the potash mines only as provided by law; (2) sales for export can be made only by potash-mining companies; (3) the maximum quantity to be sold and the part to be sold for export is fixed by a central administrative agency; (4) the quota of each producer is determined by this central agency, and is the same both for domestic and export sales; a failure to participate to full quota in domestic sales operates to reduce the export quota; (5) the granting of quotas for new mines as they are opened by the mining companies is allowed and regulated (this of course reduces the quotas of existing mines); (6) the prices of domestic sales are fixed in the law, but may be changed by the Government from time to time as provided; (7) the prices of export sales must not be less than domestic prices; (8) a heavy tax is levied on excess sales; (9) heavy penalties are provided for defrauding the Government of the tax on excess sales and for other specified violations of the law; (10) certain modifications are permitted with respect to the prices of potash obtained under contracts made before a certain date, while certain other contracts having effect over a long term of years are declared invalid. The last-mentioned provisions relate to certain business and international complications which are not of importance in this connection. The general purpose of the law was to regulate production and prices so that there should not be an excessive competition between producers and a dumping of potash at low prices in export trade on the one hand, nor very high prices for the domestic consumer on the other hand. Dumping is effectually checked by the system of allotting and dividing domestic and export sales and taxing heavily any excess sales. Low prices in the domestic market are established by a direct fixing of the price. Export sales are generally made at higher prices than domestic sales, but the export prices are not uniform. The prevention of excessive competition between the producers has apparently not succeeded; instead, there has been an extraordinarily large development of new mines, and with the limitation of total output this has resulted in reducing the quota of each mine and increasing, it is said, the costs of mining the potash. It is generally reported that the Government contemplates further legislation to restrict the opening of new mines, but that the private companies are opposed to this. As was expected by the Government, the enactment of this law facilitated the reestablishment of the potash cartel, in which nearly all mining companies participate, including the States of Prussia and Anhalt. In the original draft of the bill it was planned to establish a cartel by law and to compel all mining companies to become members thereof. 1 Verhandlungen der vom K. K. Handelsministerium veranstalteten Kartell Enquête, Wien, 2. Jull 1912, IX, p. 92. While the potash law is an exceptional one, Germany has also in a few other cases enacted revenue laws which, by discriminating in favor of concerns already operating, have encouraged the formation of cartels. The industries which have been thus affected are (a) spirits, (b) beer, and (c) matches.1 Notwithstanding the peculiar legislation with regard to particular industries just discussed, it is important to emphasize the fact that the German law regarding combinations is primarily one of free contract, and the general attitude of the public administration toward cartels is laissez faire. Administrative intervention in the management of cartels, or to counteract their activities, is of rare occurrence. Section 10. Austria. There are no criminal laws against industrial combinations or cartels in Austria, but they are invalid under the civil law. The Penal Code of 1852, section 479, prohibited agreements among manufacturers, etc., to raise the price of a commodity to the disadvantage of the public, or to cause a scarcity thereof, etc., but this was repealed in 1870. The "coalition" law of April 7, 1870, provides in the second section that agreements of employers through shutdowns or lockouts to reduce wages, etc., or of employees through strikes to increase wages, etc., are null and void. In the third section the attempt to carry out such agreements through intimidation or force is made criminally punishable. The fourth section reads as follows:? SEC. 4. The provisions contained in sections 2 and 3 are applicable also to agreements of manufacturers for the purpose of raising the price of a commodity to the disadvantage of the public. Thus, cartel agreements are void at the civil law. Under the rules of civil procedure prevailing in Austria prior to 1895 it was possible to make such agreements effective for all practical purposes by providing for a private arbitration to enforce the agreement. Such an arbitration decision could not be appealed from except in case of fraud.3 In 1895, however, a new Code of Procedure was adopted which provided that the decisions of such an arbitration are inoperative if "repugnant to compulsory rules of law," and it is further provided 1 Reichsgesetzblatt, 1909; Branntweinsteuergesetz vom 15. Juli 1909, S. 661; Gesetz wegen Aenderung des Brausteuergesetzes vom 15. Juli 1909, S. 695; Gesetz betreffend Aenderung im Finanzwesen vom 15. Juli 1909, S. 757. Mention may also be made of the German Southwest African diamond régie under which arrangements exist between the Government and the producers of diamonds for marketing the output, etc. See Demuth, Der Diamantenmarkt, Karlsruhe, i. B. 1913, p. 76. It should be noted, also, that the Government shortly before the war introduced a bill for establishing a monopoly in the wholesale trade in illuminating oil from petroleum, to be exercised by a company whose capital stock was to be subscribed to both by the Government and by private interests, but in the management of which the Government was to have the controlling influence. The prices to be charged by this company, as well as the profits to be divided, were to be regulated according to the provisions of this bill. 2 Gesetz v. 7. Apr. 1870; Reichsgesetzblatt für die im Reichsrate vertretenen Königreiche und Länder, Jahrg. 1870. Allgemeine Gerichtsordnung, art. 273. that the parties can not, in a legal sense, renounce their right of appeal to the courts in such cases.1 The meaning of the law of 1870 regarding cartel agreements has been frequently interpreted by the courts. A cartel of oleum producers, organized in 1887 for the sale of oleum, chiefly in the export trade, on breach of the agreement brought an action for damages. The suit was defended on the ground that the agreement was not enforceable under the law of April 7, 1870. The highest court in Austria held that the agreement was invalid and that no claim for damages could be allowed. The decision turned chiefly on the definitions of the words in the law. The word translated above as "manufacturers" (Gewerbsleute) was held to include not only craftsmen, but also factory producers, the court pointing out that the word was so used in various laws and that there was no reason to suppose that the legislator had intended to limit it in this instance. Another case related to a combination of chalk producers who by agreement had established a common selling bureau in Vienna. The court held that the agreement was void and that it was not necessary to show that there had been an actual advance in prices, as such a result might be presumed at law from the nature of the agreement, which provided for restricting the output. The court also defined the term "commodity" (Ware) to include not only finished goods used in ordinary consumption, but also unfinished goods used further in manufacture.3 A recent case, for which a full report of the decision is given in the public press, was as follows: A number of reinforced concrete construction concerns formed an association for regulating their bids on building contracts, under a written agreement, which provided among other things that they should inform each other concerning undertakings on which they proposed to bid, and should come to an agreement as to the manner in which the bids were to be made in each case; that in certain cases contributions should be made to a common fund by the concern which was awarded the undertaking; that violations of the agreement should be punished by fines; and that arbitration should be resorted to for the determination of disputed matters. A concern which had been awarded a certain undertaking shortly afterwards withdrew from the association and refused to pay the contribution in respect thereto required by the agreement, on the ground 1 Civilprozessordnung, v. 1. Aug. 1895, secs. 595 and 398. In certain cases the validity of agreements with cartels can be attacked by the parties who purchase from them; see Einführungsgesetz, art. XXIII, of the Civilprozessordnung, and Einführungsgesetz, art. XXX, of the Exekutionsordnung. 2 Entsch. v. 20. Jan. 1898, No. 242, Sammlung v. Civilrechtlichen Entsch. des K. K. Obersten Gerichtshofes, Bd. XXXV, S. 10. a Entsch. v. 6. Apr. 1899. No. 3419, Sammlung v. Civilrechtlichen Entsch. des K. K. Obersten Gerichtshofes, Bd. XXXVI, S. 199. ♦ P. Betonbauunternehmung, w. Ed. A. u. Konsorten. Entsch. d. K. K. Obersten Gerichtshofes vom 10. Juni 1913; reprinted in Kartell-Rundschau, August 1913, pp. 623, 631. that the contract was executed after withdrawal. An arbitration proceeding to which the said concern refused to be a party adjudged a fine. The case was appealed to the highest court which held that the lower court was right in declaring that the arbitration court could not disregard the provisions of sections 2 and 4 of the law of April 7, 1870, and further that it was evident from the by-laws of the association regulating bidding that the agreement was invalid under that law, as well as from the fact that the damages claimed were based on the amount by which the price of the undertaking was increased in consequence of the cartel. In 1907 five manufacturing companies made an agreement regarding selling prices and terms, including minimum prices for sales in AustriaHungary. The court held that the agreement was invalid under the coalition law, that it was not material whether prices had actually been advanced or not, that the intent to advance prices appeared from the character of the agreement, that the limitation of the agreement with respect to time and space did not relieve it of illegality, that the number of participants was immaterial, and that the law related to commodities in general and not merely to articles of necessity.1 While the inferior courts in Austria have in several instances given decisions in favor of the legality of such combinations, the judgments of the highest court appear to have been almost invariably against them. 2 CIVIL LAW. The General Civil Code of Austria contains two provisions which are of interest in this connection. Article 26 declares that unpermitted companies as such have no rights, either against their members or against others, and that they are incapable of acquiring rights. Unpermitted companies are defined as those which are forbidden by the political laws, or which are clearly repugnant to security, public order, or good morals. Article 878 is to the effect that whatever can not be done, or whatever is actually impossible or unpermitted, can not be the subject of a valid agreement. Some writers hold that these provisions would have application to cartel agreements in certain cases, but they do not appear to have been applied by the courts. According to an official German publication, a decree (Hofkanzleidekret) of August 27, 1838, declares that agreements to prevent competition in bidding at public auctions are invalid. The same authority states that a cartel having the form of an association can be dissolved under section 6 of the Law of Associations of November 15, 1867, as being contrary to law, while the organization of a cartel 1 Entsch. v. 7. Mai 1912; Die Praxis des Obersten Gerichtshofes, No. 72, Bd. 14, p. 124. * Pick: Praktische Fragen des oesterreichischen Kartellrechtes; Wien, 1913, p. 31 et seq. in the form of a stock company could be prevented under section 14 of the Imperial Patent of November 26, 1852, as not in accordance with the public interest. A combination of dextrin manufacturers organized an association with limited liability and sought to obtain official registration. This was refused by the registry court on the ground that the association was not of the kind contemplated by the law, but a combination in the sense of section 4 of the Law of April 7, 1870. This decision was affirmed on appeal by the highest court (Sept. 12, 1906).1 Several serious efforts to enact general laws controlling cartels have been made in Austria, the first bill (subsequently amended) being introduced in 1897.2 In 1903 a radical departure was taken in a law concerning the sugar industry which fixed the quota of each refinery and was intended to facilitate the formation of a cartel.3 As the governing commission of the Brussels International Sugar Convention held this arrangement to conflict with the provisions of the treaty in such a manner as to necessitate the imposition of a surtax, this law was repealed in the same year. As an accompaniment to this law, a bill was introduced prohibiting cartel agreements concerning the division of the market in the purchase of sugar beets; but although considered in several subsequent legislative sessions, it has not been enacted into law.* Section 11. Hungary. There are no provisions of law in Hungary which specially affect combinations, except section 128 of the Criminal Codes concerning Minor Offenses of 1879, which reads as follows: Whoever in consequence of agreements, promises of participation in profit or other compensation or any advantage attempts to frustrate or to diminish the success of a public auction; further, whoever obtains on this basis a share in the profit, compensation or other advantage: shall be punished with imprisonment of not more than two months and a fine of not more than three hundred gulden. The courts, apparently on the basis of this law, have repeatedly held that combinations or cartels which aim to exclude competition to the disadvantage of the public are null and void. In a recent case, however, the highest court in Hungary took a different position. No official report of this case has been secured, 1 Adler u. Clemens, Sammlung handelsrechtlicher Entscheidungen, Bd. XIII, Nr. 2597, 8, 427. * Regierungsvorlage, Gesetz v.— über Cartelle in Beziehung auf Verbrauchsgegenstände, u. s. w. 154 der Beilagen zu den Stenogr. Protokollen des Abgeordnetenhauses, XIV Sess., 1898. Gesetz vom 31. Jänner, 1903, betreffend die Regelung der individuellen Vertheilung des Zuckercontingentes, Reichsgesetzblatt, 1903, S. 53. 4 Regierungsvorlage, Gesetz v.- betreffend das Verbot der Rübenrayonnirung und die Lieferung der zur Zuckererzeugung nöthigen Rübe, 1678 der Beilagen zu den Stenogr. Protokollen des Abgeordnetenhauses, XVII Sess., 1903. • Ungarisches Strafgesetzbuch über Uebertretungen, 12-14, Juni 1879. ⚫ Denkschrift über das Kartellwesen, Berlin, 1908, IV. Teil, p. 12; Baumgarten und Meszleny, Kartelle und Trusts, Berlin, 1906, pp. 281–283. |