the pay is not thus received, the bureau draws upon the purchaser for the amount by the middle of the succeeding month.

The purchaser must declare that the pig iron bought is intended solely for his own consumption, and he agrees not to reassign it in whole or in part without the formal assent of the bureau. The prices are regularly fixed upon a sliding scale, varying with the price of coke, increasing or decreasing by 1.5 francs for each franc of increase or decrease in the average price of coke. The bureau insists also upon the contracts being made for a period of three years, with the understanding that there shall be regular monthly shipments. For example, if these conditions of sale as regards the term of the contract, the manner of delivery, the use of the product, etc., are not met, the bureau cancels the contract, leaving no choice to the purchaser except to close his works, there being practically in all that section only this one seller of pig iron for manufacturing purposes.

The sliding scale is managed as follows: When, for example, the basis price is 82 francs a ton for a certain grade of pig iron, with coke at a price of 25 francs a ton, the changes would be as follows: If coke should increase to 32 francs a ton, pig iron would be invoiced at 10.5 francs above the basis price that is, at 92 francs. In certain parts of France, especially in the south, there is an opportunity to buy some little pig iron aside from the bureau, but for ordinary founding the purchasers are practically compelled to accept these Longwy conditions. It seems to be a general opinion, which is perhaps at any rate partially sustained, that the bureau benefits by an increase in the price of coke, inasmuch as the allowance of a franc and a half increase for the increase of 1 franc in the price of coke is somewhat more than the added cost of manufacture coming from the increased price of the coke. It is therefore charged, with what degree of truth it is difficult to determine, that the bureau deliberately puts the base price of its product in connection with a base price for coke which is somewhat below the price which is to be expected. In consequence, it regularly receives the benefit which comes from the increased price of coke, and very seldom, if ever, has to endure a loss which, for the same reason, would come with the decreased price of coke. Whether this complaint is a valid one or not depends, of course, upon the fairness of the adjustment of its sliding scale in connection with the price of coke.

Inasmuch as one object of the bureau is to assure to its customers the regularity of its operations, it must be necessary that its prices be fixed in accordance with a sliding scale, so that contracts can be made for comparatively long terms with the certainty that they can be carried out by the different parties concerned. Through the medium of the sliding-scale contracts the bureau can adapt much more exactly its production to consumption, and thus prevent the great fluctuations that might come were prices fixed more rigidly by normal demand and supply.

In connection with its selling contracts the bureau has been criticised at times because it has shortened the delays in payment, and has practically, in consequence, suppressed discount. The managing director of the bureau, Mr. Aubé, made a special report on this subject at a meeting of directors of bureaus, in which he argues that discount, which at first was perhaps logical, is now immoral and stupid, and that its suppression really benefits the purchaser. He believes that 30 days is a sufficient term of credit, and thinks that longer and varying times of payment are decidedly injurious to the trade. In conversation Mr. Aubé takes the position that he has rendered a great service not merely to his bureau, but to all great industries, by this suppression of discount, inasmuch as his plan has been followed by others connected with the great industries.

In fixing the prices to consumers the management of the Longwy bureau doubtless attempts to do substantial justice among the different purchasers, but it is likewise true that certain customers have a greater advantage in making purchases than do others, and that special conditions of the trade need to be taken into consideration, so that the bureau deals with its customers not always in accordance with any fixed rule which obtains in all cases, but rather in accordance with the circumstances of each individual case "comme negociant." In one special case to which attention has been called a French "bureau" seems to have overestimated its own power. One of the very large purchasers, like the railways, attempted to secure somewhat more favorable terms from the bureau than were first asked. Upon the bureau's refusing to make any different terms and assuming a somewhat dictatorial position as an establishment that knew it had a monopoly, the customer went elsewhere and imported very large quantities of iron. As the event showed, he could not secure from abroad any better rates than the comptoir had offered. He did, however, secure the same rates, and, as he felt, he freed himself, for the time being at least, from the grasping hand of the monopolist.

THE TARIFF.

There is perhaps no reason for saying that the French tariff, on the whole a high protective tariff, has been the cause of the formation of the industrial combinations that exist; but, on the other hand, there can be no doubt that the tariff has enabled the combinations to exert somewhat more power than they otherwise could have done.

In speaking of the professional syndicates attention was called to the fact that the manufacturers of material for railways were enabled to exercise somewhat more power than they otherwise could have done on account of the relations of the railroads to the French Government. The protective tariff doubtless had also something of a similar influence, although that is not the matter of chief consequence.

In a somewhat different way the bounties on sugar doubtless affect sugar prices and enable the refiners of sugar, through the combination which enables them to control the output, to secure higher prices from the French consumer, in part to the benefit of the foreign consumer, than would be possible without this unity of action. The case can perhaps be made out. somewhat more directly with reference to the Comptoir de Longwy in connection with the iron industry. It is stated on the best authority that in fixing the prices of their iron product the bureau takes regularly into account to the full extent possible the duty on iron. The statement was even made that if one wished to obtain the prices of iron of the comptoir over a period of years one should take the English prices of iron of the same quality, add to that the freight from the English works to the French point of destination, and add to that the French import duty on iron. Thus one would secure with substantial accuracy the price of the comptoir. This, of course, is simply saying in other words that the French bureau exploits the tariff to the full extent for its own advantage. How far this may be justified in order to enable it to make living profits is of course something that can not be accurately stated; but there can be no doubt that were the tariff lowered or removed the prices of the comptoir would have to be proportionately lowered. It is of course entirely possible that any material lowering would be to the serious detriment of the Longwy industry. This protection has also enabled the iron syndicates to enter on more favorable terms into agreements with their foreign rivals in Belgium and elsewhere.

THE FRENCH LAW REGARDING COMBINATIONS.

The French law regarding corporations will be explained in detail in Part II, with some especial statements regarding sections 419 and 420 of the criminal code, which deal also with the question of monopoly. We must here also, however, discuss briefly the effect particularly of section 419 so far as it has affected the form of combination. That section, first passed in 1810, reads as follows: "All those who, by deliberately spreading abroad false or slanderous facts, by offering a higher price than that asked by the vendors themselves, by association or coalition between the principal holders of the same merchandise or food stuffs, whether with the view to withholding them from sale or with a view to selling them only at a certain price, and all those who, by any fraudulent means shall effect a rise or diminution in the price of food stuffs, or in the sale of public securities, above or below the price determined by natural and free commercial competition shall be punished by an imprisonment of 1 month to 1 year and by a fine of from 500 to 2,000 francs. Those guilty of the foregoing may be also put under the surveillance of the police during from 2 to 5 years.' And section 420, as follows: "The penalty for the foregoing shall be an imprisonment of from 2 months to 2 years and a fine of from 1,000 to 20,000 francs if these manoeuvres have been practiced on grain, flour, bread, wine, or any other drink. A surveillance by the police, if ordered, shall in such case be

during from 5 to 10 years."

The provisions regarding the surveillance of the police were repealed by the law of May 27, 1885. The remainder of the sections stand at present, although their application seems to have varied slightly from time to time under the decisions of the court.

The severe penalty and the lack of exact knowledge as to what constitutes a monopoly under this law has had varying effects:

(a) While the tendency toward combination has been too strong to be resisted, there can be no doubt that owing to this law the combinations have been much more secret as regards their method of work than would otherwise have been the One usually finds it difficult, with the exception of the bureau at Longwy, to get possession of any of the forms of agreement that are used in the coalitions, even when the fact of combination itself is granted. It seems to be a general belief

case.

among business men that while combinations are very common the agreements are either not put into writing or are kept very secret by the parties to the agreement. (b) Beyond question, the form of the agreement itself has been modified materially by the law. In the first place, as has been intimated before, for the purpose of preventing any public knowledge of these agreements which they may believe to be illegal, they are often not put into writing at all. M. Say, of the sugar refiners' combination in France, stated that while their agreements were entirely legal, inasmuch as they merely determined the relative proportions of the output at different times and never entered at all into agreements upon prices, nevertheless those agreements were merely verbal understandings which were never put into writing, and no penalties were attached. In spite of this apparently very loose form of agreement, however, it is the prevailing opinion in France that the sugar combination is one of the firmest and most powerful in existence.

There can be little doubt also that in order to avoid the penalties of this law the form of the selling bureau has been adopted. For example, the Comptoir Metallurgique de Longwy is an independent organization by itself, which acts as the agent of different manufacturers in selling their products. It can perhaps not be said technically that these establishments have entered into an agreement regarding prices, but at the same time that effect has been secured. The managers of the bureau claim, of course, that they are entirely within the law, and in fact the first purpose of the bureau itself, as laid down in the articles of agreement, is to the effect that nothing contrary to the laws is intended or shall be done by the bureau. Nevertheless, one of the acutest thinkers in France, a publicist of note, in commenting upon the bureau, says that prices are imposed upon sellers who lose all liberty in order to become the mere agents of the bureau, and that the organization is contrary to the laws of France, but that the Government appears powerless. There can be no question that the purpose of the bureau is to enable it to influence prices directly, although it is possible that by the device of the bureau they may have succeeded in technically, at any rate, escaping the violation of the law.

(c) The tendency also, which seems to be noticeable in France of late, of organizing various competing firms or corporations into one single corporation that shall buy up all the plants, is, in part at any rate, due to the influence of this law. When a single corporation is formed which owns all of the different plants the question of combination in France, as in the United States, is eliminated. The question of the size of the corporation is not raised in either country.

It is interesting to note some of the interpretations by the French courts of this section (419) of the penal code. The law was doubtless passed, as were the monopoly laws in England in the earlier days, largely to prevent the control of local markets, where, owing to temporary circumstances, one small group might make a corner to the detriment of the public. As early as 1836, however, the court of cassation decided, in a case where two transportation companies-stage coach lines-had united in order to drive out a rival by lowering the fares and dividing the loss between them, that transportation of persons by stage coaches was to be considered as merchandise, and that a union of two or more lines to prevent competition was illegal under this article of the code. The court says, "the provisions of this article apply evidently to everything which, being the object of commercial speculations, has a current price habitually determined by the free and natural competition of the particular business.1 Three years later2 the same court substantially reaffirmed this principle in a somewhat similar case. In 1845 it decided further that the obligations of insurance policies were also merchandise and that a combination in consequence among insurers was punishable. Again, in 1854, it was held that the combination which brought about an increased price in salt was illegal, under article 419, and in consequence could not be enforced under the civil code.

There seems to have been some differences of opinion between different courts in certain other particulars. In 18835 the court of Paris decided that the shares of a private company were merchandise, following apparently the earlier decisions of the court of cassation. But two years later the court of cassation itself in a somewhat similar case seemed to take a different view, and decided that the shares of a private company were not merchandise under the law. In fact, some of the later decisions of the other courts seem to show that they are falling rather into the spirit of the latest days, and are recognizing that agreements among producers are not of necessity contrary to the public interests, and should be upheld unless they are

1 Sirey: Recueil Général, 1836, Pt. I, p. 881.

2 Ibid., 1839, Pt. I, p. 721.

3 Ibid., 1845, Pt. I, p. 434.

4 Dalloz: Jurisprudence Générale, 1854, Pt. V, p. 118. 5 Sirey, 1883, Pt. II, p. 97.

6 Ibid., 1885, Pt. I, p. 514.

clearly detrimental. In 1892 1 the court of Paris, for example, decided that article 419 was not applicable to a limited syndicate of producers of phosphate. The syndicate included only part of the phosphate producers, and there was competition in various markets, so that it was not proved at any rate that the combination had caused any fictitious increase or decrease in prices. Again, two years later, in 1894,2 the court of Grenoble held in a somewhat similar way that the association for the control of the manufactures of ceramics was legal. It was not shown that prices had been increased, and it did not seem that the prices had been higher than those of manufacturers who were outside of the combination. In consequence the contract was held to be legal.

In spite of the apparent weakening of the force of the law by these later decisions, the court has still apparently no intention of attempting to set the law aside, for in 18963 it was held that these sections, 419 and 420, were valid, and that the law of March 21, 1884, providing for the formation of professional syndicates did not operate to repeal them.

Probably the one experience that has tended more than all others to make the business men of France wary in the organization of combinations was the punishment of M. Secretan of the copper combination. His acts were declared to come under this section of the code, and he, in spite of his social and political prominence, was imprisoned.*

Although the courts seem pretty consistently to have sustained these laws, modern French lawyers have little doubt that they can form combinations either after the model of the bureau at Longwy, or in some other form that will stand the test of the French courts, and that will, in consequence, be held legal. The matter has not, however, been yet fully tested. Some complaints which have been made by the rivals of these combinations to the French Government seem not to have produced any effect. In the case of certain porcelain manufacturers, when complaints were made, the department of justice decided that there was no cause for action, because, as it said, it was not shown that prices had been raised, the fact being that prices had been lowered. The Government took the position that the lowering of prices was not contrary to the public interest and that therefore there was no cause for action.

The general result seems to be that this is another case where laws passed many years ago to meet local conditions have been applied to modern conditions at times unwisely, and that the general effect has been rather to hamper the natural development of business methods and to force business men into new and special methods of doing business contrary to the normal ones, without, however, stopping the tendency toward combinations which business conditions seem to have demanded.

1 Sirey, 1892, Pt. II, p. 150.

2 Dalloz: Recueil Général, 1894, Pt. II, p. 277.

3 Sirey: Recueil Général, 1896, Pt. II, p. 164.

4 See also, for the whole discussion, Francis Laur, De l'Accaparement, Paris, 1900.

APPENDIX.

ARTICLES OF ASSOCIATION OF METALLURGICAL BUREAU OF

LONGWY (COMPTOIR MÉTALLURGIQUE DE LONGWY.)

Between the undersigned

[Statuts 1er Août 1899.]

1. Mr. George Rolland, officer of the Legion of Honor, engineer in chief of mines, residing at Paris, rue Pierre Charron, no 60,

And Mr. Paul Labbé, residing at Gorcy,

Both acting in the name of, and as the administrators-delegates of, the Gorcy Met, allurgical Company, a joint-stock company with a capital of three million francswhose place of business is at Gorcy.

2. Mr. Gustave-Désiré Raty, chevalier of the Legion of Honor, residing at Saulnes, Acting in the name of, and as manager of, the Saulnes Blast Furnace Company, a joint-stock company with a capital of four million two hundred and fifty thousand francs, whose place of business is at Saulnes, and whose firm name is Gustave Raty & Co. 3. Mr. Fernand-Raoul-Henri, Baron d'Huart, chevalier of the Legion of Honor, residing at Longwy-Bas,

And Mr. Hippolyte-Alphonse-Joseph, Baron d'Huart, chevalier of the Legion of Honor, residing at Longwy-Bas,

Both acting in the name of, and as the administrators-directors-managers of, the Metallurgical Company of Senelle Maubeuge, a joint-stock company with a capital of four million francs, whose place of business is at Longwy.

4. Mr. Jean-Baptiste-Adrien-Fernand, Comte de Saintignon, chevalier of the Legion of Honor, residing at Longwy-Bas,

Acting in the name of, and as manager of, the Blast Furnace Company of Longwy and Sauvage, a joint-stock company with a capital of four million francs, whose place of business is at Longwy, and the firm name F. de Saintignon & Co.

5. Mr. Remi-Désiré Jacquemart, residing at Aubrives,

Acting in the name of, and as director of, the Metallurgical Company of Aubrives and Villerupt, a joint-stock company with a capital of four million two hundred and fifty thousand francs, whose place of business is at Aubrives (Ardennes).

6. Mr. Jean-Louis Revémont, residing at Villers-la-Montagne,

Acting in the name of, and as administrator-delegate of, the Lorraine Industrial Company, a joint-stock company with a capital of four million francs, whose place of business is at Nancy.

7. Mr. Jean-Florentin Tresson, residing at Herserange (commune in canton of Longwy),

Acting in the name of, and as director-administrator-delegate of, the Chiers Blast Furnace Company, a joint-stock company with a capital of three million francs, whose place of business is at Longwy.

8. Mr. Jean-Joseph-Edouard, chevalier Van der Maesen, residing at Villerupt, Acting in the name of, and as director-manager of, the Blast Furnace Company and Ironworks of Villerupt-Laval-Dieu, a joint-stock company with a capital of four million francs, whose place of business is at Monthermé Laval-Dieu (Ardennes). 9. Mr. Leon Pugh, residing at Religieuses (commune in canton of Longwy), Acting in the name of, and as director-manager of, the Metallurgical Company of the East, a joint-stock company with a capital of one million six hundred thousand francs, whose place of business is at Anvers (Belgic), avenue des Arts, no 60.

10. Mr. Jean-Baptiste Marie-Victor Comte de Lespinats, chevalier of the Legion of Honor, residing at Neuves-Maisons,

Acting in the name of, and as administrator of, the Ironworks Company of Chatillon, Commentry, and Neuves-Maisons, a joint-stock company with a capital of eighteen million five hundred thousand francs, whose place of business is at Paris, rue de la Rochefoucald, no 19.

11. Mr. Ernest-Jules Planche, residing at Paris, rue Le Peletier, no 16, Acting in the name of, and as director-general of, the Montataire Ironworks and Foundry Company, a joint-stock company with a capital of three million eight hundred and sixty-five thousand francs, whose place of business is at Paris, rue Le Peletier, no 16.