The Davignon Plan: Whither Competition Policy in the ECSC?

• Author: David Dale Martin
• Published date: 01 December 1979
• Date: 01 December 1979
• DOI: http://doi.org/10.1177/0003603X7902400406
• Subject Matter: Article

The Antitrust Bulletin/Winter 1979

THE

DAVIGNON

PLAN:

WHITHER COMPETITION

POLICY

IN

THE

ECSC?

by

DAVID DALE MARTIN*

The competition policies of the Commission of the Euro-

pean Communities rest not only on the 1956 Treaty of Rome,

which established the European Economic Community, but

also on the 1951 Treaty of Paris, which created the European

Coal and Steel Community and began Europe's progress

toward a common market. The two communities, along with

the European Atomic Energy Community, were unified in

1967/

but

the treaties have not been harmonized. Therefore,

the Commission has quite different powers to depart from

competition in favor· of cartelization as its basic policy for the

coal and steel sectors of the common market. Furthermore, for

the coal and steel sectors the supranational European "govern-

ment" has superseded the national governments to a much

greater extent than for the economy generally. Thus, even

nationalized steel industries are not subject to national govern-

ment price controls and restrictive practice regulations.

*Professor of Business Economics and Public Policy, School of

Business, Indiana University, Bloomington.

AUTHOR'S NOTE: Research conducted with financial support from

the Indiana University Foundation and the Indiana University Inter-

national Programs Committee. The author acknowledges particular

indebtedness to Mr. John Conrad for his assistance in legal research.

1''Treaty Establishing a Single Council and a Single Commission

of the European Communities," Office for Official Publications of

the European Communities, Treaties Establishing the European

Communities, Luxembourg, 1973, pp. 747-773.

©1980 by Federal Legal Publications, Inc.

837

838 THE ANTITRUST BULLETIN

Several aspects of the ECSC

treaty

have been ably

discussed in this journal." Professor Klaus Stegemann also has

recently published an excellent book explaining and analyzing

how

the

European steel market has functioned under the rules

of the Treaty of Paris." About the time

that

book was going to

press, the Commission announced its "crisis measures" to cope

with the persistent low demand for steel and its consequences

on prices and profits of steel companies.' These new measures

seem to represent adefinite shift from a policy of competition

toward a policy of cartelization

that

may have lasting

consequences. They have come to be known as the "Davignon

Plan"

after

the Belgium member of the Commission, Viscount

Etienne Davignon, who was in charge of industrial policy

at

the time.

Commissioner Davignon's cartelization solutions for the

post-1974 European recession have not been limited to the

steel industry,

but

his policies have been inhibited for lack of

a legal basis in industries governed by the Treaty of Rome.

For example, The Economist reported

that

a fiber cartel:

was officially set up in

June

[1978], and actually signed

at

the EEC commission headquarters, with the blessing

2Hans G. Mueller, "The Prohibition of Price Discrimination in

the

ECSC:

The Rules and Their Enforcement," The Antitrust

Bulletin, Vol. XI, No. 4 (July-August 1966), 733-765; Klaus

Stegemann, "Three Functions of Basing-Point Pricing and Article 60

of the ECSC Treaty," The Antitrust Bulletin, Vol.

xm

(Summer

1968), 395-432; Erick Zimmerman, "Prohibitions of Discrimination

in Private Commerce in the Treaties of the EC," The Antitrust

Bulletin, Vol.

xm

(Fall 1968), 1083-1123; Hans Mueller, "The Policy

of the

ECSC

Towards Mergers and Agreements by Steel Companies,"

Vol. XIV, The

Antitrust

Bulletin (Summer 1969), 413-448.

3Klaus Stegemann, Price Competition and Output Adjustment in

the European Steel Market, Tiibingen: J.C.B. Mohr (Paul Siebeck),

1977.

4Several extracts from the Official Journal setting forth the

newly adopted "common steel policy" are reprinted in The Antitrust

Bulletin,

Vol.

xxm

(Fall 1978), 627-637.

DAVIGNON

PLAN 839

of the industry commissioner Viscount Davignon

....

The

EEC's one official cartel for the steel industry, is to some

extent a special case, since it is backed by the powers

under the 1951 Paris Treaty on coal and steel. But under

the Treaty of Rome, cartels for other industries are

normally illegal. The Commission as a whole so far has

rejected efforts to amend article 85 of the Rome Treaty

to allow approved cartels for "any industry in crisis.?"

If

Commissioner Davignon should succeed in amending the

Treaty of Rome to extend the steel policy to

industry

generally,

the

implications will be very great for world trade

and competition policies in

other

nations. This

article

examines the distinctive features of the Treaty of Paris

that

provide the legal basis for the cartelization of the European

steel

market,the

nature and limitations of competition before

these new "crisis measures" were adopted, the policy responses

to the post-1974 recession, and some implications for the

structure of world steel markets.

THE CRUCIAL PROVISIONS OF THE TREATY OF PARIS

Both the Treaty of Rome and the Treaty of Paris have two

articles somewhat analogous to Sections 1 and 2 of the

Sherman Act. Articles 85

(Rome)

and 65 (Paris) deal with

agreements and concerted practices and Articles 86 (Rome)

and 66 (Paris) concern abuse of a dominant position by one or

more firms. Much has been written on these antitrust-like

provisions and we shall not say much more about them here

except

that

taken alone they might serve to prohibit

the

sort

of privately negotiated,

but

government tolerated, cartels

that

dominated most of the industrial markets of Europe and the

world in the inter-war period." The crucial difference between

5The Economist, November 11, 1978, pp. 58·60.

6See George W. Stocking and Myron W. Watkins with the

assistance of Alfred E. Kahn and Gertrude Oxenfeldt, Cartels in