Evening star., 1948-12-18

pose Its policies because this is good politics?
II such actions are reprehensible, If they are
immoral, who is to tell the business leader, the
labor leader, the politician, that this is wrong?
Who is to enunciate the principles by which
such activities can be gauged? In whose realm
does the question of morality of action lie-the
businessmans the politicians or the church,
mans? WILLIAM A. HAYES.
Graduate Hall, Catholic University
Basing Point Systems Condemned
To the Editor of The Star:
The question before Senator Homer T. Cane
hart's Trade Policies Committee is of vital
Importance. 1t is: What. If anything, shall the
Congress be asked to do about the cement
decision? In that decision the Supreme Court
anlrmed Federal Trade Commission order
prohibiting "a cement producers from continu-
ing their common course of action, UNDER
standing or conspiracy" to sell cement
IN accordance with the basing point delivered
price system.
Ihls question likewise Is important to other
industries using similar methods of delivered
pricing estimated, by Hartley W. Barclay of the
New York Times, to exceed 600 in number; and
to the public.
The court did not hold the absorption of
freight charges by a producer unlawful but
merely upheld the commission in having out
lawed combination to use the basing point
system to the exclusion of other methods by
which producers acting as individual concerns,
lawfully may price their products. combina-
ton to use fob. plant pricing exclusively would
be equally unlawful. The Clayton Act recog-
nlzes that there are lawful as well as unlawful
determinations in price. No commission or
court can compel the use of the fob plant
pricing method.
Basing point systems are the direct opposite
81 price competition. Under them each pro-
ducer who elects to bid charges the same price
delivered at any point in the country as every
other producer charges delivered at that point.
Base prices are made high enough so that
=. competing producers can afford to sell at or
near other producers plants absorb the addi-
tlonal freight cost and still make a satisfactory
proht Each refrains from giving his neighbor-
customers the benefit of their location and
obtains from them better profits than from
distant customers.
The public has no more benefit of price COM
petition, when this system is working, than if
every plant in the industry were owned bv a
single monopoly. There is no incentive to any
producer to lower his base price. New business
would not be attracted since every other pro-
ducers delivered price to the locality auto
matlcally would be decreased to precisely the
same ngure. And any plan to increase the base
price would involve little risk of business loss,
Automatically other producers delivered prices
there would advance to the same figure
Device Tolerated for Profit
Inere are reasons why this system has been
tolerated. Businessmen like it. not only as
producers and sellers but also as buyers, One
who buys steel as raw material for a fabricat-
ing plant does not greatly object to paying a
nigh delivered price provided he is certain
that his local competitors must pay exactly the
same delivered price. They all can pass on the
increased cost to the public without injury to
one another. Then too, many buyers have
similar systems in their own industries and
cannot make much outcry.
Warehousemen and wholesalers sell on a
mark-up and are likewise much more inter-
ested In being free from the danger that their
local competitors may get lower prices on their
purchases than they are getting themselves.
Railroads receive benefits from the economi
eally unnecessary hauling that results
from the system.
Organized labor evidently hopes for a con-
noncompetitive prices and deprives employers
OF the argument. competition is SO bad we
can't afford to raise wages"
Evidence given to the committee by these
classes of witnesses of course cannot be i'm
peached, but it is affected by self-interest.
This pricing system must not be regarded as
an actually successful case of the entire coun-
try lifting itself by its bootstraps
Somewhere there must be, and are, people
who pay the bill. They are the general con-
Stunning public, an unorganized populace that
does not know much about the basing point
system and what it does
But abandonment of price competition by
600 basing point industries, more or less,
means noncompetitive prices, high PRICES
strong inf1ationary influence, the danger of
driving consumers out of the market and a
hreat OF economic recession
Price competition, the fundamental economic
institution in this country, has been losing out
This is due chiefly to the use of the basing
point system and corporate concentration of
wealth and power in the hands of q con-
stantly diminishing group of big industry men,
Still more of threat, from a long-range
view, is the trend of these delivered price
systems toward a situation in which the Fed
eral Government may be compelled to attempt
the folly of supervision of commodity prices
in interstate commerce. Such is the ultimate
goal of the conquest of business over price
competition. This would be an intensified
N. r. A. and, in the event of depression.
might end free competition in this Country
and usher in some form of American authori.
tartan regime.
Danger in Eliminating Competition.
I am convinced that it would be great
mistake If Congress were to enact a statute
which would facilitate each member of every
industry in simultaneously following the bas-
ing point system-oh! strictly as individuals
In common sense as well as in law when
leading members of an industry at the same
time and with mutual knowledge follow a
course which inevitably eliminates price COM
petition, the presumption is that they act un-
lo~ r,o,rt IN hat ov,I IN.