Opinion ID: 1483125
Heading Depth: 1
Heading Rank: 7

Heading: Price Leadership.

Text: Another feature of the pricing system under attack greatly emphasized by the Commission is that certain mills are recognized as price leaders. The Commission states: The base price of course is announced by the base mills. Unless these mills are recognized as price leaders and their base prices accepted, adopted, and woven into the price structure by their competitors, there can be no basing point system.    Base mills can set whatever base price they think best, subject only to preservation of their accepted leadership and the general wisdom of their action.    The effect of this situation is that each base mill has an area in which its base price is supreme and recognized as such by its competitors who do business therein. This contention is consistent with finding 6, which divides the respondents into four classes, one of which is other respondents [not named] have been mere followers. While perhaps this contention is valid theoretically, we think it is applicable to any pricing system and especially that which the Commission would impose. Certainly under any system each producer could determine the price at which its product was to be sold and such price would be supreme in its own territory, irrespective of what its competitors might do or think. We would think that in all forms of industry, particularly those of great magnitude, irrespective of the pricing system employed, that there would be found price leaders and price followers. We would suppose further that the leaders are those who occupy a commanding position, perhaps because of their size and strength, and that the followers would be those of less vitality. It may be a fact, we suspect that it is, that a price follower does not become such of his own free choice but that he is forced into such a position by a larger and perhaps dominating competitor. And it may also be a fact, again we suspect that it is, that in many instances those who are capable of exercising price leadership impose upon their less fortunate competitors. If such be the case, however, we do not see how this could create any inference of conspiracy or concerted action between the two groups, and neither do we see how it has any bearing upon the pricing system under attack. In fact, it has been held that one may follow the price leadership of another without imposing any restraint on competition. In United States v. International Harvester Co., 274 U.S. 693, 708, 47 S.Ct. 748, 754, 71 L.Ed. 1302, the court stated: And the fact that competitors may see proper, in the exercise of their own judgment, to follow the prices of another manufacturer, does not establish any suppression of competition or show any sinister domination. [Citing old Cement case.] In United States v. Standard Oil Co. of New Jersey, D.C., 47 F.2d 288, 316, the court stated: While it is not the subject of direct evidence, yet it is fairly inferable from the situation shown by the evidence that, if the major companies follow the Socony prices in this area, they do so because they do not wish to engage in a price-cutting war which might entail losses to all concerned (including Socony) without any compensating benefits. Such a view has no sinister aspect, but is merely a matter of business judgment and prudence illustrated in every community in the country by retail competitors in all lines. [Citing many cases, including the old Cement case.]