Trusts

Trusts, in Economics. The word "trusts," as used here, includes all those aggregations of capital engaged in productive industry that, by virtue of their industrial strength, have or are supposed to have some monopolistic power. Legal monopolies, as such, and natural monopolies are excluded, although it is frequently true that the trusts are aided by and sometimes control natural monopolies. Trusts are here considered to be identical with the so-called "capitalistic monopolies." As. "trusts" started in America, the subject will be considered here first from the point of view of American experience.

While it is probably true that trusts are a product of evolution, it is desirable to analyse and explain that conception in. some detail if we are to understand their industrial significance. Competition, especially among industries managed on a great scale, often makes modern business unprofitable. Commercial men have been thus compelled in some way to modify former methods of doing business. So long as most industries were run on a small scale, the differences in the ability and the facilities. of the various competitors were so great that only those at the lower end of the scale of excellence were forced out of the business - this to the general advantage of industrial society. The great 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 form which was 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 Stephenson, that "where combination is possible, competition is impossible," has a much wider application now than in the early days of railways. The modern facilities for the transportation of goods, for the rapid transmission of intelligence by fast mail, and especially for the instantaneous exchange of information by the telegraph and telephone, have made it possible to manage easily a large business, however widely separated its different plants or establishments may be. In the middle of the 19th century or thereabouts, on 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 uniform and can be readily tested by purchasers, especially if the goods are such that they are ordinarily sold in large quantities, the competition between rival establishments must almost of necessity be a competition in price. Sugar refining, oil refining, the distilling of spirits, the manufacture of salt, are such industries. The standard quality is readily tested, and the manufacturer who can offer the standard product at the lowest price effects a sale. Industries manufacturing comparatively inexpensive articles for the retail 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 kind. When the reputation of a certain 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. Soap, baking-powder, photographic cameras for general use, and of late years certain brands of coffee, patent medicine, and other drugs of similar nature, are examples of this class. Those industries in which the competition becomes a matter of cutting of prices can by combination remove rivals from the field, and then put prices up to a remunerative rate. Competitors in industries of the second class by combination can save many of the costs of selling, and thus without any increase in the price of the product may save enough of the cost to make the business profitable.

Some of the advantages of combination over competition which have led to the organization of trusts may be enumerated: r. The cost of selling may be greatly lessened. As has been intimated, competition in the case of industries of the second class named above leads to very expensive advertising in order to effect sales. An examination of the pages of. any of the American magazines, with a thought as to the amount charged for the use of these advertising pages (from one hundred to as high as even four hundred dollars, or from 20 to X80, per page for a single insertion in some of the magazines with the largest circulation) will convince one of the cost of such competitive advertising. The expense involved in making attractive show-windows in stores or shops, and in calling the attention of the public to popular wares by posters scattered about the country and by legends painted on rocks, on buildings along the lines of railways, &c., are other common examples.

2\. The salaries of commercial travellers, together with their hotel and travelling expenses, are of a similar nature. This competitive advertising in many cases does not increase to any noteworthy extent the consumption of the products in question, but merely attracts customers from one manufacturer to another. Combination among establishments that do this costly advertising saves a large part of the expense without lessening materially the quantity of goods sold.

3\. If different manufacturing establishments, scattered throughout the country, are brought under one management, it will be possible for orders for goods to be received at one central office, and then to be distributed to the federated establishments, so that goods can be despatched to customers in each case from the nearest establishment. In this way freight expenses may be very greatly lessened, 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 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 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 personal supervision to the details of management of each institution. An executive officer of the highest skill, however, will so select his subordinates, so direct their work, and so infuse into them his own spirit, that, under careful inspection, comparatively little will be lost from his inability to be present personally in each 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 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 superintendent will be given the 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 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 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 bar 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 mills are likely to call for from ten to fifty different kinds. If these orders go to an establishment which has but one large mill, it may be necessary, in order to execute the order, to change the rolls in the mill several times, causing thus a waste of power, of time and of energy. If several establishments are combined, each can be equipped for certain sizes. When, in these circumstances, a large order is received, to each establishment will be sent that part of the order which it is especially equipped to fulfil, and thus, without any changes of rolls or stoppage of machinery, the separate sizes can be made. The same principle holds of course in nearly all lines of work, in some to a greater degree than in others; but in the manufacture of hoop and bar iron a saving from this source amounting to from a dollar to a dollar and a half, or from 4s. to 6s., per ton is sometimes made.

7\. The advantage of unifying in one establishment the manufacture of products somewhat allied in nature appears also in selling goods. 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 Company of America, which controls probably 90% of the entire product of corn spirits, found it to its advantage to add to its plant several rye distilleries, and to purchase a number of the leading brands of whiskies for consumption as beverages, in order that they might 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 mere size of an establishment and its ability to supply at any time on short notice any order, however large, gives it also an advantage in retaining custom. A concern that controls only from 5 to to % of the entire output of a country in any special line cf goods might at times find it impossible to supply goods promptly. Large customers who might thus be embarrassed are more ready to 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 considerable regularity, one-sixteenth of a cent a pound more on its refined sugars than the 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 foreign markets, is a matter of time, expenditure of energy, and of money, the large establishment with great capital has in this particular also a decided advantage. The Standard Oil Company, and American Tobacco Company, and other similar establishments, have thus been able to open up new markets in Europe, in Japan, China and other portions of the Far 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 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 grant credit somewhat unwisely. The combination controlling a large part of the market is not so tempted, and moreover has the power to bring needed pressure to bear upon delinquent debtors more readily, so that losses from bad debts are much less frequent.

Besides the special savings that serve as reasons for the formation of combinations, certain special favours at times lead to their formation.

i. The protective tariff is most frequently cited as such a favour. By the protection which a protective duty gives against foreign competition, it doubtless often furnishes the occasion for the formation of trusts. If a large amount of capital is tempted into the industry through the profits promised by the tariff, and therefore competition among the various establishments becomes fierce, it is much easier for them to form a combination with the certainty of good profits, provided the domestic competition can be overcome, if they are certain that foreign competition also is to be excluded. On the other hand, it would hardly be right to speak of the tariff as in this case the direct cause. In other industries not protected by the tariff the same fierce competition leads to the formation of combinations. The tariff is simply an encouraging condition. 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. Railways 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 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 forbidden. It remains beyond question true that they are, notwithstanding, very frequently granted.

In recent years in the United States there can be little question that the formation of the great combinations has been much. encouraged by the opportunities, which promoters were able to seize, of making for themselves large profits. The movement towards combination was so fully recognized and the advantages in many cases so palpable, that a well-informed and skilful promoter was often able to persuade a large proportion of the manufacturers in some special industry to combine. In preparing the 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 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 sufficiently large to compensate them for their risk, writer.  to furnish to the combinations 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 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 (20o,000) in return for say four millions of stock (800,000), or to purchase itself at a fixed price all the remainder of the $4,000,000 stock unsold at the date agreed upon, the bank itself to become the sales 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 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 commission, and not infrequently it has been asserted that the managers of the banks have been given a special 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- Th  capitalization. What the proper basis of capitalization C apitaliza?  for a manufacturing industry should be, is a matter that cannot perhaps easily be determined by a definite prin ciple which shall be applicable in every case. The laws that have been most strict on the subject 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 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 element of monopoly enters into the business to any noteworthy extent, the prices of the product may be kept so high that 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 penalty is 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 probability both the deferred stock and the bonds, if any have been issued, will also have to go without interest, it may be necessary to reorganize many of these combinations and to start them anew on a much lower capitalization.

When the person organizing the combination is himself an active business man, and has the intention of himself directing the affairs of the combination, another The element besides that of personal profit very frequently enters into the problem. Most strong 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 satisfaction of being in substantially absolute control of the entire industry in a country, or possibly even in the 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 pride of power and the 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.

i. The form of combination which has ordinarily been first adopted has been some kind of agreement with reference to maintaining prices, or to paying wages, or to dividing the territory for the distribution of the product, or similar questions. Experience has shown that, generally speaking, such agreements are not likely to be kept in good faith for a long 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 place their stock in the hands of a small board of trustees, giving to these trustees an irrevocable power of attorney to vote the stock as they see fit, or in accordance with specific instructions given at the beginning. The title to the stock itself remains in the original holder, with the right to sell or pledge or dispose of it as he 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 majority of the stock of each of the different constituent companies gave to the trustees absolute power of election of 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 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 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 parent corporation as the stockholder owning all of the stocks, and these dividends are the source of profits of the new corporation. The 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 of wages to those remaining in their employment than it was possible for the constituent companies and Wages. p P 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 wageearners 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 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 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 the work than before the combination, so that not merely has the total expense been lessened, but also the average 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 close one or two works where troubles have arisen, and to 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 opinion that within a comparatively short time they will be so thoroughly organized in all of the 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 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- prices.  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 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: (1) The losses to investors through the acts of the promoters and financiers at the time of the organization of the combinations, and through the 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 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 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 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 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 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 Civil War (1861-65), but it had not reached noteworthy proportions, excepting in connection with the railways, until within the last twenty years of the 19th century. During the later years many consolidations were made, the largest number during the years 1898-1900. 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 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 advice, of course, would not he given were the industry one which was well adapted for consolidation.

## Great Britain

The tendency towards consolidation has been for several years very noticeable in Great Britain, although the form has been rather that of a pool or ring than that o f a trust or of a single large corporation. In the g g P coal and milling industries there have been agreements; and, particularly in 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 bacon imported from Denmark.

Of late years there has been a marked tendency towards the formation of large corporations that buy up a very large proportion of competing manufacturing plant, and in this way secure at least a temporary monopoly of the market. The Salt 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 dyeing industries in Bradford and in 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 calico printers, the fine cotton spinners, the 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 cement, wall-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 yet judge 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 England, and the government has passed no laws opposed to it. 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 law is expected to prevent most of the abuses of the combinations.

## Germany

Germany seems to be peculiarly the home of combinations so far as Europe is concerned. In 1897 Liefmann, writing regarding combinations in Germany, was able to mention combinations which were international in their scope in fortyone 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 80 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 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 Austria and in France, a central selling 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 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 Austrian sugar manufacturers, is somewhat peculiar in that the refiners 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 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 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 code there has been a 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 article. Consequently, the agreements that have been made, so far as they are intended to control prices, are usually kept 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 petroleum refiners, the 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 output 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. Contracts for the division of the market, for the 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 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 supervision and regulation by government authority. (J. W. J.) Bibliography.-C. W. Baker, Monopolies and the People (1899); A. Berglund, The United States Steel Corporation (New York, 1907); G. L. Bolen, Plain Facts as to the Trusts and the Tariff (New York, 1902); J. B. Clark, The Control of Trusts (New York, 1901), The Problem of Monopoly (1904); W. M. Collier, The Trusts; what can we do with them? what can they do for us? (1900); W. W. Cook, The Corporation Problem (1891); J. P. Davis, Corporations: a Study of the Origin and Development of Great Business Combinations  (New York, 1905); E. Dolleans, L'Accaparement (Paris, 1902); J. R. Dos Passos, Commercial Trusts (New York, 1901); L. Duchesne, L' Avinement du regime syndical a Verviers (Paris, 1908); T. Duimchen, Die Trusts and die Zukunft der Kulturmenschheit (Berlin, 1903); R. T. Ely, Monopolies and Trusts (New York, 1900); G. Fagniez, Corporations et Syndicats (Paris, 1904); C. Genart, Les Syndicats industriels (Ghent, 1896); A. P. C. Griffin, A List of Books relating to Trusts (Washington, 1902); E. von Halle, Trusts in the United States (New York, 1895); F. W. Hirst, Monopolies, Trusts and Kartells (1905); J. W. Jenks, The Trust Problem (New York, 1903); L. Lief man, Die Unternehmerverbande (Leipzig, 1897); H. D. Lloyd, Wealth against Commonwealth (New York, 1894); D. H. Macgregor, Industrial Combination (1906); H. W. Macrosty, The Trust Movement in British Industry (1907); F. Pierce, The Tarif f and the Trusts (1907); W. Z. Ripley (editor), Trusts, Pools and Corporations, (New York, 1905); P. de Rousiers, Les Industries monopolisees aux EtatsUnis (Paris, 1898); I. M. Tarbell, The History of the Standard Oil Company (1905).