Price-Raising War

Of each customer's dollar plunked down on grocery counters for potatoes, farmers get 47-c-, for apples 33-c-, for dairy products 46-c-, for corn flakes 20-c-, for soda crackers 8-c-. Of each dollar spent for food a quarter of a century ago, the farmer received 52 to 60-c-; in recent years his share seldom has exceeded 41-c-.

To the trustbusting eye of the Justice Department's Thurman Arnold, this spread between farm and shop prices has looked wide enough to drive a good big Sherman Act investigation into. Last week, Arnold served notice on the food industry that the investigation was under way. First up for scrutiny were 18 "situations," ranging from fruits to fish. Sample complaints: that in some places bakers' associations kept prices a cent a loaf too high; that packers in one city upped prices an average of 5-c- a pound by fixing slaughtering quotas.

Recalling that Arnold's first big, nationwide investigation into living costs (housing) resulted in 99 indictments against 1,538 defendants, the Justice Department termed the foodstuffs probe "a logical successor . . . because next to rent food is the largest item of consumer expenditures." Placed in charge by Arnold was the same man who ran the housing investigation -- able, publicity-shy young Corwin D. Edwards. As usual, Economist Edwards refused to talk about his job, just got down to work.

By coincidence or design, the Edwards investigation came at a time when many a merchant yearned restlessly for higher price tags. Meat prices were boosted in September. Grocers and other retailers, watching the defense boom, talked about the necessity of keeping prices down, thought about the possibility of putting them up. Three weeks ago, in Colorado, they put them up.

Like 23 other States, Colorado has an Unfair Practices Law. Passed in 1937, it prohibits merchants from selling goods at less than cost. The Colorado Food Distributors' Association, formed at a mass meeting of Denver grocers to enforce it, has for two years defined "cost" as wholesale price plus 9% for overhead.

Three weeks ago, 250 members of the association met in the auditorium of Denver's Conoco (Continental Oil) Building, decided that 9% was too low. On a show of hands, only a few grocers confessed to operating costs of less than 14%, none to less than 12%. The minimum markup under the Unfair Practices Law was upped promptly to 12%, plus 2% for grocers with their own wholesale warehouses.

Up with the percentage jumped T. W. Henritze, divisional manager for potent Safeway Stores, Inc., second largest U. S. chain. Reading from a bristling statement he had prepared for just such a situation, Henritze gave his fellow members something to think about: "Safeway is emphatically against any increase in this markup. A higher markup goes beyond the sound purposes of the law and represents an attempt to use the law as an instrument to fix prices. . . . The Department of Justice already has issued warnings against combinations under any guise whatever taking advantage of the war crisis to raise prices to consumers. . . . Safeway is forced to resign." With that he left the hall, ignoring shouts that he stay to answer questions.

No publicity stunt, Safeway's refusal to go along on the increased markup was in line with a basic policy laid down by its industrious. 130-lb. president, Lingan Alan Warren. "When you get wide spreads you are vulnerable," Warren once said. "That is why Safeway does not believe in making too much profit on any one thing." It was also, as events turned out, insurance that Safeway need feel no qualms when Thurman Arnold's men get to Colorado.

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