Evening star., 1950-01-19
Letters to The Star
Explains Opposition to Principle
OF Basing Point Bill

Explains IMPOSITION TO frinclpIe
OF Basing Point Bill
To the Editor Of The Star:
Perhaps no measure affecting business in
general, since the National Industrial Re-
covery Act, has been brought before the
Congress and the public of Importance equal
to that of the basing point bill (S 100S)
which is to be considered by the Senate
this week.
Its Importance consists chiefly in these
facts: For many years an increasing num-
ber of industries, which include most heavy
goods lines, have used one or another of
several delivered price systems. All these
systems accomplish the same result the
quoting and selling at the same delivered
price by every competitor" at each respec-
tive buyers destination. The most typical
is the multiple basing point system. under
which the producer who is located at
basing point is the recognized price leader
in the territory throughout which his all
rail freight rate is lower than that of any
other producer located at any other basing
point.
Whatever base price basng point pro-
ducer makes for his territory, plus the all
rail rate of freight from his city to each
buyers location IS the recognized delivered
price to respective buyers, not only for him
but for all other producers.
Producers do not cut below that delivered
price although it is high enough SO that
they often find that they can afford to ship
heavy goods halfway across the country
by-passing other producers locations and
absorbing the excess Of carriage COSTS
The conference committee has adopted
many of the ideas of the friends and users
of basing point systems. They report:
When sellers sell at the same price
because they are in vigorous competition
with each other and each finds that he
cannot get more for his product than others
are getting for like products, competition
has not been lessened or injured but is
actively at work, assuming an absence of
agreement, actual or implied"
Conferees Eluding Issue?
This eludes the issue in two ways. It
assumes first, that system under which
everyone, buyers and sellers, knows precisely
what the delivered price of each seller will
be at each destination in the country, pro-
vided he elects to quote, and that all will
be the same, is competition" in price; or
that the price element is not vital to COM
petition.
These systems also destroy the incentive
to price competition by reduction in prices.
To reduce ones base price in ones own ter
ritory merely automatically reduces all
competitors" delivered prices in that ter
ritory and does not particularly increase
the chance of getting business Any com
petition which leaves price to one side,
especially in heavy goods lines, robs the
public of the benefits of the American eco
nomic system.
The conferees in the above excerpt it
seems to me- elude the issue secondly by
improvidently assuming that industries such
as steel. cement. lumber and many others
are quite likely following these systems
without agreement actual or implied"
Producers in the industries in question
have pursued their systems, at least until
the Supreme Court handed down the cement
decision, each with an everyday knowledge
that no other competitor" would invade
his territory with any delivered price below
the regular basing point price. The theory
of the conference committee and Of the
bill is that these competitors" are acting
independently.
The Supreme Court, however. frequently
has laid down the doctrine that men must