Mr. Loyd V. Steere, Counselor of Mission, Office of the United States Political Adviser for Germany, to the Secretary of State 51

924. Office of Military Govt for Germany US from Office of Political Adviser at request of Echols52 and Fahy.53 Before receipt of Dept’s cable 764, Oct 30, re proposed law on decentralization of German economic power Quadripartite Legal Directorate agreed 30 Oct on draft law generally conformable to State Dept teletype conversation Oct 2454 and based on text prepared by US Legal Division. Text of law approved [Page 1568] by Legal Directorate 30 Oct cabled AGWar55 for Clay 31 Oct and now repeated to you as follows:

“Control Council law No. blank entitled Prohibition of Excessive Concentration of German Economic Power. In accordance with paragraph 12 of the Potsdam decisions,56 and for the purpose of preventing Germany from endangering the safety of her neighbours or again constituting a threat to them or to international peace, and in order to destroy Germany’s economic potential to wage war, and in order to facilitate Germany’s reconstruction on a peaceful and democratic basis, it is essential that German economy should be decentralized by the elimination of all excessive concentration of economic power as exemplified, in particular, by cartels, syndicates, trust combines and other types of monopolistic or restrictive arrangements which could be used by Germany as instruments of political or economic aggression.

Participation by Germany in international cartels and similar arrangements is forbidden.

The Control Council therefore enacts as follows:

Article I

Excessive concentrations of German economic power, whether within or without Germany and whatever their form or character, are prohibited and must be eliminated.
Unless expressly exempted by the Economic Directorate of the Allied Control authority, the following shall be deemed excessive concentrations of economic power within the meaning of this law:
Every enterprise controlling, directly or indirectly, more than blank percent of the total German production or other economic activity in the industry or field to which it belongs;
Every enterprise controlling, directly or indirectly, a volume of business (as expressed in annual turnover) of more than blank million Reichsmark;
Every enterprise employing, directly or indirectly, more than blank persons.
It shall be the duty of the Economic Directorate to determine by general or special order whether other enterprises or activities, not enumerated in paragraph b above, constitute excessive concentrations of economic power within the meaning of this law. In making such determinations the Economic Directorate shall give due consideration to the following factors:
The percentage of total German production or other economic activity which the enterprise or activity controls in the industry or field to which it belongs.
The volume of business it controls, directly or indirectly, as expressed in annual turnover.
The number of persons employed by it, directly or indirectly.
The character of its production and the nature of its activities.
The nature and extent of its participation in any contract, agreement, combination, practice or other arrangement or relationship of a restrictive or monopolistic character, e.g., such as tend to create special privileges in the purchase or sale of materials, restrictions upon production, distribution or prices, allocation of territories, or the exclusive exchange of patents or technical information.
Any other factors bearing on the war potential resulting from the concentration of economic power.
Any grouping of enterprises or activities of dissimilar character or covering distinct stages of production.
The Economic Directorate may exempt in whole or in part, and on such terms and conditions as it may deem appropriate, any arrangement, act or thing prohibited by this article, if it finds that such exemption is consistent with the declared purposes of this law and is also required to further some other declared objective of the occupying powers.

Article II

Participation, directly or indirectly, by any German person, in any cartel, combination, enterprise, activity or relationship in restraint of international trade or commerce is hereby declared illegal and prohibited. This provision shall not be construed, however, to prohibit ordinary agency agreements and simple transactions of purchase and sale.

Article III

The Economic Directorate is authorized to take such action in regard to the elimination of enterprises or activities forbidden by this law as it finds necessary and consistent with the principles and. purposes set forth in preamble including the elimination, the redistribution or removal of property, investments and other assets and the cancellation of obligations of cartels, syndicates, trusts, combines and other organizations of a monopolistic and restrictive character, or any suitable action.

Article IV

The Economic Directorate is empowered to require German persons, or any defined categories thereof, to file information regarding their business activities, relationships, or properties, domestic or foreign; and it may examine the records, papers and activities of all such persons.

Article V

The Economic Directorate is empowered to make such surveys and investigations as it deems appropriate for the fulfillment of this law.

Article VI

The elimination of excessive concentrations of German economic power as provided herein shall be completed by 31 Dec. 1946.

[Page 1570]

Article VII

Any person violating this law, or any order, decree, regulation, or directive issued pursuant hereto shall upon conviction be fined not more than Reichsmarks 100,000 or imprisoned not more than 10 years or both.

Article VIII

As used in this law:

The term ‘persons’ shall include any natural or legal person, or body of persons, public corporation or governmental agency; and
The terms ‘enterprise’, ‘activity’, and ‘relationship’ shall include every kind of economic, business or financial instrumentality and activity, whether in the form of a cartel, trust, combine, stock company, concern, aggregate of firms or bodies, or otherwise, and whether related by agreement, combinations, association, or understanding.

Article IX

The Economic Directorate is empowered to delegate to such subcommittees or other agencies as it may create or designate for the purpose, all or any of its duties or powers herein provided. The Directorate may in its discretion review and modify or set aside any determination by any such subcommittee or agency, and may revoke or modify its delegated authority at any time.”

This draft now goes before Coordinating Committee. Economic Directorate to fill in the blanks in article Ib. Coordinating Committee meets 6 Nov.57

Request you consider matter in light of above text and current situation here. General Clay now in Washington and suggest he be consulted.

  1. Mr. Murphy and General Clay were in Washington November 1–9 for discussions with the State and War Departments on matters relating to military government and Control Council policy in Germany. No record of these discussions has been found in Department files.
  2. Maj. Gen. Oliver P. Echols, U.S. Assistant Deputy Military Governor for Germany.
  3. Charles Fahy, Legal Adviser and Director of the Legal Division, OMGUS.
  4. Record of conversation not printed.
  5. Adjutant General War Department, Maj. Gen. John H. Hilldring.
  6. Reference is to paragraph 12 of the political and economic principles to govern the treatment of Germany in the initial control period; see Conference of Berlin (Potsdam), vol. ii, pp. 1483 and 1504.
  7. For further discussion of the law in the Coordinating Committee, see the report contained in telegram 1126, November 28, 8 p.m., from Berlin, p. 1571.