Producer to Purchaser

For 24 years the Federal Trade Commission poked and jabbed at heavy industry's . basing-point system ,of pricing. Under that system, producers absorbed enough freight costs to "meet competition" in areas distant from their mills, added "phantom freight" costs on some short-haul sales. Thus they got to identical prices at any given destination. Last April, the Supreme Court upheld FTC's charge that such identical prices added up to trustlike collusion. The court ordered the defendants in the case, the cement industry, to drop the basing-point system. The order went into effect last week.

The industry was feeling no pain: with cementmakers now selling f.o.b. at their mills, the savings on freight absorption meant increased earnings. Consumers were in a different boat: with airfreight costs now added to their bills, buyers suddenly found the delivered price of cement boosted as much as 25%, depending on the distance from producer to purchaser.

Strategic Surrender. Then U.S. Steel Corp. made a surprise announcement: with "no recourse other than to comply," it too would switch to an f.o.b. system. Bethlehem Steel Corp., Wheeling Steel Corp., and Youngstown Sheet & Tube Co. promptly followed suit, signaling an industry-wide changeover.

Some steel distributors, without waiting to hear what the new costs would be, immediately upped their warehouse prices 5% to 10%, Some users expected eventually to be paying--and passing on--as much as 20% more, for steel.

Big Steel's statement about "no recourse" to the contrary, the only pressure to do away with the basing-point system in the steel business was strictly internal. FTC's case against steel was not due to come up for months, and probably could have been kept from final decision for years. But if they had to give in some time, steelmen figured, the''best possible time was during the present sellers' market. In addition to boosting current profit, the switch to an f.o.b. price system would bring pressure on Congress, from thousands of high-paying steel users, to authorize a return to basing points.

The effects of this strategy would be widespread. FTC says that there are 191,907 companies which use basing points. As industry's bellwether, Big Steel had set a pattern which thousands would follow. As a result, U.S. consumers might soon have to pay more for a whole lot of things --for furniture, oil, machinery, paper and hundreds of other items.

Consumer Endurance. It was a tough week all around for consumers. To pay for the new wage gains of John L. Lewis & Co., soft coal mines boosted their prices 4-c- to 50-c- a ton (retail equivalent: up to $1.25 a ton). Though hard coal producers had raised prices only a month ago to cover higher wages, one of the biggest of them, Lehigh Navigation Coal Co., Inc., raised the ante again, by as much as $1.10 a ton. A few hours after the rail-wage fight was settled (see NATIONAL AFFAIRS), the Interstate Commerce Commission gave 61 Eastern railroads permission to boost passenger fares an average of 17% (a total of about $61,000,000 a year). By passengers' standards, it meant that coach travel was now as expensive (3-c- a mile) as Pullman travel was before the war.

Following' the lead of U.S. Rubber, eight other tire producers upped prices 4 1/2% to 7 1/2%. Kaiser-Frazer Corp. became the seventh automaker in six weeks to announce new price increases, ranging from $23 to $169 a car.

Evidence that few companies would be able to resist the general trend came from the Government-controlled North American Rayon and American Bemberg Corps. After arguing for months that the companies' prices .were already too high, the Office of Alien Property was finally won over by minority stockholders, agreed to let management charge 10% more.

Would U.S. buyers continue to foot the bills? With employment at an all-time peak, most sellers thought they would. But in the entertainment and resort businesses, which are usually the first to feel price resistance, there were contrary signs. In Chicago last week, row upon row of empty seats forced Balaban & Katz to slash some prices almost 50% in its six Loop moviehouses. The Cape Cod Chamber of Commerce complained that many visitors were so intent on cutting expenses that they slept in their cars overnight.

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