Evening star., 1948-06-13
Cement Case
Poses Upset
Price Traditions May
Reform as a
Result
By Roder Wineet


traditional methods of quoting a
series of uniform prices without re-
gard to the distance of the customer
from the producing plant.
The possibility for change is SO
complicated and SO far-reaching
that considerable confusion exists as
to just what will or could happen.
Possible Effects
Depending on final Interpretation
of the Supreme Court decision and
future rulings now pending, together
with enforcement of the law through
the Federal Trade Commission, these
things could occur:
/. American business could be
broken up into scattered self
sufficient islands of industry.
2. Big producing centers could be-
come smaller.
3. New production centers could
rise.
f, 4. Companies may merge or split
into separate operating groups de-
pending on location.
5. The national price structure
way be decentralized, with different
prices quoted in different places,
some higher and some lower, de-
pending on where you live.
Whatever the actual results In
practice, and it may take years to
reach the end d-point, the outstanding
question is whether it will be good
or bad for the people. Historians
probably will have to answer that.
System Held Unfair
Here is the background:
The Supreme Court April 26, in a
6-to-1 decision, upheld the Federal
Trade Commission against the. Ce-
ment Institute forbidding any COM
bination or conspiracy to fix prices
through a basing point system OF
quotations.
Justice Black in the majority de-
cision wrote: Concerted main
tenance of the basing point deliv-
cred price system is an unfair meth
cd of competition prohibited by the
Federal Trade Commission Act"
Many leaders in large industries
interpret this to mean all bas1ng
point price systems and their varl-
ations are illegal. On the other
hand, Robert E. Freer, Chairman OF
the Federal Trade Commission, said
it was unwarranted to assume that
Use of the basing point system
would be illegal, he said, if it was
part of a price-fixing conspiracy OF
constituted unjust discrimination in
turing competition.
How Prices Vary
What is the basing point system
and who uses it?
Practically everybody uses 1t or is
affected by it, and it has these
forms:
l. Single basing point-Prices are
quoted free on board f.ob) at a
single city, say Atlanta. Every man.
ufacturer of a certain product will
quote his price of that product fob
Atlanta. The buyer pays the freight
! from Atlanta.
}, Suppose your business is in Chi
, cago. You buy the product and 1t
is delivered to your door at a fixed
price plus freight from Atlanta, re-
; gardless of the location of the manu-
featuring plant. If the manufactur-
er is in Chicago, his freight is small
, If. he is in Dallas, his freight Is
large. You still pay only the equiv
alent of freight from Atlanta to Chi
cago.
2. Multiple basing points-The
principle is the same, but the con-
sumer can buy at the basing point
price nearest his business.
3. Zone basing price-Prices are
the same within any zone regardless
of the distance from the producer to
. the consumer. A familiar evidence
of that is the phrase prices slightly
higher west of the Rockies
Postal Rate Example
4. Phantom frelght-This occurs
when a producer adds arbitrary
freight costs to a product even
though the product is not shipped
/ the entire distance covered by the
charge or when one type of freight
such as rail is charged and differ
ent method of shipment such as
truck is used.
The United States postal system
itself is a classic example OF basing-
point-system operation. A letter
mailed within New York costs
cents. A letter mailed from New
/ York to San Francisco costs 3 cents
: The Government absorbs the dill
ference.
Parcel post rates are fixed on
zone basis regardless of the differ
ence in distance within zone.
: The Government charges a phan'
tom freight rate if it sends you'
airmail letter by rail when the
planes don't fly. :.
1t ahsorbs freight rates when !,
: handles large volumes of certain
7 types of mail at loss as public
service.
No one, however, suggests the
Government should charge postage
. on a cost-plus-freight basis.
If business has to be done on a
cost-plus-freight basis, then there
: are almost limitless changes IN
sight. Among some Of them are:
i /. Producers would have to move
, to a geographical point where their
raw material freight costs and nm
ished material freight costs would
be in economical balance, either
having one large plant In an area