Evening star., 1951-04-22
Profit Standard
To Limit Future
Price Increases
No Boosts Allowed
Industries Making
$50 of '46-' '4o Bose
By james Y. Newton

The Government last night an
lnounced a new basic price control
policy that forbids industries to
raise prices if profits have reached
or exceeded set standard.
Economic Stabilizer Eric A.
johnson. who made the announce
lment. described it as tough"
policy. Under it, no industry will
be permitted to increase if the
individual industry's dollar prof.
its amount to 85 per cent or more
Iof the average of its three best
years in the four-year period
Il946-1949, inclusive.
The step is the first of three
drastic actions the Government
plans to take in tightening inf1a-
Ition controls on all fronts. The
Others are to freeze cost-of Living
wage increases of workers and
parity boosts for farmers. The lat
ter will require legislation and is
expected to be a part of a general
new control program President
Truman soon will submit to Con-
tgress.
To Apply to Ali Industries.
In addition. Price Director
Michael v. Disable will announce
Wednesday a regulation for spe-
cific control of manufacturers
prices. 1t will replace the general
freeze imposed on most goods and
services in January and is expect
ed to result in a rollback of some
prices.
| Mr.. Johnston outlined the
lprice-prof1t control policy in a
letter to MIR. Disable. 1t viii apply
to all industries, and will take
effect as soon as an individual
industry has been placed under a
| specific price control ceiling. Of
1 ficials said it will become effec-
tive at once in the coal, steel and
basic metals industries.
! Mr.. Johnston told reporters
THAT consideration for q price In
'Icrease win not be given unless
1.-THE average profits Of an industry
fall below the as per cent yard
stick" This viii be so even where
individual companies Of the in
sfdustry may be losing money or
dare well below the IS per cent
profit standard.
i "A Very Tough Policy"
i Il want to emphasize that this
lis going to be very tough policy"
Mr.. johnson said. "And we will
lget a lot of squawks. It will mean
that from here on out most cost
increases Qabor. materials or
overhead increases) will have to
be absorbed"
i Asked if the policy did not pen.
alize the low-proflt company and
reward ones with high profits. Mr..
Johnston said that in every in.
Idustry there are always some
firms making money and others,
generally Inefficient ones, losing
money.
1--WE want to reward efficiency"
The added. 1--WE don't want to PEN
ialize efficiency. That is normal
in business and we do not want
Ito distort the normal relationships
of an industry"
The Defense Production Act re-
Iquires that price ceilings must al.
low a business generally fair
and equitable" profit. The new
order fixes the IS per cent in
1dustry-wide profits ''yardstick" as
meeting the requirement. 1t is
the standard that is used in the
excess profits law.
/ Details Left to Disable.
/ In the letter to Mr.. Disable, Mr..
Johnston stated:
THE profits should be figured
before Federal income and excess
profit taxes and after normal de-
'Ipreciation only. with adjustments
made for any changes in new
worth" ta
Producers of scarce metals or
iother items badly needed in the
defense program, Mr.. Johnston
said, viii get special treatment.
Otherwise, he left the details Of
Applying the new formula to Mr..
Disable to work out. He said that
an industry itself will gather the
data and submit it to the price
idirector. But no price increase
would be considered unless firms
representing a majority Of the
lidollar volume Of business in a par
lticular industry request such con-
.lsideration.
!. Indicating that other tough"
lanti dnflation steps are to follow.
,lMr. Johnston added:
We all recognize that imitation
cant be stopped by piecemeal ap-
,lproaches or halfway measures.
Continued on Page A-6, Col. g.