Crackdown

President Truman last month asked the steel industry to "wait and see" before raising prices. The industry waited nine days, then one by one the major companies boosted prices an average of $5 to $7 a ton (TIME, Aug. 4 et seq.). This week, the Federal Trade Commission, headed by Chairman Garland S. Ferguson, cracked back on the industry. FTC charged steel with conspiracy to fix prices.

FTC's formal complaint was aimed at the 26 major steel companies and the American Iron & Steel Institute, gave them until Sept. 19 to answer. In prospect was a "cease-and-desist" order by FTC to break up the industry's "basing point" system.

Point. The basing point system, charged FTC, results in identical price quotations at any given destination. The companies using it "have calculated their delivery charges on the fiction that each shipment is made from one of a limited number of common basing points cooperatively used and recognized among producer respondents."

The companies were accused of adding to their base prices--in lieu of actual freight, shipping and switching charges--an arbitrary amount, "automatically arrived at with mathematical precision" by a formula provided by the steel institute. Even though cheaper truck or water transportation might actually be used, the formula allegedly bases delivery prices on all-rail freight and assesses arbitrary "switching charges." The result, said FTC, is the same as if "all mills were under one ownership and control."

Counterpoint. Walter S. Tower, slight, sandy-haired president of the American Iron & Steel Institute, was left officially speechless by FTC's assault, declined all comment. His spokesman, however, predicted that most steel customers would rally to the industry's defense because the multiple basing point system, they say, saves them money.

Critics of the present system, under which there are basing points scattered through the land, have sought to replace it with an "F.O.B. mill" formula, whereby the customer would pay the actual freight charges. The industry contends the basing point setup is virtually F.O.B. mill. Steelmen were also quick to point out that they had been using the present system since 1924, when FTC outlawed the "Pittsburgh plus" system, which made Pittsburgh the basing point for the whole country. They suspected aloud that all the sudden hollering was just a political maneuver to take housewives' minds off high prices at the corner grocery.

FTC can order the system stopped. But if the industry chooses to disobey, the question will have to be fought out in the courts. So far, FTC's efforts to win similar cases in the courts have failed. The last precedent was a 1946 decision by the U.S. Circuit Court of Appeals in Chicago, which refused tp enforce an FTC order for the cement industry to abandon a similar multiple basing point system.

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