The Bundeskartellamt (Federal Cartel Office) is the institution specifically instructed and empowered to prevent a return to the monopolies and cartels that periodically controlled much of the German economy between the 1870s and 1940s. The policies of the office, like the office itself, have been controversial, with some Germans wanting it to have greater power and others believing that it is already abusing its existing authority.
The Bundeskartellamt was established in 1957. Many, including Erhard, believed that it had not been given enough authority to restrict cartels and other monopolistic practices. The Western Allies had insisted that the fledgling Federal Republic have such a law, but West German business associations used their influence to undercut the authority of the Bundeskartellamt to the point where it has sometimes been described as a "Swiss cheese with countless holes." Some of the holes in the Swiss cheese were closed in 1973, when the Bundestag passed a merger law (Fusionsgesetz ) intended to block monopolies in advance so that the Bundeskartellamt would not always have to act after the fact.
In retrospect, the laws and the office have performed a central and useful function, but they have not been able to prevent a gradual shift toward ever larger companies in Germany. The number of mergers in West Germany increased rapidly during the late 1980s, rising to over 1,000 per year. And the Bundes-kartellamt has not been effective in curtailing the countless informal contacts and discussions that have characterized the German system (like other European systems) and that would be suspect and perhaps illegal in the United States.
Because the Bundeskartellamt tends to use nonconfrontational tactics, the office has often been denounced as ineffective. Critics contend that the office has actually blocked very few mergers or other forms of cooperation. They also assert that hidden monopolistic or oligopolistic practices have been creeping back into the German economy. But others argue that the very existence of the Bundeskartellamt has enhanced competition and that the office's predilection for solving problems through nonjudicial processes fits properly into the German system and is therefore effective in that system.
Despite its title, the Bundeskartellamt does not have the final authority over German mergers and acquisitions. That authority is reserved for the political level, the Ministry for Economics, which on more than one occasion has overruled the Bundeskartellamt. After the Bundeskartellamt had raised a number of searching questions about the legality and propriety of Daimler-Benz's 1989 acquisition of Messerschmidt-Bölkow-Blohm (MBB), and after it had even disapproved the acquisition, the minister for economics approved the merger on condition that Daimler-Benz and MBB sell off majority control in a small marine and technology division. The government justified the step by recalling that it had specifically sought the merger to support MBB--which was engaged in military production and could not be permitted to collapse--with Daimler-Benz's financial resources.
The Bundeskartellamt has faced a particularly difficult task in the integration of the East German and West German economies. Many eastern German firms could not survive unless they could merge with large western German firms. The process may, however, create new enterprises whose size and combination of resources could open the way for monopolistic or oligopolistic temptations. Powerful economic and political pressures for such mergers exist, especially to help revitalize eastern Germany, but they also raise serious questions about their potentially negative impact on competition. Under those circumstances, the Bundeskartellamt has acted with considerable circumspection, blocking some mergers but approving most of them.
The Bundeskartellamt faces an even greater problem in the growing Europeanization of German business under the aegis of deeper EU integration. It became clear by the early 1990s that the EU's European Commission in Brussels was prepared to permit greater cooperation between European firms in order to compete more effectively against the worldwide reach of the giant corporations of the United States and Japan. Such cooperation went against German cartel laws. To solve the problem, the Bundeskartellamt announced in early 1993 that it would permit greater degrees of cooperation between small- and medium-sized German firms if that cooperation actually led to greater intra-European competition.
Because Germany has a federal system, state (Land ; pl., Länder ) and local governments also have important functions. This reflects the German tradition, which before Hitler combined a mix of national, Land , and local structures with carefully defined and deliberately circumscribed powers. Land and even local authorities are involved in many economic functions, such as social services, development and energy policy, education (including vocational training), public housing, environmental protection, and industrial policy. They also share certain tax revenues that are centrally collected but distributed among the central, Land , and local authorities in accordance with carefully negotiated ratios that were changed after unification slightly to the advantage of the new eastern Länder .
The Länder do not always act and think alike. Different old Länder have followed different economic policies since the early years of the Federal Republic. On the one hand, the minister presidents, or heads, of two Länder , Bavaria and Baden-Württemberg, have stressed industrial development policies that have departed radically from those of others, putting their Länder into the forefront of German technological development. On the other hand, the Länder of North Rhine-Westphalia and the Saarland for a long time concentrated their resources on subsidizing coal and steel production, entering the competition for new industries much later than other Länder . The possibility for creating separate Land policies has also encouraged some new Länder to try their own development policies. They have invited potential investors from other countries to visit them, and they have engaged in export promotion.
Data as of August 1995