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Government and Business in Germany: Public Policy toward Cartels*

Published online by Cambridge University Press:  24 July 2012

Theodore F. Marburg
Theodore F. Marburg
Affiliation:
Professor of Economics, Marquette University
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Abstract

Through a careful analysis of public policy and opinion, Professor Marburg considers the nature, allowable range, and economic effects of those business associations designated “cartels” in German usage. Marked contrasts with American theory and practice in similar fields emerge.

Type
Research Article
Information
Business History Review , Volume 38 , Issue 1 , Spring 1964 , pp. 78 - 101
Copyright
Copyright © The President and Fellows of Harvard College 1964

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References

1 I have described the manner in which these agreements were made and violated in the American brass industry. See Marburg, Theodore F., “Imperfect Competition in Brass Manufacturing during the 1830's,” Journal of Economic History, vol. III (December, 1943), pp. 33–37CrossRefGoogle Scholar and Small Business in Brass Fabricating: The Smith & Griggs Manufacturing Company of Waterbury (New York, 1956), pp. 10, 24Google Scholar, et passim.

2 The extent of price-fixing under the NIRA is reviewed in Burns, Arthur R., The Decline of Competition (New York, 1936)Google Scholar. “Only 12 of the first 677 codes empowered the code authority … to establish minimum prices without reference to the cost of production.” In July, 1934, “The power to fix minimum prices was withdrawn … and replaced by a clause empowering the administrator to set minimum prices based on ‘reasonable cost’ wherever he adjudged an emergency to exist.” See pp. 472 ff.

3 Lütge, Friedrich, Deutsche Sozial- und Wirtschaftsgeschichte: Ein Überblick (2nd ed., Berlin, 1960), p. 362CrossRefGoogle Scholar.

4 Henderson, W. O., The State and the Industrial Revolution in Prussia, 1740–1870 (Liverpool, 1958), pp. 119 ffGoogle Scholar, describes the role of Prussia‘s Seehandlung, founded by Frederick the Great in 1772 and which continued in operation well into the nineteenth century. A new study unavailable at the time of writing is Fischer, Wolfram, Der Staat und die Anfänge der Industrialisierung in Baden, 1800–1850 (Berlin, 1960Google Scholar). See also Fischer‘s, , “Das Verhältnis von Staat und Wirtschaft in Deutschland am Beginn der Industrialisierung,” Kyklos, vol. XIV (Fasc. 3, 1961), pp. 337–63CrossRefGoogle Scholar.

5 Treue, Wilhelm, “Wirtschafts- und Sozialgeschichte Deutschlands im 19. Jahrhundert,” Gebhardt, Bruno (ed.), Handbuch der deutschen Geschichte (Rev. ed., 4 vols., Stuttgart, 1960), vol. Ill, p. 384Google Scholar. See also Treue, Wilhelm, Wirtschaftsgeschichte der Neuzeit (Stuttgart, 1962), pp. 412, 539Google Scholar.

6 Goetzke, Wilhelm, Das Rheinisch-Westfälische Kohlen-Syndikat (Essen, 1905)Google Scholar. Goetzke cites, on p. 4, the 1844 yearly report of the Essen Handelskammer, which reported, “The mines of the Ruhr have formed an association … [for] restricting production.” He also cites an earlier organization in operation in 1825, the Essen-Werdensche Becken.

7 Henderson, W. O., The Industrial Revolution in Europe, 1815–1914 (Chicago, 1961), pp. 59Google Scholar ff; Liefmann, Robert, Cartels, Concerns, and Trusts (London, 1932), p. 22Google Scholar; Clapham, J. H., The Economic Development of France and Germany, 1815–1914 (4th ed., Cambridge, 1936), pp. 309 ffGoogle Scholar.

8 This Trade Regulation Act was adopted for the North German Confederation on June 21, 1869. It was adopted as a Reich statute on April 16, 1871, and, in a modified form, by the Federal Republic of Germany on September 29, 1953. See Landmann-Rohmer, Gewerbeordnung (Rev. by Eyermann, Erich and Fröhler, Ludwig, 2 vols., Munich, 1956), vol. I, pp. 1 ffGoogle Scholar.

9 S. B. (Beld.) w. den Sächsischen Holzstofl-Fabrikanten-Verband (kl.) Rep. VI, 307/96, Entscheidungen des Reichsgerichts in Zivilsachen, vol. 38, pp. 155–62. (Decision of February 4, 1897Google Scholar.) The contrast between this decision and the Sherman Act cases is discussed in Schwartz, Ivo E., “Antitrust Legislation and Policy in Germany: A Comparative Study,” University of Pennsylvania Law Review, vol. CV (March, 1957), pp. 626–35Google Scholar.

10 Böhm, Franz, “Das Reichsgericht und die Kartelle,” ORDO, vol. I (1948), pp. 197–213Google Scholar, reprinted in Böhm, Franz, Reden und Schriften (Karlsruhe, 1960), pp. 69–81Google Scholar.

11 Röper, Burkhardt, “Der Wirtschaftliche Hintergrund der Kartell-Legalisierung durch das Reichsgericht 1897,” ORDO, vol. III (1950), pp. 239–50Google Scholar.

12 The legality of boycotts and the fact that boycott agreements were enforceable is discussed with supporting cases in Landmann-Rohmer, Gewerbeordnung, vol. I, pp. 74 ff. In later years the use of the boycott was, however, restricted insofar as a monopolist could be required to supply customers depending upon him. See Kronstein, Heinrich, “‘Cartels’ under the New German Cartel Statute,” Vanderbilt Law Review, vol. I (March, 1958), pp. 271–301, esp. p. 272Google Scholar.

13 Liefmann, Cartels, pp. 215 ff.

14 The text of the Ordinance of 1923 is reproduced in Liefmann, Cartels, pp. 351–57.

15 Böhm, Franz, “Monopoly and Competition in Western Germany,” Chamberlin, Edward H. (ed.), Monopoly and Competition and their Regulation: Papers and Proceedings of a Conference Held by the International Economic Association (London and New York, 1954), pp. 141–67CrossRefGoogle Scholar, esp. pp. 162 ff

16 A total of 385 associations was reported in a Ministry of the Interior inquiry early in the twentieth century, although this may be fewer than actually existed. A tally by the Federation of German Industries in 1923 placed the total at 1,500 while a government count of 1925 reported 3,000. Liefmann, Cartels, pp. 25, 30, 31. Hermann Levy questions if one can properly include, in national statistics on cartels, “an agreement between a number of hotels in the Black Forest, fixing the prices of their rooms and certain general conditions of catering.” He states, more generally, that “there is no field of economic organization in which figures prove or explain so little.” Industrial Germany: A Study of Its Monopoly Organizations and Their Control by the State (Cambridge, Eng., 1935), pp. 15–16Google Scholar. Readers of this Review will be delighted to know that a thorough review of pre-World War I German cartel history, on an industry-by-industry basis, is now being conducted by Professor Erich Maschke of Heidelberg. This study should make possible a reappraisal of the eifects of public policies in the light of the business-history record.

17 Kantorowicz, Wilhelm, Psychologie der Kartelle (Berlin, 1904), p. 14Google Scholar.

18 Liefmann, Robert summarizes the conclusions of the report in his Kartelle und Trusts (Stuttgart, 1905), pp. 124 ffGoogle Scholar. The report of the Interior Ministry inquiry included a stenographic report of testimony and supporting documents. The various volumes deal with cartels and trade associations in each of the leading industries. Kontradiktorische Verhandlungen über Deutsche Kartelle (Berlin, 1903, et seq.)Google Scholar.

19 The Court's use of judgments from the economists is discussed in Röper, Burkhardt, “Der Wirtschaftliche Hintergrund der Kartell-Legalisierung durch das Reichsgericht 1897,” ORDO, vol. III (1950), pp. 238–50, esp. pp. 240 ffGoogle Scholar.

20 Liefmann, , Die Unternehmerverbände (Freiburg, 1897)Google Scholar; Schutzzoll und Kartelle (Jena, 1903)Google Scholar; Kartelle und Trusts (Stuttgart, 1905)Google Scholar; Cartels, Concerns, and Trusts (London, 1932)Google Scholar.

21 Tschierschky, S., “Handelskammern und Kartelle,” Kartellrundschau, vol. VII (March, 1909), pp. 227–48Google Scholar. The author refers the reader to his own volume of 1905, which explores the issues more fully: Die Organisation der industriellen Interessen Deutschlands. Earlier, Tschierschky had published “Eine Bibliographie der Kartelliteratur,” Kartellrundschau, vol. II (December, 1904), pp. 860–64Google Scholar.

22 Goetzke, Das Rheinisch-Westfälische Kohlen-Syndikat, pp. 3, 207, 269, et passim.

23 Wölfers, Arnold, “Das Kartellproblem im Lichte der deutschen Kartelliteratur,” Schriften des Vereins für Sozialpolitik, vol. CLXXX, pt. 2 (1931)Google Scholar. Among some of the writers listed by Woelfers were Tschierschky, Lehnich, H. v. Beckerath, Schmalenbach, and Halm.

24 Liefmann, Cartels; Beckerath, Herbert v., Modern Industrial Organization (New York, 1933)Google Scholar; Levy, Industrial Germany; Pribram, Karl, Cartel Problems: An Analysis of Collective Monopolies in Europe with American Application (Washington, 1935)Google Scholar.

25 Pribram, Cartel Problems, p. 120.

26 Franz Böhm, “Die Forschungs- und Lehrgemeinschaft zwischen Juristen und Volkswirten an der Universität Freiburg in den dreissiger und vierziger Jahren des 20. Jahrhunderts,” Böhm, Reden und Schriften, pp. 158–75.

27 A brief discussion in English of the program and of the German views is to be found in Franz Böhm, “Monopoly and Competition.” The directives of the Allied Military Government were issued initially in the American Zone as Law No. 56 and in The British Zone as Ordinance No. 78. They both declared that cartels and combines constituted excessive concentration of economic power, without drawing a clear distinction between the two types. In practice, it was necessary to proceed differently in The two classes of cases. The directive issued in the French Zone was designated as Ordinance 96.

28 This issue was explored over pertinent years in the monthly Wirtschaft und Wettbewerb and in the annual ORDO. A later review was undertaken in 1957. Mestmäcker, Ernst J., “Dekartellierung und Wettbewerb in der Rechtsprechung der deutscben Gerichte,” ORDO, vol. IX (1957), pp. 99–130Google Scholar. The American reader interested in exploring this issue will benefit from the careful survey in Damm, Walter, “National and International Factors Influencing Cartel Legislation in Germany” (Ph.D. dissertation, University of Chicago, 1958)Google Scholar.

29 Kronstein, “ ‘Cartels,’ ” pp. 273 ff. Background on directives of the Military Government of November 29, 1948, to the four Länders of the U.S. Zone is provided in Monthly Report of the Military Governor, no. 41 (November, 1948), p. 74Google Scholar.

30 Clay, Lucius D., Germany and the Fight for Freedom (Cambridge, Mass., 1950)CrossRefGoogle Scholar.

31 Damm, “Cartell Legislation,” pp. 157–69. See also Brown, Lewis H., A Report on Germany (New York, 1947Google Scholar) and Martin, James S., All Honorable Men (Boston, 1950)Google Scholar.

32 Entwurf zu einem Gesetz zur Sicherung des Leistungswettbewerbs und zu einem Gesetz über das Monopolamt, submitted to DrErhard, on July 5, 1949 (Frankfurt, 1949)Google Scholar. The appointment of this committee of professional persons to work on the problem is described by Erhard, Ludwig, Prosperity through Competition (London, 1958), pp. 118 ffGoogle Scholar.

33 “Kartelle im Blickpunkt der Wirtschaftspolitik,” Der Volkswirt, December 16, 1949. Translated and published in Erhard, Ludwig, The Economics of Success (London and Princeton, 1963), pp. 64–71Google Scholar. See also, Guenther, Eberhard, “Entwurf eines deutschen Gesetzes gegen Wettbewerbsbeschränkungen,” Wirtschaft und Wettbewerb, vol. I (November, 1951)Google Scholar.

34 This letter is republished as “Ten Theses in Defence of Anti-Cartel Legislation,” Erhard, Economics of Success, pp. 128–37.

35 Damm, “Cartel Legislation,” p. 10. See also, Entwurf eines Gesetzes gegen Wettbewerbsbeschränkungen (Bundestagsdrucksache: Synoptische Gegenüberstellung des Regierungsentwurfs und der Änderungsvorschläge, Cologne, 1955)Google Scholar.

36 New York Times, July 5, 1957; The Economist, July 20, 1957.

37 The legislative history of the law and its present day significance in terms of the over-all effect on economic order is to be reviewed anew in a forthcoming volume: Gernot Gutmann, Hans-Joachim Hochstrate, and Rolf Schlueter, “Die Wirtschaftsverfassung der Bundesrepublik Deutschland: Entwicklung und Ordnungspolitische Grundlagen” (Schriften zum Vergleich wirtschaftlicher Lenkungssysteme, vol. IV, ed. by K. Paul Hensel).

38 The text of the law is translated in “New Law on Cartels in the Federal Republic of Germany,” World Trade Information Service Economic Reports, part I, no. 58–1, Bureau of Foreign Commerce (January, 1958)Google Scholar. A very thoughtful appraisal of the law as one specific measure in the over-all pattern of Germany's market economy will appear shortly in the volume by Gutmann, et al.cited in the previous footnote. By contrast with the large number of legal commentaries, this volume considers the several provisions of the law in terms of their significance for the economy. I am obliged to the authors for permitting me to examine the manuscript. There are numerous commentaries considering the law from a legal point of view. An outstanding short comment, for American use, is that by Heinrich Kronstein, “ ‘Cartels.’ ” Among the commentaries published in German, the following are particularly noteworthy: Rasch, Harold, Wettbewerbsbeschränkungen, Kartell- und Monopolrecht (Berlin, 1958)Google Scholar; Langen, Eugen, Kommentar zum Kartellgesetz (Neuwied, 1958)Google Scholar; Lehnich, Oswald, Gesetz gegen Wettbewerbsbeschränkungen (Cologne, 1962, et seq.)Google Scholar, this is generally referred to as Frankfurter Kommentar; Hans Mueller-Henneberg, Gustav Schwartz, et al., Gesetz gegen Wettbewerbsbeschrankungen(Rev. ed., Cologne, 1963).

39 Title I, Section 5, paragraph 3, "New Law on Cartels," p. 3.

40 See, e.g., Kronstein " 'Cartels,' " pp. 284-87.

41 One of those approved, and all four of those refused in 1960, were still subject to review or appeal at the end of the year.

42 “Erlaubnis eines Syndikats nach #5, abs. 2 und 3 GWB; Beschluss des BKartA vom 27. Oktober 1959,” Wirtschaft und Wettbewerb, vol. IX (December, 1959), pp. 903–915Google Scholar.

43 “Verlängerung eines Verkaufssyndikats: Beschluss des BKartA vom 22. Oktober 1962” and “Verlängerung des Steinzeugsyndikats: Bekanntmachung Nr. 92/62 des BKartA vom 4. Dezember 1962,” Wirtschaft und Wettbewerb, vol. XIII (February, 1963), pp. 136–45 and p. 115Google Scholar.

44 “Erlaubnis eines Syndikats nach § 5 Abs. 2 u. 3 GWB: Beschluss des BKartA vom 10. Dezember 1959,” Wirtschaft und Wettbewerb, vol. X (February, 1960), pp. 142–51Google Scholar. Renewal was requested in 1962. “Antrag auf Verlängerung des Kali-Syndikats: Bekanntmachung Nr. 83/62 des BKartA vom 26. Oktober 1962,” Wirtschaft und Wettbewerb, vol. XII (December, 1962)Google Scholar.

45 Bericht des Bundeskartellamtes über seine Tätigkeit im Jahre 1960 sowie über Lage und Entwicklung auf seinem Aufgabengebiet, Deutscher Bundestag, 3. Wahlperiode, Drucksache 2734, pp. 34–31.

46 Berichit des Bundeskartellamtes über seine Tätigkeit im Jahre 1962 sowie über Lage und Entwicklung auf seinem Aufgabengebiet. Deutscher Bundestag, 4. Wahlperiode, Drucksache IV/1220, p. 90.

47 Ludwig Erhard, “The Aims of the Law Against Restrictions on Competition,” speech in the German Federal Parliament, March 24, 1955. Reprinted in Erhard, Economics of Success, pp. 170–79. The quoted passage is from p. 173.

48 “Eine Politik der Mitte und der Verständigung: der Wortlaut der Regierungserklärung von Bundeskanzler Erhard vor dem Bundestag,’ Frankfurter Allgemeine Zeitung, October 19, 1963, pp. 12–14. Cited passage is on p. 14.

49 “Die ‘weiche Welle’ trägt nicht weit,” Industriekurier, October 22, 1963, p. 1.

50 Guenther, Eberhard, “Das Gesetz gegen Wettbewerbsbeschränkungen im Rahmen der deutschen Wirtschaftspolitik,” Wirtschaft und Wettbewerb, vol. XI (November, 1960), pp. 747–54Google Scholar.

51 Hensel, K. Paul, “Marktordnung,” Handwörterbuch der Sozialwissenschaften, vol. 7 (Stuttgart, 1961), pp. 161–69Google Scholar.

52 Hoppmann, Erich, “Der volkswirtschaftliche Inhalt der Ausnahmeregelung für Exportkartelle im Gesetz gegen ‘Wettbewerbsbeschränkungen,’” Jahrbuch für Sozialwissenschaften (Göttingen, 1960), p. 301Google Scholar.

53 Ottel, Fritz, Zwei Jahre deutsche Kartellpolitik: Wettbewerb — Modell oder Wirklichkeit? (Frankfurt/Main, 1960)Google Scholar.

54 Salin, Edgar, “Soziologische Aspekte der Konzentration,” Schriften des Vereins für Sozialpolitik, N.S., vol. XXII (Berlin, 1961), p. 41Google Scholar.

55 ORDO, vol. XII (1961), pp. xxxi–xlviiiGoogle Scholar. In the Forward it is pointed out that the divergence of actual economic structure from the model is not unique to the market economy. The market economy, it is contended, is a socially defensible system only with competition. The authors point out that Salin's statement (that there is a necessary trend toward further concentration) is an unsupported assertion. Further, they assert that since wider freedom of consumers and producers can be achieved through the competitive market economy, this is worth striving for. In the subsequent issue of ORDO, this view was further developed with particular focus upon the absence of definitive empirical evidence showing that optimum size of firm is so large as to preclude effective competition. See Lenel, Hans Otto, “Vom Stand der Konzentrationsdebatte in der Bundesrepublik,” ORDO, vol. XIII (1962), pp. 281–303Google Scholar.

56 Seemann, Klaus, Die Verwaltungspraxis des Bundeskartellamtes zu den Höherstufigen Rationalisierungskartellen nach 5 Absatz 2 und 3 GWB (Cologne, 1960)Google Scholar.

57 Benisch, Werner, “Auflagen durch Kartellbehörden,” Wirtschaft und Wettbewerb, vol. XI (July, 1961), pp. 449–64Google Scholar.

58 “Ablehnung der Genehmigung eines Syndikats,” Wirtschaft und Wettbewerb, vol. XII (March, 1962), pp. 206 ffGoogle Scholar; “Ablehnung einer Syndikatserlaubnis,” Wirtschaft und Wettbewerb, vol. XIII (February, 1963), pp. 157 ffGoogle Scholar. The decision covering the industry in Lower Saxony was reported in Wettbewerb in Recht und Praxis, vol. VIII, No. 1 (1962), pp. 12 ffGoogle Scholar.