Klaus W. Richter. Die Wirkungsgeschichte des deutschen Kartellrechts vor 1914: Eine rechtshistorisch-analytische Untersuchung. Die Einheit der Gesellschaftswissenschaften. Tübingen: Mohr Siebeck, 2007. xi + 244 pp. EUR 69.00 (cloth), ISBN 978-3-16-149232-7.
Reviewed by Elaine Glovka Spencer (Department of History, Northern Illinois University)
Published on H-German (December, 2008)
Commissioned by Susan R. Boettcher
Laws and Institutions: The Case of the Rhenish-Westphalian Coal Syndicate
Historians who compare the industrialization of Imperial Germany with
that of its economic rivals have often identified the prominence of cartels
as a distinctive feature of the empire's economic development. They
have not, however, always agreed on the nature or magnitude of the impact of
cartels on the German economy. In his monograph, Klaus W. Richter
focuses less on the economic consequences of cartel activities than on
internal transformations within cartels and their relationship to
the society in which they operated. Drawing on his training as a jurist,
Richter begins by examining the evolution of the generally favorable
legal environment for German cartels. Within the framework of the
nineteenth-century edicts, laws, court decisions, and public debates he
chronicles, Richter traces the consequences for corporate competition
and cooperation in Germany up to the First World War.
In his discussion of cartel-related court cases, Richter explores the
assumptions underlying major decisions. Most significant among such
decisions was that reached by the Reichsgericht (the highest German
court) on February 4, 1897. The court recognized cartel agreements as
legally enforceable contracts. Violators could be taken to court. Like
others before him, Richter contrasts that decision with the Sherman
Antitrust Act of 1890 in the United States, which called for the
prosecution of agreements in restraint of trade. To explain why
anti-cartel sentiments were markedly less prevalent in the Wilhelmine Empire
than in the United States, Richter surveys the views of influential
German legal and economic commentators of the era. Under the
empire, in spite of periodic protests from the representatives of
consumer interests, the weight of public opinion remained on the side of
toleration of cartels. Respected German jurists and economists, notably
Gustav Schmoller of the Younger School of German National Economy,
viewed American trusts as a by-product of misguided anti-cartel
legislation and an oppressive evil to be avoided at all costs. Against
the backdrop of the economic fluctuations of the 1870s and 1880s, many
prominent German opinion makers were predisposed to accept cartel
agreements as bulwarks against ruinous competition that led to the
triumph of ruthless trusts at the expense of everyone else. Among those
viewed as likely to suffer most from the tyranny of the undisciplined
marketplace were smaller, less competitive businesses, their workers,
the local communities that depended on them, and ultimately the nation
as a whole. German jurists and economists of the Second Empire perceived cartels not as rapacious conspiracies prospering at the expense of
consumers, but as guarantors of economic stability that provided a
foundation for rational investment.
In his analysis of corporate cooperation and competition, Richter
combines legal history with the application of concepts adapted from
New Institutional Economics. He draws particularly on the works of Douglass C. North and Oliver E. Williamson. Starting with the assumption that
institutions are of fundamental importance, Richter explores the rules of the game, both formal and informal, that shaped the environment in
which German cartels functioned. Within this institutional framework,
Richter stresses the importance of periodic renegotiations of cartel
contracts, focusing on organizational innovations called forth by
unforeseen developments and the need to minimize transaction costs,
especially those related to enforcing agreements.
Looking ahead from the perspective of 1897, the year of the
Reichsgericht decision recognizing cartel contracts as legally
enforceable, Richter outlines what kinds of organizational changes
could be expected to follow. He labels his projections a "prognosis."
According to Richter, given their leaders' inevitably imperfect
foresight and the constant need to close unforeseen loopholes that
enabled opportunistic members to circumvent limitations on their
activities, cartels would find themselves compelled to develop ever
more complex governance structures. Over time, these increasingly elaborate
cartel agreements would come to resemble the very trust-like
organizations their supporters claimed they were trying to prevent.
Since the fates of Germany's pre-World War I cartels are long since
known, Richter had no need to wait to see whether the developments he
foresaw for the decades after 1897 would actually materialize. To illuminate how cartels fared under the Second Empire, Richter offers a case study of
one particularly well-known collusive agreement, the Rhenish-Westphalian Coal Syndicate (RWKS). As reasons for focusing on the RWKS, Richter
notes not only its longevity and importance for the economy as a whole,
but also the availability of relatively abundant documentation relating
to this agreement.
The RWKS came into being in 1893 as two decades of often worrisome
market conditions for German heavy industry were about to give way to a
generally more prosperous, expansive period. The founders of the
syndicate could draw upon experience gathered during earlier attempts to regulate competition and dampen economic fluctuations. Previous attempts to manage competition in the coal industry had been hampered by limited
geographic reach and inadequate enforcement mechanisms. This time, the
organizers went beyond the negotiation of agreements on prices and
production quotas and established a market syndicate. The RWKS was a
legally independent sales organization that marketed the output of
member companies. The syndicate had its own headquarters and sizable
staff. It set production quotas for member firms from year to year,
along with the prices at which coal would be sold. Nearly one hundred
firms joined the new organization. In 1893 they already collectively
controlled 87 percent of the coal produced in the Dortmund Mining
District (40 percent of the national total).
The newly formed RWKS faced its share of organizational difficulties,
among them problems related to balancing the diverse interests of
smaller, older mines and larger, newer mines and of mines located in
geologically very different parts of the coal field. Companies wishing
to expand their production quotas took advantage of loopholes in the
initial contract. One possibility was to claim expanded quotas for new
production shafts, even for those never actually intended to yield
coal.
Among the most difficult issues the syndicate faced was how to allocate
quotas to the Hüttenzechen (coal mines linked to metallurgical
concerns). The Hüttenzechen insisted that limits on the quantity of
coal they produced should apply only to that output designated for sale to
outside consumers, not to that used within the vertical combines of
which they were part. Such an arrangement was the price the
foundry-owned mines exacted for joining the syndicate. One consequence
of this concession was increased incentive for more vertical
integration.
To deal with these and many other disagreements among members and
between members and outsiders, the syndicate's contracts had to be
renegotiated repeatedly. Richter focuses on the changes embodied in
successive RWKS contracts between 1893 and 1909. He views the ever more elaborate rules and increased syndicate oversight embodied in these
renegotiated contracts as necessary steps in reducing transaction costs. Not surprisingly, he interprets these developments in the direction of
ever greater fusion as validating his prognosis from the perspective of
1897.
Richter's volume is intended for specialists. First and foremost, the
author addresses himself to legal historians. He offers his study as an
interdisciplinary exercise demonstrating the usefulness of applying to
legal history concepts borrowed from New Institutional Economics. He has less to offer readers whose primary interest is economic or business
history. Richter did not investigate the archives, relying instead on
published sources. The debates he recounts were carried on in public by
jurists and economists. Of interest would have been more attention to
the views and reactions of cartel members themselves and the
behind-the-scenes-negotiations in which they so ceaselessly engaged. The
architects of the RWKS and the personal and professional networks
linking them are largely missing from Richter's account. His index, for
example, lists ten entries for economist Gustav Schmoller, but none for
Emil Kirdorf, the director of the RWKS. Richter adds to our
understanding of the institutional framework in which cartel-related
decisions were made in Imperial Germany, but stops short of following
the actual making of such decisions within that context.
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Citation:
Elaine Glovka Spencer. Review of Richter, Klaus W., Die Wirkungsgeschichte des deutschen Kartellrechts vor 1914: Eine rechtshistorisch-analytische Untersuchung.
H-German, H-Net Reviews.
December, 2008.
URL: http://www.h-net.org/reviews/showrev.php?id=15505
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