but, according to a statement in the public press, the facts and decision of the court were as follows:1 Several firms of contractors made an agreement regulating their participation in bidding on public contracts, including provisions as to prices and conditions, and penalties for breach of the agreement. A party to the agreement who disregarded it was fined, and on refusal to pay the penalty was sued for payment. The defense set up was that the agreement was invalid. Judgment was given against the defendant and on appeal was upheld by the highest court. The court said in part:

If those engaged in a branch of business combine to hinder the offer of cut prices which endanger the economical operation of the industry in order thereby to maintain a reasonable price for their work, an agreement pursuing such an end, and not fixed for too long a period (it was for five years in this case) can be regarded as incon: sistent neither with the interest of the participants nor with that of the public nor as repugnant to good morals. Persistently low prices developed in consequence of unhealthy competition, for instance, can result in a crisis in the branch of industry in question. A combination which seeks to avoid a crisis injurious both to the contractor and to the party employing him serves also the interest of the public. Such a combination, which furthermore is a proper factor directed to the maintenance of a branch of industry and whose reason for existence is not based on the purpose of frustrating or diminishing the results of public biddings, does not comprise the active elements of a dealing repugnant to section 128 Article XL of the Law of 1879.

It appears that adjudication of the validity of cartel agreements can be avoided by providing that disputed matters shall be determined by private arbitration, the decisions of such a tribunal not being subject to review by the courts."

It is also stated that according to certain administrative ordinances 3 it is possible for the governmental authorities in certain cases to disallow the acts of associations or even to suspend or dissolve associations whose by-laws conflict with such ordinances or which endanger the general interests or the pecuniary interests of members thereof.*

Section 12. France.

In France both the criminal and the civil law contain provisions which affect the legal existence of industrial combinations. These laws are chiefly found in the general codes which were enacted shortly after the Revolution.

CRIMINAL LAW.-The principal provision of the Penal Code against cartels is found in article 419, namely:

ART. 419. All those who by false or calumnious reports sown by design in the community, by offers of prices higher than those asked by the vendors themselves, by union or coalition among the principal possessors of the same merchandise or commodity not to sell or to sell at a certain price only, or by whatever fraudulent ways

1 Pester Lloyd, Jan. 17, 1912.

? Baumgarten und Meszlény, op. cit., p. 283.

* Verordnungen des Ministers des Innern; 29. April 1873, 2. Mai 1875, u. 26. Feb. 1898.

4 Baumgarten und Meszlény, op. cit., p. 284.

and means, shall have effected the advance or decline of the prices of commodities or merchandise or of public securities above or below the prices which the natural and free competition of trade would have fixed, shall be punished with imprisonment of one month at least or of one year at most and with a fine of five hundred francs to ten thousand francs. The culprits may, further, be placed by decree or judgment under the surveillance of the superior police during two years at least and five years at most. Article 420 of the same code provides heavier penalties if the commodities are breadstuffs, bread, or wine or other potables.1

Article 419 of the Penal Code has been frequently applied to industrial combinations or cartels. One of the earliest cases, decided in 1838, was as follows:

Certain soda manufacturers of Marseille combined to sell all their output through one agent, who took the precaution of leasing six factories not then in operation for the purpose of preventing competition. Prices were advanced for the finished product, although the price of the raw material declined. The highest court in France declared that this combination was within the prohibition of article 419.2 In another early case the same court declared that a consolidation of competitors into a single company was not an illegal coalition under article 419, because that article contemplated a plurality of persons which did not exist in a single juristic person (personne morale).3

In 1870 a combination was made of all the important manufacturers of iodine, who agreed to divide the field which supplied the raw material and to fix the quantities to be purchased in each, and the prices to be paid therefor; they agreed, further, to dispose of the entire output of the manufactured product through a syndicate which fixed the prices and other conditions of sale. The court held this agreement to be in violation of article 419 of the Penal Code as well as invalid under the civil law, and said in part (p. 493):

It results from these statements of fact and conclusions that the agreements in litigation have organized between the principal manufacturers of iodine and the defendants a coalition tending to give to the merchandise prices above or below the course which the free and natural competition of commerce would have determined. Whence it follows that in declaring them null and of no effect, the decree which is attacked, far from violating the articles invoked in the appeal, has only made a just application of Art. 419 of the Criminal Code and 1133 of the Civil Code.

One of the most interesting and important cases which shows the later tendency of the courts was that of a combination of producers, having about two-thirds of the phosphate production of the Somme district, who agreed to apportion and limit their output and to fix selling prices. The court in consideration of the fact that

1 Code Pénal, arts. 419, 420. The provisions of the last sentence in the section quoted above appear to have been abrogated by a law of May 27, 1885.

* Mille et autres fabricants de soude de Marseille c. Ministère public, Cour de Cassation, 31 août, 1.38; Journal du Palais, 1838, p. 391.

* Bulletin des arrêts de la Cour de Cassation Criminelle, du 23 janvier, 1838, p. 40

'Cournerie c. l'ellieux et Mazé-Launay, Cour de Cassation, 11 fevrier 1879, Journal du Palais, 1879, p.

the combination did not include more than two-thirds of the production of the Somme district, and that there was competition from producers elsewhere in France, as well as in Belgium and other countries, held that the combination did not comprise the principal producers within the meaning of article 419.1

A case of world-wide notoriety was that of the Secrétan copper corner of 1887-1889. Secrétan attempted a corner in copper by making individual contracts of purchase with producers in various parts of the world, who knew his purpose and expected to profit by his operations. No agreement was made, however, as to the price at which Secrétan should sell the copper. The court stated that in all respects but one the scheme came within the reach of article 419, the defect being that Secrétan's selling price was not fixed. Hence, the court held that the criminal law was not violated, although the agreements themselves (see p. 272) were invalid under the Civil Code.2

A more recent case was a combination of manufacturers in an "association with a collective name" which was alleged to have been formed to suppress all competition among the lime producers of St. Astier. The defendants claimed that it was a legal association, but the lower court held it to be contrary to article 419 of the Penal Code, because it aimed to fix a uniform price throughout the greater part of France.3

On March 21, 1884, an act was passed, entitled "Law regarding the establishment of professional syndicates." Article 2 provides that they may be established freely without authorization of the Government. Article 3 of this law provides that

the professional syndicates have for their exclusive purpose the study and defense of economic, industrial, commercial and agricultural interests.

It was held by some that this law repealed article 419 of the Penal Code, but in the case of a mineral-water combination which was condemned under article 419, this view was expressly denied by the court, as also in the Secrétan case cited above.

French legal writers generally find the following elements in the offense described in article 419, namely, (1) plurality of agents, (2) principal holders of a commodity, (3) an artificial change in price, (4) an agreement not to sell except at a certain price.5

It also appears, as for example, in the phosphate case discussed above, that the courts take account of the circumstances of the case

1 Cajot et Cie. c. Ferry et May, Cour de Paris, 14 avril, 1891; Dalloz, Jurisprudence générale, 1893, Pt. II, p. 70.

2 Secrétan c. Min. Publ., Cour de Paris, 5 août, 1890; Dalloz, Jurisprudence générale, 1893, Pt. I., p. 56. * Mallebray c. Compagnie générale des Chaux de Saint-Astier et autres, Tribunal de commerce de Périgueux, 2 juin, 1899; Journal du Palais, 1901, Pt. II, p. 226. For judgment on appeal, see p. 272.

A... et autres c. Germain-Pernet, Cour de Lyon, 21 avril, 1896; Journal du Palais, 1896, Pt. II, p. 164. Cf. Babled; Les syndicats de producteurs et détenteurs de marchandises, Paris, 1893, pp. 134-137; Colliez, Trusts, cartels, corners, Paris, 1904, pp. 461-462.

and in particular the degree of control the combination has obtained in deciding whether it has violated the law.

Besides article 419, there is another article of the Penal Code aimed at combinations, namely, article 412, which is directed at combinations to destroy competition at auctions. This article reads as follows:

ART. 412. Those who, in the sale of property, of usufruct or of lease of movable or immovable things, of an enterprise, of a furnishing, of an exploitation or of any service whatsoever, shall have hindered or disturbed the freedom of auctions or public biddings, by means of acts, force, or threats, either before or during the auctions or public biddings, shall be punished with imprisonment of fifteen days at least, and of three months at most, and with a fine of one hundred francs at least and of five thousand francs at most.

The same penalty shall apply to those who by gifts or promises, shall have kept bidders away.1

Condemnations have been obtained against persons combining in the manner prohibited by this section in several instances."

CIVIL CODE. Several provisions of the Civil Code have application to the question of the validity of combination agreements.

In article 1108 the essential conditions for a valid contract include a lawful ground. The chief articles affecting the validity of cartel agreements are as follows:

ART. 6. Laws which concern public order and good morals may not be set aside by particular agreements.

ART. 1131. An obligation that is without ground or is based on a false ground or an unlawful ground can have no effect.

ART. 1133. The ground is unlawful when it is prohibited by law or when it is contrary to good morals or public order.

ART. 1172. Every condition of an impossible thing, or contrary to good morals, or prohibited by law, is null and renders null the agreement which depends on it.

An illustration of the application of the foregoing articles is found in the case of the combination of manufacturers of iodine, already described (p. 270). The court on appeal declared this combination to be repugnant to article 1133 of the Civil Code, as well as to article 419 of the Penal Code,"

In the case of the St. Astier lime company, the facts concerning which have already been stated (see p. 271), the court on appeal decided the company to be invalid under the Civil Code; the court said in part (p. 231):

*** that it suffices to establish that the obligation of the various contracting parties had an unlawful basis and purpose; that such was the case of the members of the association criticised, since it results from the facts and circumstances of the case that the said association had been formed only in order to forestall and prevent

1 Code Pénal, art. 412.

Cour de Cassation, 15 mai 1857; Cour de Cassation, 8 janvier 1863.

Cournerie c. Pellieux et Mazé-Launay, Cour de Cassation, 11 février, 1879; Journal du Palais, 1879, p. 490. Mallebray c. Compagnie générale des chaux de Saint-Astier et autres, Bordeaux, 2 janvier, 1900; Journal du Palais, 1901, Pt. II, p. 225.

the foundation at Saint Astier of competing factories, which was contrary to the principle of liberty of commerce and industry; that thus the agreement attacked ought to be annulled also by application of articles 1131 and 1133 of the Civil Code. * * *

The French courts have developed a very extensive law regarding unfair competition based on article 1382 of the Civil Code, but no applications have been noted to the practices of combinations. (See p. 569.)

SPECIAL LAWS.-In connection with the laws to prevent the destruction of competition the following provision in a French mining decree is of interest:

It is prohibited to any concessionaire of mines, of whatever nature they may be, to unite his concessions with other concessions of the same kind, by association, acquisition or in any manner, without the authorization of the Government.1

For violation of this decree the penalty provided is the same as for violation of article 419 of the Penal Code. (See p. 269.)

A law concerning associations enacted in 19012 provides in article 12 that an association chiefly composed of foreigners and having its principal place of business in a foreign country whose operations have the effect to disturb the normal conditions of the market for securities or for commodities, under conditions affected by articles 75 to 101 of the Penal Code,3 may be dissolved, and if the directors, etc., of an association so dissolved maintain or reestablish it contrary to law, they shall be punished by fine or imprisonment. This law, however, does not appear to have had any practical application.

While certain Government monopolies have been established in France, for example, in tobacco, there do not appear to be any instances of private industrial monopolies established by law.*

Section 13. Italy.

The criminal laws of Italy concerning persons who artificially affect prices generally relate only to those who use fraud or violence. The civil law is substantially similar in its most pertinent sections to that of France, although interpreted more liberally. A notable feature of Italian legislation is the establishment of a compulsory cartel in the sulphur industry.

CRIMINAL LAW. The principal provisions of the Italian Penal Code, which have any clear relation to cartels, are articles 165,

1 Décret du 23 octobre, 1852, No. 4567, art. 1.

? Loi relative au contrat d'association du 1 juillet, 1901.

These articles relate chiefly to military matters, including materials of war.

A bill was recently introduced in the Chamber of Deputies, according to the public press, which provided for the establishment of a company, in which the Government should be a stockholder, for the purpose of importing and refining petroleum, but according to the account given, monopoly powers were not to be conferred upon it. (See National Petroleum News, March, 1914, p. 52.)

⚫ Codice Penale.

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