Authority to price pursuant to this section ends at the close of the fiscal year or sooner, if the firm has achieved its maximum profit margin allowed or approaches it within .01% at an annual rate. Section 150.202 provides relief to firms with a loss or low base period profit margin. It allows a firm to calculate and use as its base period profit margin a minimum profit margin. Calculations of the minimum profit margin allowed is similar to the calculations made for the loss and low profit rule. However, the firm must use financial data from its two best base period years in making these calculations. The adjustment to base period profit margin that is provided in this section was included in the proposed low profit rules. It has been placed in a separate section for purposes of clarification.

Section 150.203 is amended to make clear that a person may price pursuant to the seasonality rule without prenotifying price increases pursuant to the provisions of subpart H. The special rules for marketing cooperatives and purchasing cooperatives have not been changed from the proposed rules.

SUBPART K—RETAILERS AND
WHOLESALERS

Subpart K sets forth rules applicable to retailing and wholesaling activities. These regulations contain several changes, some of them substantive and others merely editorial in nature, from the proposed regulations published by the Cost of Living Council on July 18, 1973.

Section 150.301 has been amended by deleting as surplusage the reference to subpart L and by deleting proposed paragraph (b) to avoid any suggestion that no other provision in Part 150 applies to retailers or wholesalers.

Proposed § 150.302 has been deleted. Regulations pertaining to the retailing or wholesaling of meat and other food products will be issued by the Council at a later date.

The definitions section has been renumbered as § 150.302 and contains a new term, "adjusted freeze price" which is defined in § 140.2. In addition for an item sold in a catalogue, the adjusted freeze price is the price specified in a catalogue printed prior to July 18, 1973. The definitions of "customer category" and "merchandise category" have been merged into the one term "category." The definition of "pricing entity" has been amended to

clarify the intent of the Council that the appropriate pricing entity is the lowest level of organization at which the initial pricing decisions are made, regardless of whether these decisions may later be modified at a lower organizational level with the firm.

The major substantive change in this subpart is the inclusion of customary initial percentage markups (CIPMs) as a means of control. The Council received numerous comments suggesting that the CIPM method be allowed, in addition to the gross margin method, because so many firms traditionally use the former system. Accordingly, this subpart has been amended, where appropriate, to pertain to CIPMs as well as gross margins.

The new § 150.303 sets out the methods to be used in computing CIPMs and gross margins. The formulae are self-explanatory.

The general rule of § 150.304 has been amended in several respects. First, it has been changed to provide that no price may be increased above the adjusted freeze price (rather than above the base price, as provided in the proposed rules) until, in the case of a Tier I or Tier II firm, the retailer or wholesaler has submitted the merchandise pricing plan or, in the case of a Tier III firm, it has completed its merchandise pricing plan.

The second change contained in this section, as discussed above, is the inclusion of CIPMs as an acceptable control mechanism under this subpart. Whether a retailer or wholesaler chooses to be controlled by either the CIPM system or the gross margin system, he must still exercise control on a category basis. However, the provisions of this subpart do not require a retailer or wholesaler who has traditionally priced his goods on an item-byitem basis to change that practice. He may continue to price in that manner, but his compliance with this subpart will be controlled on the basis categories in accordance with the rules set forth herein.

In sum, the general rule now provides that a retailer or wholesaler must control his prices so that for any fiscal quarter his CIPM or gross margin for each category does not exceed the higher of (1) his CIPM or gross margin for each category during the same quarter of the base period or (2) his base period CIPM or gross margin. Further, his CIPM or gross margin for any fiscal year may not exceed his base period CIPM or gross margin. Also, the firm may not exceed, during any year, its base period profit margin.

A new provision has been added to the general rule stating that if a retailer or wholesaler does not increase the price for any item within a category above the adjusted freeze price, the CIPM or gross margin limitations for that category does not apply.

Finally, a new provision has been added to the general rule which makes clear that the retailer or wholesaler of both food products and non-food products remains subject to the requirements of subpart M of Part 130 or subpart I of Part 140, with respect to the sale of the food products.

The rules for the establishment of categories are now contained in § 150.305. This section is very similar to the corresponding section in the proposed rules. A change has been made in paragraph (b) to clarify the Council's intent that if, because of a retailer's or wholesaler's normal accounting and management practices, it could not group its items into the categories listed in Appendix A, it may form merchandise categories of all related items sold within the same general description and include those categories in its merchandise pricing plan. A sentence has been added to paragraph (d) of this section setting forth the rule for computing CIPM's or gross margins for manufacturing or service activities. In the case of manufacturing activities, CIPM's or gross margins shall be computed on the basis of direct material costs, and in the case of service activities they shall be computed on the basis of direct material and labor costs.

Section 150.306 specifies what must be put into a merchandise pricing plan for price category I and price category II firms. This section, too, is very similar to the corresponding section in the proposed rules, with the added recognition of CIPM's as an allowable basis for control. Paragraph (a) (4) has been amended to make clear that a retailer or wholesaler selling many different products need not include a list of all of those products in its merchandise pricing plan, but rather may list them by product line.

A new § 150.307 has been added pertaining to the merchandising pricing plans of firms selling both food and non-food products. As stated above, this subpart does not apply to the retailing or wholesaling of food products subject to subpart M of Part 130 or subpart I of Part 140. Therefore, to the extent possible a retailer's or wholesaler's categories should not include meat or other food products, but rather should be limited to non-food items. If,

however, because of the firm's customary pricing practices, it is impossible to separate the food and non-food items, the food products may be included in the firm's merchandise pricing plan. However, notwithstanding their inclusion in a merchandise pricing plan, food products remain subject to the pricing rules of subpart M of Part 130 or subpart I of Part 140.

Section 150.308 pertaining to incomplete and nonconforming plans has been modified in two ways. The corresponding proposed regulations implied that immediately upon receipt of notification by the Council that a firm's merchandising pricing plan is not acceptable a firm could no longer increase any prices. This provision has been clarified to state that the Council shall determine on a case-by-case basis whether a retailer or wholesaler shall be prohibited from making price increases pending the submission of an acceptable merchandise plan, and shall notify the firm of its determination.

Paragraph (b) of this section allows the Council, in certain situations, to order a reduction of prices to adjusted freeze prices (rather than to base prices as stated in the proposed regulations).

Proposed regulation 150.308 has been renumbered 150.309 and retitled. As proposed, this section provided that once a firm's merchandise pricing plan has been approved by the Council, the firm must use the specified CIPMs or gross margins in controlling its prices and in filing the reports required by the Council. As restated, this section provides that the firm must begin controlling its prices according to the plan as soon as it is submitted.

Proposed regulation 150.309 has been renumbered 150.310. This section is substantively the same as the proposed section, with the appropriate amendment to reflect the use of CIPMs.

Section 150.311 contains the reporting requirements and is different from the proposed regulation. Under this section, quarterly reports for price category I and price category II firms must be filed within 45 days after the end of each fiscal quarter and the year-end report must be filed within 90 days after the end of each fiscal year. The annual reporting requirement for price category III firms has been deleted.

Section 150.312 is a new provision. This section addresses three problems that may be experienced by retailers and wholesalers in complying with the

provisions of this subpart. The first problem is one which may arise if a firm is unable to exclude exempt items from its merchandise categories. In such a case, if a retailer or wholesaler exceeds his allowable CIPMs or gross margins for a category, the Council shall excuse the overage to the extent that the firm can demonstrate that the overage is attributable to the sale of exempt items. The second problem involves prices specified in contracts entered into prior to 9:00 p.m., e.s.t., June 13, 1973, under which performance occurs after August 12, 1973 and before January 1, 1973. This section provides that to the extent that a retailer or wholesaler can demonstrate that an overage in his allowable CIPMs or gross margins is attributable to the charging of such prices, the Council will excuse that overage. The third problem is one created by temporary unforeseen changes in product mix. In this case, the Council may take into account such temporary unforeseen changes in product mix in determining whether a retailer or wholesaler is in violation of the limitations prescribed in § 150.304 (c) (1) or (2).

Finally, § 150.313 provides for the repurification of quarterly violations. A new paragraph has been added providing for the repurification of fiscal year and fourth quarter violations. This section has also been modified to reflect CIPMs in addition to gross margins.

SUBPART P-MASS TRANSPORTATION

SYSTEMS

Subpart P has not been changed from the version found in the Notice of Proposed Rulemaking except for minor technical changes.

In consideration of the foregoing, Part 150 of Title 6 of the Code of Federal Regulations is amended as set forth below, effective August 13, 1973.

(Economic Stabilization Act of 1970, as amended, Pub. L. 92-210, 85 Stat. 743; Pub. L. 9328, 87 Stat. 27; E.O. 11695, 38 F.R. 1473, E.O. 11730, 38 F.R. 19345, Cost of Living Council Order No. 14, 38 F.R. 1489)

Issued in Washington, D.C. on August 6, 1973.

JOHN T. DUNLOP,

Director, Cost of Living Council.

(a) Except as provided in paragraph (b) of this section and in § 150.2 of this subpart, this part supersedes the price rules in Parts 130 and 140 of this chapter, effective 11:59 p.m. e.s.t. August 12, 1973.

(b) The price rules of Part 130 of this chapter remain effective until 11:59 p.m. e.s.t. September 12, 1973, with respect to sales of food subject to Subpart F of that part and with respect to sales of meat subject to Subpart M of that part. Part 140 of this chapter also remains effective with respect to sales of food and meat subject to Subpart I of that part until 11:59 p.m., e.s.t., September 12,

1973.

(c) Any report required to be filed with the Council under Part 130 or any rule, order or regulation of the Council in effect on August 12, 1973 for any reporting period which ended on or before that date and which was not filed by that date, shall be filed with the Council in the form and within the time in which it would have been filed pursuant to Part 130 of this chapter. Forms required to be completed and placed among the records of a firm on a quarterly basis pursuant to Part 130 for any quarter which ended prior to August 13, 1973, shall be completed and filed among the firm's records in the form and within the time in which it would have been required to be so filed pursuant to Part 130 of this chapter.

(d) Price renegotiation provisions in price or rent contracts, which depend for their operation

upon the modification or termination of the Economic Stabilization Program, were previously declared to be inoperative as unreasonably inconsistent with the goals of the Economic Stabilization Program. Such renegotiation provisions continue to be inoperative on the same ground. This part shall not operate to permit :

(1) A retroactive increase in prices or rents for goods or services sold or leased while those prices or rents were subject to past or present provisions of this title, or

(2) A prospective increase in prices or rents under the terms of a contract subject to a decision and order issued at any time pursuant to this title, except to the extent consistent with such decision and order.

(e) This part does not apply to economic transactions which are not prices within the meaning of the Act. Examples of transactions not within the meaning of the Act are:

(1) State or local income, sales and real estate taxes;

(2) Workmen's compensation payments; (3) Welfare payments;

(4) Child support payments; and

(5) Alimony payments.

(f) The Council may permit any exceptions, exemptions or reclassification that it considers appropriate with respect to the requirements prescribed in this part. Requests for exceptions or exemptions from the requirements of this part shall be submitted in accordance with the provisions of Part 105 of this chapter.

(g) This part applies to:

(1) Economic units and transactions in the several States and the District of Columbia; and

(2) Sales of goods and services by firms in the several States and the District of Columbia to firms in the Commonwealth of Puerto Rico.

§ 150.2 Procedures and remedies applicable to certain Phase II and Phase III matters. (a) Paragraphs (a) and (b) of § 130.7 of this chapter remain effective with respect to Phase II matters.

(b) The procedures and remedies under Part 130 of this chapter remain in effect with respect to all matters which were subject to that part before August 13, 1973, and with respect to all matters referred to in § 150.1 (c) of this chapter.

(c) The procedures and remedies specified in Subparts E through H of Part 140 of this chapter