PRICES: OPA Victim No. 1

Having had a week to digest it, the U.S. knew what was wrong with the new overall price ceiling (TIME, May 4). It would not work unless it were reinforced by the rest of the President’s seven point anti-inflation program, especially farm price control, wage control, and the mopping up (by taxes and war bonds) of excess consumer purchasing power. And OPA last week estimated the excess purchasing power at $17,000,000,000.

Until these are put in effect, OPA’s blanket ceiling (effective next week) would be a frost. But with or without them, it was sure to be a terrific pain in the neck to 1,800,000 retailers scattered throughout the U.S.

Coverage. Scarcely a retailer but had to worry about some parts of the General Maximum Price Regulation.* It applied to almost every article sold. Listed by name were some 170 “cost-of-living commodities’ so strategic that stores are required to post their ceilings not only with OPA but also where their customers can see the figures.

But the Regulation’s full breadth was definable only by listing the things it did not control: farm products, books, magazines, movies, etc., collectors’ items and precious articles, securities, raw naval stores, restaurant meals, insurance, advertising, utilities and a few other services. The selling price of everything else was frozen at the highest levels for each individual supplier during the month of March. Penalties for noncompliance: up to a year in jail and $5,000 (plus liability for triple damages), suspension for a year of the license to do business that OPA’s Regulation automatically grants to all sellers.

Leon Henderson made it clear that he did not consider the March price structure ideal. He promised that he would realign prices at different selling levels when and as “gross inequities” showed up. Some were so immediately obvious that supplementary OPA orders were already being readied.* But OPA made its over-all ceiling policy clear: retail prices are not to be changed; the changes will come at the wholesale or manufacturing level. If necessary, subsidies will be used, as they have been in Britain (to the tune of £125,000,000 a year) and in Canada. “But the ceiling,” said OPA firmly, “will not be punctured.”

The Retailer, therefore, bears the brunt of the whole price-control program. With few exceptions, U.S. retailers were having the horrors last week. Worst blow was that OPA had denied their plea for a “rollback” of ceiling dates that would recognize the lag between rising wholesale and retail prices. Since retail prices in recent months have been rising more sharply than wholesale prices, the lag between them was smaller in March than it had been earlier (when wholesale prices were rising very fast). But retailers maintained that their price level was still some 10% behind their suppliers’.

The National Association of Retail Grocers called this squeeze “disastrous,” predicted wholesale bankruptcies unless OPA could iron out their problems in a hurry. Other retailers put a finger on the saddest inequity of all: the failure to provide a wholesale rollback is hardest on the patriotic merchant who tried to keep the lid on his prices (by averaging his costs), while the one who jumped his prices as fast as his costs rose is rewarded. National Retail Dry Goods Association’s General Manager Lew Hahn gulped down his disappointment, promised that his 6,000 members “will do their best.” But Lew Hahn and his colleagues foresaw plenty of other horrors too:

> Every seller must keep voluminous records on prices charged for all commodities, on allowances, discounts, etc., not only for OPA itself but for carping customers. This is an expensive nuisance to large retailers. But to the hundreds of thousands of small grocers, general merchants, etc., who keep records in an aboriginal way if at all, the clerical problem is almost hopeless. Lew Hahn thought that a lot of small fry would be put out of business if the recording provisions were strictly enforced.

> OPA gave no inkling of how it would police ceiling evasion through lowered quality. Difficult to detect, this practice can increase consumers’ cost of living just as surely as the actual increase of prices.

> No provision is made for price adjustments in case unit volume falls off so sharply as to eliminate profits. This problem—like most of the rest of the order—hits low-price manufacturers and distributors hardest of all, may well mean that some narrow-margin merchandise will disappear from the market.

> The physical job of policing the order and of correcting inequities is so enormous that many victimized retailers may go under before OPA can get around to their rescue. Leon Henderson last week gave this migraine to an ex-Harvard professor of government, Merle Fainsod, who heads OPA’s new Retail Trade & Services Division. There was serious trade talk of an ultimate need for no less than 300,000 OPA policemen. Long before that number are hired, Professor Fainsod will find himself smack up against Paul McNutt’s manpower mobilization problem.

For lack of shipping space, F.W. Woolworth has been unable to make any deliveries to its Cuban stores for threee months.

* Least disturbed retail group: druggists who are already operatingunder price control via local fair-trade laws which in New York apply to some 75%of all drug items.

* Two adjustments due almost immediately: 1) a definition of how to price seasonal merchandise like women’s summer and fall clothing, which is not comparable to anything soldin march: 2) a similar decision on men’s clothing for fall, where the wool shortage and recent wageincreases pose special problems. Probable solution: allowing a normal markup.