Downtown

P: A year ago last March Congress ordered the Federal Communications Commission to look into American Telephone & Telegraph Co., largely because it never had been investigated before. An original $750,000 appropriation became $1,150,000, and FCC investigators began to find out all there was to know about the monopolistic Bell System. One thing they found out was that over a 22-year period A. T. & T. had earned 10.9% on its long-distance business. Last January A. T. & T. "voluntarily" reduced rates on night and Sunday long-distance calls, knocked $4,000,000 off the U. S. telephone subscribers' annual bill. In September a reduction of rates on calls of more than 234 miles resulted in additional savings of $6,000,000. Last week, just before the FCC hearing was due to resume, the third reduction within a year was announced with savings of another $12,000,000. FCCommissioner Paul A. Walker said he thought the Congressional appropriation had been a "good investment," prepared to ask the new Congress for more funds, so that the investigation can be continued into next year.

P: Down cracked the Federal Trade Commission last week with a complaint against virtually the entire U. S. automobile industry for "false and misleading representation." What the Commission objected to was the so-called "6% plan" for instalment buying. The Commission named four finance companies--General Motors Acceptance Corp., Commercial Credit Co., Universal Credit Corp., Commercial Investment Trust Corp.--in its complaint.

As many a disillusioned automobile buyer has learned by now, the 6% interest rate on instalment purchases has no relation whatever to the actual interest cost. It is simply an advertising slogan. To the unpaid balance on a car is added the cost of insurance, the total being multiplied by .06 to find the premium paid for the privilege of buying on the instalment plan. Since the debt is paid off in regular instalments, the borrower has the use of only about one-half of the original loan if the monthly debit balances are averaged. Thus the true interest cost in the "6% plan" is approximately 12%.

P: Banned by the Robinson-Patman Antiprice Discrimination Act is the old practice of charging a big customer less than a little customer unless the difference can be justified by actual savings on volume business. Everyone agrees that it is cheaper to handle a few large orders than many small ones but in a mixed business it is almost impossible to determine precisely what the saving is. To circumvent this legal and accounting problem U. S. Rubber Co. last week announced a novel method of meeting the Robinson-Patman Act. After the turn of the year a new subsidiary called U. S. Tire Dealers Mutual Co. will purchase tires from the parent company on an equal footing with big buyers like motor-makers and mail-order houses. Mutual will handle all distribution, passing on the profits, if any, to its dealers. Thus while the dealers will still have to pay more for their tires than volume customers, the difference will be exactly equal to the extra cost of selling in small quantities. U. S. Rubber will then look solely to a manufacturing profit.

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