history but was by no means uniform in the several countries. In England, it can be said to have begun shortly after the passage of the Limited Companies Act, of 1862, and to have reached the climax during the decade from 1880 to 1890. The English business combination is neither horizontal nor vertical, but rather financial in character, being effected through what is called the "investment company" described in a later chapter. The reasons for the deflection of the movement along this peculiar tangent are perhaps to be found in the laws against organizations and combinations in restraint of trade, in the conception based upon economic teachings, that free competition is the natural order of business which may best be conducted as individual enterprise, and in the policy of free trade that makes it almost impossible to have higher prices within the country than exist without. But despite these obstacles, few combinations have been formed, particularly in the South African Mining Industry and in the manufacture of soap. Lever Brothers, Ltd., have practically a monopoly of the latter industry. These, however, are but exceptions rather than the rule.

a

In Germany, the combination movement appears to have begun in earnest during the decade preceding the year 1890. Instead of being legally suppressed, it was encouraged. As a result of this attitude it naturally followed the horizontal lines which did not generally affect the ownership interest, but brought into being great syndicates to control the distribution of the product. These syndicates are called "kartells." The exacting requirements of the law concerning corporate promotions and capitalization appear to have interfered somewhat with the process of integration, and to have brought about a condition of financial combination centering about the great banks, while large numbers of so-called "finance companies" tie the establishments of each industry together into a vast, more or less unified

network dominated by a central concern and its affiliated banking interests. However, since the close of the war the weakness of horizontal combination has become apparent. It is too susceptible to control by labor organizations and presents too good a target for the application of state control or the institution of state ownership. Thus, under the leadership of such men as Hugo Stinnes, August Thyssen, the Krupp group and others, a period of integration has been ushered in that has been surpassed only by the great American trust period. What the final result of this movement will be, it is difficult to foretell.

In Belgium, combinations have followed the lead of Germany, since its industrial system corresponds most closely to that of its larger neighbor. France, which is not an industrial country in the modern sense of the term but rather has contented itself with putting its savings into foreign investments, seems in a large measure to have followed the English example. Switzerland with its cosmopolitan population, seems to have borrowed not only from its several European neighbors but also from the United States. Combinations in other European countries have, for the most part, emanated from one or the other of the greater industrial nations and cannot be said to have been influenced greatly by native any or local

considerations.

Classification of Combination Organizations. - Enough has already been said to indicate that there are several types of organizations that may be employed for purposes of combining entrepreneurial units. These may be divided into two broad groups, namely, (1) those that do not ordinarily involve a claim on the capital of the units involved and (2) those that are instituted through the ownership right. In each group there are several classes as shown by the following outline:

A. Combinations ordinarily not involving ownership rights:

(1) Associations formed by means of agreements between units that retain their autonomy, but pledge themselves to coöperate in carrying out the aims and purposes of the organization. They are commonly known as "business men's associations."

(2) Factors' Agreements, whereby producers and distributors seek to exercise a control over the product with respect to price, conditions of sale, etc., while it is being distributed by independent businesses. The most common types are "price control agreements," "tying contracts," and the like.

(3) Federations created by agreements between combining units that retain considerable autonomy, but delegate to a central body in which they are usually represented the power to control certain phases of their business. There is usually documentary evidence of their existence. The most important types are known as "pools," "kartells" and "syndicates."

B. Combinations involving ownership rights:

(4) Securities-combinations formed through the acquisition by a person or a business organization of the securities issued by other ownership organizations. They may or may not be for the purpose of control. Where control is the aim it is exercised. through application of the rights resting in the security-holder. The holding corporation, the combination trust and, more rarely, the joint stock company are employed for this purpose. The various 'means of utilizing this method of combination will be described under the title of securities-substitution companies. These constitute the most characteristic ownership feature of our modern business organization.

(5) Fusions arising out of a unification of the assets, liabilities and general business of several units, leaving but a single unit. They include " mergers " and "amalga

mations."

This classification is based upon the extent to which the independent action and existence of the individual ownership unit is compromised, limited or controlled. There is no clear-cut line of demarcation dividing the several types. A single combination may employ one or more of them in its make-up. While pure forms, that are representative of the several classes, are very common, they are perhaps no more so than the hybrid types. For this reason it is deemed advisable to describe and treat them in groups, namely; (1) those that ordinarily do not involve ownership rights and (2) those that involve such rights directly. And while it may be objected that the former class is not a proper subject for a work of this kind, because those types of combinations introduce no new principle into the ownership organization; yet it must be conceded that without some understanding of these forms of combination, it would be difficult to portray the ownership organizations of today to a degree even approaching completeness.

2 Combinations formed under methods 4 and 5 are frequently called consolidations. Under this heading the several types of fusions were fully explained in Chapter XI.

CHAPTER XIV

COMBINATIONS ORDINARILY NOT BASED ON OWNERSHIP RIGHTS

A. ASSOCIATIONS AS BUSINESS COMBINATIONS

ASSOCIATION is a human instinct that is quite as prevalent among business entrepreneurs as in any other class of society. It furnishes that element of cohesion essential to the existence of organized civilized society; and is especially developed in the field of business enterprise where it fosters that stability and progress so necessary for the fullest development of business opportunity. No class of persons knows better than the business man the value of association, and no other class has utilized it to such great advantage. He knows full well the truth of the old adage "in union there is strength," and proceeds to organize his general and specialized types of associations. This he has done for centuries and is still doing, on a grander scale than ever before.

Back in the middle ages the chaotic and unstable political conditions led to the development and organization of the Gild Merchant in the incorporated towns and boroughs where business first began to rear its infant head. These organizations had for their purpose, among other things, the adoption of uniform trade practices, weights and measures and the like; but they soon became part and parcel of the town government and lost their business character. Trade Gilds made up of all masters (entrepreneurs) engaged in a given trade within the community, took their place as business men's associations. The weavers,