power to purchase and sell at reasonable cash prices wheat, flour,
meal, beans and potatoes. The power under this Act ran to the
President, and the Fuel Administrator and Food Administrator
acted under “executive orders.” On the other hand, the War
Industries Board acted under less specific authority proceeding from
the general war powers of the President. Thus the prices fixed for
steel, copper, lumber and other commodities by the Price-Fixing
Committee of the War Industries Board were in theory approved by
the President before being publicly announced. In some cases,
however, such as retail lumber prices in certain eastern cities, the prices
were announced without formal approval by the President.
The means of enforcing prices when “fixed,” whether determined by the price-fixing agencies or reached by agreement with the producers, were various, ranging from appeals to the patriotism of the trade to commandeering orders. In most cases there was in the background the possibility of the Government's taking over the industry; and in not a few the army or navy did commandeer plants or stocks of merchandise. In such cases a price was named which was subject to adjudication, first by the Board of Appraisers and then, upon appeal, by the courts. On Dec. 24 1917 all wood chemicals (acetic acid, alcohol, etc.) were commandeered for a period of six months and later the commandeering order was extended to cover the second half of 1918. Apart from purchases on army or navy account, however, price-fixing was effected chiefly by “licences” and control of “priorities.” The Food Administration and the Fuel Administration, under the Act of Aug. 10 1917, put in force extensive systems of licensing, under which unlicensed producers and distributors were not allowed to engage in business, and licences were revoked, if the regulations were disobeyed. The War Trade Board also licensed importers of certain articles on condition that the prices which it fixed should be observed. The administration of priorities proved to be a major element in the price-fixing programme, and involved many important questions. Toward the end of 1917 a priorities division was established within the War Industries Board and a priorities commissioner placed at its head. Representatives of the Fuel Administration, the Railroad Administration, and the U.S. Shipping Board were placed upon a Priorities Committee. The War Trade Board, the Food Administration, and the army and navy were also represented. The Price-Fixing Committee of the War Industries Board and the Priorities Committee worked in harmony. This was of the utmost importance, as it made possible a substantial degree of unity of policy among the different Government purchasing departments; and, through the power of the Priorities Committee over fuel and transportation, pressure could be brought to bear upon a recalcitrant business concern for the purpose of compelling it to adhere to fixed prices. The Priorities Committee undertook whenever necessary to administer priorities in the production of all raw materials and finished products, save food, feeds and fuels. The distribution of fuel was, of course, under the supervision of the Fuel Administrator, and transportation service under the U.S. Railroad Administration, but the Fuel and Railroad Administrators were guided largely by the “preference list” issued by the Priorities Committee and by the recommendations of the division chiefs of the War Industries Board, and on the whole came to work in close relation to the committee's general policy. The Priorities Committee, then, exercised a general function of adjusting production to the needs of the nation at war by allocating the limited supplies of fuel and basic raw materials, and its powers were sometimes used as a club to reinforce the authority of the Price-Fixing Committee in particular cases. The Army and Navy Appraisal Boards were called to pass on prices in the case of commandeer orders issued for the requirements of those departments. When a commandeer order was to be issued the practice developed of having the chief in charge of that division of the War Industries Board which dealt with that commodity approve the order in which the price was named. If, as was frequently the case, the producers of the commodity were not satisfied with the price, the matter was brought before the Appraisal Board. It is important to observe that those members of the Price-Fixing Committee who represented the army and navy were also members of the appraisal boards of these two departments.
Various methods of applying price control were tried. Prices may be fixed both directly and indirectly. As a rule, each commodity the price of which it was desired to fix was taken up directly and a specific price made for its purchase; but in some cases reliance was placed upon indirect control of the price of one commodity through direct control of the price of another. A most interesting and important phase of indirect price-fixing activities lay in the attempts to restrain prices by controlling consumption, as in the cases of tin, platinum, coal, sugar, wheat and meat. These efforts culminated in rationing in the case of sugar and the requirement of purchase of substitutes in the case of wheat or flour. Steps were taken, also, to prevent waste and to improve methods of production, for example, cleaner threshing of wheat. Most of such “conservation” measures are to be approved without reserve. Closely connected with the conservation phase as seen in control of demand, rationing, etc., were stabilization and pooling. But pooling, while partly used to facilitate rationing (as in the case of sugar), may also be used to keep prices up, either locally or throughout the entire market. In at least three cases, wheat, sugar and tin, the Government entered upon a pooling programme for the purpose of stabilizing prices. Stabilization is a term which implies mixed motives, a considerable part of its purpose commonly being to maintain or keep up prices, at least in a part of the field. This was the case with the Sugar Equalization Board and the tin pool, and the Government's Grain Corporation.
The degree of precision with which prices were fixed varied widely from commodity to commodity, ranging from a loosely determined maximum price to a careful determination of the definite price to be charged for a particular commodity in the case of a particular purchase. As a rule, only maximum prices were fixed, although in a majority of cases the price named as a maximum was the one which actually prevailed. This was not infrequently taken for granted by the price-fixing agency. In some important cases, however, the actual market price fell below the maximum named by the Government. This was true of zinc plates and sheets and certain kinds of lumber. Also, in the case of rubber, a price was named by the War Trade Board as a maximum, which was considerably higher than the market price. As has been already noted, a minimum price was fixed for wheat, the reason being that it was desired to guarantee the market in this case and thus encourage production. The price of hogs was fixed on the basis of a positive minimum after the failure of the attempt to maintain the price on the basis of a fixed ratio to corn. Wheat also furnishes a case in which both a maximum and a minimum price were specifically fixed. Obviously a result similar to that obtained by naming a price may be gained by limiting profits or gross margins. Thus, an effort was made to restrict the profits of the meat-packers to 2½% on sales, and in the case of the five largest packers a maximum margin on meat of 9% on investment was named. The flour millers were limited to a profit of 25 cents per barrel. Dealers in cotton-seed and peanuts, both ginners and others, were limited, beginning July 1 1918, to a margin of $3.00 per ton over cost (not replacement value). This method was also largely used by the Fuel Administration in an attempt to regulate the price of coal to consumers, and in Sept. 1917 this agency announced its plan for fixing the maximum gross margins of retail dealers in coal and coke. Each dealer was authorized to add to the average margin for 1915 between his delivered cost price of coal or coke and the price charged consumers, 30% to cover increased expenses provided the gross margin thus arrived at did not exceed his average for July 1917. Fixed rates of commission or margins of profit were imposed also on dealers in newsprint paper, retail lumber and other commodities.
In addition to the above methods, there was the attempt to fix retail prices directly by publishing fair prices, as was done for groceries by the local “price interpreting boards” set up by the Food Administration. Price-fixing by restricting margins passed into the realm of hopes and aspirations in such cases as the earlier regulation of the lake-forwarders by the Fuel Administration, and the cotton-ginners by the Food Administration, for in these cases the producers were merely urged to charge “reasonable” prices. Much the same may be said of the somewhat tentative moves made by the Oil Division of the Fuel Administration toward fixing the price of petroleum and its products. In July 1918 the Oil Director made some proposals with regard to fixing the differential between the prices of crude and those of refined products; and in Aug. he announced a plan to stabilize the price of crude oil, stating his belief that this would prevent radical changes in the price of refined products. It does not appear, however, that the plan had any appreciable effect.
From the foregoing it would appear that there were three chief types of price-fixing:—(1) maximum prices, in the case of basic staples which had wide public interest, often recognized as “pegged” prices when any scarcity or rapidly advancing cost existed; (2) definite prices, (a) to encourage production by guaranteeing returns, (b) Government purchases (direct or indirect) in the nature of single transactions; (3) margins, (a) absolute amount per unit, (b) percentage on sales, cost, or investment; this method being used when it was desired to cover the distribution of products, the marketing of which was not integrated with manufacture. The minimum price, strictly speaking, was the exception, but is logically associated with the definite price, which is both maximum and minimum.
Another distinction of some importance in fixing prices depended upon the place at which the price named was to apply. Some prices were made on an f.o.b. factory basis, while others were on a delivered basis. The practice prevailing in the industry was partly followed. The tendency, however, was to fix prices on an f.o.b. factory or mill basis, a natural tendency when the price is based on cost. In a majority of cases, prices came to be made f.o.b. the producer's plant. In many cases, however, prices were quoted f.o.b. some market basing point. This was notably true of copper, which was always quoted f.o.b. New York, although the metal was secured from mines in Michigan, Montana and Arizona, and refined at various seaboard points. In the case of commodities produced in several competing areas there was often a tendency to quote prices on a delivered basis. Prices delivered were fixed for New England spruce,
