GOVERNMENT: Wolf by the Ears

I hold a wolf by the ears. Nor do I know by what means I can get rid of him, nor how I am to keep him.—Terence

Most U.S. industries last week had a price wolf by the ears. For the cement industry, a way to get rid of him seemed relatively plain. Bowing to a Federal Trade Commission order recently upheld by the Supreme Court (TIME, May 10), Universal Atlas Cement Co., largest cement maker in the U.S., last week grudgingly gave up its basing-point system of pricing. The company called the order “economically unsound and wrong,” but it announced that it would sell henceforth at prices f.o.b. its plants; freight costs would be applied to the buyer’s bill. Smaller cement companies promptly followed suit.

Universal Atlas is a subsidiary of U.S. Steel, so some steelmen thought that the parent might soon give the cue to abandon basing points in steel and many another industry. But short of more specific orders from FTC, the decision would come hard. To many industrialists it seemed that dropping the basing-points system—and using the alternative of discounts to meet competition—could cause as much trouble as holding on to them. The dilemma had been neatly, if inadvertently, pointed up by the Supreme Court itself.

Under the basing-point system, the important fact was that cement delivered to any given job was sold at a uniform price, no matter who manufactured it. To the court this was collusion, and a wicked practice that must be stopped forthwith. However sound the decision, it did not make things crystal clear. Just a week later, in another Big Business case, the Court upheld an FTC order which seemed to make the appearance of collusion inescapable.

To hang on to its biggest customers, Morton Salt Co. had been giving extraordinarily large trade discounts. Unconvinced that this had any relation to real savings in Morton’s costs, FTC had charged that the discounts were unfair to smaller buyers. The Supreme Court in effect had ordered Morton Salt to stick to a uniform price list for big & small alike. Reasoned one businessman: “If everyone does stick to his price list and the price lists gravitate to a common level, as they will be compelled to do under the economic law of uniform price, then, according to the Supreme Court, the sellers can be found guilty of collusion.” If he breaks from his price list, he is guilty of an unfair trade practice. Groaned another: “Let Congress step in and spell out what the law really means. Any legislation, however radical, is better than the uncertainty.”