power of fixing prices in a conservative way, and it has at times held prices somewhat lower than they probably would have been had See also:free competition existed in that industry. So long as the combinations are managed conservatively, and so long as the government is able to secure a 'careful supervision over them, it is not to be expected that there will be much hostility in Germany on the part of the government. France.—The number of combinations in France is probably much less than in Great Britain or Germany. In the penal See also:code there has been a See also:provision for many years against monopoly brought about by unfair means, and in one or two rather prominent instances there seem to have been convictions under this See also:article. Consequently, the agreements that have been made, so far as they are intended to control prices, are usually kept See also:secret. There have been, however, notably in the case of the iron industries, agreements made among the leading manufacturers, under which the proportion of output assigned to each was fixed. A single selling bureau has also in such cases been established, which receives all orders and fixes the prices for all of the different establishments concerned. So far this form of organization, although in certain localities it seems to have secured monopolistic power has not been successfully attacked in the courts. For several years it has been supposed that a similar agreement existed among the sugar refiners. They themselves, however, acknowledge only an agreement regarding the amount of the output which shall be assigned to each, and deny any agreement as to prices. Of course an agreement regarding output would be likely to have a material effect upon prices. Somewhat similar combinations exist among the See also:petroleum refiners, the See also:porcelain makers, and some few others. The government has taken no active steps in the matter, but popular opinion seems to be awakening somewhat. Austria.—In Austria the development of combinations has been very marked. The most successful combination, on the whole, as well as one of the earliest, has been that of the iron industry. The sugar industry, however, including both refiners and producers of the raw sugar, and the petroleum industry, are also combinations of great power. The form of these combinations is ordinarily that of an agreement regarding both out-put and prices. In some instances a central selling bureau fixes the prices, in others the market is divided, while in others still other forms of agreements of many kinds which serve to secure a monopoly are found. The movement has spread very rapidly indeed, until, in the opinion of many writers in Austria, practically all branches of industry, in which agreements for the lessening of competition will prove advantageous, are now largely controlled by combinations. The courts of Austria have, on the whole, shown themselves hostile to the movement. Con-tracts for the See also:division of the market, for the See also:assignment of fixed proportions of the entire output to different establishments, the fixing of prices, &c., are declared void and will not be enforced by the courts. This adverse See also:action, however, does not seem to have affected very materially the tendency towards combination, although it has perhaps tended somewhat to encourage the formation of large corporations which should purchase all of the separate plant in any one industry. This tendency, again, is checked by the fact that the corporation law requires publicity in business, and that the taxes are heavier on corporations than on private firms, both as regards the legal rate and the certainty of Collection. A government commission has recommended recognition of the combinations by law and their careful super-See also:vision and regulation by government authority. (J. W. Additional information and CommentsThere are no comments yet for this article.
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