Share this story
Close X
Switch to Desktop Site

Pending East-West German Deals Spark Concern

EAST Germany, where the state owned and ran everything for 40 years, has just set up an agency to guard against monopolies. A wave of pending agreements between large West German and East German firms prompted concern in both countries that inefficient Communist monopolies will be replaced by capitalist ones.

This week the mighty Deutsche Bank AG in Frankfurt announced a joint venture with East Germany's Deutsche Kreditbank AG. The venture could end up as one of the largest commercial banking operations in East Germany.

About these ads

It comes on the heels of another, more controversial deal. Allianz AG, the largest insurance company in West Germany and a giant in Europe, announced last month that it will be buying a 49 percent interest in the East German state insurance company - the only insurer there.

Cooperative agreements between East and West Germany are also pending in such areas as machine tools, construction, electronics, and cars and trucks. Volkswagen, Opel, and Daimler-Benz, for instance, have agreed with their counterparts in East Germany to start up production there. All of these deals, however, are conditional on East Germany following through with certain legal changes.

Economists and antitrust specialists are less concerned by the cooperative agreements in manufacturing than by the deals in the service and financial sectors.

``When those gates fall at the border, goods will stream'' into East Germany, says J"urgen Kiecker, spokesman for West Germany's Federal Cartel Office.

Whatever monopoly has been allowed to grow - be it in shoes, cars, or computers - it won't last when the border is truly open, and the West German mark becomes the only currency. Other companies from the West will simply ship their products East, he says.

Packing and shipping a service, however, is much harder than taking goods across a border, Mr. Kiecker explains.

He is also concerned about other deals. The East German gas station network is interested in forming partnerships with Western oil companies, but on a regional basis, he says. Each company would have its own region, which means prices could be set artificially high due to lack of competition.

About these ads

But even if the West German cartel office wanted to investigate some of these cases, it couldn't. East Germany is still a sovereign state. ``We have no jurisdiction there,'' Kiecker explains.

The West German cartel agency has worked closely with East German officials to set up their own monopoly watchdog. A competition law, similar to West Germany's, will take effect next month. ``We haven't heard the last word'' on the German-German deals, Kiecker says.

Deutsche Bank points out that its intention to form a joint venture will not give it exclusive entry to the market next door. The joint venture, in which Deutsche Bank will hold a 49 percent interest, will involve about 100 of Kreditbank's 150 branches, says a Deutsche Bank spokesman. This leaves Kreditbank the opportunity to cooperate with other Western banks, though access to two-thirds of the branches is still a Deutsche Bank coup.

Apparently, Kreditbank is already negotiating with Dresdner Bank, the second-largest bank in West Germany. All three of West Germany's major banks have meanwhile set up small offices in East Germany and at least have their foot in the door.

``We regret that the main participants are West German firms,'' says Helmut Giesecke, director of foreign trade for the Association of German Chambers of Industry and Commerce in Bonn. The language barrier, he says, is a big reason, but so is the uniqueness of German reunification.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.