(4) Who trespasses on the provision of section 3, paragraph 2, is also guilty of an offense and shall be punished with one to six months' imprisonment and with a fine of from 200 up to 10,000 florins.

SEC. 16. Members of the committee not belonging to the corporation of Government officials having trespassed on the duty of secrecy shall be removed at once from their functions by the ministry of finance.

If aggravated circumstances supervene they are further to be fined up to 1,000 florins. Government officials committing indiscretions in official business are to be punished according to disciplinarian provisions.

SEC. 17. The authorities of the country (magistrates) can inflict the aforesaid fines (sections 13 and 14, paragraph 2), but appeals can be made within two weeks to the ministry of finance. The cases are to be tried in the district where the offense has been committed. The disciplinary fines go to the imperial treasury. Offenses named in sections 14 and 15 are submitted to the jurisdiction of the common-law

courts.

SEC. 18. The manager of a trade is responsible jointly for any disciplinary fine inflicted upon his representative, according to the present law, and likewise for any fine against his attorney, on account of an offense (section 14) committed in presenting the proper notice.

The manager is answerable jointly for the fines for other trespasses inflicted on the ground of the present act, if the trespass has been committed by his own order, with his knowledge, or if it could have been prevented by his due care and attention. The responsible person is to be summoned to the civil-law court.

SEC. 19. The bond given by the management of the trust is held as security for all disciplinary or other fines inflicted from the time of the deposit of the bond against any manager, member, or representative. The Government has first claim on the bond for fines.

In the cases of section 15, paragraphs (1) and (2), the ministry of finance, after having heard the committee (section 10), is authorized to declare the bond forfeited in whole or in part.

The bonds forfeited go to the imperial treasury, unless the bond has been deposited a fortnight after the order of the ministry of finance was issued, or has been supplied to the full amount after the forfeiture. The ministry of finance shall be authorized to prohibit the existence of the trust or to cause the missing amount of the bond to be collected.

SEC. 20. The ministers of finance, of interior, of justice, and of commerce and agrigulture are ordered to carry this act into effect, which becomes valid with the day of its publication.

APPENDIX II.

EXPLANATION OF BILL RELATING TO AUSTRIAN TRUSTS. Introduction.-The establishment of combinations of capitalists for the purpose of mitigating or removing the harmful effects of free competition and substituting in its place, through a preconcerted and united action of the members of such a combination, conditions of production, prices, or sales as favorable as possible to such members, is taking place in Austria since comparatively recent times in everincreasing measure. Although exhaustive statements about the spread and growth of these combinations are wanting, there can be no doubt that this development is taking place with the greatest rapidity; that combinations of employers occur in all spheres of business, in the sphere of production, of commerce and trade, and of insurance; that they are just as frequent in the case of finished products ready for use as with the partly finished, raw, and auxiliary materials, etc.; in short, that they have become one of the most important phenomena of our economic life and have scarcely left untouched by their efforts a single branch of industry. The cause for this rapid spread is probably to be found to a great extent in the fact that modern industry is built up in a continually more perfect development of the principle of division of labor, and that, therefore, combinations of producers of the finished products easily lead to very similar combinations of those producing the things necessary for the manufacture of these products.

Like similar combinations of capitalists in foreign countries, these combinations (usually designated as combinations or cartels in the widest sense of the word), following the trend of modern economical development, aim at securing the advantage of the individual capitalist by creating through contracts, through formal agreements

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of organization, an economic organism in which the individual capitalist must submit to a certain self-imposed restriction of his liberty in favor of all the participants. The individual may in this case pursue his advantage only in so far as it is attainable for all members of the combination, and as an equivalent for this self-imposed restriction this advantage is assured to the capitalist, though possibly in a smaller measure, and the possibility offered to him to make his calculations with definite factors instead of the incalculable conditions of the market, and to eliminate at least a few of the numerous unknown quantities which, more or less, every undertaking has to take into account, considering the relation of our industries with those of the world. The conviction has triumphed that individual economic prosperity can be assured more easily through such combinations, through creating an economic collective power, and through subordination to a common interest, than through unrestrained individual effort, which under the system of free competition may often, though only for a short period, prove more profitable.

To be sure, it can not be denied that the abuses arising from free competition have in some spheres of industrial life reached such a degree that the capitalists were compelled by sheer force of circumstances to unite their economic powers. Such combinations (Cartell-Vereinigungen) represent primarily an act of economic self-help, an expression of the beneficent idea of association, which in such, as in other cases, has brought about useful results, not only for individual interests, but also for the community. Though, then, beyond doubt, many of such combinations have a sound kernel in their firm and sound organization, and although they may at times have beneficial results, still contrary effects have recently made themselves so strongly felt and have become so impressed on the public mind that combinations are usually judged with reference to their harmfulness, and that the Government has been more and more frequently and urgently called upon for measures against them. This was done in numerous interpellations and resolutions of the imperial Diet and the provincial parliaments, in resolutions of chambers of commerce (Gewerbe-Kammern), in (public) meetings, in the press, etc.

These impulses, coming from various directions, which must probably be regarded as an expression of prevalent public opinion, have confirmed the Government in its conviction of the necessity of legal regulation of combinations. The practical difficulties, which were due principally to the novel character of the subject, and which, up to date, had not been ex professo legally dealt with by any State (if the American legislation, which was not applicable to our conditions, be excepted), made it expedient to analyze the various industrial branches and to single out those in which the formation of combinations is of particular significance from the point of view of taxation and social effect on the masses (sociale Massenwirkungen). From this critical analysis it became clear that the abuses of combinations have nowhere else become so sensible as in certain common articles (Massenartikeln) of daily use which are liable to an indirect tax in close connection with their industrial production. Then it became perfectly apparent that combinations might seriously endanger the aims of certain schemes of taxation which were of weight in determining the rate of certain indirect taxes, and, furthermore, that combinations have even endangered in these spheres important interests of the State treasury and of large masses of the consumers. This was then the most weighty consideration that determined the Government, in fulfilment of its duties toward the interests of the State treasury and as guardian of the common weal, to stake off as a reservation the sphere of these articles of consumption subject to the indirect taxes mentioned and to make it the subject of legal regulation. This regulation appears to the Government to be a necessity to prevent the burden imposed on the consumer by the present system of indirect taxation of these articles being increased by private organizations, against the purposes of revenue legislation and in a manner harmful to the community. Such considerations must have the more influence with the Government at a time when the same, from important reasons of State interest, is confronted by the necessity of increasing the indirect taxes on these articles. Under these conditions the Government considered it an absolute duty to prevent the resources of the people being drawn upon beyond the necessary burden of taxation by private agreements that practically aim at the imposition on the consumer of compulsory sacrifices in the nature of indirect taxes. Combinations and rings.-In spite of the above-mentioned delimitation of the field chosen for legal regulation, the different phenomena and effects which combinations in general show were also to be considered. Combinations which have already become at the present day, as an economic type, constant collective phenomena, have shown the most varied development, extending in all possible directions, and have, under different external conditions, produced very different effects. Thus it happens that very different things are understood under the name of combinations, and from this it also follows that the question, frequently quite general, whether trusts are useful

or harmful, can not be answered concisely. For if one asserts in an offhand fashion the usefulness or harmfulness of combinations, it is still anything but clear to what such statements refer-whether to the capitalist or to the workingman, or the population, etc. But in order to be able to judge whether combinations are useful or harmful to the community it is necessary to distinguish between different kinds of combinations. Public opinion does this instinctively by designating one form of combinations as rings and the other as combinations in the narrower sense of the word. With this distinction the opinion has become established that the rings, but not the combinations, in the narrower sense of the word, are harmful to the community. The most important distinction between these two forms consists in this: That the ring is an instrument for the sale of wares, while the combination is an instrument for the production of wares. In spite of the prevailing opinion that the rings are harmful to the community, this harmfulness can not pass for a definite characteristic, and even if public opinion is on the right track in so far as the rings are certainly in the majority of cases instruments of speculative abuses of a nature harmful to the community (like the copper ring or the former maize and oats ring of Austria), still cases are conceivable where combinations of dealers pursue aims which in no wise injuriously affect the interests of the community, so, for the sake of example, when an opposition ring was formed to uphold the rate of exchange of Government securities against a ring of speculators who tried to depress it, or if (to cite another example) combinations are entered into, as was recently done by a syndicate of banks in the United States of America to counteract a depreciation of domestic currency by uniting to bring in foreign money. Likewise it is possible to conceive of combinations of exporters who, to preserve the reputation of domestic trade with foreign countries, agree not to sell an inferior class of wares, etc.

Only such combinations can probably be designated as harmful to the community that buy up a commodity or obtain deliveries in order to raise the prices of this commodity, through complete or partial closing of the markets, beyond its normal rate: or which, through fictitious sales or delivery, depress prices beneath their normal rates in order to supply themselves at these depressed prices-which do all this to obtain, through falsifying the state of the markets, unjustified gains. The peculiarity of the ring, therefore, is this: That speculators combine in order to falsify in their favor, in the manner stated, the state of the markets. It may already be mentioned here that the regulation of the special question now under consideration includes both classes of combinations, the rings and the combinations (proper).

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Usefulness or harmfulness.-In judging the combinations in the narrower sense of the word also, the question of their usefulness or harmfulness calls for investigation. For the position of the public authorities toward the combinations depends on the answer to this question. But, as already stated, a concise logical subdividing of combinations for the purposes of regulation, according to external distinctions-for example, according to categories like "combinations of production,' ""combinations of prices, combinations of selling," etc.-can not be attempted, but a critical examination of combinations according to their economic purposes rather is necessary. It is a different thing whether a combination wishes solely to make economic gains corresponding to the state of the markets and to prevent losses of a normal character, or whether it attempts to obtain a monopolistic supremacy in the market, in order that it may carry on a monopolistic policy of prices, falsify the state of the market, and thus obtain exorbitant gains. The true and practical criterion for a classification of combinations can be found only in the purposes of a combination. From this point of view one can divide them

1. Into such as attempt to reduce uneconomic conditions produced by free competition (such as overproduction, cutthroat competition, excessive underbidding to get orders, excessive expense of advertising, etc.) and consequent abuses (loss of capital in enterprises, gluts in the market, lowering of wages, discharge of workingmen, etc.) to economic conditions (i. e., corresponding to the existing economic situation), this refers particularly to prices; and,

2. Into such that attempt to establish a de facto monopoly in order to obtain excessive earnings, excessive prices, not corresponding to the economic situation; or in order to restrict the production of commodities in an uneconomic manner.

There can be no doubt that combinations of the former kind are useful, and even deserving of encouragement. For, in so far as they keep within the limits established by the existing economic conditions, they can have a salutary regulating influence on the whole industrial world, by insuring a certain stability of production, by adapting the quantity of production to the demand, and so, perhaps, actually bringing about a transition from a condition of irregular production to an economically more perfect, regulated production. On the other hand, there can be but little doubt about the general harmfulness of the second kind of combinations.

In this attempt to distinguish combinations critically, the difficult question, to be sure, remains unanswered: What are economic conditions corresponding to the existing economic situation, and what is the contrary? There is a fair and an unfair speculation; there is a fair and an unfair competition; there is fair interest and usurious interest; there is also economic production and its contrary. If one can determine all these conditions, why should it be impossible to find a standard for estimating what conditions (particularly prices) correspond to the existing economic situation? It should also be remembered that here, in spite of the economic character of the subject, moral standards also apply, the definitions of which can not be determined from certain external characteristics, like degrees of temperature on the scale of a thermometer. These moral standards, on the contrary, shade off, on practical application, one into the other, but they nevertheless show undeniable distinctions, or even strong contrasts. As little as there are sharp distinctions between genuine enterprise and daring speculation, between economy and avarice (although such contrasts doubtless exist and are formed in all economic conditions), just as little can the want of such sharp delimitation in the matter under consideration be regarded as an obstacle against taking the aforementioned contrasts as a starting point and basing the practical application of them on the difference of the individual

cases.

In all such cases a question of facts will arise upon which, in every individual case, an organ of the state specially adapted for the solution of these problems will decide. The Government intends to make this institution of such a character that it will not only possess professional competence and reliability of judgment, but that the same will also be in a position to command, by the way in which it is selected, a high degree of authority in the eyes of the public. (Cf. the comments on sec. 11.) The Government can not resist the conviction that combinations contain from their very nature the germs of excrescences, and that a most suitable soil for these excrescences is to be found in the midst of the class hatred and class feuds that prevail throughout the whole social body. A quite uncontrolled development of combinations leaves room for the possibility that the danger of uneconomic prices, uneconomic earnings, and uneconomic restriction of production should become an abuse threatening the whole economic life. Although this development has not reached a climax up to the present, nevertheless the Government considers itself obliged to take positive measures, already at this point, with a view to the abuses already existing, as well as with a view to the aforesaid possibility of future developments. The thought of Government interference thus broached leads up to the frequently ventilated question whether the state can or should interfere in this matter. Principles of state interference. The right of the state to interfere has been denied from various sides, and the opinion is not infrequently expressed that the modern state, with its present institutions founded mainly on the idea of the so-called constitutional state (Rechtsstaat), must refrain from such a serious interference with economic conditions. So much is certain that as a result of the rapid emergence of social questions modern states have been confronted with a problem which, in difficulty of solution, has possibly no equal in history. From this point of view alone it is clear why the responsible circles approach the legislative treatment of the great social problems only with the greatest care. But it were an illogical conclusion to derive from such circumspect treatment the conclusion that the modern state is not adapted for economic interference, and this would be directly contrary to established facts. It will probably be sufficient to recall the modern social legislation of Austria in order to show that we are already in a stage of development that has long ago outstripped such scruples. This very legislation is a proof of the fact that the idea of interference, through the power of the state, in social conditions can be adapted to the most difficult forms of modern social economy; that the state is zealously intent to bring its administration, in this point also, to a level with the highest requirements of the times.

If, now, doubts about the power of the modern state to interfere in reference to this point can not be entertained, the question of expediency demands a detailed consideration.

As already mentioned, the Government has determined, with forethought, to mark off a regular segment of the province of combinations and to experiment on the same with the legislative regulation of combinations. The principal reason leading to this determination is that precisely those combinations that deal in certain articles of consumption, subject to indirect taxation, have developed abuses and economic dangers that make the interference of Government appear a peremptory command of political necessity. The interests falling within the sphere of the administration of finances urgently call for legislative measures in their protection. For these combinations affect the whole management, organization, and success of important and rich revenueyeilding undertakings in a manner justly regarded by the public as a serious abuse,

so that legislative regulation of this matter, more than any other, does not permit of any longer postponement.

Sugar cartel. With reference to this it is sufficient to call attention to the sugar cartel, the development of which is most significant in regard to all the points discussed. The Government does not at all refuse a hearing to the arguments made in favor of the sugar cartel, and it recognizes particularly that its existence assures a certain stability of the sugar industry (so important for our economic life and particularly for agriculture) and of the other industrial pursuits with it or depending on it. Although the Government does not disregard this aspect of the case, all the more since it has, as before stated, always considered their industrial services in judging the combinations, nevertheless the complaints about the oppressive effects of the sugar cartel upon the consumer and the beet-growing population could not be refused a serious consideration. It is well known that this combination has used the favored position accorded to the sugar industry by a protective tariff to keep the price of refined sugar for home use at a level which frequently exceeds considerably the price of production and reasonable private earnings.

The sugar industry is one of the industries receiving support from the state by means of open export premiums. This premium not only encourages export, but increases the rates at home, the price of refined sugar for home consumption being raised, over against the price in the markets of the world, by the amount of the legal premium. It follows from this effect of the export premium that consumers in Austria-Hungary must pay dearer for their sugar, in spite of overproduction, than the consumers of other countries. If this state of affairs is aggravated by the fact that the refiners of sugar make agreements to still further raise the price of refined sugar, then it is hard to deny a certain justification to an opposition against such combination.

The economic aims of our legislative revenue and premium policy have been seriously injured from this cause, in spite of the burdens imposed upon the community for the sake of these industries.

There is one thing very apparent about the sugar cartel, namely, a number of effects that must be expected to appear in the whole sphere of industrial production of those articles subject to indirect taxation, as soon as economic conditions favor in a like manner the formation of combinations.

Economic reactions.—It is self-evident that such combinations affect unfavorably the consumption and consuming power of the population. When the producers of articles of daily use unite to furnish them only at a price that is higher than it would be without a combination, they compel the population, through their practical monopoly, to pay them a higher rate, an actual cartel premium.

Of course this, often enough arbitrary, increase of prices must materially impair the consuming power, and as far as the consumption of the articles under the control of combinations keeps on a certain level, in spite of much greater strain on the consuming power, then this is accompanied by a disproportionately greater burdening of the consumer solely for the advantage of the combined capitalists. As a further consequence, the consuming power of the population in general, the standard of living, and the economic development of the classes concerned are affected detrimentally.

Just so much as the resources of the population are taxed increasingly in favor of private enterprise, their resources naturally decrease in their relation to the state. Whenever this happens it thwarts those principles of revenue policy which are often applied in enacting indirect taxes, such, for instance, as that on the economic ground of sparing the consuming power the tax rate should not be fixed higher than a given point. More than this, the same economic condition is produced as under a higher rate of taxation, only with this difference, that the increase in receipts, due to a greater burden on consumption, does not flow into the treasury of the state, but into the pockets of the members of the combination.

The whole manner of such organized combination, and particularly the fixing of the prices, amounts to drawing upon the resources of the population in a way resembling a Government revenue monoply. Now, it lies in the nature of the modern state, and it may also be regarded as an incontrovertible assertion of modern financial science, that a monopoly shall exist only as a state monopoly and for the purpose of raising certain indirect taxes. From this it follows, furthermore, that in the sphere of private economy similar developments having the essential characteristics of a monopoly should never come into existence and find recognition through private agreements, but solely through legislative power. This view of the question puts into even stronger light the inadmissibility of the present unhindered interference of the combinations with the entire economic life and even with the financial sovereignty of the state.