The Cost of Living Council has published in the Federal Register final
general price regulations for Phase IV of the Economic Stabilization
Program. The regulations go into effect at 11:59 P.M. (E.S.T.) on
August 12, 1973.

The regulations issued today cover all sectors of the economy governed by
the price controls program except food, petroleum, insurance, construction
and health. Phase IV construction regulations were issued on July 19.
Regulations for insurance and petroleum will be issued later this week.
Phase IV Stage B regulations for food which will go into effect on
September 12 will be issued for comment during the week of August 13.
Phase III Mandatory Health regulations were reinstituted on July 19.
Modified health regulations will be developed and issued later this year
after extensive consultations have been held by the newly appointed Health
Advisory Committee.

Director John T. Dunlop noted that the final regulations incorporate many of the suggestions submitted in the approximately 700 comments on the proposed regulations received by July 31. "The Council is appreciative of the time and thought that businessmen, consumers, economists, accountants, and attorneys invested in the valuable comments we have received," he said. "Generally, most comments were aimed at improving the regulatory mechanism rather than at contesting the underlving principles of the controls."

A summary of the major changes made in the proposed regulations, resulting from comments received, are as follows:

I. PRENOTIFICATION AND REPORTING

1. Price increases up to the adjusted freeze price or base price for an item, whichever is higher, need not be prenotified; prices above that level must be prenotified by firms over $100 million.

2. The current cost period for prenotification is the most recently completed 30-day accounting period instead of the previous quarter.

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3. A firm may compute input costs at the rate incurred on the date the prenotification form is signed. Other current period costs for reporting purposes are to be computed for the last accounting month in the current fiscal quarter.

4. Prenotification of prices for new products is not required but data on new products must be included in quarterly reports when the firm projects more than $10 million in new product sales.

5. The maximum price which may be charged for any one item in a product line after prenotification is 110% of the base price or 110% of the adjusted freeze price of that item (whichever is greater) plus the percentage of cost justification with respect to the product line times the base price or adjusted freeze price, whichever is higher.

6. The 30-day prenotification "clock" starts when the application is stamped with the time of receipt.

7. Anticipated costs may not be included in a prenotification request. 8. "Certificates of no price increase" are allowed on an entity level in lieu of quarterly reports for firms that have not increased any prices. 9. Category III firms (annual revenues below $50 million) need not file annual reports.

II. COSTS AND PRICES

1. A new "adjusted freeze price" has been added which generally allows prices permitted under Phase III and freeze rules to remain.

2. The base price of an item may be determind by means of a statistically valid sampling technique.

3. Temporary special deals (not more than 31 days in duration) may be excluded from base price calculations.

4. Contracts entered into prior to June 13 may be honored according to their terms. Contracts entered into after June 12 are subject to Phase IV rules except that price increase need not be prenotified under these contracts with respect to performance occurring prior to October 12, 1973.

1. The Phase IV profit margin limitation will not apply to a firm which does not increase any price above its base prices or adjusted freeze prices.

2. The profit margin limitation applies to firms with partially exempt sales in the following manner: (1) If a firm has 90-percent of its sales in exempt products and the non-exempt 10-percent is less than $50 million, it is exempt from profit margin limitations and quarterly reporting; (2) If a firm has both exempt and non-exempt activities it is subject to the profit margin limitations, but a profit margin overage will be excused if the firm can demonstrate that the overage is attributable to the sale of exempt items.

3. Firms must restate base and current period financial data to reflect acquisitions and divestitures as they are defined by the Securities and Exchange Commission for its 10-K and 10-Q reports. IV. RETAIL AND WHOLESALE

1.

Firms may elect to control prices on the basis of customary initial percentage markups on a category basis as well as on a gross margin basis.

2. The base period has been expanded to include a choice of either the last fiscal year ending before February 5, 1973 or the last four consecutive fiscal quarters ending before that date.

3. Catalog prices published prior to July 18 are allowable prices. 4. Firms may substitute their more customary mechandise categories for those specified in the proposed regulations.

1. Volume offsets are no longer required.

2. Certified Public Accountants are no longer required to certify prenotifications and reports.