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RADIATION PROTECTION

7. The Effect of OPA's Pricing Standards on Administration, Public Acceptance, and Judicial Review

A thorough evaluation of the contribution made by OPA's pricing standards to the task of wartime price control would have to be directed to each level in the hierarchy of standards. It would be necessary to consider whether the particular pricing standards that the Congress, the President, the Economic Stabilization Director, and the Price Administrator developed in the discharge of their respective functions were the "right" standards. From the standpoints of economic effect, of administrability, and of public and judicial acceptance, were they the most effective standards that could have been devised, and, if not, what standards would have been preferable to them? When, however, the inquiry reached the level of the Price Administrator, another question might also be raised: Did experience indicate that the Administrator had been wise in utilizing broad administrative pricing standards at all? Would he not have done better to have proceeded as nearly on an ad hoc basis as the statutory standards and the requirement of statements of considerations would permit?

Obviously, this introductory chapter provides no occasion to appraise the substantive merits of OPA's pricing standards, but it may be appropriate to direct some comments to the question stated above. That question is difficult to answer or even to discuss in isolation from an appraisal of the substantive merits of the standards used. How

13 These opinions were not published but were kept on file in the office of the secretary of the agency where they were available for public inspection.

ever, there are some considerations which, if noted now, may aid the reader in forming his own conclusions as he follows the treatment of the particular standards in the succeeding chapters. These considerations relate to the effect of the pricing standards upon administration, upon relations with industry and with Congress, and upon judicial review of the maximum price regulations and orders issued under them.

The Effect of Pricing Standards on Internal Administration

From the standpoint of internal administration, the great affirmative contribution made by the pricing standards was the simplification of the issues that subordinate officials had to decide. Ordinarily a price executive in charge of one of the twenty-odd commodity branches in the Price Department had to deal directly with the representatives of as many as twenty or thirty industries, occasionally more. Every one of these industries had its peculiar pricing problems. If for each industry the price executive had been free to examine all the conceivable solutions to its problems, and to select the one he found most suitable for it, then he and his branch would soon have been bogged down in a mire of argument, proposal, and counterproposal. Moreover, to avoid gross discrimination, the tests which he developed in his branch to govern increases in price ceilings would have had to be sent up the chain of command for clearance. This would have meant the loss of time and the likelihood of bottlenecks at higher levels. Moreover, these delays would have been aggravated by the difficulty of devising appropriate statistical and accounting techniques to elicit the data that each of the various tests might require. Pressure would have mounted to substitute guesswork for facts, and, almost invariably, experience showed, guesses erred on the side of high prices.

Administrative standards to govern price increases gave to the price executive a more manageable job. His task was to apply the tests called for by the standards. If an industry claimed to be in over-all hardship, an accounting study of the current and base period earnings of the entire industry or a representative sample was indicated. If the ceilings of a particular product line were the target of complaint, a cost study could be set up for it. There remained, to be sure, issues aplenty for the price executive to resolve-issues that called for good judgment, firmness, and tact-but the frame of reference within which the questions arose was set by the applicable pricing standards.

Against these gains must be set off the fact that the pricing standards sometimes created hard cases. One reason the standards were relatively simple of application was that they excluded many facts from consideration. Sometimes these excluded facts were of consequence. and, but for the existence of the standard, might have been given controlling weight. To disregard them occasionally meant a degree

of hardship, now and then a diseconomy. The Deputy Administrator for Price and the division directors spent much time and thought in the handling of the hard cases that the price executives brought to them for consideration. Some modifications were made in the standards to avoid such cases, but, by and large, the line set by the standards had to be firmly held or the principal value of having standards would have been lost.

Effect of Standards on Industry and Congressional Relations

Pricing standards served somewhat the same function in OPA's relations with industry and with the Congress as they did within the organization. Each industry tended to look at its own case as setting a distinctive problem. Usually the members of an industry came to Washington with little appreciation of the implications that the request they were urging had for price control as a whole. They observed as a rule that the particular price increases they sought would not in themselves cause any considerable rise in the cost of living; indeed, they could often show that there would be no direct effect whatever on the cost of living. Not unnaturally, moreover, the businessmen were inclined to approach the problem of setting ceiling prices in the familiar terms of a bargaining process, and it was necessary for OPA to establish that even an emergency agency of the Government could not operate on that basis.

Probably no method which the agency could have devised could have been more effective in minimizing these difficulties than the adoption and use of general pricing standards. When the price executive could point to a standard that applied not simply to the particular industry or group of industries with which he was dealing, but to all or a wide segment of American industry, the businessmen became aware of the scope and character of his basic problem, and they also came to realize that, though the standard might appear stringent, at least it was applied even-handedly. The focus of debate was shifted away from the special circumstances of the particular industry to the adequacy of the pricing standard-in other words, to the job of price control.

The attitude of the Senator or Representative was, in many cases, not unlike that of his business constituents except that he had a better perspective and usually could more quickly see the broader implications of the industry's request. Moreover, quite a few members of Congress achieved a considerable knowledge of OPA standards, and so they did not continue to approach the agency's position simply in terms of the particular case. Finally, the Congress as a whole came to recognize that it could not revise price control by piecemeal amendment and that the substitution of new pricing standards for those already in use was an exceedingly difficult business. This consideration was an important factor in preserving the standards of the price control laws from drastic amendment until the summer of 1946.

The Effect of Pricing Standards on Judicial Review

As has been noted, the development of pricing standards by the Administrator was carried beyond the bounds of legal compulsion as a matter of administrative judgment. Nevertheless, in retrospect, it appears clear that this policy did much to fortify OPA's legal position and to simplify its task in defending particular regulations against attack in the courts.

If the Administrator had sought to determine each claim for an increase in price ceiling on as narrow a base as was legally permissible, then nearly every case in which an aggrieved industry protested OPA's determination would have represented a distinct legal problem. If the Administrator had been successful in the Emergency Court of Appeals in defeating an attack by one industry, the court's decision would have had little value as a precedent in cases involving other industries. Naturally, such a situation would have encouraged protests and litigation.

When, instead, the Administrator rested his refusal to increase an industry's ceilings squarely on the proposition that the pricing standards adopted by him did not justify those increases, then the issue before the Emergency Court was whether those administrative pricing standards properly implemented the pricing standards laid down by Congress in the statutes. If the court were to decide that issue in OPA's favor in one case, then its decision would validate OPA's administrative standards for all cases falling fairly within the standards thus approved. Thereafter it would be evident that nothing was to be gained by attacking the denial of a price increase when the denial was predicated on valid pricing standards, properly applied.

Just such a decision was reached by the Emergency Court in Gillespie-Rogers-Platt Co. v. Bowles, decided on August 24, 1944.14 In that crucial case, the court expressly upheld both the industry earnings and the minimum product standards and thus laid a firm base for pricing operations based on those standards. After concluding that their use by the Administrator was "a reasonable exercise of the discretion conferred upon him in the administration of the act," the court added: "It follows that the present complainants * * * had the burden of showing the facts from which the Administrator in the light of the industry earnings and product standards could find that these prices [maximum prices of bleached shellac] had ceased to conform to the statutory standards." 15

The validation of standards by the court carried with it the burden of adherence to them unless a clear showing could be made that a departure in a particular situation was consistent with their general

14 144 F. (2d) 361 (1944).

15 Id. at 367.

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application, and the court had on one occasion to overrule the Administrator for failing to abide by his own general pricing standards. In the pricing of meat products, the Administrator claimed that accounting difficulties made it impracticable to apply the minimum product standard to determine the adequacy of ceilings for particular cuts or even for all the products of a given species of livestock. The court rejected this view and in effect directed the Administrator to apply the product standard on a species basis.17

The same industry furnished another example of the same principle, applied in this instance, however, to a pricing standard contained in an adjustment provision. Early in the history of price control, a regulation—Supplementary Order No. 9—had been issued authorizing individual applicants to secure adjustments of ceilings in any case in which the applicant could show that his ceiling impeded or threatened to impede production of a commodity which was essential to the war program and which was or would be the subject of a Government contract. An applicant, Armour and Co., applied for an adjustment under this order, showing that its existing ceilings obliged it to perform its Government contracts at a loss. This application was denied, as was the ensuing protest, on the ground that the applicant's over-all position was favorable, and that relief, if granted, would be illusory since it would soon be offset by resulting higher livestock prices. The court, convinced that the protestant had met the terms of the adjustment standard, rejected the Administrator's contentions and upheld the protest. The court pointed out that "An adjustment provision in a regulation has the force of law, becomes one of the rules of the game, so to speak. If an applicant makes out a case within the framework of the adjustment provision, the denial of relief by the Administrator must be deemed an arbitrary act. The Administrator is no less obligated to give the relief called for by the adjustment provision because of his discovery, through experience that the adjustment provision is ill-advised If such has proved to be the case, the thing to do is to rewrite or amend the adjustment provision.” 18

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Instances such as the foregoing in which the Administrator was found to have failed to adhere to the standards he had set to govern the agency's operations were very few. It is probable that these occasional reverses had a salutary effect that extended beyond the particular matters affected by them. The presence of a vigilant umpire made for better administration of the rules of the game.

16 Presumably the Administrator could lawfully have discarded the entire system of standards for a new one if the latter system were reasonable and in accord with the statutory standards. What the Administrator could not do was to take action in particular cases that was inconsistent with standards to which he purported to adhere.

17 Armour & Co. v. Bowles, 148 F. (2d) 546 (1945).

18 Armour & Co. v. Brown, 137 F. (2d) 233, 240-241 (1943). For an interesting extension of this principle, in the field of rent control, see Hillcrest Terrace Corp. v. Brown, 137 F. (2d) 663 (ECA, 1943).