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their contents. Therefore every development of this bureau into a regular bureau of concessions would be repugnant from the consideration that the granting of attributes of State authority to combinations is to be avoided under all circumstances.

Thus the conviction is established that the cartel bureau is, as it were, merely the hull, and that the real kernel is to be found in the regulations according to which the cartel bureau or another organ of the State would have to proceed. Only in one case would such a proposal obtain independent significance for the regulation of combinations, namely, if the cartel bureau were to receive the character of a governmental institution that is independent of the general administrative organism, and privileged to decide independently in matters of combinations. In this way the idea of an administrative cartel court is reached, which has lately been proposed by eminent authority.'. But this proposal also causes many misgivings. As already explained, the function of the State administration in matters of the combinations is a part of its practical economic policy, and the Government is therefore of the opinion that the solution of these questions should be transferred, according to their nature and according to all precedence in our legislation, not to a court, though it be only a forum for the settlement of administrative questions, but rather to the sphere of administration in the narrower sense of the word. And even within this sphere, divided as it is into (1) the decision of individual rights by due authority (instanzmässige Entscheidung), and (2) into the so-called free administration (freie Verwaltung) through which the State, with unbiased judgment and to the best of its ability, cares for the interests of public weal, the second only, i. e., the free administration, will be satisfactory in dealing with combinations.

It is further inherent in the nature of a judicial decision that the same pronounces solely judgments of a declarative nature; that is, it clears up the cases in question which fall under the head of laws which were already in force before the beginning of litigation. But the decisions of the executive in matters of combinations must be of a constructive (constitutiv-) nature, for these decisions must grasp the varying economic conditions (Conjuncturen) of each industrial branch, and bring about, within these conditions, such relations as will harmonize public and private interests. Such administrative decisions, which have the force of norms of public law issued by virtue of the power to establish rules (Verordnungsgewalt), must not by any means be based solely on the legal and economic conditions that exist at the promoting of a combination or the formulation of any particular measure of a combination, but it must also follow the later economic development as being a very important factor. Also for this purpose a judicial decision is not well adapted, because it can not, by principle, take into consideration the changes which have later developed in the most cases.

To these considerations of principle is added the important practical consideration that the judicial procedure does not, from its character, give assurance of the necessary despatch of decision which is necessary here where the immediate consideration of sudden development of economic life is in question. It might therefore easily happen that a judicial decision would become effective only after the favorable economic conditions had been fully exploited and when the combination, having gained its end, had been already dissolved. Even if such a proceeding should be endowed with a quasi power of injunction (Interdictenschutz) (the propositions as yet made have not gone so far), and if this power were carried out in the most summary fashion (for instance, after analogy of the possessionum summariissimum), it would probably be inefficient, because it would, even then, not respond to the double requirements of a quick and at the same time exhaustive decision.

Final results. As a result of these considerations the Government determined to adopt none of these systems, but rather to select another type, which unites elements of the registry and prohibitory system into one system of administrative regulation, combining therewith at the same time regulations of a penal and civil nature. This combination is the system embodied in the present bill, which provides for registration and the right of supervision and prohibition by the state, with sanctions of invalidity in civil law and prosecution in penal law.

The Government considers it an advantage of this regulation that it expresses in this form no positive approval of individual combinations, but while confining itself to a passive attitude (Assistenz), nevertheless remains in a position to obtain a perfect insight into the character and effects of these combinations, and to protect the interests of the population and state treasury against possible abuses.

The proposed regulation of combinations is based on this fundamental idea. At the same time the Government feels confirmed in its belief that this law will be an efficient weapon against abuses of combinations, principally from the fact that it

1 Cf. Dr. Emil Steinbach: Legal Transactions of Economic Organization, Vienna, 1897, p. 183.

knows itself to be one with the incessant wishes of public opinion. If Macaulay said that a law had no eyes and no hands, and was nothing but a piece of paper as long as public opinion did not breathe the breath of life into the dead letter, then the Government can assume that this law will not lack vitality. The Government also hopes that the law will have influence by the mere fact of its existence, and prevent harmful abuses of combinations in its province. For the Government wishes to prevent only these abuses, not combinations in general, and as the Government combats, in the interests of the community, the abuses of combinations, it considers itself justified, at the same time, to insure for the legitimate purposes of combinations a sufficient degree of liberty.


Section 1.

Delimitation of the subject.—This paragraph has a double aim, firstly, to mark off the province to be regulated, and, secondly, to express the supreme principle of this regulation—that of state supervision-for the combinations falling under the head of this law.

Since the interests of the revenue policy and, indirectly, the returns from indirect taxes form the starting point for the promulgation of this law, the present attempt of a partial regulation of combinations leads naturally to the subject of the great industries which produce articles of daily use, and more especially those that are of the greatest importance from the point of view of large consumption by the masses, as well as from the point of view of a productive indirect taxation. Such are, primarily, the well-known staple articles of the taxes on production, namely, sugar, spirits, beer, and mineral oil, the taxation of which is regulated by special tax laws.

These indirect taxes form in modern Austrian financial legislation, ever since the first agreement (Ausgleich) with Hungary, a special head for which identity in the principles of taxation has been established by the constitutional law (Staatsgrundgesetz) on the common affairs (of Austria and Hungary). (Cf. Constitutional law of December 21, 1867, R. G. B. 146, sec. 2, 1, 2: “Indirect taxes closely connected with industrial production.”) A demarcation useful for present purposes, and, as it were, especially prepared for the same, has thus already been made through an historical development of legislation (though originally intended for other purposes), and this domain could therefore, without further difficulty, be selected as the subject of this partial law on combinations.

The criterion, then, for this demarcation was afforded by the articles of production subject to indirect taxes of the above-mentioned kind, the enumeration of which, be it understood, is here made only by way of example, as other articles could be or could become the subject of an indirect tax standing in a like connection with industrial production. Salt, which article is subject to a state monopoly, may already be considered in this connection in certain cases; for the tax monopoly in regard to this article must also be regarded as a form of connection of industrial production with indirect taxation in the sense of the law passage cited. To be sure, salt is relevant only so far as the monopoly leaves free a place for the activity of private enterprise in the economic process from production to consumption; for wherever the monopoly covers the article, the opportunity for combinations does not exist, on account of the exclusion of private enterprise. Such a latitude for private enterprise exists in the salt monopoly with reference to the retail sale, middlemen's profits, and possibly export. From this fact it further follows that, for the delimitation, the articles themselves that are subject to the indirect taxation (or the monopoly) must be decisive, not the various forms of enterprise in connection with these; therefore not only the industrial production and the great industries mostly concerned with the articles, but also the most various other forms of enterprise may give occasion for combinations that would fall under the head of this law. Thus it is expressly understood that not only combinations of producers merely, i. e., combinations in the narrower sense, but also the combinations of commerce and speculation usually comprehended by the name of rings come under the head of this law.

But in all the combinations regulated by this law, the activity of the combined undertakers must have reference to an article in a stage of production when it appears as a subject of indirect taxation (or of a state monopoly). Combinations of beet growers which concern only the production or price of beets will not come under the head of this law, since beets are not subject to any indirect taxation closely connected with industrial production. But combinations of manufacturers of raw sugar in reference to the procuring or the price of the beets (cartels about prices or in

reference to the dividing of the markets, Rayonnirungscartelle) are affected by the law, since the enterprise of manufacturers of raw sugar, for whom the beet is procured, is directed to the production of an article that is subject to such a tax. Likewise comprehensive combinations of undertakers participating in the production of an article in different stages of production come under the head of this law if the final product of this whole series of production is subject to indirect taxation of the indicated kind, and the regulation of the price or of production of intermediate products is brought into some organic connection with the final product (e. g., fixing of prices of beets in a definite ratio to the existing prices of raw and refined sugar). For the application of this law the nece

ecessity of obtaining the most serviceable definition possible of combinations was evident. A generally recognized characteristic of combinations is the following: The attempt to exercise a determining influence upon conditions of production, price, and sale, in order to make these as well as the whole conditions of the market of the article more favorable for the members of a combination. A second characteristic, acknowledged in the same manner, is the joint action of members of a combination, which regularly finds expression in the agreement to curtail or abolish free competition, since such concerted action is intended to insure, as a suitable means, the attainment of the desired end; and this concerted action is a typical characteristic of combinations, however different the external form and appearance, as well as the intended effect on conditions of production, prices, and sale may be.

State supervision. In the system of law state supervision is the supreme principle out of which the other legal provisions about state interference are developed genetically. The obligation to register (secs. 2, 4, 6) is a primary condition for the exercise of state supervision, while the definition of the right of control and inspection by the state executive (sec. 7), with its last consequence, the right of prohibition by the state (secs. 8, 9), determines the exact extent of state supervision. At the same time, special provisions are made regarding the organization of the administrative bodies which are to exercise the right of state interference (secs. 11, 12) and a number of sanctions are established to insure the efficiency of all these provisions.

Sections 2 and 3.

Notarial form. For the establishment of the agreement of combination a notarial attestation is required, because, in comparison with other agreements, for which this form is obligatory, the subject of agreements of combination is of such importance to the public that at least equal demand for an authentic record existed. Besides this form appeared a serviceable means of preventing, as far as possible, the concealment, misrepresentation, etc., of facts. The designation of section 2 and the demonstrative enumeration of the points which the statutes attested by a notary must contain serves to insure these ends.

Relation to existing laws in reference to associations.-From the principle of state interference followed the necessary consequence that the invalidity of certain agreements of combination, pronounced in section 4 of the law on associations of April 7, 1870, R. G. B. No. 43, could no longer be upheld. It would be repugnant to all sense of justice and absolutely irrational that something should be subject, in its entirety, to the legal consequences of nullity and invalidity before the law, after having been regulated as an object of most thorough state inspection, and after having been considered approved, if not prohibited by the state authorities according to sections 8 and 9. It would also be a legal anomaly if notarial attestation were prescribed for an agreement, and if this agreemeut were nevertheless to be treated as invalid or null without distinction. The Government finds it all the easier to concede the validity of certain agreements in private law, since former experiences have shown the very slight practical significance of invalidity of such agreements in private law.

Apart from this necessary change in the law on coalitions, the relation of the present law to the law on coalitions is defined by section 3 to the effect that in other respects both laws are valid side by side. The legal rights of the laborers are, therefore, altered in no way to their disadvantage by the present partial law on combinations; agreements of undertakers to the disadvantage of their laborers fall as before under the sanctions of the law on coalitions; indeed, there are even added in the present law new severe sanctions for contraventions of this kind that might be committed in the way of a combination. (Secs. 8 and 16.)

Since combinations come under the general head of associations, they will have to fulfill, according to the form adopted and the character of the association, the conditions prescribed for them by the existing laws on associations (patent on

associations, of November 26, 1852, R. G. B. No. 253; code of commercial law (Handelsgesetzbuch), second and third book; law on associations of November 15, 1867, R. G. B. No. 134; law on business and savings associations (Erwerbs_und Wirtschaftsgenossenschaften) of April 9, 1873, R. G. B. No. 70, and others. The present law does not desire to interfere with the effects of these laws for the reason that it aims solely at a regulation of combinations from the standpoint of its own particular purposes.

Sections 4 to 6. Objects of registry:—The following are conceived as objects of registry: The act constituting the combination, i. e., the agreement of combination established by notarial attestation, furthermore, every amendment of the agreement, the act dissolving the combination, also a statement of the essential functions of an existing combination, as, e. g., the fixing, whether directly or indirectly, of prices, of the quantity of production, of the conditions of purchase and sale. The accession or withdrawal of a member of a combination is, according to section 2, to be deemed a change of agreement, and from that fact alone must be duly reported. For the sake of clearness these cases are specifically enumerated.

Subjects of obligation to report.-Subject to the obligation to report are all members of the combination who, as those principally interested in the combinations and as bearers of the legal relation subject to report, appear to be principally marked out for the fulfilment of this duty.

They are not absolutely compelled to fulfill this duty themselves, but may, at their own responsibility, avail themselves of representatives specially authorized for it. By the requirement of special authorization the responsibility of the members of a combination for the reporting is specially emphasized, because for the relation between the State authority and the combinations the obligation to report is the foremost duty, and when one considers that the efficiency of essential legal provisions is dependent on it, it appears a very important duty, whose fulfilment must be safeguarded by special responsibility:

The obligation of the notary to deposit copies of the agreement of combination is independent of the obligation on the part of the members of a combination to register. Nevertheless, since the assistance of a notary is legally requisite for the obligatory notarial form of the agreements of combination, it is natural to use this attestation to transmit to the authorities a complete knowledge of the constitutive act of the combinations.

The double obligation of reporting and depositing [the terms of agreement] will constitute a useful measure of control, which is made necessary by the importance of these reports.

Cartel register.-From numerous utterances of the public the Government inferred the desire for publicity of the agreements of combination.

Indeed, this desire that combinations might emerge from the obscurity in which they have as a rule sought shelter into the light of publicity must be acknowledged as just, principally, because the population, which is so much interested in the agreements of combinations, has surely some claim to a knowledge of their contents. In a certain sense it is to the advantage of the combinations themselves if they have nothing to conceal from the public; in fact, formerly a not uncommon aversion to publicity led to suspicions and unfavorable opinions, often devoid of any justification.

The Government hopes, besides, that in the light of publicity the opinions about combinations will become more settled and also that a separation between permissible combinations and such as offend against public morality will take place in public opinion. The Government deems it of special importance that the momentous decisions in the matter of combinations, which are reserved to it according to the provisions of this bill, find a support in public opinion. For this purpose there is need, above all, of an efficient organization, in order to bring to general notice as quickly as possible the facts furnished by the reports in reference to combinations, as prescribed in section 5, as well as the decisions thereon of the State executive.

The establishment of a bureau of publicity is to serve this purpose, the simplest and most natural form of which is the collection of copies of the reports and decisions with the department itself that receives the report (the ministry of finance).

The collection of these copies constitutes the register of combinations (cartel register). The publicity to be effected by the same is to be further increased by the instruction of immediate publication in the public journals of all copies deposited.

Section 7. State supervision.—The right of State supervision is twofold in its effects: Firstly, that of inspection of the accounts; and, secondly, the right of demanding information about the business affairs; imposing in the first case a sufferance upon the com

binations and combined capitalists, in the other case a positive performance. In both cases this right includes an insight into the entire business relations of the combinations (into the particular circumstances of their business as well as into their entire business as combinations) and into the internal and external relations of combinations. The possibility of an exhaustive exposition of all these conditions is an indispensable foundation for the exercise of State supervision; and it is therefore provided for, to the same extent at least in principle, as in other domains where a right of State supervision exists. (Patent of associations of November 26, 1852, R. G. B. No. 253, sec. 22; regulation of insurance of March 5, 1896, R. G. B. No. 31, sec. 38.). On the other hand, this complete exposition is a burden, to be sure, imposed for the interest of the public, but certainly no serious obstruction to the management and development of business; in fact, business life is compelled to submit to such inspection by State authorities in other cases-for example, the inspection of accounts, according to articles 34, 40, 240 of the code of commercial law (Handelsgesetzbuch). Besides, the exercise of this privilege will as a rule not amount to a permanent condition, but rather consist in isolated acts of inspection of accounts. Furthermore, it is self-evident that the strictest preservation of the secrecy of office to which the inspecting authorities are bound in general, and also in reference to the members of combinations, will remove any great apprehension that the right [of investigation] may jeopardize business interests.

In one point, where the purposes of State inspection permitted it, the law itself sets a limit to inspection into business affairs by providing expressly for the guarding of business secrets in technical appliances and processes.

Sections 8 and 9.

If the State supervision is to be efficient, it must be endowed with the attributes of an active interference of the State authority with the existence or important actions of the combinations. This need led to the establishment of the right of prohibition or interdict resting with the executive, in which right the police power of the State in economic matters finds its highest expression. If State supervision is the eye, the right of prohibition is, as it were, the arm of State authority. In this right there is contained just as much an obligation to act as also an intentional limitation of State interference, which is to restrict itself solely to a defensive attitude toward abuses and is to avoid on principle every act of positive consent or approval. (Cf. the General Commentary, p. 128.)

The attitude of the State executive toward combinations is therefore exhausted by the alternative of sufferance or prevention.

The State right of prohibition, as the pinnacle of the fabric of State supervision, must be founded on a consideration of the conditions brought to notice by that State supervision. Therefore the most careful investigation of all the circumstances that involve an injury of public interests by a combination must precede the promulgation of a governmental prohibition.

This examination is an act of the supreme supervision of economic conditions resting with the State, and from its nature must be left to the discretion of the State executive. The law furnishes for this examination certain criteria, so that with every promulgation of a prohibition there is at the same time expressed a logical decision, in the affirmative, about the pertinence of the legal presuppositions. For determining whether the purpose of a combination or some particular act on its part demands its suppression, two criteria are established by the law: (1) Does the law apply to the case under consideration? (2) Is the general purpose or the special act of the combination legally inadmissible?

As far as the first criterion is concerned, an action of the combination that is of public interest must be concerned, that is, the pursuit of the special aims of a combination—a regulation of the prices, production, or sales (sec. 1). The regulation of prices may take place directly by fixing combination prices, or indirectly by fixing the quantity of the output through the division of market territory or by agreements about the buying of means of production, such as raw auxiliary materials, performances of labor, and the like. Considering the significance of all these conditions for the prices of the products of combinations, the action of the combination which may lead to State prohibition will consist, as a rule, in an indirect or direct influence on the prices of these products, be it to increase or maintain them. With an opposite tendency, a fixing of prices for auxiliary raw materials and other means of production will occur where combinations undertake the regulation of production. The fixing of prices may, as such, have reference directly or indirectly to wares or performances of labor, since not only wares or performances of labor, or both, can be a means of production for combinations, but also the production of goods or the furnishing of

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