F.O.B. Is Better

In The Trial, Author Franz Kafka tells of the ordeal of an accused man who is never told the charges on which he is being tried. For the past 8 1/2 months, many U.S. businessmen have felt somewhat the same. The U.S. Supreme Court ruling against the basing-point method of setting prices in cement (TIME, May 10) had been so vague that many businessmen were not sure what was and what wasn't legal. Last week, in answer to six questions from the Chamber of Commerce of the State of New York, the Federal Trade Commission took most of the mystery out of the court's decision.

FTC said it was not concerned with pricing methods, but only with possible conspiracies to fix prices. Individual businessmen, it said, are free to compute their prices by using basing points, absorbing freight charges, or any other way they please, provided they do not use the system to conspire to fix prices illegally.

But FTC also sounded a warning that any use of the basing-point system was likely to arouse its suspicions. FTC said it would suspect conspiracy whenever: 1) prices quoted by competing firms stayed uniform over any length of time, or were changed in concert; 2) competitors whose prices were unusually low were squeezed out or "disciplined" some other way; 3) companies habitually accepted a drop in sales rather than cut their prices.

In short, when FTC last year was plumping for f.o.b. pricing, it was not trying to lay down a law; it was merely pointing out the safest way to avoid suspicion. But, warned FTC: "No pricing formula ... is automatically free from or . . . subject to a charge of conspiracy."

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