The Emergence of the Common European Competition Policy. Competition Policy in Germany, the European Coal and Steel Community and the European Economic Community

Table of Contents

1. Introduction

2. Competition policy in Germany
2.1. Deconcentration and Decartelisation in Germany
2.2. Ordoliberalism
2.3. The Beginnings of German Competition Policy after the Second World War

3. The European Coal and Steel Community
3.1. The Foundation of the ECSC
3.2. The Treaty of Paris
3.3. Implementation of the Treaty of Paris and Reconcentration in Germany

4. The European Economic Community
4.1. The Spaak Report
4.2. The Treaty of Rome
4.3. German Influence on the Treaty of Rome
4.4 Regulation 17 and the Implementation of the Treaty of Rome

5. Conclusion

6. Bibliography

1. Introduction

The emergence of a common European Competition policy is a process which has started in the 1950s and still is in progress.

During these more than sixty years major reforms in the competition sector have contributed to European integration and the development of the European Union as we know it today. The first steps aiming at a competition policy were made in the 1950s with the establishment of the European Coal and Steel Community and later the European Economic Community.¹ In this paper I will address the emergence of the European competition law in the 1950s and early 1960s and draw a special focus on how Germany and its national competition policy influenced the European course.

The main part of this paper is subdivided into three parts, the Competition Policy in Germany, the European Coal and Steel Community and the European Economic Community.

Therefore I will first discuss the development of German competition policy.

In particular, I will explain the deconcentration and decartelisation of the German coal and steel industry. Thereafter I will give a short introduction into ordoliberalism as it influenced the German idea of competition policy and lastly give a summary of the history of the German competition law’s beginnings.

Afterwards I will deal with the foundation of European Coal and Steal Community and analyse the Treaty of Paris, the treaty which established the ECSC. Finally I will draw attention on how the Treaty of Paris was implemented and shortly comment on the reconcentration of the German steel industry.

In the last part I will discuss the emergence of the European Economic Community. I will give an overview of the drafting of the Spaak Report and thereafter discuss the Treaty of Rome and the competition policy provisions it contains. That leads me to Regulation 17/62 which implements the Treaty of Rome to finally conclude with the German influence on the Treaty of Rome and Regulation 17.

2. Competition policy in Germany

2.1. Deconcentration and Decartelisation in Germany

In Germany the establishment of the so-called Konzerne, big cartels in the coal and steel industry were an important economic strategy while Hitler was in power. ² After the Second World War it was beyond dispute that Germany should never again be in the position to threaten world peace. Especially the steel sector was a key industry for wars and during that time 78% of the German crude steel production was in the hands of the six steel concerns Vereinigte Stahlwerke AG, Fried. Krupp, Hoesch AG, Klöckner-Werke AG, Gutehoffnungshütte AG and the Mannesmann Röhrenwerke AG. Hence the decartelisation, the breaking down of the cartels in the German steel industry, was the most important task during the deconcentration process, which also affected the chemistry and banking sectors.³

The in 1945 by the victorious powers enacted Potsdam Agreement stated in Article 12 “the German economy shall be decentralised for the purpose of eliminating the present excessive concentrations of economic power as exemplified in particular by cartels, syndicates, trusts and other monopolistic arrangements.”⁴

The old concerns were broken down into new companies and the reestablishment of a vertical integration under a single management was prohibited. To control the steel industry the North German Iron and Steel Control was established by the Allies.⁵

The decision lead to resistance from Germany. Theodor Beste, for example, a professor for business administration in Cologne, stated that economically seen the deconcentration was not acceptable as the new organisation would not be as effective “measured in terms of productivity, profitability and efficiency.“⁶

The Bundestag saw the Allied Law as a diktat imposed by the occupation⁷, but had to comply with the decision at least at first.

2.2. Ordoliberalism

The main ideological influence on the emergence of the German competition law was ordoliberalism, a set of ideas developed in the Freiburg School,⁸ which had emerged in the 1930s and 1940s.⁹

The Freiburg School consisted of German intellectuals who positioned themselves against both the totalitarianism of the Nazi regime and state socialism. In 1933 the economist Walter Eucken and the two lawyers, Franz Böhm and Hans Grossmann-Doerth, met in Freiburg and discovered that they held similar positions towards the failings of the Weimar Republic and that their approaches resembled one another. ¹⁰

The basis of ordoliberalism is political and economic liberalism¹¹ to which the ordoliberal thinkers added new aspects and therefore developed the liberal tradition.¹² The aim of the ordoliberal doctrine was to restructure the society, which had been destroyed during the World Wars.¹³ Economic efficiency which included economic growth, technical development and the efficiency of allocation was important,¹⁴ but meanwhile the ordoliberals perceived that economic power could hinder social justice if it created unequal opportunities for the market participants.¹⁵

Hence the philosophy demands for a powerful state to establish the legal framework for the economy¹⁶ and to assure individual economic freedom.¹⁷ As economic power can threaten democracy¹⁸ the ordoliberals were opposed to concentrations.¹⁹ Therefore this doctrine calls for a competition policy to act against, for example, cartels. ²⁰

There were many important representatives of the ordoliberal school who influenced competition law in Germany and Europe. Examples are Ludwig Erhard who was the German Minister of Economics from 1949 to 1963 and later Chancellor or Alfred Müller-Armack who negotiated for the German position during the establishment of the European Economic Community I will later draw attention to.²¹

Consequential the ordoliberal philosophy has to be considered while analysing German competition policy and its influence on Europe.

2.3. The Beginnings of German Competition Policy after the Second World War

In 1947 after the Second World War the United States established a decartelisation law in Germany to break down concentrations, especially in the coal and steel sector. As this law had the clear aim to destroy cartels, it can be seen as the first German antitrust law after the war.

The post war period was characterized by a strong economic growth in Germany with an average rate of 8.6% from 1950 to 1959.²²

Germany underwent a phase of high political stability due to the Christian Democratic Union which was seventeen years in power and continuously pursued the objective of a social market economy²³ with Konrad Adenauer being Chancellor and Ludwig Erhard being his Minister of Economics for an exceptionally long time.²⁴

Especially under the ordoliberal influence of Ludwig Erhard, it was clear that Germany needed its own competition law in order to gain back its sovereignty from the Allies, albeit only in Western Germany. Erhard wanted a law that would prohibit cartels, supervise the abuse of economic power and prevent concentrations.²⁵

The first attempt for an autonomous competition policy was the Josten Draft which had strong ordoliberal influences.²⁶ It demanded for a monopoly office to supervise the abuse of economic power, break down cartels and prohibit mergers.²⁷ Nevertheless the Josten Draft was not supported and after many other attempts in 1952 eventually a new government draft was submitted to which all parties could agree upon. After further modifications and concessions to industrial leaders, on January 1, 1958 the law against restraints of trade (Gesetz gegen Wettbewerbsbeschränkungen GWB) finally became effective²⁸ and the German cartel office (Bundeskartellamt) was established to secure competition and break up cartels. ²⁹

It is noteworthy that the law against restraints of trade did not contain provisions against mergers, similar to the meanwhile established competition rules in the European Economic Community I will later address.³⁰ That allows to conclude that the German ordoliberals could not entirely carry their point³¹ and there had to be taken further steps towards a fully effective competition law.

3. The European Coal and Steel Community

3.1. The Foundation of the ECSC

Robert Schuman, a former French Minister of Foreign Affairs, addressed the European Coal and Steel Community for the first time on a press conference in April 1950.³² In May 1950 he launched the Schuman Declaration, a new project for European integration in a limited, but important sector, the market for coal and steel.³³ Coal provided for three quarters of the European’s energy needs and before the invention of plastic and composite materials steel was of highest importance.³⁴

Schuman wanted to found a supranational organisation to place the French and German coal and steel production under a common supervision. That was a crucial stage for the European integration and an important step to overcome the enduring opposition of France and Germany.³⁵

During the press conference Schuman already suggested the need for competition rules that would form an important part of the ECSC Treaty. ³⁶

The French had a clear motivation to approve of this plan. The French officials wanted to control the German deconcentration to avoid a re-establishment of the old cartels. Meanwhile French companies wanted access to German coal at the same price as their German competitors. ³⁷

While the French sought to monitor German developments, Germany saw the Schuman Plan as the opportunity to escape from the deconcentration measures of the Allies and therefore it approved of the plan. German capital actors supported the prospect of a common market for coal and steel, but they wanted to assure that the new institutions would not hinder German re-concentration to a level corresponding to the size of their French counterparts.³⁸ To supervise the German steel industry the French negotiated for an inclusion of competition rules in the treaty to be established.³⁹

Finally six countries, Germany, France, Italy, Belgium, the Netherlands and Luxembourg negotiated and in April 1951 signed the treaty establishing the ECSC which started operation in August 1952 with Jean Monnet as the first president of the High Authority.⁴⁰

3.2. The Treaty of Paris

The Treaty of Paris, which established the European Coal and Steel Community, contains four parts.

The first part deals with the “European Coal and Steel Community” and its objectives, the second one determines “The Institutions of the Community”, the third the “Economic and Social Provisions” and the fourth gives “General Provisions.”⁴¹

As written in the second part, the ECSC contained four main institutions, namely the High Authority, the Court of Justice, the Council of Ministers and the Common Assembly.⁴²

[...]

¹ Warlouzet/Witschke, Rise, pp. 439, 446

² Warlouzet/Witschke, Difficult Path, p. 440 Warner, Steel and Sovereigntly, pp. 5-7

⁴ Ruhm von Oppen, Documents, p. 44

⁵ Warner, Steel and Sovereigntly, pp. 5-7

⁶ Beste, Entflechtung, p. 83

⁷ Schmitt, European, p. 107

⁸ Buch-Hansen, Rethinking, p. 82

⁹ Kassim/Aman, Myths, p. 126

¹⁰ Gerber, Law, pp. 232, 233

¹¹ Warlouzet, Rise, p. 8

¹² Gerber, Law, p. 239

¹³ Gerber, Law, p. 239

¹⁴ Kassim/Aman, Myths, p. 126

¹⁵ Gerber, Law, p. 241

¹⁶ Buch-Hansen, Rethinking, p.83

¹⁷ Kassim/Aman, Myths, p. 126

¹⁸ Buch-Hansen, Rethinking p. 83

¹⁹ Gerber, Law, pp. 240-241

²⁰ Warlouzet, Rise , p. 8

²¹ Warlouzet, Rise, p. 8

²² Buch-Hansen, Rethinking, p. 82

²³ Buch-Hansen, Rethinking, p. 82

²⁴ Gerber, Law, p. 268

²⁵ Gerber, Law, pp. 270, 271

²⁶ Warlouzet/Künzler, National, p. 7

²⁷ Gerber, Law, p. 273

²⁸ Gerber, Law, pp. 275, 277

²⁹ Buch-Hansen, Rethinking, p. 83

³⁰ Buch-Hansen, Rethinking, p. 83

³¹ Buch-Hansen, Rethinking, p. 84

³² Schmitt, European, p. 102

³³ Warlouzet, Rise, p. 7

³⁴ Lovett, United States, p. 426

³⁵ Schumann, Schumann Declaration

³⁶ Buch-Hansen, Rethinking, p. 88

³⁷ Warlouzet, Rise, p. 7

³⁸ Buch-Hansen, Rethinking p. 90

³⁹ Buch-Hansen, Rethinking, p. 89

⁴⁰ Schmitt, European, pp. 104, 108

⁴¹ Treaty of Paris, pp. 1,4,13,31