PRICE FIXING IN THE UNITED STATES DURING THE WAR

I

N discussing price fixing it is necessary to define the subject, since there are various methods of controlling prices, some

IN

of them far removed from the popular notion of what is involved in the operation. As used in this and a subsequent article, the term "price fixing" includes any regulation of price effected directly or indirectly by government agency. More specifically, the discussion will be confined to the control of prices in which some agency of the government having power to enforce its decision, determines, or sanctions the determination of, a price by some process other than that of free bargain between buyer and seller. This definition is intended to cover both price agreements made between buyer and seller with the sanction of a government agency and prices established by some branch of government for its own requirements. In the latter case the arrangement would commonly be in the nature of an ordinary contract between buyer and seller; but when the purchase is made with a threat to commandeer, and the price is named by the branch of government directly or indirectly concerned, that price may be said to be fixed.

Such a definition gives a broad scope to the field of the inquiry. It will be admitted by all who are conversant with the facts that the whole history of price fixing in the United States during the period of the war will never be known. The pricefixing agencies were in fact so numerous, and the arrangements made were so often informal, that an exhaustive treatment of the subject would be well-nigh impossible. Moreover, many prices were controlled indirectly, and when this control was to any degree intentional, the result may be properly termed a fixed price. Nevertheless, material is available for a study of a great part of the price-fixing activities of the government, and even where such is not the case, the writer's first-hand knowledge enables him to speak with some authority concerning methods and results.

In this article price fixing in the United States during the war will be discussed under three general heads: (1) scope and period; (2) agencies and their powers; (3) methods. The subject will be continued in a subsequent paper which will consider the purposes and results of the policy and undertake a critical appraisal of it.

1. Scope and Period

In what follows, attention will be confined chiefly to the formal price fixing which was carried on by such agencies of the government as the War Industries Board and the Food and Fuel Administrations. Prices were more or less formally fixed by various departments or branches of the United States Government for at least 110 important products, each of which required a separate price-fixing operation. This was exclusive of

'The following is a partial list of products for which prices were fixed by some government agency or sanction. They are arranged with some idea of the order in which the prices were fixed, although no pretense to accuracy in this regard is claimed.

repetitions or renewals at later periods which often involved as much work and study as the original decisions. More than 30 of the products, however, were duplications in the sense that they represented merely different grades of some of the other eighty or more commodities, e. g., the different grades of wheat and iron.

Metals and metal products furnished the widest field for price fixing. The Price Section of the War Industries Board reports nineteen metals and metal products under the head of "controlled commodities." Several cases of price fixing in the metals group were not covered by this report, but, on the other hand, the figures of the War Industries Board include separate enumeration of the various grades of pig iron and steel products, and the additions and subtractions to be made seem to balance one another, leaving the number of metal price fixings approximately as reported. The other groups of commodities which appeared most frequently in price fixing were cloths and clothing, building materials, including lumber, foods, farm products, drugs and chemicals and fuels. Prices were fixed for all the chief basic materials of industry, except petroleum and raw

cotton, and also for a group of the more important manufactured products.

In general, it may be said that prices were fixed for three chief classes of commodities: (1) basic raw materials and fuels, such as iron ore, copper, lumber, sulphuric acid and coal; (2) munitions of war, such as sulphuric acid, grade "A" zinc, platinum and cotton linters; (3) general consumption necessaries, such as coal, sugar, flour and raisins. The basic raw materials and fuel affect all classes of commodities, including munitions and direct consumption goods; and the consumption necessaries are also essential to the maintenance of an army. Nevertheless, each of the three classes has its separate significance, and the classification throws light on the purposes of price fixing. The prices that were first formally fixed by the government fall chiefly in the basic raw materials group. A more shortsighted policy might have begun by regulating prices of articles required by the army and the navy and those which figure most conspicuously in public consumption.

While in most cases it was the price of a unit of commodity that was fixed, in others it was the rate to be charged for a service. For example, in the latter part of 1918, at the request of the Railroad Administration, the War Industries Board fixed the rate for cotton compressing. This rate has been virtually part of the railway rate, cotton often being compressed in transit. In such cases, the price is like a "rate," in that it is not based on specific cost, and is a charge made for a service rendered in necessary connection with the plant. Similarly the margins of cotton ginners and retail lumber yards were regulated, and in the latter case charges for milling and delivery were segregated. As is well known, the charges of various middlemen and dealers in food and coal were fixed.

An examination of the list of commodities whose prices were fixed shows that articles which may be classed as exclusively luxuries, are not included. Some of those listed, as, for example, platinum, raisins, leather and alcohol, may be subject to luxurious consumption; but in price fixing they were not regarded as falling within the category of luxuries.

It is of some interest, moreover, to note that in several in

stances the commodity listed was either localized in production or centralized in control, notably in the cases of aluminum, nickel, anthracite coal and copper. In others, however, neither condition existed, as in the case of lumber, wheat, hollow building tile and canned foods.

The fraction of the total market for a given commodity affected by a price-fixing order varied widely, ranging from a relatively small part represented by purchases by a single department of the government to practically the entire world. market. In some cases, prices were fixed for the United States Government alone, e. g., nickel, quicksilver, sulphuric acid, cement, New England spruce and other lumber. In others the prices were fixed for the government and made available to the public in a contingent way, as, for example, in the case of hemlock lumber, where it was provided that any quantity of the commodity which, in the judgment of the lumber director of the War Industries Board, could be released for the commercial market, might be sold to the public, subject to the maximum price fixed for the government. In still other cases, purchases by the allied governments, for example, copper and raw sugar, were included in the scope of price fixing for the United States Government; and in still others, the railways of the United States were specifically mentioned, even when the price did not apply to the public. Prices were sometimes fixed for single branches of the government, as in the case of oil products for the navy and cow-hide splits for the quartermaster's corps of the army. Prices were even fixed by the United States Government to apply to purchases by the allied governments only, as was the case with fuel oil, gasoline and kerosene.

The President, however, early took a firm stand for the principle that prices charged by producers to the public and to the government should be uniform, and, with the exception of prices on certain purchases made by government departments, rapid progress was made during 1918 toward carrying out this policy. Thus the prices on pine, fir lumber and cement, which at first applied only to direct government purchases, were extended to the public. Political motives coupled with a legitimate