Basing Points and Delivered Prices

November 10, 1948

Report Outline
Congress and Basing Point Price Systems
Legality or Illegality of Delivered Prices
Economic Factors in Pricing Controversy

Congress and Basing Point Price Systems

Opening of Inquiry on Indutrial Pricing Policies

Legal and economic questions pertaining to the use of certain pricing methods widely employed in American industry are due for a thorough airing at Senate hearings which opened Nov. 9 and which may continue into January. The specific problem before the Senate Trade Policies Committee, headed by Sen. Capehart (R., Ind.), is whether or not to recommend that Congress expressly authorize use of basing-point and other uniform delivered price systems under safeguards designed to preserve free competition. Recent court decisions have raised serious doubts as to the legality of those pricing practices. It has been contended that if they must be generally abandoned, as violative of the antitrust or anti-price discrimination laws, the effects on the free enterprise system and on the location of industry will be far-reaching and disruptive.

The matter of basing points is taking a place alongside several other recent cases in which Supreme Court decisions have so upset established industrial practices, or presumably settled principles of law, as to place Congress under pressure to restore the status quo ante. A 1946 decision, making employers potentially liable for billions of dollars in back portal-to-portal pay, led the following year to enactment of a law closing the federal courts to such suits. Another labor decision, in June 1948, in the so-called “over-time-on-overtime” case, has necessitated revision of accepted compensation practices under the Wage-Hour Act, opened the possibility of suits for back pay in large amounts, and raised demands for corrective legislation.

Efforts to “override” the Supreme Court's 1947 decision in the tidelands oil case, by congressional action to restore full jurisdiction over those lands to the states, have so far been unsuccessful. Congress initially attempted to ward off a tidelands decision favorable to the federal government by passing a bill which President Truman vetoed in 1946. Consideration of basing-point legislation at the next session would likewise be an anticipatory move, because the Court has not yet spoken finally and conclusively on the question. However, in this case, pressure for action has been heightened by the cloud thrown over the validity of present pricing methods by decisions already handed down.

ISSUE TRACKER for Related Reports
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Aug. 05, 1954  Discount Selling
Aug. 10, 1951  Price Cutting and the Law
Apr. 25, 1951  Enforcement of Price and Rent Controls
Nov. 10, 1948  Basing Points and Delivered Prices
Sep. 14, 1948  Prices and Politics
May 28, 1947  Retail Price Agreements
Aug. 12, 1935  New State Laws for Price Maintenance
Apr. 03, 1930  The Trend of Commodity Prices
Antitrust and Monopolies
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Commercial Law