Eleven of the large brewers in Vienna have made an informal agreement, which is not written. They meet from time to time and talk over the conditions of business. Generally speaking, they agree not to cut prices against one another. If one has a special brand of beer that through careful work he has introduced among the dealers, the others agree not to attempt to substitute with that dealer another brand for a leading one.

In this way there is a certain division of the territory in the city among the different brewers, so that the keenness of competition has been lessened, and likewise considerable saving has been made in the cost of deliveries.

Perhaps the most important factor in this combination, at any rate one of the most important ones, is their cutting off credits from those retail dealers who do not pay their bills promptly. If a dealer fails to pay any one of the members of the combination the others refuse absolutely to sell to him. Informal as this combination is it seems to have been effective; and, as one of those interested in the matter says, they have found it very profitable.

The greater part of the combinations regarding which one hears the most are national in their scope, embracing a large proportion, often all, of the important manufacturers in any one line in Austria. Not infrequently the agreements concern only Austria or Austria-Hungary and do not apply to the export trade, that being left entirely to the separate members of the combination. The largest combinations, such as the iron and sugar, include all of the important manufacturers in both Austria and Hungary, although, as will be seen later, each country forms a unit within the combination itself. In not a few instances, also, these Austrian combinations have working agreements with combinations in Germany, in the United States, and elsewhere.

2. The form of combination most usual in Austria is what in the United States would probably be called a pool; i. e. there is an agreement on output and also a selling bureau. These agreements very frequently concern the output, often concern prices, and sometimes have to do with other matters in connection with either the manufacture or sale of the goods concerned. It will probably serve our purpoes best to give two or three illustrations of the more prominent ones, which, nevertheless, vary somewhat in their form.

The general iron combination of Austria-Hungary.—The contracts among the different members of this combination concern 4 different kinds of products: (1) Roll bar iron, round, square, etc.; (2) structural beams and U-iron; (3) heavy sheets, that is, sheets of more than 2 millimeters thickness, reservoir and kettle sheets; (4) railroad small material.

The purpose of the agreement is said to be the production and the sale of the manufactured products named, so far as they are sold within the tariff limits of Austria-Hungary. In order, by means of an intelligent understanding, to avoid a useless and injurious competition it is the intention to restrict each establishment so far as possible to its own natural market, so far as territory is concerned, and to secure a uniform method of treating dealers.

To each one of the members of the agreement is assigned, in the agreement itself, a certain percentual quota of the entire product for the home market, based on its normal production, and this share is fixed separately for each one of the four different kinds of products mentioned above. This is necessary, inasmuch as some of the establishments produced only certain kinds of products and not all of them. An establishment which has not assigned to it a share of any one of these products is not permitted to undertake the manufacture and sale of that product during the period of the agreement. These agreements have been made for periods of 10 years each.

In the contract are not reckoned products which are exported either by being sent directly into the foreign country or through being sold to manufacturing establishments (for example, manufacturers of wagons or of locomotives), and by them used for export. In similar manner products are not reckoned which are used for the immediate manufacturing needs of the establishment itself.

In order to determine and to control the percentage of output of each one of the members, there has been created a so-called evidence bureau in Vienna, to which, every 10 days, is sent by each member of the combination a detailed report of its output of each one of the separate qualities of goods mentioned in the agreement, with the place from which the goods are shipped and the price for which they are sold. Each month the evidence bureau brings together these reports of all of the members into one table and, on the basis of the percentage allowed, shows to each establishment whether it and the other members have sold more or less than the amount to which they are entitled, how much they are still entitled to sell, or exactly how much they are in excess. From this monthly report each one can then tell whether he should check his sales during the coming month or should attempt

to push them somewhat further. These reports to the evidence bureau are tested by the officers of this bureau itself at the different establishments.

If it should be shown that a member has purposely left his report incomplete, there is a penalty of 10 gulden to be paid for each meter-centner not thus reported. The decision regarding such questions is given to a special arbitration committee established from time to time as occasion arises.

At the head of this evidence bureau there is an executive committee of 2 members, elected from year to year by the members of the combination. This executive committee, working in harmony with the evidence bureau, has the duty of carrying out the agreements, and especially of seeing to it that each member sells no more and no less than he should, in order to abide by the percentual amount allotted him. Inasmuch as in practice it is not possible always for each member to reach the exact amount due him, those who have sold more than their share pay to those who are behind a certain amount, which during the last year was fixed at 11⁄2 florins for each meter-centner.

Each member of the combination is permitted to transfer his share entirely or in part to any other member. In order to make it sure that the different members live up to their agreements, each one has deposited with the evidence bureau a bond for an amount proportionate to his share of the general output.

It will be noticed that each member of this combination is entirely independent as regards his production, and that he sells his own product independently. Although there is no agreement regarding prices, since each member is strictly limited in the amount of his production for the home market and is not at liberty to extend his sales at all beyond the amount agreed upon, he will naturally attempt to secure as good prices as possible.

Besides this general agreement between the Austrian and Hungarian manufacturers, there is a separate agreement among some of the different members themselves; for example, a small group of three among the largest inanufacturers have a common selling bureau instead of having each one of the separate concerns sell independently. So likewise, speaking generally, among the Austrian manufacturers, not merely is the percentage of output agreed upon, but there are also certain agreements regarding prices. It will readily be seen that it is possible to have in this way agreements within agreements so long as the general nature of the combination is of the character already set forth.

This iron combination includes substantially all of the manufacturers in both Austria and Hungary who are of special importance, but within the last year or two there have been independent companies whose competition has quite materially checked the tendency to secure large profits.

Another factor that has tended to strengthen the combination, especially among the Austrians, is the fact that Herr Wittgenstein, the leader among the Austrian manufacturers and the real founder of the combination, together with some of his more intimate business associates, are very large stockholders in several of the different establishments, so that there is real unity of interest which tends to make the combination firm aside from the control that is exercised by the central committee. Besides this general iron combination there is also an agreement among the rail manufacturers which differs from this general iron combination in this respect: To every member is guaranteed the same selling price f. o. b. at the works. This is secured in this way: Every member secures for the rails which he has delivered the selling price which corresponds to the average price secured during the year in question by all of the members of the combination. If one member has secured in that year a less amount (freight and other conditions of competition being taken into account) than the average, he receives from those who have received more than the average enough to bring both to the average price.

The sugar combination.-The sugar combination in Austria, which has formed also the model for the new sugar combination in Germany, to be explained in some detail later, has had a varied history. The first start toward the formation of the combination was apparently given in 1890 by the great Hungarian sugar refineries, at that time newly erected. The first combination embraced the sugar manufacturers of the entire Austro-Hungarian customs district, and had for its chief principle the securing of the advantage which was intended to be given by the protective tariff. At that time the margin between the duty upon raw sugar and the free refined sugar had been lowered to 6 florins and 50 kreutzer per meter-centner. In the first place the attempt was made to fit the output of domestic refined sugar to the actual demand by a general agreement, but in July, 1891, the agreement was made somewhat more definite. Under the new articles, to each establishment was assigned a definite quantity (its contingent) as a maximum which it was allowed to bring forward for the payment of duty within a determined period. This amount was supposed to be accurately gauged by the domestic demand. Prices then were not fixed under the agreement, although

there were often verbal understandings regarding the price. This combination, made for a year, was later extended twice for periods of a year each. The effect can be seen from the fact that the margin which in October, 1891, had dropped as low as 4 florins 45 kreutzer, had been increased in October, 1892, to 8 florins 75 kreutzer; in October, 1893, to 9 florins 30 kreutzer, and in January, 1894, to 10 florins 5 kreutzer. In 1894, however, the price of raw sugar in the world market lowered very materially, dropping from some 24 florins at that period to below 12 florins a year later. Besides this influence to lower the profits of the combination new competing refineries had been erected to take advantage of the profitable conditions brought about through the combination. The temptation to sell independently was strong, and in 1894 the combination was dissolved. January, 1895, the margin had fallen to 6 florins; in July to 5 florins; in September to only 4 florins. This effect brought about a new combination in October, 1895, made for two years, which has since been extended. The form of the combination was changed. The contingent of each refiner was agreed upon as before, and for every meter-centner entered above this contingent a penalty of 10 florins was exacted. In order to secure this penalty, shares of one of the prominent sugar refineries, the Chropine, were secured jointly by factories and placed on deposit as a pledge. In order still further to make the combination safe, an attempt was made not merely to include the refineries, but also the manufacturers of raw sugar, by allowing them half of the profits whenever the margin between refined and raw sugar exceeded 6 florins, it being understood that the manufacturers of raw sugar were not themselves to refine nor to furnish raw sugars to refiners who were not within the combination. This effort at first, however, failed, largely because certain manufacturers of raw sugar felt that they could not pay as high for bids as could the manufacturers of raw sugar who were also refiners and included in the combination. At length the raw-sugar manufacturers, crowded somewhat by the conditions outside of Austria which led to a very decided fall in prices in the markets of the world, themselves organized in order to enter the markets of the world on somewhat better terms than they otherwise could do. Finally, in 1897-98, a joint combination, including both the manufacturers of raw sugar and the refiners, was organized, which has been extended to the present time. The general plan of organization is substantially as follows: The total amount of sugar needed for Austria is agreed upon each year. The percentage of refining to be allowed to each sugar refiner is determined. Likewise the amount of raw sugar to be taken from each manufacturer of raw sugar is fixed. The manufacturer of the raw sugar is to secure for his product whatever price he can, that being determined naturally by the condition of the market. In case he receives less than 15 florins for each meter-centner, the balance up to that amount is made up to him at the end of the yearly period out of a fund raised by a proportionate assessment made upon the refiners. The raw-sugar producers on their part agree not to become refiners themselves, and not to sell raw sugar to any refiners outside the combination. In case the raw-sugar manufacturers can secure more than 15 gulden per centner for their profit this benefit goes to themselves.

The refiners can afford to guarantee this minimum price of 15 gulden because it keeps the raw-sugar producers from becoming refiners, and without serious competition the refiners can thus fix the price high enough to make it pay. In this way the raw-sugar producers secure a good price for, say, two-fifths at least of their product. The export price is of course likely to be somewhat lower.

Nearly all of the refiners and of the raw-sugar producers are in the agreement, which has been arranged for a definite period lasting about a year longer. Those who object to the combination are mainly some of the producers of raw sugar. Their demand has at times put up the price of bids so that the profits even with the guaranteed price are not very large. However, nearly all the persons in Austria who are familiar with the agreement and with the condition of sugar manufacturing there seem to think that the existence of the entire sugar industry practically depends upon the combination.

Other agreements.-Many other combinations of somewhat less importance have been made, with varying forms, but most of them have at any rate a selling bureau, which insures uniform prices, as well as an agreement upon output. For example, the wire and wire-tack combination, founded in 1889, consisted primarily of a joint bureau called The Commercial Bureau of Wire and Wire Tack Manufacturers of Bohemia. Seven competing firms entered into this combination with the result that the production was limited to the amount that the selling bureau could dispose of. The bureau itself does not work for profit, but has its expenses distributed among the manufacturers according to the amount of product delivered by each member. The combination of the producers of enameled ware likewise has a central selling bureau charged with the marketing of domestic and kitchen utensils in AustriaHungary, including Bosnia and Herzegovina, as well as in Roumania and Servia.

The bureau takes the orders and distributes them among the members of the combination. In this case certain manufacturers, who, for various reasons, could not formally join the combination, agree to the conditions and the prices fixed, and sell their own products under those conditions. The bureau is under constant control and inspection by the manufacturers. Aside from the bureau, this combination has also a committee as an executive organ of the general assembly. The committee consists of 7 members, meets monthly, with a quorum of 5 members, keeps track of the condition of the market, and gives directions to the selling bureau. The general control of the entire establishment is, of course, in the general assembly, in which each member has votes corresponding to his share of the total output.

The petroleum combination has likewise a joint selling bureau and limits each refiner to a certain percentage of the entire output. Likewise the producers of the crude oil have the amount which shall be delivered to the central bureau for sale within the country strictly determined. In the case of the crude-oil producers, their combination does not permit them to sell any oil either obtained from their own wells or bought from other producers to persons not belonging to the society without the mediation of the executive committee. Members are permitted to sell crude oil to one another with the consent of the central committee. The central bureau not merely acts as the agent for the sale of crude oil produced or bought by the members, but it also buys crude oil for the purpose of selling it on joint account, and may likewise carry on enterprises of other kinds which promote the aims of the society. The executive committee fixes the prices at which the crude oil is to be disposed of, both within the country and for export, and determines the quantity of crude oil that is to appear on the home market and to be exported, as well as the share allowed to the several producers. In case of violation of the agreements in any particular there is a certain conventional penalty fixed. For example, there is a maximum fine of 1 florin for every meter-centner of crude oil disposed of contrary to the agreement; also for delays in contributing one's share there is a penalty of 25 florins for every day of delay, etc.

In Austria-Hungary, in the manufacture of glass bottles, there are from ten to a dozen larger manufacturers. Two of the more important ones of these have a joint selling agency, but, as will be seen, it is not of importance as compared with the entire trade.

The soda combination consists also, in the main, of a central controlling bureau which receives all orders and assigns to the individual members their share of the total production. This has likewise a supervising board and a general assembly to control the business of the combination.

The combination of the producers of sugar of lead have the Bohemian Union Bank in Prague as their central selling place, where are received and distributed orders among the members according to the share which each has in the total production. It is expected to regulate the inland consumption. Every month there is a balancing of accounts among the members on the basis of the average prices obtained. Each member may produce more than his share provided he exports the surplus on his own responsibility.

The wood-pasteboard combination of 39 members has likewise a central selling bureau established through the Vienna Bank Association.

The pack-thread combination has a joint selling agency which sells the product within the country itself so far as possible, and has also control, to a considerable extent, of the export trade. This combination has agreed upon a basis of labor hours for the workmen in the different establishments, and has determined the productive capacity of each factory, this output being determined on the basis of the actual average output of the last three years before the organization was made. The sirup and grape-sugar combination, which embraces probably in the neighborhood of 90 per cent of the entire output of the country, selected one of the important banks as its central selling agency. general assembly have the direction of affairs as an executive committee. A committee of four responsible to the

The copper combination seems to differ quite materially from the others in that it does not have in view the regulation of the production of the members, but regulates merely the terms of credit which they shall all allow, the periods of discount, prices for the production of extraordinary plates, etc.

3. Besides the various forms of combinations consisting of agreements on output and prices, to which attention has been called, within the last two or three years several combinations more after the type of the American single corporation have been made. Mention has already been made of the combination of soda-water manufacturers in Vienna, and to the fact that they, through joint ownership of the means of production, were able to make various important economies. directors in the soda combination, and one who is also interested in some of the One of the

others, has called attention to the fact that the ordinary form of combination in Austria does not permit so great economies as does that form which is common in the United States. Agreements among different corporations, each of which retains its own separate existence and management, does not permit the dismantling of the more poorly situated or less well-equipped plants. The aim must rather be so to hold prices that even the poorest plants in the combination may still exist; and in the soda combination, for example, they have still left in operation some plants which have the older and more expensive processes. This relative lack of efficiency in the Austrian form of combination has been fully recognized by some of the more intelligent managers; and it is probable that on that account, wherever the Austrians or Germans come into immediate competition in the world markets with the American combinations, they will be gradually forced to adopt a form more like that in common use in America, or at any rate one which will permit the combination to have more complete power over its separate members.

The reason that has ordinarily been given by the Germans and Austrians for the retention of their present form of combination is that in the first place they do not wish so great publicity regarding their business as the corporation form would require. As will be seen in Part II, corporations are organized in Austria only upon special permission of the proper Government bureau, and before granting that permission the Government requires very complete reports. For example, in making application for permission to organize the corporation, it was necessary for the different sodawater manufacturers to furnish to the Government in the first place their proposed articles of association; second, a petition to the Government for the right of incorporation; third, the minutes of their organization meeting; fourth, an account of the expenses of founding; fifth, their reasons for organization; sixth, the detailed contract of sale of each one of the separate establishments to the new corporation, together with a detailed list of the properties, the amount paid for each, and the form of the payment; seventh, their expenditures and their income, showing their net profits; eighth, their table of estimated income for the combination; ninth, a list of all of the properties with the shares that were taken; tenth, an inventory of the property of each separate concern; eleventh, an extract from the trade register of business firms regularly kept in the commercial court of Vienna, in which the standing of each establishment is given; and twelfth, a signed statement of the income of each concern for the preceding two years.

It can readily be seen that many establishments which might like to be organized into a single corporation would hesitate before putting on file with a government office all of these various reports regarding their business. A second reason which tends to prevent the organization of single corporations instead of merely trade agreements is the higher taxes. In the first place, corporations are taxed much higher, indeed, several times higher, than are private firms; and secondly, owing to the degree of publicity that is insisted upon for corporations, there is not the same opportunity of evading taxes that private individuals or firms have. In consequence, the taxes are really many times as high as they are for the private firms.

In spite, however, of these disadvantages which, so far at any rate, have beyond doubt tended to check the formation of corporations, some combinations have been put into that form. Besides the one already mentioned, attention may be called to the corporation of the Austrian fez manufacturers, formed in 1899, which produces a very large proportion of all these Turkish caps that are worn throughout the East, Vienna being the central point for their manufacture. This combination took in several different establishments, together with the machinery, patents, etc., of three others, giving to the organization for the time being, at any rate, substantially a complete monopoly of the entire business. The joint stock company is in the usual form of Austrian corporations, and is thus open to the inspection and in part to the control of the Government.

A third combination which has taken this form, made in 1899, is the corporation of the Roth-Kosteletzer und Erlacher Spinnerei und Weberei. This was formed for the purpose of uniting cotton, woolen, linen, and silk spinners and weavers. In the form and conditions of organizations it agrees with the others mentioned. In the section dealing with the legal conditions in Austria, more details regarding the circumstances of corporation organization will be given.

PROMOTION.

The promoter.-Attention has already been called to the fact that in the making of these combinations the promoters have more frequently probably been bankers than men of any other profession, and the promotion of the combinations has been brought about in consequence rather by men who are financially interested in