[Seventh Quarterly Report for the Period Ended September 30, 1943] [From the U.S. Government Publishing Office, www.gpo.gov] OFFICE OF PRICE ADMINISTRATION CHESTER BOWLES, Administrator SEVENTH QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1943 UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON : 1944 For sale by the Superintendent of Documents, U. S. Government Printing Office Washington 25, D. C. • Price 15 cents LETTER OF TRANSMITTAL Office of Price Administration, W ashington^ D. C.^ February 15,19^. Sirs : I have the honor to submit herewith the seventh report of the Office of Price Administration, covering the period ended September 30, 1943. Sincerely yours, Chester Bowles, Administrator. The Vice President. The Speaker of the House of Representatives. Il TABLE OF CONTENTS Chapter Page I. The Price Control Program_______________________ 1 General Developments__________________________ 1 Special Problems______________________________ 3 Extension of Control__________________________ 5 Subsidy Operations____________________________ 9 Roll-backs Without Subsidies_________________ 12 The Community Pricing Program________________ 13 Price Panels______________________________ 17 Standards and Grade Labeling_________________ 18 Industry Advisory Committees_________________ 21 Emergency Court of Appeals____________________23 II. Transportation and Utility Rates________________ 26 Transportation_______________________________ 26 Public Utilities_____________________________ 30 III. Developments in Rationing________________________ 33 Distribution of Ration Book Four_____________ 34 Ration Banking______________________________ 34 The Inventory and Control Branch_____________ 38 Food Rationing_______________________________ 40 IV. Developments in Rationing—Continued______________ 50 Fuel Oil__________________________________ 51 Northwest Solid Fuels Program________________ 53 Coal Rationing_______________________________ 54 Heating and Cooking Equipment________________ 55 Gasoline_____________________________________ 58 Rubber Tires_________________________________ 60 Automobiles_____________,___1_____________ 62 Bicycles__________________1_______________ 63 Shoe Rationing_______________________________ 63 Rubber Footwear______________________________ 64 Typewriters__________________________________ 65 III IV • Table of Contents Chapter Page V. The Rent Control Program__________________________ 66 Rental Housing Operations_____,_______________ 66 Amendments and Interpretations________________ 68 Protest Proceedings_____1___________________ 70 Emergency Court of Appeals____________________ 73 Administrative Operations___________________ 80 VI. Enforcement_______________________________________ 83 Enforcement Activities________________________ 85 Litigation____________________________________ 88 VII. Organization and Management_____________________ 91 The Administrator and His Staff_______________ 91 Price Department_______________________________95 Rationing Department__________________________ 96 Rent Department_______________________________ 97 Enforcement Department________________________ 97 Information Department________________________ 99 Administrative Management Department________ 99 Professional Services Department_____________ 101 Organization of Field Activities_____________ 101 VIII. War Price and Rationing Boards________________ 105 What the Boards Do___________________________ 105 How the Boards are Organized_________________ 110 The Boards’ Problems_________________________ 113 THE PRICE CONTROL PROGRAM The progress of price control during the summer quarter was evident in the behavior of the cost of living. Prior to May, the cost of living had been rising nearly 0.8 percent a month. Follow-ing May, this trend was reversed and for the first time since November 1940 the cost of living showed a decline. In September 1943 the Bureau of Labor Statistics index was nearly 1 percent below the May level. This was accomplished under the four-point program announced April 30 to implement the President’s hold-the-line order.1 Under that program food prices were steadily reduced during the summer and by September had fallen nearly 4 percent below the May peak. The reduction was especially marked in fresh fruits and vegetables, the items which had accounted for most of the rise in the cost of food. By September these prices had been reduced 14^ percent below their spring peak. Although seasonal factors entered into this development, it was in greater part due to the positive action taken by the Office to impose and improve price control in this sector of the retail market. A closely related part of the program to hold the line was the development of dollars-and-cents prices for meats and groceries, community by community. Under this policy, specific and pub-' lished prices are substituted for a merchant’s individual “freeze date” prices or for prices computed by formula from his individual costs. The result is to put retailer and housewife equally on notice as to what the exact ceiling prices are. This program, implemented by the work of the local board price panels, is discussed in detail below, as is also the use of subsidies in connection with the reduction of food prices. GENERAL DEVELOPMENTS Progress toward simplification of regulations was made in several directions. Examples are the replacement of numerous 1 See Fifth Quarterly Report, p. 1. 2 • Seventh Quarterly Report diverse licensing provisions by License Order No. 1, revision and simplification of Supplementary Regulation No. 14 to the General Maximum Price Regulation, development of uniform adjustable pricing provisions, and elimination of monthly reports by retailers on the ceiling prices of many cost-of-living commodities. Other activities of the Office in the field of price control during the quarter were concerned mainly with bringing regulations into line with the requirements of the Taft Amendment, which barred grade labeling and restricted the use of standards, and with the extension of control to new price areas. One of the major developments was the restaffing necessitated by the mandate of the Congress in the so-called “business experience” amendment to the National War Agencies Appropriation Act passed in June. The amendment stipulated that after August 15 no part of the appropriation made to the Office could be directly or indirectly used for the payment of the salary or expenses of any person “who directs the formulation of any price policy, maximufn price, or price ceiling with respect to any article or commodity unless, in the judgment of the Administrator, such person shall be qualified by experience in business, industry, or commerce.” After consultation with the Comptroller General as to the interpretation of the amendment, recruitment of new personnel was begun in order to fill the positions affected which were not already held by men whose qualifications met the terms of the amendment. In an effort to secure for these important jobs the services of outstandingly able men with practical experience, many business organizations and trade groups were consulted, including manufacturers, producers, wholesalers, and retailers, both large and small. The resulting appointments have been of men with long and distinguished records in various fields of business endeavor. Great credit is due them as well as departing officials that operations continued without interruption and that no slackening of activity occurred during the period of the change, although the restaffing had not yet been completed by the end of the quarter. New appointees worked with the officials leaving the affected posts long enough to become familiar with the fundamentals of the programs. Two former directors of commodity divisions were retained within the price department in an advisory capacity without responsibility for directing the formulation of any price policy, maximum price, or price ceiling. Price Control Program • 3 SPECIAL PROBLEMS Continued consideration was given during the quarter to providing more appropriate pricing methods for commodities which no longer could be controlled under the General Maximum Price Regulation. That regulation set ceiling prices for each seller, on each commodity handled, at the highest price charged to the same class of purchaser in March 1942. This method of pricing, however, becomes less satisfactory in many commodity fields as the interval between the base period and the selling date increases. Developments Under GMPR Since March 1942, a number of changes have occurred in the cost structure, particularly in the food area, where many items were not subject to control at the early levels of production until relatively late in the development of the OPA program. Many industries, moreover, are operating below their base period level of efficiency because of inadequate materials or labor, or both. In addition, upward wage adjustments have added to costs in some industries. Decided pressure against established ceilings has thus threatened constantly to make it impossible to hold the line. The Office therefore decided to take the affected commodities out of the GMPR and put them under specific regulations, using pricing methods which were more appropriate in view of altered economic conditions. This policy will continue to require a substantial proportion of staff time, in large part because the mere passage of time requires special treatment for a larger number of cominodities. In an effort to keep its general pricing framework essentially simple, the Office has refrained from issuing new and specific regulations for commodities effectively controlled by the freeze provisions of the GMPR. Specific regulations have been issued, however, wherever the lack of adequate base-period records and the unrealistic nature of remote freeze dates meant unworkable and impracticable price control. The guiding rule has been to strike an appropriate balance between simplicity and rough justice, as under the GMPR, and equity, with all the complexities which were entailed in adapting a regulation to the varieties of circumstances under which it must apply. 4 • Seventh Quarterly Report Wage Adjustments The period July through September brought also a series of pressures due to wage increases approved by the War Labor Board. Many industries where wages have traditionally been substandard are included within the rule of the War Labor Board permitting application to be made for readjustments in their wage rates. Foundries, printing establishments, the whole area of service trades, the lumber industry in New England, the South and Central States, etc., applied for higher prices during the quarter as a result of wage increases. Feed Prices Priqe control over such commodities as dairy products, meats, poultry, and eggs remained precarious so long as feed prices themselves were below parity. Under statutory provisions, feed prices could not be controlled until they rose to parity, and their continued rise during the quarter threatened to result in serious pressure upon the ceilings that had been established for these commodities. In dairying the pressure became critical and led to the announcement during September of a program of dairy feed payments to be made during the ensuing quarter. This is discussed below in connection with other food subsidy programs. Exemptions From Control The Office has reviewed, from time to time, the problem of exemption from price control of certain unimportant or relatively negligible commodities. During the summer and early fall, the problems in exemption policy became acutely, apparent. The food production program for the 1943 crop season called for expansion of acreage in certain commodities subject to price control and the reduction of acreage on a number of less significant and less nutritious items, many of which had not been brought under price regulations. As the crops were harvested, however, the farmers who had planted Persian melons, or any of a number of other items which were of less importance to the Nation than, for example, milk or basic food products, received prices for their output‘that yielded incomes far in excess of those realized by Price^Control Program • 5 farmers who had concentrated on the essential and necessary foodstuffs. There are serious implications in this development for the coming year. Unless controls are tightened on some of these less significant food items, advantages to the farmer in producing them will have a serious effect on production planning in the more necessary commodities. In spite of the effort involved, it may be necessary to extend price regulation to the less important items in order to prevent a diversion of manpower and farm resources to items of minor importance to the Nation’s diet. The alternative of permitting an increase in other farm prices to compare with the yield of those commodities which have not yet been brought under effective control is of course ruled out by the terms of the Stabilization Act of October 2,1942. EXTENSION OF CONTROL Control over prices was widened in four major areas during the quarter under review—primary products; used commodities; feed, fertilizer, and seed; and synthetic and substitute rubber. Primary Products Prices for standing timber, determined on the basis of appraised value, were brought under control in some western timber areas. In the field of food products, control of prices was extended to live hogs, fresh fish and seafood, and certain fresh fruits and vegetables. Dollars-and-cents ceilings were set for the price of live hogs sold anywhere in the United States. Dollars-and-cents prices per pound were also set both at the producer and retail level for the leading species of fresh fish caught in the New England area, halibut and salmon along the west coast and Alaska shores, and scallops and Pacific crabs. Issuance in July of the regulation covering fresh lettuce and cabbage was the first step in control of fresh fruits and vegetables other than temporary measures. Dollars-and-cents prices, set at wholesale receiving points, involved rollbacks of 25 and 50 percent, respectively. Provisions of the regulation were later extended to cherries, grapes, and certain fresh berries? 6 • Seventh Quarterly Report Used Commodities An important step in controlling inflation in used goods prices was taken during the quarter with the issuance of a regulation covering these commodities. Such control as had hitherto existed had been limited to a few specific articles or was under the General Maximum Price Regulation. Prices were set at 75 percent of the new price for articles in good working condition with no missing parts, and 33 percent for other used items. The regulation covered a wide variety of items including furniture, bedding, baby carriages, stoves, floor coverings, hardware, etc. Other actions taken in this field involved tightening control over prices of used typewriters, the reissuance of the regulation covering second-hand machine tools, and the extension of control to used pressure vessels and used fruit and vegetable containers. Feed, Fertilizer, and Seed Since feed, fertilizer, and seed constitute a basic element of farm costs, control of prices in these products is particularly important for the whole structure of cost-of-living stabilization. During the quarter five new dollars-and-cents regulations were issued covering the price of feed. These actions, which included prices for feed screenings and feed products of peanuts, soybeans, cottonseed, and alfalfa, are important in establishing definite ceilings which will encourage marketing of the products. Inflated prices of cabbage, legume, and grass seed were reduced by price actions, and regulations were issued on domestic and imported fertilizers. Synthetic and Substitute Rubber The fact that synthetic rubber products have begun to come into the market in increasingly large quantities creates a considerable price problem. Production costs for synthetic rubber articles differ from those for crude rubber products, and there is the additional factor of differences in raw material costs. The pricing problem also involves the difficulties of making allowances for developmental costs. Since sufficient production experience and cost data are not yet available, the agency and the industry agreed that prices in general be set temporarily at the same level as prices for similar articles made of crude rubber, and that these prices be reviewed in the light of production experience. Temporary prices Price Control Program • 7 were established for new rubber tires and tubes and for rubber drug sundries. Recently the price of neoprene rubber was reduced from 45 to 27% cents per pound, and corresponding reductions were effected in the prices of certain articles made of neoprene. It may be anticipated that prices on other synthetic rubber articles will follow the same course as that for neoprene, i. e., prices will be set on the basis of high initial production costs and reduced as costs decrease. Tables 1 and 2 show in detail the commodities brought under control during the quarter under review and those for which dol-lars-and-cents ceilings were set. Table 1.—Extension of Control, July-September 1943 Effective date Commodity Level of action July 13,1943. Fresh berries All sales except retail. Jobber and packer. Retail. July 20, 1943 Georgia and Florida shade grown tobacco July 26, 1943 Eating and drinking establishments (New York, New Jersey, Pennsylvania, Maryland, Delaware, and District of Columbia). Red sour cherries and berries , July 29,1943 Do. Julv 30, 1943 Fresh salt water fish and seafood Do. Aug. 5, 1943 Blends of carbon tetrachloride. Distributor. Aug. 6i 1943. White birch pulpwood (produced in Minnesota, Michigan, and Wisconsin). Bulk milk. All sales. Aug. 19, 1943 Inter-handler sales. “Do. California grapes All except retail. Dealer and importer. All. Aug. 24, 1943 Imported mixed fertilizer and superphosnhate ... .. Aug. 25, 1943 Cabbage seed Aug.-28,1943 Bland apple sirup Manufacturer. “Do.' Linseed oil '. All. Do.... 100 percent wool felt Manufacturer. Aug. 31, 1943 Standing timber • All sales. Sept. 6, 1943 Hops (New York State 1943 crop). All. Sept. 10, 1943 Broomcorn '. ... Producer. Sept. 14, 1943 Imported Canadian fresh-water fish Wholesale. Sept. 16,1943... Fresh grapes and apples ... Retail. Sept. 2L 1943 Fresh fish* (shrimp and 6 species of Canadian freshwater fish). Concord grapes and California juice grapes All. Sept. 24, 1943 Do All sales except retail. Sales to warehousemen, jobbers, distributors. Importer. Grower-prod ucer. Producer. Idle and frozen industrial materials Sept. 25, 1943 Imported finished rice Sept. 30, 1943 Natural oils of peppermint and spearmint. '. Oct. 4,1943 Live hogs _■ '. Table 2.—Dollars-and-Cents Prices Set During July-September 1943 Effective date Commodity Level of action July 6, 1943 Aluminum alloy . . Producer. Do. Processor. Producer. Producer and shipper. Manufacturer. Country shipperand wholesale. Producer and wholesale. July 9,1943 i July 10, 1943 July 12, 1943.. . Tight wooden barrels Canned asparagus, mustard greens, and turnip greens. Hardwood charcoal Do Eggs and egg products Do Hardwood heel blocks and finished hardwood heels.. Fresh berries July 13, 1943.... Do 48 species of fresh salt-w’ater fish ’Retroactive to Apr. 3, 1943. 8 • Seventh Quarterly Report Table 2.—Doliars-and-Cents Prices Set During July-September 1943—Continued Effective date Commodity - Level of action July 14,1943 Central hardwood lumber Mill. Do. West coast logs Do. Do Pulpwood (cut in North Carolina and western Virginia). Producer. July 16,1943 Bulk ethyl gasoline Refiner. Do Transportation of petroleum and petroleum products. Transportation companies. . Mill. Do Wheat mill feeds Do Pulpwood (cut in eastern Virginia) Producer. July 20, 1943 Georgia and Florida shade grown tobacco Packer. 'Do' Lettuce and cabbage Producer and wholesale. Processor and packer. Mill. July 22, 1943 Cider vinegar July 23i 1943 Appalachian hardwood lumber Do . Raincoats and fabrics Producer and wholesale. Direct-mill. All sales. Maple, birch, and beech flooring July 26; 1943 Used agricultural' containers 'Do' Wood slat com cribbing _ Producer. July 27,1943 Poles and pilings ~ 2 Do. July 29, 1943 New bicycle tires and tubes . All. July 30,1943 Guanidine carbonate Producer. Wholesale and retail. Do. Aug. 3,1943 Victory garden fertilizer Aug. 4; 1943 Certain offal horsemeat items Do New slate grey uniforms for naval officers All. Aug. 6, 1943 Frozen fruits Processor. “Do White birch pulpwood (produced in Wisconsin, Michigan, and Minnesota). All sales. Aug. 9, 1943 Fine cotton goods Manufacturer. Do. “Do . Neoprene rubber hose Do .. Synthetic resins.. <. Do. Aug. 10, 1943 Men’s black rubber no-lace mine pacs Wholesale and retail. Producer. “Doi Virginia anthracite coal Aug. 12, 1943 Corded rubber men’s half heels. Sales to wholesalers, repairmen, and consumer. Aug. 13, 1943 Engleman spruce, red cedar, and incense cedar lumber (produced in Alaska and delivered outside continental U. S.). Producer. Aug. 17, 1943 Refrigerator replacement units (General Electric Co., Bridgeport, Connecticut). All. Aug. 19, 1943 California grapes All except retail. Grower and dealer. Producer. All. Do 2 1943 Pacific coast crop of hops Do Pine tar and pine tar oil.—“. Do .. Hospital grade hot water bottles and combination syringes. Aug. 20,1943 Coal tar Do. “Do.’ Used bonded abrasive wheel stubs All sales. Aue. 21, 1943 Canned soft clams Canner. Doï... 20 constructions of fine cotton cloth Manufacturer. Producer. Do... Pine wood charcoal . Aug. 24, 1943 Aromatic red cedar lumber Do. Do Soapstocks (in 5 cities) All sellers. Aug. 25, 1943 14 standard grades of book paper.. Manufacturer. All. Doi Imported and domestic alfalfa meal Do 33 grades of groundwood specialty papers Manufacturer. Do Wood and wool tops and yams..'.."..~ Producer and wholesale. Manufacturer. Producer. Do Writing paper and certain other fine. papers Aug. 26, 1943 Birch, maple, and basswood veneers^ Doi No. 3 hide's and skins All sales. Do Packaged potato chips All sellers. Aug. 28,1943 Bland apple sirup. 2 Processor. “Doi Oak flooring..... Mill. Aug. 30,1943 Gummed kraft sealing tape Manufacturer. Retail. “Do Ice boxes ... ... .. . Sept. 1,1943.. Ground mica Producer. Sept. 4', 1943 Frozen peeled shrimp... Processor. Do Joint welding and prime coating . AU sellers. All. Sept. 6, 1943 1943 New York State crop of hops ..... Sept. 8,1943 Sausage ... Retail. Sept. 9,1943 New synthetic rubber tires and tubes Wholesale and retail. Do. Truck tires and tubes Retail. Sept. 10, 1943 Broomcom Producer. Sept. 11, 1943 No. 2 fuel oil.... All. ’ Do Hauling fresh tomatoes ; Haulers. Do Printing of second-hand textile bags All sellers. Sept. 13,1943 Petroleum products (in Oklahoma) Producer. Table 2.—Dollars-and-Cents Prices Set During July-September 1943—Continued Price Control Program • 9 Effective date Commodity Level of action Sept. 14,1943 Imported Canadian fresh-water fish.... Wholesale. ‘Do.' Metal frame bedsprings All sellers. Sept. 16,1943 Sept. 18, 1943 Crude cottonseed oil.. Asbestos-cement building materials Producer. Manufacturer. Sept. 20, 1943 Kosher sausage ; . Fresh shrimp Retail. Sept. 21, 1943 Producer and wholesale. ‘Do. Potassium chlorate Manufacturer. Sept. 23,1943 Maintenance and repair of oil burners Dealer and supplier. ‘Do. Process tankage, sewage sludge, bagged castor Producer and jobber. Sept. 24, 1943 pumice, and castor cake. Concord grapes and California juice grapes Logs and bolts (produced in Wisconsin and Michigan). Beef (frozen, boneless) All except retail. ‘ Do.' Producer. Sept. 25, 1943 Sales to war procurement Do Imported finished rice ... , .... Book matches * agencies of lend-lease. Importer. Sept. 27, 1943 All. ‘ Do.' Eastern poles, piling, and mine materials Used pressure vessels and enclosed atmospheric pres- Producer. Do All sales. Sept. 28, 1943 sure vessels. Locks and lock sets ------ Producer and jobber. Manufacturer. All sales. Sept. 30', 1943 Do .. Cast iron pressure pipes Iceland wool Do Methyl salicylate Producer and wholesale. Do.... Natural oils of peppermint and spearmint Mechanical rubber goods ' Men’s and boys’ cotton flannel shirts Lanolin Dealers, grower-pro- Oct. 1,1943 Do Oct. 4, 1943 Do ducer. Producer. Retail. Primary distributor and Live hogs .. wholesale. Producer. Do Variety'meats and edible by-products Chemical and chestnut extract cordwood Current California wine, bulk grape brandy, bulk grape spirits. Ammunition for civilian use Wholesale. Oct. 5, 1943 Oct. 7, 1943 ... Do All sellers. Do. Wholesale and retail. Oct. 8, 1943 White pine, spruce, and hemlock lumber (produced in 7 middle Atlantic and Southern States). . Used flat bedspring frame and retopped flat bedsprings. Hardwood charcoal (produced in Arkansas^and Tennessee). Tampons - — Mill. Oct. 9, 1943 All sellers. Oct. 12, 1943 All sales. Oct. 27, 1943 Retail. Nov. 1, 1943 Prime quality heavy steel products Warehouse*. SUBSIDY OPERATIONS Subsidies on meat and butter, introduced during the preceding quarter for the purpose of reducing the retail prices of these commodities, had an added effect upon the cost-of-living index during the quarter now under review. Retail prices of beef and veal in September reached a point 9.4 percent below the high point in May. In the same period, retail pork prices declined 9.2 percent, and lamb prices 4.7 percent. In September the retail price of butter was 9.2 percent lower on the average than in May. Seven subsidy programs were announced by the Office of Economic Stabilization during the quarter. Two of these were designed to prevent the price of apples and onions from reflecting 10 • Seventh Quarterly Report full transportation costs from distant sources of supply and two others to reduce the price of peanut butter and of potatoes. A fifth, program was intended to maintain the price of peanut oils in the face of an increased support price. The two other programs were designed to stimulate production, one on prunes and raisins, and the other, a subsidy on hay, to maintain milk production in specific drought areas while maintaining stable retail prices for these commodities. Apples and Onions The apple subsidy consists of the absorption of part of the freight costs involved in shipping apples from the Pacific Northwest to the East and to certain other areas. Without this program the ceiling on apples in these areas would have to be sufficiently high to reflect Pacific Northwest prices plus freight, a level considerably higher than is necessary to meet the requirements for apples produced within these areas. At a cost of approximately 4 million dollars it was possible to save 30 million dollars to apple consumers in the areas affected. The Commodity Credit Corporation was also authorized to absorb the freight on shipments of onions from distant points. This program will make it possible to establish prices on the basis of cost, including freight, from normal rather than distant points of supply. Peanut Butter The reduction in retail peanut butter prices was expected to be between 6 and 7 cents per pound. Because of the percentage markups governing pricing in the distributive channels, this price reduction could be effected by payment of a subsidy of 4^ cents per pound, paid to producers on peanut butter sold for civilian consumption. It was expected that this subsidy would cost about 15 million dollars and that the price reduction would save consumers about 21 million dollars. Vegetable Fats and Oils During the quarter under review, a subsidy of one-half cent a pound on vegetable oils was discontinued. It had been instituted by the CCC at the request of the Office in the autumn of 1942, in order to enable refiners to continue production of vegetable oil products, while permitting retailers to continue selling under Price Control Program • 11 their March 1942 ceiling prices. On the basis of the study of the industry’s operations during the period when the subsidy was being paid, the Corporation decided that the subsidy was not needed by the industry to enable retailers to sell within these ceilings and consequently it was terminated in September 1943, when the contract for the 1942-43 crop year expired. The CCC began subsidization of peanut crushing and renewed a 1942-43 subsidy for marginal soybean processing in order to prevent a price increase on peanut and soybean oils which would have made it impossible to maintain the ceiling prices on their end-products. Prunes and Raisins In order to encourage the fullest possible production of dried prunes and raisins, a support price program for these fruits was announced in August 1943 by the War Food Administration. The total cost of the subsidies to the Government is expected to be 13 million dollars. The total saved by the consumer through the subsidy payments is estimated at 18.5 million dollars, or nearly 3^4 cents per pound. Under the plan, the War Food Administration will purchase the total pack of raisins and prunes from the packers at prices approximating $45 per ton higher than the 1942 prices which packers received. This increase will be reflected in prices paid by packers to growers. The Commodity Credit Corporation, as the fiscal agent for the War Food Administration, will resell at 1942 prices the portion of the pack allotted for civilian consumption. Hay Action was taken to maintain milk production in the drought area around Washington, D. C., by making hay available to farmers at prices which they had been paying in their own area. Under an agreement between the Commodity Credit Corporation and farmer cooperative associations, it was arranged for the cooperatives to purchase the hay in surplus-producing areas and resell it for feeding dairy cattle. Approximately $12 per ton, the difference between cost and selling prices, will be paid by the CCC to the cooperatives. Total cost of the subsidy for the period from October to April, during which the program is scheduled to operate, was expected to amount at the maximum to 2 million dollars. 12 • Seventh Quarterly Report Potatoes At the time that the programs to roll back the prices of apples and peanut butter were formulated, the Office together with the Commodity Credit Corporation, worked out a procedure whereby prices of the bumper crop of white and sweet potatoes could fall to levels that would move output into consumption without imperiling financial returns to the producer. It was expected that consumer prices for these potatoes would fall possibly as low as the levels of September 1942 and that farm prices might fall below the loan rates. Under the procedure evolved, the farmer will be paid the difference between the loan rate and any lower market price. Cost of living will thus be reduced, the crop will move freely into the market at the favorable consumer prices, and. a farm return adequate to maintain the supply will be assured. Coffee Though a reduction of 3 cents a pound in coffee prices by means of a subsidy had been announced, this program became impractical when the rationing of coffee was discontinued. Nearly 50 percent of coffee consumption passes through institutional channels. To ensure that the price reduction would be passed on to the consumer, it would have been necessary to restrict subsidy payments to retail sales of coffee by tying the payment to consumer rationing of the commodity. This was no longer possible after the dropping of rationing. To have proceeded with the program and permitted the benefits to accrue to institutional users would not have benefited the consumer enough to warrant the cost to the Government. The transportation subsidies to compensate for war-caused increases in shipping costs of coffee was discontinued August 25, since shipment of coffee over normal peacetime routes was restored and insurance rates were reduced with the decline of submarine warfare. A slight remaining increase over peacetime transportation costs was to be absorbed by the roasters. ROLL-BACKS WITHOUT SUBSIDIES During the quarter under review, roll-backs were instituted on a number of additional commodities without the use of subsidy payments. Table 3 gives these commodities in detail both for cost-of-living items and for industrial materials. Price Control Program • 13 Table 3.—Roll-Backs Ordered During July-September 1943 Effective date Commodity Level of action Amount of price reduction uly 10 1943 Sun-dried shrimp Processor and 35 cents per pound processor, and 42 cents per pound packer 5 cents per hundredweight. $2 per case; 6 cents a can at retail. Substantial amount. July 12, 1943.... July 13, 1943.... Do Dry edible beans packer. Wholesale Canned Alaska Chinook salmon Producer Fresh fish Producer and whole- July 20,1943.... Do— Neoprene hose and belting sale. Producer Varying amounts. 12-18 cents a barrel. Residual fuel oils (gravity*of 20° and higher in Wyoming). Fresh and frozen pork Refiner— July 30,1943.... Do Sales to war procurement agencies or lend-lease. Producer and whole- 50 cents per hundredweight. Lettuce, 25 percent; cabbage, 50 percent. 3-5)^ cents per pound on magnesium remelt ingot; 1 cent on segregated scrap. Up to $13.50 per machine. H cent per gallon on 10,000 to 60,000 gallons; % cent on 60,000 or more. 0.4 cents per yard. 1-12^ cents per pound. 17^ cents per pound of neoprene. $2 per hundredweight. 20 percent. Indeterminate. Lettuce and cabbage Do V--- Magnesium remelt ingot and segregated scrap. Used typewriters.— sale. All sellers July 31,1943. — do Aug. 1,1943 Bulk gasoline (sold in New Jersey, Pennsylvania, Maryland, District of Columbia, Delaware, and Virginia). Insect netting .. do ... Aug. 9,1943 Manufacturer .. Aug. 12, 1943.... 8 items of frozen fish and other Processor Do seafood. Rubber commodities containing neoprene. Canned sliced bacon M ann facturer Aug. 13, 1943.... Producer and whole- Aug. 17, 1943.... Chemical cotton linters, hull fibers and “free grade.” Distilled spirits and wines sale. All Aug. 25, 1943.... Wholesale and retail. Aug. 27, 1943.... Pork or breakfast sausage Wholesale .. $2 per hundred-weight. 3 cents per dozen. Approximately 6 percent. 10 to 15 percent for consumer. $1 per carload. About 5 percent. 10 percent. 4 percent. 10 percent. 3 to 10 percent. 3^ and 1 cent, respectively at retail. Ji cent per pound for hard scaled, 1 cent for kosher. 2 cents per box of 10. Aug. 30, 1943.... Shell eggs * . do Do Gummed kraft sealing tape.. M anufactui er Sept. 4, 1943 Frozen peeled shrimp Processor . Sept. 6,1943.... Cottonseed oil, meal, cake, and pellets. Specialty paper bags and envelopes Asbestos-cement building materials. Meat sold in retail stores groups 3 and 4 (with margins of 19 percent or less during 1941). Laminated plastic sheets, rods, and tubes. Neoprene goods do Sept. 8, 1943 Producer Sept. 18, 1943... Sept. 20,1943... Do Manufacturer....... Retail Manufacturer Oct. 1, 1943 .do Oct. 4, 1943 Frozen and drawn poultry Processor and whole- Oct.'12, 1943... Oct 27, 1943.... Poultry items (hard-scaled and kosher). Tampons sale. Wholesale Retail THE COMMUNITY PRICING PROGRAM Considerable progress was made during the quarter with respect to the community pricing program for retail sales of food. 564181—44-----2 14 • Seventh Quarterly Report This program, it will be recalled, was begun in May as an integral part of the general dollars-and-cents pricing program which has as its ultimate objective the provision of clear and unmistakable retail prices for major food items in the average family’s budget. The technique of determining community prices is extremely simple. Most dry groceries and perishable foods are controlled at wholesale and retail by regulations which provide specific maximum mark-ups that are to be added by the merchant to the net delivered cost of each item. These mark-ups are different for various types of foodstuffs, and they vary also among the different groups of wholesalers and retailers. In any given community, the net cost of a particular item (for instance, a No. 2^ can of X brand tomatoes) will be very nearly the same to all retailers in each group. Thus it is practicable for the OP A district office to set a definite price for an item on an area-wide basis. It is necessary to follow this procedure on a community rather than a national basis because of the fairly wide variation in the net cost of identical items from one community to another, occasioned chiefly by differences in transportation costs. Furthermore, there are many instances where brands prominent in a particular community may be of only minor importance, or even completely unknown, in other sections of the country. At the beginning of the quarter, about 200 areas were covered by community price orders. The average order lists the prices of approximately 700 items for each of the four main groups of stores. At the end of the quarter, coverage had been extended to 316 communities containing altogether about 560,000 retail food stores, about 92 percent of the stores in the country. Approximately 93 percent of the national population lives in these community pricing areas. Adjustment Provisions The general principle of community pricing is to translate into dollars and cents, and to publish as the official ceiling price, that price which the vast majority of retailers would otherwise have as their individual ceilings under existing nation-wide mark-up regulations. Where variations in net cost within the same retail group are negligible, this principle is thoroughly workable. At an early stage in the program, however, it was discovered that there is an important segment of the retail food trade to which the principle cannot be applied without modification. Price Control Program • 15 Some stores find it necessary to buy at a significantly greater cost from sources other than those which serve most of the retail outlets in their group. This is particularly true of small chains and large specialty grocers. Since these food outlets have historically operated in the same manner as the smaller independent retail food stores, it would be discriminatory to force them into competitive position with the large chains which operate on different principles. The field organization was therefore given authority to make necessary adjustments to prevent inflationary price increases in the more important low-cost outlets and, at the same time, provide equitable ceiling prices for merchants whose net costs are relatively high. District offices make these adjustments as promptly as possible in all cases where equitable treatment requires it, with the result that the most serious criticism of the earlier community price orders—namely, that they created a severe “squeeze” for some merchants—was corrected during the quarter. Publication of Lists In order that community price lists may remain a good approximation of the ceiling prices which would otherwise exist for major food items covered by basic nation-wide regulations, it is necessary to revise them periodically to take account of changes in the basic regulations, to eliminate brands which have disappeared from the local market, and to include new brands. While amendments to the community price orders may be made at any time, it is considered advisable to have a complete revision, including publication of new lists at least once every quarter. In cooperation with the Government Printing Office a uniform publication and distribution program was worked out. The actual printing of lists was partially decentralized by providing for printing facilities on a regional basis, and lists suitable for posting in retail establishments were given wide distribution. No lists have been printed for direct distribution to consumers, who must rely chiefly oh newspaper publication or upon lists posted in stores for their knowledge of ceiling prices. It "was planned during the quarter, however, to make all price lists in each area available to consumers within a short time. 16 • Seventh Quarterly Report General Appraisal of the Program The community pricing program has generally met with an extremely favorable reaction from both consumer groups and retail food merchants. For consumers it provides a list of unmistakable ceiling prices on items which are purchased daily. Thus it is a vast improvement over the General Maximum Price Regulation under which prices of an identical item could vary without any recognizable pattern from store to store. From the consumer standpoint, it is also an improvement over straight markup regulations under which the exact ceiling price cannot be checked by anyone who does not have access to the storekeeper’s own records. While the trade at first had certain valid objections to the program, those objections have been met by changes in the publication program, by better administration which comes only through experience, and by prompt application of adjustment provisions to hardship cases. By the end of the summer the trade was generally agreed that the community pricing program is fair both to the merchants and to the consumers. Extension to Other Fields Basic regulations to permit flat pricing of fresh fruits and vegetables were planned during the quarter. Regulations in effect permitted the issuance of commodity prices on oranges, grapefruit, lemons, potatoes, onions, lettuce, cabbage, and a few minor items. Plans were under way at the end of September to include apples, lima beans, snap beans, carrots, cauliflower, celery, cucumbers, egg plant, green peas, spinach, tomatoes, peppers, beets, and other fresh fruits and vegetables. Because of the seasonal price movements which are incorporated in the basic regulations and because of the fact that the source of supply for any single community may shift rapidly, thus resulting in a significant change in transportation costs, it is not feasible to include fresh fruits and vegetables in the same program with the community pricing of dry groceries. Plans for another and separate program were initiated during the quarter. Pilot studies were conducted in several cities on the basis of which a nation-wide program covering the fresh fruits and vegetables subject to basic regulations was being framed. Price Control Program • 17 PRICE PANELS2 Members of price panels during July, August, and September made 250,000 recorded visits to retail food stores. These committees of local citizens attached to the war price and rationing boards handled 60,000 consumer complaints and referred 2,500 cases to district offices for further action. For the Office, this adds up to the most intensive campaign of personalizing price control so far undertaken. For the retailer it means the extension of an open invitation to cooperate with his fellow citizens in controlling the dangers of inflation. And for the community it means assurance that the honest merchant will not be penalized by the unfair competition of the wilful violator, nor will consumers become the prey of the unscrupulous operator in a time of national stress. The price panels have given impetus to the retail price control program by furthering understanding of price control as a wartime necessity, by promoting compliance with the regulations among retailers and consumers in the community, and by providing a channel for the consideration and settlement of consumer complaints. Major emphasis during the quarter was on price regulations relating to food and food products. The community pricing orders, covering a large percentage of the food purchases of the average consumer, provided the price panels with their largest single continuous project. Difficulties of Organization Generally speaking, the panels have been organized successfully, although some have experienced difficulty in recruiting panel assistants and in retaining them on a permanent basis. The difficulties are understandable in the light of the previous mobilization of available volunteers in other programs, the failure of some communities to appreciate local inflationary pressures, and a reluctance expressed in some areas to take over a program which was felt to be a responsibility of the professional staff of the Office of Price Administration. This problem is gradually being overcome, due to growing public realization that prices can be controlled, that it is to the 2 See also ch. VIII, p. 105. 18 • Seventh Quarterly Report best interests of the community to see that they are controlled, and that there is a positive program which can be picked up and developed locally to accomplish results which will strengthen the whole war effort. An intensive job has been accomplished by the Office in servicing the panel program with its more than 50,000 volunteers. The district offices have met the challenge by sending out their best qualified personnel to explain the program in the community, to train panel members and panel assistants, to establish procedures, and to institute programs, even at the sacrifice of other pressing district office responsibilities. Relations With the Public The panels have used various means and methods to bring about a genuine understanding of price control as a curb on inflation in a wartime economy. These range from sponsoring public meetings and essay contests, and preparing materials for press and radio, to setting up price control exhibits in local store windows and holding price control “clinics” on special problems for the benefit of both consumers and the trade. In order to perform effectively, they must convince the public that price control is an important line of defense in the total war effort. The acceptance of price panels by merchants as counselors and friends has proved that most merchants will comply with the regulations if they know what is required of them. No better evidence of this can be given than the attitude expressed by one storekeeper who asked his panel to send a price panel assistant other than a regular customer to visit him—he wanted to know when he was wrong, he explained, and he was afraid a regular customer would hesitate to call his mistakes to his attention for fear of “hurting his feelings.” STANDARDS AND GRADE LABELING On July 16,1943, the Taft amendment to the Commodity Credit Corporation Act became section 2 (j) of the Emergency Price Control Act, as amended. This amendment prohibits the Office from requiring grade labeling and sets forth for the first time the conditions under which the Administrator may make use of commodity standards in the control of prices. Price Control Program • 19 In signing the Commodity Credit Corporation Act, the President made the following announcement: The language of the bill appropriating funds for the Office of Price Administration was construed as prohibiting the Administrator from making use of standards in any case regardless of how essential they were to price control unless such standards had been previously established by industry acceptance or by government action. I am satisfied this bill (Taft amendment) has no such meaning. It was presented to the Senate and Houses to avoid the consequences that would have followed the adoption of the language in the appropriation bill. Senator Taft, who sponsored the language in the appropriation bill and the modification in this bill, stated expressly that the modification preserved power in the Administrator to “standardize” a commodity in any case in which this was “absolutely essential to an effective system of fixing prices.” These assurances are in accord with the purpose and the terms of the compromise amendment and must be taken as controlling. It is with this understanding that I have signed the bilk Action on Grade Labeling The Office took prompt action to conform to the mandate of the Congress. Grade labeling requirements were removed from 20 regulations covering meats, eggs, poultry, butter, canned fruits and vegetables, rubber heels, antifreeze, rayon hosiery, and certain lumber, paper, and other products. However, these revised regulations do not prohibit sellers from grade-labeling their products, if they desire to do so, and some manufacturers of rubber heels and antifreeze have indicated that they will continue to gradelabel their products voluntarily. On August 5 the Director of the Office of Economic Stabilization issued OES Regulation 1 which ordered continued the grading and grade labeling of beef, veal, lamb, and mutton carcasses and wholesale cuts. Federal grading and grade marking had been recommended by the meat industry itself and was approved by the industry during the 9 months the OPA regulations requiring such grading and marking had been in effect. Policy With Respect to Standards The Office has always followed a policy closely similar to that set forth by the Taft amendment with respect to the use of standards in price regulations. Wherever practicable, existing trade standards or those previously required by another Government agency have been used. Standardization by the Office of Price 20 • Seventh Quarterly Report Administration has been resorted to only where, in the absence of existing trade or Government standards, no practicable alternative existed for effective price control. Following the passage of the Taft amendment, a review of this policy and an examination of existing price regulations were made to determine their compliance with the provisions of the amendment. The standards contained in the regulation covering men’s and boys’ work and sport shirts and the one covering women’s rayon hosiery were revised to assure complete conformity with the Taft amendment and to incorporate several suggestions made by members of the industry. Analysis of Standards Provisions As of September 30, there were 444 price regulations in effect. A total of 261 regulations contained standards provisions; of these, 167 contained standards which were in general use in the trade prior to their use by OPA; 32 contained standards legally required by another Government agency. The remaining 62 regulations contained standards which, while not in general use in the trade or required by another Government agency, were necessary in the judgment of the Administrator because no practicable alternative existed for effective price control. In brief, the Office found it necessary to make use of standards which were not in general use or required by another Government agency in only one-seventh of its regulations. In some of these cases, as in the regulations covering eggs, butter, and meats, the Office merely selected as a basis for establishing ceiling prices one of several standards already familiar to the trade and used in a substantial portion of its transactions. In other cases, standards of an informal character, never given official recognition in the trade, were accepted and formalized by the Office, as, for example, those for used and reconditioned refrigerators, vacuum cleaners, and typewriters. Where wartime scarcities have made pre-war industry standards obsolete, the Office has had no alternative but to devise new standards suitable to present conditions. In this group are standards developed for rubber footwear, rubber drug sundries, and bedsprings with nonsteel frames. Price Control Program • 21 Use of Standards This use of standards by OP A has served to protect a number of industries. Without such standards, the Administrator would have been forced either to adopt a complicated formula or “freeze” type regulation for each commodity in an attempt to make ceiling prices reflect customary grade differences or, instead, to ignore such differences and set some average price for the commodity which would have been too high for some low-grade articles and too low for those of superior quality. INDUSTRY ADVISORY COMMITTEES Provision is made in the Emergency Price Control Act for establishing industry advisory committees at the request of any substantial portion of the industry for which prices are being set. In the belief that many problems of price control could be more satisfactorily solved by frequent and wholehearted consultation with industry, the Administrator on June 7, 1943, directed that Office practice go beyond the requirement of the statute and that industry advisory committees be set up immediately as a matter of administrative policy. On August 18 the Office issued a field order that formalized the committees at every level where price authority has been delegated. Since the public announcement of the industry advisory committee plan, men from industry are fast becoming a fully integrated part of price control methods and procedures. At the end of September, 226 committees had been appointed and apprised of their rights and responsibilities. These formal committees, known by announcement to their entire industries, are not general policy makers, as many believe. They are working committees of men who know cost data, merchandising, and pricing methods in their own particular segments of the industries regulated, men who work with the price executives of the Office in the drafting, simplifying, and amending of actual price regulations. Appointment of Members For this reason the Administrator appoints the members of an industry advisory committee with a great deal of care, after a thorough study of the industry has been made, a study that 22 • Seventh Quarterly Report shows the number of firms, the different types of operations, geographical locations, the percentage of firms organized into trade associations, the proportion of total volume by size of firms, all factors that will insure the appointment of a thoroughly representative body of men to advise the Office. These men are asked to work and speak, so far as is humanly possible, for their entire industry and not their own firms, for the men not present at the conference table as well as for those at work there. This system of working committees had to the end of September brought the continuing advice of 2,916 businessmen to the price control operations of the Office. Joint Committees During the quarter under review steps were taken to bring about better coordination among war agencies in the use of industry committees. On September 8 the Office reached an agreement with the War Food Administration to use the same committee personnel and hold joint meetings. Each agency nominates members to be sure of adequate advice on its own peculiar problems, and then formally appoints them to conform with its own legal procedures. With due consideration of the problems which committee members themselves wish to have presented, the two agencies together prepare the agenda of the meetings. It has been found beneficial to have all matters relating to the processing, distribution, pricing, and rationing of food heard by the same groups of industry representatives. The Administrator also appointed to the bituminous coal industry advisory committees of the Office all eligible members of the 22 bituminous coal producers advisory boards of the Solid Fuels Administration. Notices of all industry advisory committee meetings are'sent to all other Government agencies which work with industry in time of war. Results of Committee Work There are many problems yet to be solved before proper balance is reached between industry knowledge and advice, and government responsibility and authority in the use of committees in necessary wartime controls. The belief of the Administrator that these problems can be solved rests on his experience with those Price Control Program • 23 committees which have been functioning for a comparatively long time. This experience demonstates that continued consultation results in better understanding on the part of each of the problems and responsibilities of the other. EMERGENCY COURT OF APPEALS The Emergency Court of Appeals, established by the Emergency Price Control Act of 1942, reviews regulations or orders under the act in connection with appeals from persons whose protest against a regulation or order hasi been denied by the Administrator. From the effective date of the act through the end of September 1943, a total of 88 complaints had been filed in the Emergency Court of Appeals, of which 57 involved price regulations and orders.3 Up to September 30, the court had rendered 10 opinions involving price problems, one of which was adverse to the Price Administrator. In Lincoln Savings Bank, v. Brown, the court upheld the authority of the Administrator to control charges for the rental of safe deposit boxes under Maximum Price Regulation No. 165. In disposing of the complainant’s contention that the effect of these charges on the cost of living was negligible, the court said: It is true that an increase in complainant’s prices, in and of itself, does not substantially affect living costs. Complainant’s statement is correct, so far as it goes, but it is deceptive in its intended inference that, for that reason, no purpose is served by the regulation of safe deposit rental rates. Accession to this type of reasoning would virtually destroy the effectiveness of the act. Complainant’s argument is apjdicable to thousands of commodities besides its own. Clearly, however, the collective effect of so many increased prices could create the very chaotic condition that the act was designed to prevent. It is plain to us that there is compelling reason to restrain the complainant and others in its class from making their individually inappreciable contributions to what would result in a very appreciable total. In Davies 'Warehouse Co. v. Brown, the court sustained the Administrator’s interpretation of the public utility exemption contained in section 302 (c) of the act as not including warehouses, irrespective of particular characteristics of State regulation. Petition for certiorari was granted in this case and at the close of September it was pending in the United States Supreme Court. 8 See pp. 73-79 for cases involving rent regulations. 24 • Seventh Quarterly Report In United ¡States Gypswm Co. n. Brown, No. 23, the court sustained an order of the Price Administrator requiring the Gypsum Co. to absorb the 3 percent transportation tax on products sold on a delivered price basis. In this case, the United States Supreme Court denied petition for certiorari. In another proceeding brought by the same company, United States Gypsum, Co. v. Brown, No. 29, the court sustained the application of the General Maximum Price Regulation to prices charged by that company in a particular area despite the closing of one of the mills formerly operated by the company in that area. In rejecting the contention that the Price Administrator had ignored section 2 (h) of the Emergency Price Control Act, the court said: In order to accomplish the purposes of the act with any degree of effectiveness, the Administrator must have the power to establish and hold a firm ceiling on prices throughout an area. This is of paramount importance. If established practices and methods of an industry do not interfere with the exercise of this power, there is no necessity for the Administrator to extend his jurisdiction so as to control them. Section 2 (h) was written into the act to assure against unnecessary invasions of business management, but care was taken to make it plain that if any existing methods or practices in an industry should tend to cause an evasion or circumvention of price regulations or orders, the Administrator might control them. In the present case, by his establishment of the prices for delivery in the Philadelphia area, the Administrator did not undertake to invade or revamp the business practices or methods of the gypsum industry. If, in bringing about the firm fixation of prices, such result ensued, it obviously was necessary in order to prevent a circumvention of the regulations and cannot be said to be inconsistent with section 2 (h) of the act. In Armour and Company v. Brown, the court set aside an order of the Price Administrator which denied an application for adjustment made by the company under Supplementary Regulation No. 9. That regulation authorizes the adjustment of any maximum price which impedes or threatens to impede the production of a commodity essential to the war program. The court held that the reasons given by the Administrator for the denial of the application were not sufficient to justify the denial of relief under this adjustment provision and remanded the case for further proceedings in accordance with its opinion. The Administrator then reopened the proceedings, incorporated additional evidence into the record relating to the peculiar characteristics of the meat Price Control Program • 25 packing industry, and again denied the application on the grounds that, because of the peculiar circumstances of the industry, the only appropriate basis for decision was the over-all profit position of the company and that this over-all profit position did not justify adjustment of the maximum price. At the end of the quarter, proceedings were pending in the Emergency Court of Appeals to determine whether or not the action of the Administrator was correct. In addition to these cases, the court had decided five other price cases involving procedural questions. Seventeen price cases were dismissed by agreement of the parties. As of September 30,1943, 16 appeals involving price regulations and orders were pending. . II. TRANSPORTATION AND UTILITY RATES The quarter year under review brings to a close a full year during which the Office acted on behalf of the Director of Economic Stabilization, pursuant to the act of October 2, 1942, to prevent inflationary increases in transportation and public utility charges. The purposes of that act relating to utility and transportation rate increases were largely achieved during the year. Rates and charges for these services throughout the Nation, with few exceptions, remain at September 15, 1942, levels. The prevention of transportation and utility rate increases is an important phase of the battle against inflation, since these services are important elements in the cost of production of all commodities and hence an important determinant of the level of prices. This is clear from the fact that annual payments for utility and transportation services approximate 15 billion dollars a year. The effects of increased transportation and utility rates and charges upon costs of production and the costs of living are subject to two controls through the Office: (1) Private and contract carriers and persons furnishing services such as warehousing under contract are subject to maximum prices or rate regulation in much the same manner as other industries. (2) No general rate or charge of a common carrier or other public utility may be increased unless the Price Administrator is given a 30-day notice of the proposed increase, and consent is given to his timely intervention before Federal, State,, or municipal authority having jurisdiction to consider such increase. TRANSPORTATION During the year ended September 30, 1943, 7,800 notices of increases by common carriers were received by the Office. The Office filed protests in 505 such cases, and obtained suspensions in 307. In 64 instances, the carriers withdrew. The remaining * 26 Transportation and^Utility Rates • 27 notices either involved technical changes such as discontinuance of service or correction of tariff errors, or were accompanied by clear proof of financial necessity for higher rates to permit continuation of essential services. It is estimated that the transportation activities carried on by the Office, pursuant to authority delegated by the Director of Economic Stabilization, represent a saving to the consuming public exceeding 400 million dollars. In addition, the potential opposition of the Office undoubtedly leads many common carriers to forego proposing unnecessary increases of rates and charges. Railroad Freight Increases In opposing transportation rate increases, the Office finds three types of cases: (1) Proposed general increases of rates on all services of a group of common carriers; (2) proposed increases of rates for particular services, as on certain designated commodities, by one or more carriers; (3) proposed increases of minimum rates, generally in the form of tariff provisions eliminating applicability of lower class rates, particularly on inter-changed traffic. The broader type of proposed increase presents a clear-cut issue between the Office and the carriers, to be decided by the regulatory agencies, namely whether or not the carriers need the rate increases in order to continue adequate and efficient wartime transportation services. The other two types of proposed increases usually raise more complex issues, since the rules for such rate-making have ordinarily not been based upon revenue needs. In the field of railroad transportation, the outstanding case of the year was the proceeding in Ex Parte 745, Increased Railway Rates, Fares and Charges, 1942, before the Interstate Commerce Commission.1 As a result of petitions filed in that case by the Director of the Office of Economic Stabilization and the Price Administrator, and by the Secretary of Agriculture, the Commission suspended (effective May 15, 1943) until the end of 1943, the 6-percent freight rate increases previously authorized on March 2, 1942. The parallel intrastate freight rate increases were reduced by the carriers at the same time.2 1 See also Fifth Quarterly Report, pp. 9-11. 2 On November 1, 1943, the Commission ordered the suspension continued until July 1, 1944. 28 • Seventh Quarterly Report Motor-Carrier Rates Immediately after the freight rate increase on the railroads, March 16, 1942, most of the motor carriers, freight forwarders, and water carriers also increased their rates. Generally, the water carriers removed their increases at the time of the railroad suspension although a great part of their traffic is not subject to regulation. The motor carriers retained their increases, and some groups have sought further increases. The freight forwarders, caught between competing with rail rates and at the same time paying the motor carrier increases, have partially removed their increases. On August 5,1943, Division 2 of the Interstate Commerce Commission granted a 4-percent general increase to motor common carriers in the Middle Atlantic States. The Pennsylvania Public Utility Commission acted simultaneously, and other State regulatory agencies followed the decision by authorizing similar increases in intrastate rates. The carriers had requested increases of 9.7 percent, which proposals were vigorously opposed by the Office. After the decision, joint petitions for reconsideration were filed with the Interstate Commerce Commission and the Pennsylvania Commission on behalf of the Secretary of War, Secretary of the Navy, the Secretary of Agriculture, the Director of Economic Stabilization, the War Food Administrator, and the Price Administrator, setting forth the position that the decision would produce net operating income substantially in excess of that enjoyed in peacetime. This petition was denied by the ICC September 28, 1943. In general, regulatory agencies have prescribed broad outlines of motor carrier rates. Whenever a specific rate has been placed in issue, the regulatory agencies have prescribed maximum or minimum reasonable rates, and have allowed the carriers to exercise their discretion in increasing or reducing specific rates within the zone between maximum and minimum reasonable rates. The effects of the depression and of competition between carriers prior to the war were that a large part of the traffic was carried at rates nearer the minimum than the maximum. Obviously, increases within this zone of reasonableness can add up to a substantial total which is not only inflationary in amount but Transportation and Utility Rates • 29 particularly so in its effect upon the particular commodities. The Office has therefore taken the position that increases should not be permitted unless the rates are below a reasonable minimum or the carrier needs the added revenue. Passenger Fares Prior to May 15, 1942, passenger fares were generally 2 cents per mile in coaches and 3 cents per mile in Pullman cars, except in the South where the fares were generally 1.5 cents per mile in coaches. In Ex Parte 1$, the Interstate Commerce Commission authorized 10 percent increases in these fares, and the State regulatory agencies have either acquiesced or authorized the same percentage increases. During the quarter under review, the Southern coach fare in interstate commerce was increased to 2.2 cents per mile under authority of the Interstate Commerce Commission. The Office had protested the proposal, but was denied without hearing. It recently filed a petition in support of one filed by the North Carolina Utilities Commission, which was joined by the Alabama Public Service Commission, seeking an investigation by the Interstate Commerce Commission into the reasonableness of the increased fare.8 The State commissions of Alabama, Kentucky, and Tennessee denied the increase of intrastate coach fares to the 2.2 cents per mile level, and the increase was not granted by the North Carolina Commissions. The Interstate Commerce Commission opened investigations to determine whether the State commissions should be overruled under section 13 of the Interstate Commerce Act. Hearings were held in the Alabama and Kentucky cases, and all were awaiting decision at the end of the quarter.4 The Office opposed all proposals to increase coach fares on the grounds that such increases are inflationary and that the carriers did not need the additional revenue. Motor bus carriers increased their intrastate passenger fares 10 percent at about the same time that the railroad increase was authorized in Ex Parte 1^8. Increases in Southern bus fares to correspond with those made by the Southern railroads were not proposed during the quarter, however. ’ The three petitions were denied on October 11, 1943, without hearing. reports in the Alabama (ICC Docket 28963) and Kentucky (ICC Docket ¿vouo) cases deny the increases. 564181—44- -3 30 • Seventh Quarterly Report Pick-up and Delivery Service An expeditious adjustment procedure, adapted to meet the conditions peculiar to pick-up and delivery service for railroads and other line haul carriers, was established for the purpose of maintaining adequate control of rates without causing a disruption in pick-up and delivery service in various localities throughout the country. Because pick-up and delivery rates have frequently produced revenue comparing unfavorably with that from other types of traffic, and because pick-up and delivery carriers, particularly in smaller communities, maintain very few records of revenues and expenses, many such pick-up and delivery carriers were electing to discontinue service rather than attempt to justify increases under the usual standards governing contract carrier rate increases. After extensive investigation and consultation with industry representatives, the adjustment standards applicable to pick-up and delivery service were modified so as to permit an increase in rates to the extent necessary to offset increases in operating costs since March 1942. The cost information required by the application form was simple and could be supplied readily by the carriers. The line haul carrier joined in the application by agreeing to absorb the increase in rates without passing it on to the shipper, reserving, however, the right to show such increased expenses in any application for a general rate increase based on general revenue needs. As a result of the establishment of this special procedure, the threatened discontinuation of pick-up and delivery service in small communities was averted. PUBLIC UTILITIES During the year ended September 30, 1943, some 700 notices of proposed increases in utility and local transportation rates were processed. Of these, approximately 115 were still pending before various regulatory commissions at the end of the quarter. Rate increases were granted by regulatory commissions in relatively few instances. In all other cases, requests for rate increases were either denied or withdrawn. That public utility and local transportation rates were in general prevented from rising was due at least in part to direct participation of the Office under the Act of October 2,1942. Transportation and Utility Rates • 31 Washington Gas Light Co. The Washington Gas Light case is perhaps the most important of the rate increase cases now being litigated.5 The Public Utilities Commission of the District of Columbia authorized an increase of $200,000 as against a substantially greater claim by the company. The Commission’s order was set aside by the District Court, but sustained by the Court of Appeals in a 2 to 1 decision. At the end of September, a petition for certiorari was about to be filed with the Supreme Court of the United States.6 This case will give the Supreme Court an opportunity to decide the most important problems of utility rate-making under wartime conditions. These problems include the treatment of wartime taxes, what constitutes an adequate return under existing conditions, what constitutes an adequate hearing, and other vital matters. It is possible, however, that the case may hinge upon the peculiar provisions of the sliding scale arrangement, under which this company’s rates are fixed. Other Rate Cases In the Detroit Edison case, involving the question of rate reduction, and in which the Office intervened at the request of the city of Detroit, the Michigan Commission held that it had no power to disallow Federal war taxes as an operating expense in considering the company’s earnings. The Office joined with the city of Detroit in requesting the Supreme Court of Michigan to review the question. The court has agreed to do so. The appeal taken from the order of the Public Utilities Commission of the District of Columbia in the matter of the Potomac Electric Power Co.7 was argued before the District Court during the quarter. The appeal questions, among other issues, the restrictive character of the hearings, the subordinate status of the Commission’s basic statute with respect to the sliding scale, and the treatment of war taxes as utility operating expenses. At the end of September, decision had been reserved. The Interstate Commerce Commission issued an order on September 18, 1943, reopening the proceedings in the case of the Hudson & Manhattan Railroad Co., after having first allowed a B See also Fifth Quarterly Report, p. 13. * Since that time, the petition has been filed and the Supreme Court has agreed to review the case. T See also Fifth Quarterly Report, p. 13. 32 • Seventh Quarterly Report rate increase from 8 to 9 cents and then, without hearing, allowed a token plan which in effect further increased fares. The reopened hearings were held later in the month, and the commission reissued the former order.8 In the case of the Western Kentucky Gas Co., the Kentucky Commission refused to grant an increase on the grounds that the continuation of existing rates during the war emergency would neither impair the service nor cause Undue hardship to the company. The company filed suit in the State courts. One of the cases on appeal at the end of the quarter was that of the Chicago Surface Lines, where the Illinois Commission approved a rate increase and the Office filed an appeal. In the Chicago Rapid Transit case the same commission refused a rate increase, and the company’s appeal was pending at the end of September. 8 Subsequently a statutory court granted an interlocutory injunction setting aside both increases. . Ill. DEVELOPMENTS IN RATIONING Cooperation with industry may well be considered the keynote in the progress of the rationing program during the quarter under review. Efforts were made to give businessmen a better understanding of the work of the Office and they in turn contributed many valuable suggestions fo^ operating the rationing program. In fuel oil, for example, a new working committee of industry men was formed, in addition to the year-old industry committee. The new committee represents the smaller dealers and is composed of six members, representatives of the Atlantic Coast Conference and the Oil Heat Institute of America, who are fully acquainted with conditions in the fuel oil industry. Especially close contact was maintained during the summer months with producers and distributors included in the meats-fats program in order to ascertain necessary changes in the point values of perishable products. The Office has sought suggestions, advice, and criticism from all possible sources in order to improve the rationing program. Letters from the public are given careful attention, and Members of Congress have been advised of all major rationing plans. Many Members have been very generous with their help, and have made significant contributions to the development and improvement of rationing. Simplification of forms and procedures was further developed during the quarter. Several forms were revised and issued, and plans for other revisions were made. Some forms were combined and others eliminated entirely. The new forms were designed to include all necessary information with a minimum of effort on the part of the person filling them out. Thus the reregistration of industrial users in the food program, which formerly required three forms, now takes only one to obtain corrected and expanded base data. R-1600, the form for the reporting of primary distributors of meats and fats, was also revised in accordance with recommendations of the trade and of the field offices. 33 34 • Seventh Quarterly Report One of the outstanding achievements of the quarter was the development, in cooperation with members of the food industry and others, of the token plan scheduled to go into effect early in 1944. Details of this plan are described below. DISTRIBUTION OF RATION BOOK FOUR War Ration Book Three was distributed through the mail during July and August 1943. When the mailing centers were established, a similar type of distribution was intended for War Ration Book Four. As the time drew near for distribution, however, it seemed likely that individual books would have to be “tailored,” that is, that some stamps might have to be taken from them on the basis of estimated home production of both processed foods and meats. The distribution of a war ration book by mail requires over-all organization of facilities and the printing and widespread distribution of application forms through the postal system; it requires a large quantity of envelopes prepared long in advance. At the time necessary orders for mail distribution needed to be placed, a decision against mailing was made because of the difficulties involved in attempting to “tailor” in conjunction with a mail distribution. Subsequently it was determined that “tailoring” would not be required. By that time the need for War Ration Book Four was too immediate to organize facilities for mail distribution. Instead, the distribution was planned on the same basis as for Books One and Two. The use of local sites, in most cases schoolhouses, for the distribution of the book, permitted a much faster distribution and required less detailed organization than mail distribution. Admittedly, it involved greater inconvenience to the public. The fact that War Ration Book Four has twice as many stamps as Book Two, and that early in 1944 its use will be coupled with the use of tokens, makes it likely that the distribution of Book Four will be the last general distribution of a war ration book for at least 2 years. RATION BANKING As the rationing program expanded, the ration banking mechanism for the handling of ration currency was improved and broadened to help lighten the burden of the consumer, the trade, the banks, and the local War Price and Rationing Boards. In the Developments in Rationing • 35 July-September quarter, 100 additional banks joined the ration banking program, bringing the total to 13,642, or 84 percent of all commercial banks. The balance consisted primarily of small banks in rural areas where there is little need for ration banking. The handling of the enormous volume of ration stamps arising from the processed foods and meats-fats programs constitutes a formidable problem. On the basis of experience with these two programs, it is estimated that consumers are surrendering ration stamps to food retailers at the rate of 44 billion a year. Nearly 30 billion of these are deposited directly in participating banks by retailers with ration bank accounts. The remaining stamps, received by nondepositing retailers, are passed along to suppliers and deposited by them. It is further estimated that sorting and counting these ration stamps require about 15 million man-hours a year. The larger stores must hire additional employees for this purpose, while the smaller retailer, unable to employ extra help, finds it necessary to burn the midnight oil in order to sort and count his ration stamps. In the existing programs, considerable time is lost at the dealer’s cash register in handling the 8-, 5-, 2-, and 1-point stamps, i. e., tearing out the exact point total to equal the customer’s point purchase. The food trade estimates that dealers, as a result of this delay, are able to handle only half as many customers at the cash register in a given time as prior to rationing. The Token Plan In casting about for a solution to the problem of handling these 44 billion ration stamps, it was decided that the use of tokens to supplement stamps in rationing offered more advantages with fewer disadvantages than any other proposal. Under the proposed token plan, it is expected that 5 (instead of 12) processed food stamps and 6 (rather than 16) meats-fats stamps will be validated each month. This means a saving of approximately 60 percent of the stamps put into use each month. Each stamp will have a value of 10 points in each program, which will completely eliminate sorting. It is estimated that the token plan will require only about 20 percent of the man-hours formerly needed in the trade for handling stamps. Since few purchases will amount to an even 10 points, there will be a need for change, and it is for this purpose that tokens will be 36 • Seventh Quarterly Report used. Each token will have a 1-point value. In other words, if an 8-point purchase is made, the customer will tender a stamp valued at 10 points and will receive 2 tokens in change. Tokens will have no expiration dates, but will remain valid indefinitely. The period of validity of ration stamps in these programs will probably be increased. Tokens will be distributed from the manufacturer directly to the commercial banks of the Nation, which in turn will distribute them to the dealers upon payment of ration stamps, coupons, etc. The token plan will effect a substantial financial saving to the Office. To produce and distribute a ration book costs nearly a million-and-a-half dollars. Under the token plan, War Ration Book Four may last 2 years and thereby save the printing and distribution of at least four ration books. Taking into account the cost of manufacturing tokens, the proposed program will probably result in a net saving of some three million dollars, apart from the saving effected by reducing the cost of verification of envelopes and the cost of the number of items deposited. Even more important from the standpoint of wartime economy, extending the life of existing ration books will save large amounts of scarce paper and a tremendous amount of labor, not only for people who take part in printing the books, but also for the thousands of volunteer workers who contribute their time in distributing them to the public. At the end of the quarter, tentative plans were laid for the institution of the token system around February 1944. The tokens, made from a vulcanized fiber, were to be slightly smaller than a dime, and were to carry an appropriate identifying inscription. Fuel Oil Ration Banking During the quarter under review, ration banking was extended to the fuel oil rationing program. Primary suppliers, dealers with sales of at least 250,000 gallons during the 1942-43 heating year, and consumers using 50,000 or more gallons a year were required to enter the ration banking system, while consumers using from 20,000 to 50,000 were extended the privilege of entering the Developments in Rationing • 37 system if they wished. The entrance of the fuel oil program into ration banking tended further to lessen the burden on local boards and facilitated the movement of ration evidences through the trade. Accounts Eliminated With the discontinuance of coffee rationing, approximately 150,000 ration bank accounts were removed from the books of participating banks. A reduction in the number of ration bank accounts of institu-' tional users was also achieved in the quarter. As of August 18, the order covering institutional and industrial users was amended, providing that institutional users serving less than 3,000 meals a month, and industrial users whose periodic allotment was less than 2,000 pounds of processed foods, or meats and fats, would receive rations in the form of food ration coupons and would close out their ration bank accounts. This order eliminated a large number of small accounts which did not have sufficient volume to justify their continuance in ration banking. Saving Time for the Trade The food industry found that many consumers were spending their point stamps in multiples of 16, turning in entire strips of 8-, 5-, 2-, and 1-point stamps at a time. This made it necessary for the retailer to separate the stamps into the various denominations before putting them into envelopes for transfer or deposit. To relieve this burden on the trade, procedures were changed to permit putting full 16-point strips or blocks of such strips into the envelopes. In order to give further relief to the retailer, a test was instituted in several controlled areas which allowed ration stamps to be deposited on an average point-valuation basis, eliminating the need for sorting loose stamps according to their point value. Under this plan, the dealer may count the number of stamps, usually by weighing, multiply the number by an average point-value factor (determined by sorting a small sample), and then deposit them to his account at the total point value so calculated. 38 • Seventh Quarterly Report Number of Accounts A survey of the activities of the participating banks shows that the estimated number of the various commodity ration accounts on their books is approximately as follows: Accounts Gasoline________________________________________________ 16, 583 Sugar___________________________________________________' 153, 966 Coffee*________________________________________________ 150,000 Processed foods__________________________________________' 389, 728 Meats-Fats______________________________________________ 498,833 Shoes___________________________________________________ 7.1, 008 Fuel oil2_______________________________________________ 67,080 Total______________________________________ 1,347,198 1 Discontinued August 1, 1943. 2 Begun July 1, 1943. New Reimbursement Schedule The basis of compensation for banks participating in the ration banking system was established by a firm of bank cost accountants who had studied the system in its experimental stage in New York. After the ration banking plan had been in operation for 6 months, however, it was recognized that the banks were inadequately paid for their services. Accordingly, a survey was made of direct bank costs, excluding overhead, in handling ration banking. As a result, the Office reached an agreement with the members of the American Bankers Association’s committee on ration banking on a revised schedule of reimbursement, effective for the most part as of September 1,1943. THE INVENTORY AND CONTROL BRANCH A central inventory unit, established in the early days in connection with the automobile program, now helps to keep the rationing wheels running more smoothly for all 13 rationing programs. In order to keep up to date the ever changing picture of what is happening to the Nation’s supplies of rationed commodities, the inventory unit tabulates, audits, and analyzes numerous certificates and other report forms received from the local boards, the field offices, and industry. It compiles monthly, quarterly, and annual inventory statements and indicates the movement of various types of supplies on a regional, state, and national scale. Its Developments in Rationing • 39 recent use as a focal point for direct mailing of forms and informational material to the trade, the ration banks, the local boards, and the field offices is speeding up the movement of operating materials to all parts of the country and improving the rationing administration. The entire inventory and control branch is located in New York City and has the necessary standard business machines, tabulating, sorting, and mailing equipment, with which the field offices are not equipped, to do large-scale direct mailing and to make rapid inventory compilations. Work Performed Among the reports compiled during the quarter under review, there were an analysis of interstate movement of automobiles and a selected survey covering inventory and stock movements of new and used passenger car tires. Comparative analyses were made of production and net transfer of footwear, and also of bicycles, by county and local board, for different months. An analysis of ration banking reports in the food program in one part of the country was considered so helpful to the Office that a similar study covering the banks in other areas has been requested. The compilation of a food mailing list, consisting by the end of September of approximately 500,000 names 'of processors, wholesalers, retailers, etc., was an important recent project. This list is used for the direct mailing of point charts and other informational material. Volunteer Workers To take care of the expanding operations since March 1943, the inventory branch has been assisted by a group of devoted volunteers. These unpaid workers, who supplement the services of approximately 158 paid workers, come from every walk of life and include a countess, an actress, a motion-picture critic, a former member of our diplomatic corps, and a former representative of one of our leading bank offices in Paris. Two nuns from a convent in Albany spent a 1-day holiday doing volunteer work for the branch. Several persons who came recently to file complaints because they were not receiving a larger share of rationed goods remained to help. From 25 to 60 volunteers report for work daily. 40 • Seventh Quarterly Report The contribution of the volunteers has been strongly felt in the direct mail operation of the branch. From April through September, more than a million envelopes with forms enclosed were mailed out to banks participating in the ration program and to various dealers and distributors. At an average of five forms to each envelope, a total of nearly seven million forms was mailed. The volunteer group was credited with the completion of at least 75 percent of this workload. Specialized operations, such as editing of forms prior to their tabulation, checking inventory reports and registration forms for the rationing programs, and keeping a record of special panel banks established as a testing ground in ration banking for gasoline, have also been performed by the volunteers. FOOD RATIONING The outstanding event in food rationing during the third quarter of 1943 was the suspension of coffee rationing late in July. Although rationing is essential for fair distribution of scarce supplies and helps to support ceiling prices, it is a particularly burdensome control, causing inconvenience to industry at all levels and to every individual household. It is gratifying that it can be abandoned promptly when critical need of it passes. Suspension of sugar rationing was widely discussed during the quarter. Sugar supplies improved somewhat and the prospect of further improvement became less bleak; but the bulging warehouses of sugar, occasionally reported in producing areas, were elsewhere only wishful thinking. Assurance can be given, however, that this commodity will be restored to full freedom of movement as soon as sound improvement in the sugar situation makes such a step safe. A new category, home-processed foods, was added to the rationing program in August. Prunes, raisins, and currants, which had not been rationed since March, were restored to the program in September. Because seriously disruptive shortages seemed to be developing during the quarter in certain grocery items not on the rationed list, plans were prepared to enable the efficient rationing of any of several additional items on very short notice. Regulations and forms for contingent use were drafted, and swift action can be taken should a critical shortage develop. Developments in Rationing • 41 The Wartime Food Diary Administration of the food rationing program was facilitated during the period by guidance from the “Wartime Food Diary,” a continuing survey conducted jointly by the Office and the Bureau of the Census. Since February, field representatives of the Bureau of the Census have weekly interviewed the buyers in about 3,000 households as to their current buying habits. These reporting consumers, often called the consumer panel, record their food purchases daily in a wartime food diary which provides the Office with current information on the amount and kind of rationed and unrationed food purchases for home use. This information has been valuable in setting point values. The survey has also been of inestimable value in supplying information about buying habits as affected by locality, by seasons, and by wartime shortages. Per-capita weekly purchases of* meats, fats and oils, cheese, canned milk, and canned fish for the period April-August declined approximately one-sixth from the 2 months preceding the institution of rationing. Purchases of all five food groups declined, but cheese, meat, and canned milk were most affected. Data from the consumer panel also indicated month-end buying peaks arising out of the reluctance of housewives to part with ration stamps until near their expiration date. The introduction of tokens, with an extended validity period of stamps, was expected to lessen this particular burden on retailers. Point expenditures by families in the consumer panel are also studied to ascertain whether consumers are spending their points for various foods in proportion to quantities available for rationing. Consumers are eager to obtain their full ration of meats, in volume the largest group of rationed food. Point expenditures for fats and oils, on the other hand, have tended to lag, and expenditures for canned fish to be too brisk. Monthly adjustments in point values, however, are restoring the proper movement of these foods. Special surveys of the consumer panel are made periodically to determine the extent of unused and unneeded points by various population groups, especially rural families who produce much of their own food. The Office is thus enabled to set point values for rationed foods on the basis of the net point purchasing power of the Nation. 42 • Seventh Quarterly Report Effect of Supply on Rationing Programs The fixing of point values depends principally upon the proportion of food currently available for civilians. Allocations of food for the home front are furnished the Office by the Food Distribution Administration on a quarterly basis. These quarterly allocations reflect seasonal trends and changing volumes of production, as well as fluctuating requirements of our armed forces and lend-lease. Meat production.—The only reliable statistics bn meat production are still those of federally inspected slaughter; and these have become less reliable as an index to changes in total production, because of the increased farm and local slaughter in recent months. During the July-September quarter, production statistics were obtained also from other than federally inspected slaughterers, but these contained many inaccuracies, and were seriously incomplete. Total federally inspected slaughter during the quarter was about 8 percent larger than had been predicted and nearly 17 per cent more than during the corresponding period of 1942. Slaughter of hogs and cattle deviated rather sharply from normal seasonal trends. Pork production rose 28 percent above tha't of the similar quarter in 1942, while beef production dropped 10 percent below that quarter. Meat point changes.—The FDA allocation for the quarter showed a slight decrease. To compensate for the smaller supply, particularly of beef, all retail cuts of beef were raised, effective July 4, one point above their June values. Certain lamb and veal cuts were likewise raised, to reflect decreased allocations of those species. A 1-point reduction on lard necessitated proportionate reductions of several pork cuts convertible into lard. Canned fish was raised from 8 points per pound to 12 to curtail mounting demand for diminishing stocks. Point changes effective August 1 were almost negligible. Lard was further reduced by one point; and supporting reductions were made in fatbacks, plate and jowl squares, and pork fats. For the first time, two items were assigned a zero point value: pigs feet (green) and backbones. This was done to stimulate demand for these items, which were accumulating in the freezers of hog slaughterers. Developments in Rationing • 43 In August the FDA allocation for the quarter was adjusted upward, in view of the increased slaughter normal to September. Meat supplies were expected to increase 110 million pounds over August. Of supplies available to civilians, the greatest proportion of that increase, amounting to 60 million pounds, was pork. The increased production naturally included a proportionate increase in the output of variety meats. The point-value schedules effective September 6 necessarily reflected the anticipated expansion of supplies. All retail cuts of lamb were lowered one point, to adjust to a normal seasonal trend. Many variety meats, like brains and tongues, were also lowered one or more points, to offset the greater supply of these meats and to enhance their attractiveness to consumers. There was one exception in the group—the increase of two points on veal sweetbreads, which had won competitive consumer preference. All bacon was reduced two points; and bacon rinds, used principally to season fresh vegetables and dried beans, were reduced to zero point value. Corresponding decreases were made in point values for fresh and cured bellies. In order to extend these lowered point values to as many species as the forecast increase would allow, reductions of one point per pound were made on some of the more popular beef items. These decreases embraced rib steaks and roasts and sirloin steak (bone in). Fats and oils.—Early in the quarter, it became apparent that fats and oils were moving too slówly. In July point values for all fats and oils other than butter were therefore lowered. The lowering did not affect consumer demand appreciably, but industrial users took full advantage of the cut to increase their purchases by about 20 percent, thus using up excess supply. The lowering of the point value of margarine was notably successful. Butter rationing required especially vigilant administration throughout the quarter. Only one-half the production of creamery butter was available for civilians. Furthermore, the cash price of this product was lowered by the price roll back ordered by the Office. As most of the civilian supply was absorbed by the producing areas, shortages developed, principally along the Atlantic coast, in California, and in the Northeast Central States. Accordingly, the point value on creamery butter was raised from 8 to 10, and then to 12, per pound. Since there was little improve 44 • Seventh Quarterly Report ment in the situation, the point value for October was jumped to 16. Processed butter, since it moves very slowly when it costs as many ration points as creamery butter, was given a lower point value, effective July 4. Likewise, farm butter, which is normally cheaper than creamery butter and does not move in national channels, was given a lower point value on September 5 to encourage its consumption in producing areas and thus release more creamery butter for national consumption. It became feasible during the quarter to remove some minor items, such as whey cheese, from the rationing program because of lessened demand. Several new provisions respecting allocation of rationed supplies followed recommendations by the War Food Administration. Thus in the last two allotment periods for industrial users, bakers received 100 percent of their corresponding quarterly use of fats and oils during 1942. Allotments to 11 other industrial users are to be substantially increased. Fluid milk.—During the quarter, the gap between supply and demand for fluid milk widened further. Production was limited by shortages of feed and labor while demand increased. This caused heavier diversion of milk from manufactured uses into fluid sales. In an ever increasing number of areas, shortages developed. Each new shortage area tried to keep all its production and to draw upon new sources, often distant, thus creating wasteful cross-transportation. Accordingly, on September 7 the Food Distribution Administration announced a program to control fluid milk at the distribution level by limiting quantities to be distributed in all markets to the level of distribution in June 1943. Processed foods.—The over-all supply situation during the quarter under review changed very little. During the preceding quarter, estimates of available supplies for civilians had been sharply increased, due chiefly to reduced Government requirements. Actual movement of these foods, however, that is, consumption, exceeded scheduled movement in all categories. This situation was remedied by raising September and October point values on many of the commodities which had moved too rapidly. Preliminary reports from the field indicated that this measure was successful and that the excessive disappearance rates of the various commodities were checked. Developments in Rationing • 45 One of the chief problems in connection with processed foods which engaged the Office during the quarter was that of area shortages.* The President’s committee on critical production areas has listed a number of cities as boom defense work centers, so congested as to be unable to provide satisfactory living conditions.1 To discover whether there were shortages of food in these cijties, the ratio of food stocks to transfers in each boom city was compared with that of the country as a whole. In certain areas it was found that this ratio was definitely unfavorable, that is, that transfers had increased tremendously while inventories had decreased. To remedy this situation, it was suggested to canners that they ship greater volumes of food into these critical areas. In line with the policy of making point changes only bimonthly, there were practically nd changes in August, except an increase in point values of frozen foods. In July there were 12 upward and 5 downward revisions in point values of canned and bottled fruits and vegetables; in September, there were 7 upward and 6 downward, as well as a further increase on frozen foods and a sharp decrease on dried beans, peas, and lentils. Sugar.—Action during the quarter was facilitated by the supply position, which was improved by relatively heavy receipts from offshore areas during the early part of the quarter. Increased arrivals from the Caribbean area permitted a further westward expansion of the Eastern and Louisiana refiners’ territories. In line with Office policy to relax rationing restrictions whenever conditions warrant, a flat increase to 80 percent of 1941 usage (from 70 percent) was granted to all industrial users of sugar. The increase became effective for 3 months, commencing August 1. Industrial allotments were still further increased to manufacturers of low-sugar content breakfast cereals and bakery products and of drugs, medicines, and fruit preserves. These supplemental increases were granted to implement the WFA program to encourage the use of flour and grain and, in accordance with recommendations by the National Research Council and the War Production Board, to replenish supplies of drugs and medicines. The development of an acute shortage of corn sugar and corn sirup, threatening the continued availability of sweetened products to consumers, was ameliorated by immediately making beet 1 Hampton Roads, Va.; San Diego and San Francisco, Calif.; Houston, Beaumont, and Galveston, Tex.; Puget Sound, Wash.; Brunswick, Ga.; Charleston, S. C.; Newport, R. I.; Portland, Maine; Mobile, Ala.; Pensacola, Fla.; and Portland, Oreg. 564181-^44--------4 46 • Seventh Quarterly Report and cane sugar available to both registered and nonregistered industrial users of sugar. Provisional allotments of sugar to all commercial fruit canners were also increased to 100 percent of 1941 per-unit use—from 90 percent. More complete and current data on shifting population made it possible to grant special supplemental allotments to various industrial users. Special sugar allotments to industrial users, serving areas of military maneuvers in Louisiana and Tennessee, were extended during the quarter. Sugar was also made available during the quarter for canning sweet potatoes and applesauce, and for feeding bees. Stamp No. 13, in War Ration Book One, which was valid for 5 pounds of sugar for a period of 2y2 months, expired on August 15. Because of the continued improvement in the supply situation, Stamp No. 14 was also validated for 5 pounds, for the 2^-month period August 16 to November 1, inclusive. Coffee.—Coffee rationing was suspended, effective midnight July 28,1943. This action, the first which removed a major commodity from the ration list, was taken after consultation with the Food Distribution Administration. The suspension announcement was made by President Roosevelt in his radio “Report to the Nation” on the evening of July 28. A favorable rate of coffee imports had become firmly established in the second quarter of 1943. Shipping schedules for the third quarter, though tentative at first, were so high that serious thought was given to suspension of rationing, provided minimum imports could be assured for the rest of the year. While awaiting con' firmation of these shipping schedules, the ration period beginning July 1 was shortened to 3 weeks, approximately the normal rate of consumption. Coincidental with the liberalization of the coffee ration, all inventory restrictions on the accumulation of coffee by roasters were removed. These had previously been applied to insure an equitable distribution of green coffee when total stocks were low. Assurance of high shipping schedules for the third and fourth quarters, in conjunction with greatly increased inventories, made the removal of coffee from the ration list a logical step. Developments in Rationing • 47 Institutional Users All public, private, and commercial establishments which prepare and serve food are included in the group. Food allotments to institutional users are considered in relation to the availability of rationed foods for all types of consumers. The diversity of work in administering this program is illustrated by citing some of the establishments regulated by the Office. These include all public institutions (Federal, State, county, and municipal), hospitals, homes for the aged and the poor, nurseries, convents, USO centers, prisons, school lunch programs, boarding houses, industrial cafeterias, fishing boats, hotels, railroad dining cars, and restaurants. Data indispensable to administration of the rationing program will hereafter be available from a new reporting system in the field, started in August, on the quantities of food allotted to institutional users. Simplification of all field operations is now in progress. During the quarter, special consideration was given to public and private educational and charitable institutions which produce fruits and vegetables and process them for their own use. An amendment issued in September limited the charge against point allotments to these institutional users, in a manner which encouraged the utilization of home-produced fruits and vegetables. During September, instructions were drafted also to govern the rationing of food to schools that serve lunches. The aim of the Office is to permit institutional users, especially those whose activities relate to the war effort, to function with sufficient latitude to permit adjustments to war conditions. Modifications of Procedure Most problems of food rationing have changed from those of planning to those of operating. In general, changes have been slight and have been confined to refining existing techniques and policies, rather than instituting new ones. Administrative policies of the Office have been more clearly formulated, and it is now possible to apply uniform decisions to problems arising in any section of the country. 48 • Seventh Quarterly Report Many of the amendments to the food ration orders liberalized the program. Others were largely technical, such as those defining rationed commodities more precisely. . Point charts.—With the revisions of August 4, a new method was adopted in distributing consumer point-value charts. Previously retailers were required to obtain their copies of this chart from their local boards. Since a complete mailing list of all retailers registered under the meats-fats program had been compiled, however, it was possible to mail each a copy directly. It was believed that this would correct negligence on the part of many retailers who had not posted these charts in compliance with the order. With the point-value revisions of September 6, a further improvement was made in distributing these tables. For the first time, the trade (wholesale) table of point values was printed on the reverse side of the-consumer table. This enabled retailers to secure both tables at the same time, through the mail, without the inconvenience of going to their local boards. Point tables were further simplified. Fruit and vegetable juices were combined under “juices”; and soups, baby foods, and tomato catsup and sauce were designated “special products.” Formerly the first two were listed in individual categories, and the tomato products appeared under “vegetables.” Products formerly bulked in the listing, “fruit nectars,” are now separately listed as apricot, peach, or pear nectar or juice, all others being ration-free. Recognizing unavoidable delays occasioned by manpower shortages, the regulations were amended so as to give retailers one day’s grace in posting changed point values, and large primary distributors 30 instead of 15 days after the close of a reporting period to file their reports. Ration evidences —Coupon currency in denominations of 1, 5, 20, 100, and 1,000 points was substituted during the quarter for point certificates which had previously been used wherever additional ration points had to be created. These coupons greatly simplified operations by local boards and nonbanking members of the trade. Certain classes of retailers with ration bank accounts under one of the food rationing programs were permitted to open bank accounts for their dealings under any other food program. Developments in Rationing • 49 Persons other than physicians and surgeons, qualified to administer to the sick, requested authorization to sign certificates for additional ration points for their patients. Under an amendment to the regulations, the signature of any person licensed to prescribe internal drugs by the State in which the certificate is issued will be honored. Border problems.—Several amendments written during the quarter concerned rationing problems at the United States international borders. One permits any person to import home-processed meats or fats which he produced abroad, without surrendering ration poipts. Another adjusts point allotments for meats and fats to Mexicans living in defined areas just south of the border. Originally such persons had been permitted the same rations as United States citizens. Since Mexicans generally purchased only fats and oils in this country, however, the number of points allowed was reduced to 16 and restricted to use for fats and oils. In a few specific areas, where Mexicans were unable to acquire meat in Mexican markets because of the distances involved, they were permitted to apply for the full 64 points monthly. Industriad users.—An improved method of determining maximum point allowances to industrial users of processed foods was introduced to secure a fairer distribution of supplies among this group. Users were placed in smaller, more precise classes to permit taking into consideration the varying point values of the different commodities they use. Formerly allowances were based on ah average point value for all processed foods. Wholesalers'1 inventories.—The method of computing maximum allowable inventories of wholesalers was changed to permit calculating the allowable maximum on the basis of average sales in the first 3 of the 4 preceding months, instead of on 1 month’s sales only- . IV . DEVELOPMENTS IN RATIONING—CONTINUED The ever-growing problems of fuel supply and distribution placed a heavy burden of work on the Office in the July-September quarter. It is apparent that fuel problems are interrelated, that the supply and demand situation in fuel oil is tied in with supply and demand for coal, and that a program for distributing fuel is closely associated with the distribution of fuel-using equipment. During the period covered by this report, the Office simplified and improved the fuel-oil program, and carried through the issuance of fuel-oil rations for the coming winter. In addition, the program for allocating solid fuels in the Pacific Northwest was expanded, a nation-wide program for rationing stoves and other heating and cooking equipment was put into operation, and complete and detailed plans, procedures, and forms for the rationing of coal were completed. The huge quantities of gasoline needed for war have resulted in making the gasoline shortage the chief factor in the need for transportation control. Various measures were adopted during the quarter to reduce consumption throughout the country. The tire shortage remained acute even though transcended by that of gasoline. It was met by a tightening of eligibility requirements for new tires and by a carefully worked out program for more intensive use of old tires. Other developments in the rationing programs were twofold. Diminishing stockpiles of some rationed goods called for more stringent regulations in apportioning available supplies. On the other hand, almost all the programs were revised to provide greater flexibility both in freeing business and the consumer from unnecessary restrictions and in allowing local boards leeway in meeting emergency problems. 50 Rationing Developments—Continued • 51 FUEL OIL A fuel oil rationing program, adequate for any possible contingency during the coming winter, was developed during the quarter. This is important because the supply of light heating oils continues to be very low, although there has been some improvement in the supply of heavy industrial oils. Unexpected military demands may again confront the prpgram with severe supply shortages. The program has the flexibility to meet such shortages. Issuance of New Rations By the end of the quarter under review, almost all of the 1943-44 fuel-oil rations had been issued to about 5 million consumers. Improved forms and procedures made it possible for local rationing boards to carry out the task speedily and easily. Rations were issued early, enabling consumers to fill up their tanks during the summer months, when delivery facilities were relatively untaxed, and permitting them to accumulate a reserve against the winter months when deliveries may be more difficult to obtain. The industry was thus enabled to add to winter storage, particularly in the East. Most of the 1943-44 rations were issued on a renewal basis. The applicant filled out a simple form and obtained the same basic ration he received for the 1942-43 season. Errors made in computing the ration last year were corrected, and in some instances adjustments were made to give the applicant a ration more closely in accord with his needs. Rations of applicants who had no ration during 1942-43 were determined by the local boards on the basis of minimum needs, within certain limits fixed by the floor area of the applicant’s dwelling. Changes in the Program Varying validity periods.—It has been found that certain types of rations previously issued for short periods may be issued for longer periods without damage to the effectiveness of rationing controls. As an experiment, the rationing boards have been permitted to issue cooking and lighting rations for any period up to a year. This enables the board to determine and issue the ra- 52 • Seventh Quarterly Report tion for the period most convenient to the applicant. The new plan also helps the board by eliminating the necessity for issuing a great volume of rations at bne time. Increased allowance.—The maximum amount of fuel oil to be allowed per month for domestic cooking was raised from 20 to 30 gallons. This, will take care of consumers who have experienced difficulty in getting by on 20 gallons a month, without causing any significant increase in the total quantity of oil consumed. Reserves for wdustrial users.—A special plan was devised to permit industrial users to acquire a fuel oil reserve in addition to their regular ration. This reserve will prevent the forced shutdown of companies which cannot get quick delivery of fuel oil in the middle of winter because of transportation difficulties. The plan will also relieve the pressure on the storage facilities of suppliers and dealers. Hardship cases.—Special circumstances sometimes arise which make it necessary for a consumer to use more oil than his basic ration allows.. These special circumstances were recognized last year by granting additional rations under certain specified conditions. A plan for issuing special rations is being developed which will take into account many different types of special circumstances, and will simplify the procedure used last year in these cases. Dealer shortages.—A fuel oil dealer must have on hand ration evidences plus fuel oil equal to the total storage capacity of his tanks. Checking on this balance is a simple and effective method of detecting black market operators. Many dealers get out of balance, however, through no fault of their own when oil has leaked away, coupons have been lost, or consumers have failed to turn them in as promised. As a result, the dealer may not have enough coupons to maintain the oil reserves necessary for doing business. A new plan was devised during the quarter to bring such dealers back into balance by giving them coupons to make up for their losses. Conversion program.—The problem of fuel-oil supply was also considered in relation to the coal situation. Because adequate distribution of coal supplies appeared questionable, the Office decided to suspend its program of converting fuel oil consumers to the use of coal. As a result, the restriction on issuing rations for convertible equipment was removed. However, tight Rationing Developments—Continued • 53 restrictions were placed on the conversion of coal-burning equipment to oil. It seemed desirable to preserve the status quo between coal and oil until such a time as the coal supply factors become less obscure. Fuel Oil Demand Estimate During the quarter under review, the project for estimating fuel oil demand by area was carried into effect. New 'methods were devised for supplementing the data derived from the revised application forms. A stub was prepared for each large ration issued, and summary reports were submitted to cover the smaller rations. The figures thus obtained were tabulated and analyzed, and served as a basis for a preliminary estimate of the geographical demand for fuel oil. Stubs and reports were still being tabulated at the end of the quarter. The final figures should simplify the adjustment of the oil distribution patterns existing before the war to the new patterns produced by rationing. NORTHWEST SOLID FUELS PROGRAM The tremendous expansion of industrial activity in Washington, Oregon, and Idaho, combined with growing shortages of manpower and transportation facilities, has produced a severe fuel situation in this section. Not only has fuel oil been rationed in the Pacific Northwest, but the distribution of firewood, which is widely used as a fuel in this part of the country, has also been controlled by the Office since February 1943. Following an agreement with the War Production Board and the Solid Fuels Admin-istration, the Office brought under control, beginning September 20, 1943, distribution of all solid fuels in the Pacific Northwest, including firewood, coal, coke, charcoal, and petroleum briquettes. The program established a priority system for the delivery of all solid fuels. The consumer must register with one dealer. When he places his order with this dealer, he must state the quantity of solid fuels on hand, and must estimate his needs for the current heating year. Orders with more than one dealer are forbidden. In making deliveries, dealers are required to give first consideration to industrial consumers engaged in war production and to domestic consumers who are in greatest need because of low current 54 • Seventh Quarterly Report inventories. Among domestic consumers, those with less than onefourth of their estimated annual needs on hand are to be served first and then those whose supplies are one-fourth to one-half of their estimated needs. COAL RATIONING Because of the uncertainties involved in the production and transportation of coal this year, the Solid Fuels Administration for War indicated on July 31, 1943, that preparations should be made to ration coal. Chairman Nelson of the War Production Board therefore instructed the Office to prepare the program in full, to the point where forms, instructions, regulations, and other related material would be ready for printing. The Office immediately undertook this task. Meetings and conferences were held with the coal industry and with others affected, and much advice and information was received. Forms were designed in complete detail, regulations were drawn up, and instructions and informational materials were prepared in final form. By centering special attention on the coal plan throughout the month of August, the Office was able, despite limited personnel, to develop and prepare a complete program within a relatively short time. On August 31, the Solid Fuels Administration for War indicated that consumer rationing of coal would not be necessary during the coming winter, and the Office was instructed by WPB not to print, for the 1943-44 heating season, the materials that had been prepared. The Office was directed, however, to continue until further notice Ration Order 19, which became effective September 1,1941. Ration Order 19 1 Ration Order 19 is not a consumer rationing regulation. It is a limitation order on consumer inventories. It applies, moreover, only to the larger sizes of anthracite coal. The order limits the amount of anthracite which a consumer in the 12 Eastern States and the District of Columbia may acquire for space heating, domestic cooking, and domestic water heating. It provides, with certain exceptions, that no consumer may receive a delivery of anthracite coal which, when added to his present inventory, will 1 nation Order 19 was revoked November 18, 1943. Rationing Developments—Continued • 55 bring his supply of coal on hand to more than 50 percent of what he used from April 1,1942, to March 1, 1943, the base year. A priority system for coal deliveries was established in the order to ensure that consumers who have on hand less than 25 percent of their base year consumption be served first. After that, consumers who have between 25 and 50 percent are to receive deliveries. The order does not curtail consumption, but merely attempts to spread the available supply of coal more equitably. It could be modified, of course, to limit total 1943-44 deliveries of coal to consumers to a fixed percentage of last year’s consumption. Limitation orders of this type are very difficult to enforce, however, and cannot be effectively used to bring about any significant reduction in total annual coal consumption. Future Prospects The future prospects for consumer rationing of coal cannot be accurately foretold at this time. There is considerable evidence of a serious maldistribution in the supply of coal for space heating. In many parts of the country dealer yards and consumer bins are empty, with no assured supply in sight. Even where limited quantities of coal are available, dealers have tended to supply old customers first, leaving many other customers without a source of supply. Ration Order 19 forbids such discrimination, but the difficulty of enforcing it is obvious. The program for coal rationing can be installed and operated with a minimum of preparatory work. It cannot be instituted at a moment’s notice, however, since about 2 months are required to print and distribute the prepared material, and another month is necessary to process applications and registrations. Though coal supply uncertainties continued to grow, by the fall of 1943 it was too late to begin consumer rationing during the 1943-44 heating year. HEATING AND COOKING EQUIPMENT The plan for nation-wide stove rationing, described in the quarterly report for the period ending June 30, 1943,2 was inaugurated without substantial change during the quarter under review. The final regulations were drafted and approved, forms were printed * See Sixth Quarterly Report, pp. 31-32. 56 • Seventh Quarterly Report and distributed, instructions to the field staff were prepared in full detail, and informational materials were prepared for the use of the stove trade. Training conferences were held to acquaint the field staff with the exact nature of their duties and responsibilities under the new program. The program was initiated August 24, 1943, under Ration Order 9A. On September 1, 2, and 3, dealers and suppliers registered with their respective local boards, and they received their allowable inventories shortly thereafter. Consumers began immediately to receive stove certificates. The new stove program provides that rationed stoves may be obtained only on presentation of a stove certificate at the time of purchase. Used stoves and certain types of new stoves containing little or no scarce materials and not using scarce fuels are excluded from rationing. Stove certificates may be obtained by application to a local board. If the applicant is found eligible for a stove, and if the board has any stoves remaining in its monthly quota, a stove certificate is issued specifying the type of stove for which the applicant is eligible. If the quota is already exhausted, the applicant will be issued a certificate when the board receives a new quota. The Certificate Flow-Back System As in other rationing programs, the distribution of stoves from the manufacturer to distributor and distributor to dealer is brought about by means of the flow-back system, which is essential to the effective operation of rationing control. Not only does the flow-back guard against black market operations (since each person selling a stove must obtain a certificate in order to replenish his own stocks), but it also guides the distribution of stoves into the channels of ration demand. In other words, since stoves can be transferred only in return for certificates, they will be shipped to those points where certificates are being presented. By incorporating the flow-back system, the new program prevents the hoarding of stoves by dealers and corrects the widespread maldistribution of stoves throughout the Nation. This could not be accomplished under the first stove-rationing program,3 since it contained no flow-back provisions. 8 Stoves had been rationed in 32 States where there was a fuel oil shortage under Ration Order 9, effective December 19, 1942. See Fourth Quarterly Report, p. 25. Rationing Developments—Continued • 57 Consumer Quotas Each local board is assigned a monthly quota representing the total number of stove certificates it may issue during the month. This system serves to distribute the available supply of stoves fairly over all parts of the country. One of the major purposes of stove rationing is to move stoves out of the surplus areas and direct them into the shortage areas. For this reason, the quota for each area is not set by the number of stoves in that area, but according to the ration need. If there are more stoves in one area than can be sold under the quota, they can often be shifted to other areas where the demand is greater and the supply smaller. The total national quota is set at the estimated number of stoves available, as indicated by existing stocks and production schedules. At the outset of rationing, the national quota was allocated among the several regions, districts, and counties on the basis of the census figures of stoves in use during 1940, with adjustments for population shifts and for restrictions of stove sales resulting from fuel shortages in certain areas. In the future, these quotas will be based upon the eligible demand for stoves in the different areas, as disclosed by the operation of the rationing system. Thus, where a local board finds more persons eligible for stoves in a given month than its quota for that month, this fact is considered in determining the next month’s quota for that board. Quota reserves are set up in the national, regional, and district offices for use wherever they are most needed. If a particular board faces unusual demands, it may apply to the district office for an increase in its quota from the district reserve. Similarly, a district office may get an expansion of its quota from the regional reserve and a regional office from the national reserve. Allowable Inventories At the beginning of stove rationing, each dealer was given an allowable inventory based on his sales for 1941 or 1942, whichever were larger. If a dealer had fewer stoves than his allowable inventory at the time of registration, the board gave him stove certificates which he could use to make up the difference. On the other hand, if his inventory at registration was greater 58 • Seventh Quarterly Report than his allowable inventory, he had to return to the board sufficient stove certificates received from sales to cancel the excess. The use of allowable inventories serves several purposes. Dealers who had low stocks at the beginning of rationing are assured of enough stoves for inventory needs. On the other hand, dealers are prevented from further reducing the supply of stoves available to consumers by the maintenance of oversized inventories. Finally, the allowable inventory device makes possible an easy check on the dealer’s transactions under rationing. Allowable inventories are not rigid, however. Adjustments may be made for individual dealers where necessary. Temporary adjustments are also possible to permit dealers to buy full carload lots as a measure of economy. Dealers who have enough certificates for a specified fraction of a carload may borrow a sufficient number from the local board to make up a complete carload, provided the certificates are returned as soon as the stoves are sold. The fraction varies in different areas according to distance from the main shipping points. Adjustments in allowable inventories may also be applied to whole sections of the country in order to correct the geographical maldistribution of stoves which existed at the time of registration. A general increase of about 50 percent in the allowable inventories of coal and wood stoves has been permitted since dealer registration showed available supplies to be considerably larger than was estimated prior to registration. In general, however, allowable inventories this year will be smaller than average inventories in past years because of the general reduction in supplies. GASOLINE When the quarter began, there was already a transportation-induced gasoline shortage controlling the east coast gasoline rationing program, as well as a tire shortage providing the basis for the program in the rest of the country. Moreover, the shadow of a gasoline shortage which would spread over the whole country was evident. By the close of the quarter the shadow had become a reality as far west as the Rockies, and its extension to the Pacific coast was imminent. The eastern transportation difficulties had been overcome to the extent that the Petroleum Rationing Developments—Continued • 59 Administrator for War was able to announce the approach of a program of equal treatment for all areas. As a result of the varied war needs, total gasoline available to civilian consumers had been reduced to the point where the gasoline shortage became the controlling basis for the entire mileage rationing program. Tightening of Rations The major steys by which this program was implemented were the introduction of the “earliest renewal date” program and the 3-month coupon-tailored “B” book in the West on July 24; the cut of “A,” “B,” and “C” coupons to 3 gallons in the Midwest (PAW Districts II and HI) on August 16; and, effective the first day of the new quarter, the cut of all “B” and “C” coupons east of the Rockies to 2 gallons. At the same time, date changes in eastern “A” books were arranged to give eastern motorists the equivalent of a 2-gallon-a-week “A” coupon, an increase of one-half gallon per week. In addition to the changes in the regulations, two important steps were taken to reduce consumption: (1) A nation-wide review of rationing board issuances by audit crews working out of regional and district offices was arranged; (2) an agreement with PAW was secured to issue a limitation order on naphtha which would limit consumption to 125 percent of 1941 use in order to prevent diversion that had already assumed serious proportions in certain areas. Actual issuance of the order by the PAW was expected before October 15. Other Amendments Other actions of interest included an amendment to the non-essential driving ban on July 15 permitting application to a local board for a permit to make one round trip to a vacation resort with gasoline obtained from “A” coupons on hand. This amendment led to a rapid deterioration of enforcement of the ban, which was withdrawn altogether on September 1. Provision was made on July 31 for employees who terminate employment in a particular plant to surrender to their plant transportation committees rations issued by the committees. As of September 29, the amendment governing transportation of cars for resale was tightened to prevent any movement on its own wheels of a new or used car beyond a 200-mile radius of its location at time of sale. 60 • Seventh Quarterly Report RUBBER TIRES In view of the increased shortage of new and used tire inventories, several changes were made in the tire-rationing regulations during the period under review in order that essential transportation might be maintained. The changes made were threefold in aim: To restrict eligibility for tires, thereby decreasing demand and consumption; to increase the available supply of tires by putting into service all tires which were capable of giving any further service, regardless of how limited this service might be; to stretch available tire inventories through the use of an extensive program of tire recapping. Restriction of Eligibility Effective July 1, no person possessing only a basic “A” gasoline ration was permitted to establish eligibility for tires unless he could prove that he used part of his ration for occupational driving. Since the basic “A” ration is entirely nonoccupational in the eastern shortage area, all persons in this area not having a supplemental gasoline ration became ineligible for tires. Effective July 24, no person other than an emergency high-speed operator was permitted to establish eligibility for tires if his vehicle was already equipped with four serviceable tires plus one which could be used as an emergency spare. An applicant without a spare tire, however, was permitted to acquire an extra used tire. Effective July 29, all applications for truck tires or tubes by long-haul operators permitted to have an emergency reserve had to be approved by an official OPA tire examiner prior to the issuance of a rationing certificate. This action was taken to insure that no replacements were issued for tires or tubes which, in the opinion of an experienced tire man, could be made to give additional mileage. Further plans for reducing the demand for new passenger tires were announced September 25 and made effective October 1. Eligibility for such tires was limited to persons having a mileage allowance of 601 or more miles per month. This removed from new tire eligibility all “B” and some “C” book holders; these drivers are now eligible only for used or recapped tires. Previously, all car owners whose mileage totaled 241 or more miles per month could obtain ration certificates for new passenger tires. Rationing Developments—Continued • 61 The acuteness of the new tire shortage, however, made it imperative that eligibility for these tires be restricted until such time as synthetic tire production reaches sufficient volume to warrant relaxation of rationing requirements. Complete Use of All Tires Before the beginning of the quarter under review, action had been taken to reexamine all tires held by the Defense Supplies Corporation (tires collected from the public under the Idle Tire Purchase Plan), which had been designated as unfit for further use. Those tires which showed any potential usefulness were salvaged and branded as “emergency” tires. They were then distributed to tire dealers for sale to consumers as grade III tires. Tire Recapping Effective July 19, a program was put into effect permitting dealers to brand tires which, although beyond recapping, were still capable of giving some additional service. These could then be sold to consumers, on certificate, as grade III tires. It is estimated that between 1 and 2 million tires were added to dealers’ inventories as a result of this action. Plans were instituted, effective August 18, permitting the distribution to tire dealers of some 200,000 used truck tires acquired by the Defense Supplies Corporation from the United States Army. This program also permitted dealers to acquire additional stocks of camelback necessary to recap truck tires in their possession, thereby further increasing available supplies. An additional program was announced, effective August 28, which called for the reexamination of all tires held in the scrap piles of the Rubber Reserve Corporation. All tires capable of any further service were salvaged and distributed to tire dealers for sale as grade III tires. Grade “C” camelback, formerly available only for recapping truck tires, was made available on August 25 for recapping passenger-type tires. It is not necessary to secure a rationing certificate in order to obtain such recapping service. An improvement in the quality of camelback available for recapping trucktype tires was also made on this date by permitting the use of grade “A” stock for all truck tire recapping. 564181—44- ■5 62 • Seventh Quarterly Report Other means taken to increase the life of tires through the use of recapping service were permitting the recapping of farm service tires with high grade camelback, instead of a lower quality material, and permitting commercial motor vehicles which are ineligible for tires to acquire truck recapping service without regard to their essentiality to the community. AUTOMOBILES During the quarter under review, the automobile-rationing program, covering all 1942 models and 194F models driven less than 1,000 miles, was continued. Preparing to meet highly essential needs during 1944, the Office completed plans, in cooperation with the Reconstruction Finance Corporation, to set aside 10,000 new cars for reserve purposes. It is expected that these cars will be released to fill critical Government and other needs after the new car stockpile has been exhausted. Increased attention was given also to the over-all passenger automobile transportation question, particularly to the present and potential role of the used car in the solution of developing problems. Market trends in both stocks and sales were subjected to critical analysis, and plans were drawn for a survey of used car purchasers and suppliers. The program of placing new passenger automobiles in the hands of essential users by rationing them was about 85 percent completed at the end of the quarter. As of September 30, 1943, a total stockpile of 532,800 new cars had been reported to the inventory unit. Of this number, 457,440 automobiles were released under rationing (nearly 62,000 of them during July, August, and September 1943), leaving only 75,360 in the stockpile. Quotas were being substantially reduced so that the remaining supply would last over a longer period of time. The automobile rationing regulations were amended twice during the quarter. Both amendments were of a technical nature, designed to facilitate the administration of the program. In addition to these, the Office prepared a third amendment to meet the problem of the refusal of certain dealers to sell rationed automobiles to certificate holders. This amendment was to become effective in October. Rationing Developments—Continued • 63 BICYCLES Every dealer and distributor was required during the quarter to submit to the Office an inventory of all new adult bicycles, owned, possessed, or controlled by him as of the close of business on August 22, 1943. Reports received by the end of the quarter at the central inventory unit in New York showed a total of 107,-946 bicycles in the hands of about 90 percent of the total number of distributors. With local boards issuing from 36,000 to 65,000 bicycle certificates a month, it is obvious that bicycle stocks would soon be depleted. SHOE RATIONING During the quarter under review, the validity period of stamp 18 for shoes was extended indefinitely, at the same time that a new shoe stamp, Airplane Stamp No. 1 in War Ration Book Four was announced. Stamps can now be saved until heeded, and buying that would otherwise occur during a last minute expirationdate rush can now be spread out in a more orderly fashion, without sudden depletion of dealers’ stocks. Another amendment issued during the quarter removed from rationing odd-lot shoes. Such shoes had to be sold at a specified mark-down and could not exceed a fixed percentage of dealers’ stocks. The percentage was highest for women’s shoes, lower for children’s shoes, and lowest for men’s shoes because the accumulation of broken sizes, odds-and-ends, obsolete shoes, and other problem types is greatest in women’s shoes and least in men’s. This amendment aided the dealers in clearing out merchandise for which the consumer was not willing to turn in ration stamps. The prohibition against the spending of loose shoe stamps, except in mail orders, was strengthened during the quarter by forbidding the use of such stamps in a transaction where the shoes are selected or delivered at the store, and by requiring all shoe dealers to post notices to this effect. To avoid hardship to a consumer who had inadvertently detached the stamp from his War Ration Book, or had done so without knowing that the stamp became invalid for over-the-counter purchases, provision was made to permit the consumer to surrender the detached stamp to his local board in exchange for a special shoe stamp. In order to estimate how frequently a new stamp may be validated, the Office must have information on the stocks of shoes, by 64 • Seventh Quarterly Report type, in the hands of retailers, distributors, and manufacturers. All shoe establishments were therefore required to take a second inventory as of September 30 and file it with the Office. The first inventory was taken on April 10. RUBBER FOOTWEAR Changes benefiting both the consumer and the trade were made possible during the quarter under review through increased rubber allocations by WPB for the manufacture of the rationed types of rubber footwear. Eligibility for type 4 lightweight below-the-knee boots was extended to all persons demonstrating a genuine need for this type of footwear on their jobs, regardless of whether they are engaged in essential activities. Eligibility of employer-consumers for any type of rubber footwear was formerly restricted to those who normally and customarily furnished rubber footwear to their employees, and whose employees met the essentiality and need requirements. The first restriction was removed in order to aid employers who in peacetime were engaged in activities where protective rubber footwear was not needed, and who since have shifted to industries in which their employees require such protection. The change was also intended to benefit new employers who are now engaged in essential war work. When the rationing program was originally drafted, preconservation styles of rubber footwear were included in the classification of the six rationed types. Manufacture of certain styles for general civilian use was discontinued under WPB restrictions. Whenever it was found that some of these styles no longer served any industrial use and could not be disposed of under rationing, they were released from rationing control. An amendment issued in August excluded from the definition of rubber footwear all olive drab, clay, or khaki colored boots, all over-the-shoe boots, and all lightweight ankle-fitting boots which depend upon stretch at the ankle for fitting. While some of these types are usable for agricultural work, the quantity held by any dealer was small and usually made up of broken sizes. • To clarify inventory records and control, every establishment having in stock any rubber footwear released from rationing, either by this amendment or subsequent ones, is required to attach Rationing Developments—Continued • 65 to the inventory form a statement of the number of pairs of each type so released, and to send a copy of the statement to the district office. TYPEWRITERS Prohibition of sales of class A, B, and C machines remained in force during the quarter with the exception of approximately 100 special machines per week issued by specific authorization. Rental of B and C machines was permitted without restriction for limited but renewable periods. Essential users can obtain or protect their rental supply by securing priority certificates from their local boards. The existing supply of typewriters proved sufficient to accommodate rental demands of the country as a whole, although local shortages were reported during the quarter. . V . THE RENT CONTROL PROGRAM Rent control was extended to 3 defense-rental areas during the July-September quarter and 9 defense-rental areas were expanded to include 10 full counties and portions of 2 counties not previously under control. In addition, the Island Oahu, in the Territory of Hawaii, was designated as a defense-rental area, with a recommendation that rents be stabilized as of June 1,1941. Investigations continued to be made of the need for rent control in uncontrolled areas, and extension to several new areas after October 1,1943, was contemplated. As of September 30, 1943, there were 419 designated defenserental areas, with Federal rent control effective in 329. Population in the controlled areas totaled almost 77 million in 1940, ac-ording to the Bureau of the Census. RENTAL HOUSING OPERATIONS Extensive surveys of rental real-estate operations throughout the country, compiled to reveal the effect of rent control, indicate that the industry generally continued to enjoy a favorable operating position. Increases in rental income, stemming from record occupancies in active war centers and the virtual disappearance of delinquencies in rent payment, far outstripped such increases in expenditures as occurred. Actual expenditures, however, remained generally stable since operators were enabled, despite increases in prices of certain items contributing to operating expense, to curtail unessential services through war-induced economies and by the removal of competitive pressure. As a result of these developments, 6 months of operation under rent control, between July 1 and December 31, 1942, showed an average monthly net operating income (the difference between rental income and all expenses except interest and depreciation) 34 percent higher for apartment houses, and 36 percent higher for small structures than in 1939. 66 Rent Control Program • 67 These conclusions are based upon surveys covering the 4 years 1939 to 1942 for 75,000 dwelling units of all types and rent ranges in 39 major war centers,1 and represent the most comprehensive compilations of rental housing experience yet undertaken. Income and expense data from actual records of rental operations for representative apartment houses and small structures were transcribed without audit on a standard form approved by the United States Bureau of the Budget. Expenditures clearly chargeable to capital improvement were excluded. Factors in Higher Income The surveys revealed in some detail the extent to which the three principal factors responsible for the increase in net operating income—higher rentals, increased occupancy, and reduced or stable expenses—were affected by the impact of the war program on the economy. The analysis showed that increases in income over 1939 of 3.7 percent for apartment houses and 3.6 percent for small structures were attributable to rent levels under the maximum rent regulation which were generally above 1939 and 1940. In addition there were increases derived from the slash in vacancy losses effected by the unprecedented demand by warworkers and military personnel for housing accommodations in these areas. Vacancy loss, based on the percentage relationship of rental income to scheduled rents, declined for apartment houses from 8 percent in 1939 to 2 percent in the latter half of 1942, and for small structures from 7.5 percent in 1939 to 2.7 percent during the same period in 1942. The strong role of these two factors may be seen in average monthly rental income which was 10.5 percent higher in 1942 than in 1939 for apartment houses and 9 percent higher for small structures, despite the roll-back of rents during the second half of 1942. 1 The 39 cities included in the survey are Akron, Ohio; Alameda, Calif.; Baltimore, Md.; Berkeley, Calif.; Birmingham, Ala.; Boston, Mass.; Bridgeport, Conn.; Buffalo, N. Y.; Casper, Wyo.: Chicago, Ill.; Cleveland, Ohio; Denver, Colo.; Detroit, Mich.; Fullerton, Calif.; Houston, Tex.; Indianapolis, Ind.; Jacksonville, Fla.; Kansas City, Mo.; Louisville, Ky.; Mobile, Ala.; Newark, N. J.; New Orleans, La.; Norfolk, Va.; Oakland, Calif.; Oklahoma City, Okla.; Philadelphia, Pa.; Provo, Utah; Richmond, Calif.; St. Louis, Mo.; Salt Lake City, Utah; San Diego, Calif.; San Francisco, Calif.; Savannah, Ga.; Schenectady, N. Y.; Seattle, Wash.; South Bend, Ind.; Tacoma, Wash.; Vallejo, Calif.; Wichita, Kans. Maximum Rent Regulations became effective in 10 cities June 1, 16 cities July 1, 6 cities August 1, 2 cities September 1,1 city October 1, and 4 cities November 1. 68 • Seventh Quarterly Report Stability of Expense This significant increase in rental income was not absorbed by changes in total expense, bearing out the established principle that expense does not vary in direct proportion tp occupancy. A large element of stability is contributed by such items as property taxes and insurance, and by the minimum level of servicing required, independent of the degree of occupancy. During the 4-year period total expense for apartment houses remained virtually unchanged, while for small structures there was an actual decrease in the total of 4.6 percent. The net result of such trends was a more than one-third increase from 1939 to 1942 in net operating income. For the average apartment unit this represented an increase in net operating income from $183 per unit in 1939 to $234 in 1942. The corresponding figures for the average dwelling unit in small structures show an increase from $129 in 1939 to $180 in 1942. AMENDMENTS AND INTERPRETATIONS . Seven amendments to the maximum rent regulations were issued during the quarter under review, five of which related to the regulatory provisions. Prepayment on Purchase Price In September the section of the eviction regulations governing the size of payment of principal required before the purchaser of a dwelling unit might evict the existing tenant to substitute his own occupancy was altered to reduce the amount to 20 percent of the purchase price. When first prescribed in October 1942, this requirement called for prepayment of one-third of the purchase price out of the buyer’s own funds. It was designed to provide a means of dealing with evasions of the maximum rent regulations involving sales of rented property. In view of the effectiveness of this restraint in removing and preventing a serious threat to the rent ceilings, the Administrator concluded that it was feasible to lower the payment requirement. Two interpretations issued during the quarter clarify and expand this section. One deals with the meaning of “borrowed funds” as used by this section of the regulation. If a landlord borrows the sum required for the payment from an insurance Rent Control Program • 69 company against the reserve value of an insurance policy issued by that company on his life, and the terms of the loan provide for the deduction of principal and interest from the reserve value of the policy in the event of his default, but create no further personal liability on him, then the sum so obtained by the landlord does not constitute “borrowed funds” within the meaning of this section. In such circumstances the landlord may petition for and obtain a certificate authorizing him to obtain the eviction of the tenant 3 months after certification. The second interpretation which bears on this section states that a certificate of eviction must be issued where the purchaser has paid 20 percent of the purchase price from unborrowed funds, even though the purchase was made before the date of the amendment. Additional Ground for Rent Adjustment A ninth ground for adjustment of maximum rents was added to the housing regulation in accordance with a decision of the Emergency Court of Appeals. A landlord may now apply for an increase in rent where, on the date determining the maximum rent, the housing accommodations were receiving temporary exemption from real-estate táxes, the benefit of which was passed on to the tenant and, as a result, the rent was substantially lower than that generally prevailing in the area for comparable housing on the maximum rent date. Discussion of the case which led to this recommendation by the court may be found in the section of this report devoted to protest proceedings and matters before the Emergency Court of Appeals.2 Exemption From Eviction Restraints In July the eviction sections of the regulation were amended in order to facilitate the program of the Homes Use Service of the National Housing Agency, whose aim is to alleviate the housing shortage by encouraging householders to share their homes with war workers and their families. The amendment granted an exemption from the eviction restraints to a landlord who, on or after August 1,1943, rents to a family a furnished room or rooms not constituting an apartment, located within the residence occupied by the landlord or his immediate family, provided that * See p. 77. 70 • Seventh Quarterly Report within this residence he rents to no other persons than those in the one family. In such a case, the landlord may pursue remedies of local law to reobtain possession of the accommodations. The application of other provisions of the regulation is not affected. Refunds on First Rents Another amendment issued during the quarter related to housing accommodations rented for the first time after rent control becomes effective. The first rent in this case becomes the maximum rent, subject to review by the area rent director. The change provided that the landlord’s failure to register within the prescribed period will enable the tenant to collect a refund of any amounts he has paid in excess of the maximum rent which may later be fixed in a proceeding initiated by the Administrator. Housing for War and Navy Personnel The one other change made does not relate to housing accommodations in general but applies only to housing rented to military and civilian personnel of the War and Navy Departments for which the rent is fixed by the national rent schedule of these departments. In this instance the maximum rent is the rent established by such schedule. PROTEST PROCEEDINGS Operators of rental housing filed 171 protests against maximum rent regulations during the 16 months between June 1, 1942, the date of the first rent regulations, and September 30, 1943. Protests originated in 57 different defense-rental areas and involved both hotels and other housing accommodations. Of the total, 32 were directed against the hotel regulations, and 139 were filed by operators subject to the regulations for other housing accommodations. Many protestants raised objections to more than one provision of the maximum rent regulations; 86 protests suggested changes in the maximum rent date or area designation ; 116 arose under the cost adjustment provisions of the regulations; 109 included other general and particular issues. By September 30, 1943, 15 protests were pending; all other dockets for such protests filed had been closed ; 19 protestants had withdrawn their actions ; 93 protests were denied ; and 44 protests were dismissed. Rent Control Program • 71 During the quarter under review, the Administrator issued seven opinions dealing with protests against maximum rent regulations. Hotel properties were involved in two cases, company housing in one, and other housing accommodations in the remainder. The issues raised were for the most part familiar and fell into classifications for which the general principles had already been outlined. In replying to objections to maximum rent dates made by four of the protestants, the Administrator reviewed the facts which influenced his determination of that date. The amendment clarifying the circumstances under which adjustment of rents may be granted in cases where rents are substantially lower than those prevailing in the area, because of a special relationship between landlord and tenant, was the subject of a protest filed by a manufacturer of textile machinery who also rents housing accommodations to his employees. In this case the Administrator indicated that while the employeremployee relationship continued to be the chief basis for this provision of housing accommodations, certain extra-monetary economic benefits were derived from the practice by the employerlandlord which excluded it from the intent and scope of the special relationship adjustment clause. Requests for individual cost adjustments and a fair return have already been decided before the Emergency Court of Appeals. ’ Underestimates'of Operating Costs One protestant, who operates housing accommodations subject to Federal Housing Administration regulations accompanying mortgage insurance, requested a change in the adjustment provisions of the regulation to allow rent changes for errors in operating estimates. The Administrator’s opinion in the matter of Suburban Park Apartments Corporation stated : Protestant also contends that the Regulation should provide an adjustment for under-estimates of operating costs. Such increases are of individual rather than general applicability. In a competitive market, rents fluctuate in accordance with variations in demand and supply factors ; and in any limited period the movement of rents bears no direct relationship to individual increases or decreases in operating or other costs. Varying considerations influence different landlords in the establishment of rents for their housing accommodations. Some set their rents below the market in the expectation that the elimination of vacancies and the expenses incident to turnover will more than compensate them for the difference. In general 72 • Seventh Quarterly Report it is fair to assume that the rent established is that which the particular landlord and those who assist in determining his rent policy believe will in the long run give him the largest over-all return on the property. A particular landlord encountering increased expenses foreseen or unforeseen, cannot, in a normal rental market, offset them by increasing his rents without adversely affecting his competitive position. To allow him to charge higher rents now and to deny a corresponding increase to others would permit him to utilize the peculiar circumstances created by the war to secure a type of relief and a relative advantage over his competitors otherwise unobtainable. No justification exists for an exception where FHA requirements have influenced the establishment of rents which later became the maximum rents. Hotel Rates for Transient Accommodations Hotel operators contended in one instance that hotels which provide transient accommodations are not housing accommodations within the meaning of the statute and, furthermore, that they have been adversely affected by such concomitants of defense expansion as gasoline rationing and the curtailment of nonessential business. In his opinion in the matter of the Hotel Bond Company, the Administrator replied as follows : Section 302 (f) of the Emergency Price Control Act defines “housing accommodations” as “any building, structure, or part thereof, or land appurtenant thereto, or any other real or personal property rented or offered for rent for living or dwelling purposes (including houses, apartments, hotels, rooming or boarding-house accommodations, and other properties used for living or dwelling purposes) . . .” The protestant contends that it was the intention of Congress to include only hotel accommodations which are occupied by permanent guests. Nothing in the legislative history of the Act supports this construction. On the contrary, the Report of the Senate ; Committee on Banking and Currency expressly states that the term housing accommodations includes “any property rented or offered for rent for living or dwelling purposes, including hotel accommodations for permanent or transient use . . .” [Senate Report No. 931 to accompany H. R. 5990, 77th Cong., 2d Sess.]. This statement clearly demonstrates that rates for transient hotel guests were intended by Congress to be controlled under the Emergency Price Control Act. In contending that the Administrator failed to take into consideration decreases in hotel occupancy resulting from the curtailment of nondefense activities and gasoline rationing, the protestant has not taken account of other factors which have resulted in increases in hotel occupancy. Furthermore, occupancy is not in and of itself the test by which the need for the regulation of the rentals for hotel rooms is measured. The Emergency Price Control Act directs the Administrator to stabilize rents at the level prevailing on a date when defense activities had not yet resulted or threatened to result in rental increases inconsistent with the Rent Control Program • 73 purposes of tne act. The protestant admits that the economic activity of the Hartford-New Britain defense-rental area has been affected by defense and war activities which have created a labor shortage. It has not challenged the Administrator’s finding that war activities in this area had resulted in widespread increases in rents and that further increases were threatened as the result of inmigration to meet the demand for labor created by war activities [7 F. R. 1680]. Even though some types of demand for hotel accommodations in the area may have been reduced as the result of war conditions, others have increased. Defense and war activities in an area result in increased travel and temporary residence with a consequent demand for hotel accommodations. In addition, a generally increased demand for living accommodations tends to affect all types of accommodations, including hotels. Evidence with respect to the protestant’s operations collected by the Office of Price Administration demonstrates that up to and including November 1942-July through November were under rent control—the protestant was enjoying increased room rental income. This fact points to increased occupancy, especially in view of the fact that gross room rental income continued to increase, despite the interposition of rent control. EMERGENCY COURT OF APPEALS In the Emergency Court of Appeals, established by the Emergency Price Control Act of 1942 to review cases arising under that act, there were 10 new rent cases filed during the quarter, making a total of 31 in all. Of the 10 cases, 4 were appealed to the court after the denial of a protest against a maximum rent regulation by the Administrator, and 6 arose out of dissatisfaction with an order issued by an area rent director in ruling on a petition for adjustment of maximum rent. During the 3 months ending September 30,1943, the Emergency Court of Appeals decided 6 of the rent cases before it. The Administrator’s action was upheld and the complaint dismissed in 5 instances, while 1 case was remanded to the Administrator for further proceedings. The issues dealt with included the constitutionality of the Emergency Price Control Act of 1942 and the regulations issued under it, individual adjustments, the question of fair return, and the maximum rent date in one particular area. As of September 30,1943, 7 cases had been decided by the court, 2 complainants had withdrawn, and 22 complaints were pending. Constitutionality of Price Control Act One of the first rent cases filed in the Emergency Court of Appeals was an appeal from the Adihinistrator’s denial of a 74 • Seventh Quarterly Report protest against the maximum rent regulations, alleging that both they and the Emergency Price Control Act of 1942, under which they were issued, were unconstitutional. The initial consideration of the court was to examine the position of rent in relation to war consumption and production. Their conclusion was stated as follows: We entirely agree with the three-judge district court in Henderson n. Kimmel (47 F. Supp. 635, D. C. Kan., 1942), that it is no longer open to doubt that rent control is necessary to the effective prosecution of the war effort. As Circuit Judge Phillips well said in that case: “It is necessary in order to prevent the disastrous effects of inflation, to protect the families of men in the armed service, to attract workers to vital defense areas, to bring about a fair distribution of essential labor among the several defense areas, and to insure defense workers of housing accommodations at rentals that are not exorbitant. In short it is necessary to maintain civilian morale and insure the production of necessary armaments.8 The court also concluded that the act and regulation were within the war power of Congress, and that the congressional directives in the act were sufficiently detailed and specific to guide the Administrator. The court pointed out that although the act and regulation do result in the impairment of certain lease obligations, even the States, to which the constitutional prohibition against impairment of existing contract obligations specifically applies, are not thereby constrained in the proper exercise of their sovereign power to protect the safety, health, and welfare of their people. Other points made by the complainant included charges of discrimination against the housing industry, and violation of constitutional guarantees of civil and property rights, but the court found them without merit and the complaint was therefore dismissed. Individual Cost Increases In Lakemore Company v. Brown (Emergency Court of Appeals 15, July 14,1943), the complainant had filed a petition for adjustment of maximum rents on the ground that its real estate taxes had been increased as a result of an increase in assessed valuation after appraisal. Since the grounds were not contained in the relief sections of the regulation, the petition was denied. The complainant contended that the Emergency Price Control Act of 1942 required a provision allowing such individual adjustments for increased 8 Taylor v. Brown, E. C. A. No. 10, July 15,1943. Rent Control Program * 75 assessments, increased costs, and in cases of “undue hardship.” The complainant made no charges against the maximum rent date, or the general fairness and equitability of maximum rents in the area, but rested his complaint upon circumstances applicable to his property. In the words of the court: Complainant contends that the increase in real estate taxes to which it was uniquely subjected has to that extent altered to its detriment its relative position with respect to the other landlords in the area as of the maximum rent date; and that even though it may not be entitled to such an upward adjustment of its rents as would put them on a parity with those generally prevailing for comparable accommodations on July 1, 1941, it should at least be given an adjustment in an amount equal to the increased taxes, so as to restore its relative position as aforesaid. We find no such requirement in the act or in the Constitution. Furthermore, the suggestion is utterly unworkable, because it cannot be assumed that complainant is the only landlord who has had some unique item of increased operating cost. The Administrator could not possibly undertake to freeze as of a given date the relationship between the respective operating costs of the large number of landlords subject to the regulations. The court added further: . . . we cannot say that the Administrator was arbitrary or capricious in failing to provide for individual adjustments based on individual cost increases, not of general applicability, incurred after the maximum rent date. The complainant had also raised objections to the form and matter of the economic generalizations and factual sources incorporated into the record of the protest proceeding by the Administrator. To this, the court replied: We think complainant’s objection to the procedure followed by the Administrator is not well taken. Section 208 (b) expressly authorizes the Administrator, in the administration of the act, to “take official notice of economic data and other facts, including facts found by him as a result of action taken under section 202.” Section 203 (a) provides: “In the event that the Administrator denies any such protest in whole or in part, he shall inform the protestant of the grounds upon which such decision is based, and of any economic data and other facts of which the Administrator has taken official notice.” Thus, consistently with statutory requirements, the Administrator could have waited until he had entered his order denying the protest before informing protestant of the economic data of which he had taken official notice and of the economic conclusions which he had derived therefrom and the other grounds upon which the denial was based. Instead of that, and as a matter of grace, the Administrator offered protestant an opportunity, before the protest was acted on, to take a shot at the officially noticed economic 76 • Seventh Quarterly Report data and the economic generalizations which the Administrator had formulated in his own mind in the course of performing his official duties. It is objected that the Administrator thus in effect has prejudged the case; that as witness, immune from cross-examination, he has rendered an opinion which concludes the matter which is before him as judge. This overlooks the fact that the Administrator, from the necessities of the case, does not come with a virgin mind to the consideration of a protest. He has previously performed the official act of issuing the regulation, the terms of which .of course reflect his conclusions on many economic, administrative, and legal questions. In this sense, he necessarily approaches consideration of a protest with certain “preconceived notions”—to use complainant’s phrase. It is the object of the protest procedure to give the Administrator a chance to reconsider any challenged provisions in the regulation in the light of further evidence or arguments which may be advanced by the protestant. What the Administrator did here was to lay his cards on the table in the protest proceedings, offering protestant an opportunity to play its trump cards, if it had any. Fair Return The complaint in the case of Wilson and Bennett v. Brown (E. C. A. 19, July 15, 1943), hinged upon the question of a “fair return.” The complainants argued that the regulation resulted in a confiscation of their property without due process of law because it did not permit of an adjustment to assure them of a reasonable net return on the fair market value of the property. The court ruled that the Emergency Price Control Act of 1942 was constitutional even though it did authorize the Administrator to prescribe generally fair and equitable maximum rents which might in individual cases mean failure to obtain a fair return on a fair market value. The complainants relied on decisions under the District of Columbia Rent Law of 1919 construed along the lines of public utility rate making, but the court rej'ected these and other principles derived from the law of eminent domain as inapplicable, since rent control was designed not as a permanent fixture to supplant the normal operation of competitive forces, but as an emergency brake upon the wartime distortions of normal market influences. The court stated: The proper test of constitutionality, we think, is the more general one applicable where legislation is challenged under the due process clause as constituting an arbitrary and capricious exercise of a granted power. Rent Control Program • 77 And further: . . . The validity under the due process clause of the method of rent control which Congress has authorized cannot be judged apart from a consideration of the practical necessity of administration. The court then moved to a consideration of the question of practicability and stated as follows: . . . Since the wartime power of Congress to control rents includes the power to adopt such means to this end as might rationally be considered necessary for the effective administration of the regulatory program, the only question remaining to the courts is whether Congress had any rational basis for its judgment that it would be administratively impracticable to operate a scheme of nation-wide rent regulation on the basis of assuring to each of many million landlords a fair return on the fair market value of his rental property. The answer to this question is fairly obviously in the affirmative. Real Estate Tax Exemption The decision in Hillcrest Terrace Corporation v. Brown (E. C. A. 17, July 27, 1943) was handed down shortly after the three cases discussed above. The complainant operated a South Dakota housing project built and financed with the aid of the Federal Housing Administration, which insured the mortgage. Initial rentals were set in consideration of the exemption from assessment for real estate taxes which was allowed by the laws of South Dakota for a specified period after construction. The Administrator had denied the protest filed with him by the complainant on the ground that an individual adjustment for a factor not of general applicability was being requested. The court was of the opinion that this case represented a class of properties similar to those categories for which adjustments are allowed because in some one of a series of specified circumstances rents on the maximum rent date were not set in consequence of the normal play of market forces. Consequently the case was remanded to the Administrator for reconsideration and he was instructed to devise an amendment to cover the class of situation involved in this case, consistent with the general regulatory plan. The Administrator issued Amendment No. 6, which adds an adjustment provision for rents fixed in consideration of a temporary real estate tax exemption to the Rent Regulation for Housing.4 * See p. 69. 564181-44- •6 78 • Seventh Quarterly Report Maximum Rent Date The complainant in Spaeth v. Brown (E. C. A. 20, August 4, 1943) conceded the necessity for rent control in the Cleveland defense-rental area where his property was located, but argued that the Administrator was arbitrary and capricious in fixing the maximum rent date and failed to give proper consideration to the directives contained in the act. The court found that the transcript furnished full and adequate data to support the determination of the date and that the Administrator’s action was neither arbitrary nor capricious. The complainant argued that the increases following the maximum rent date were too slight to warrant control, since even these increased rents were still relatively lower than those prevailing in the area from 1919 to 1931. To this the court replied : This may be conceded but thé answer is that it is wholly immaterial. Congress clearly authorized the Administrator to stabilize rents at the level at which they stood in the particular area in question on the most recent date which did not reflect increases resulting from defense activities. It did not intend that all rent control should be suspended until rentals reached the higher levels of an earlier generation. The complainant also contended that the maximum rent date was unfair because it was not identical with the base dates for the general stabilization of wages and prices, leaving property owners at a disadvantage with respect to the cost of living when compared with those whose income is obtained from other sources. The court pointed out, however, that net operating income does not vary in direct proportion to changes in gross rental rates. The court discussed one other point made by the complainant as follows : The complainant urges, however, that the ratio of 62.4 percent between expense and rental income in Cleveland, as shown by one of the Administrator’s exhibits, is substandard for the country at large and that the Administrator should have taken account of this in fixing the maximum rents for the Cleveland area. The evidence, however, clearly shows that there were wide differences in the expense ratio between different American cities in the years before the war. Since these differences, which are doubtless the result of bargaining between landlords and tenants in a complex of varying tax rates and other local factors, were normal before the war, it is clear that it is no part of the duty of the Administrator to attempt to reform the economy by equalizing them now. Rent Control Program • 79 Rents Established by FHA The remaining complaint decided during this quarter, Northwood Apartments v. Brown (E. C. A. 41, August 27, 1943), was filed after the denial of a protest to the maximum rent regulation. Complainant contended that instead of actual rents charged on the maximum rent date, maximum rents for housing accommodations covered by Federal Housing Administration mortgage insurance should be established by the Administrator at the level of rents prevailing for comparable accommodations. Such accommodations are subject to the regulations of the Federal Housing Administration, without whose prior approval rentals may not be increased. The complainant contended that this circumstance acted in the same manner as a lease more than one year old on the maximum rent date would have done to preclude him from meeting with his tenants to set rents according to free competitive market practice. Complainant’s rents had not been increased during the life of the project, for which commitments were signed in 1938. The court, however, noted that the Federal Housing Administration in establishing project rentals does consider the economic soundness of the project and prevailing rentals. The complainant was free at any time to apply to the Federal Housing Administration for approval of an increase in rentals. With respect to the stability of complainant’s rentals since 1938, the court stated: Nor is it of particular significance that complainant’s rents have not been raised since 1938. That may be true in the case of many other landlords whose maximum rents are governed by the general formula prescribed in the regulation. The selection of a maximum rent date necessarily means that the rents for particular housing accommodations are frozen at the level of the last increase or decrease before the selected date. If landlords, in negotiating leases on or about the maximum rent date, chose to leave unchanged an old rental schedule, this is presumably because, in their business judgment, such rents were appropriate in the then existing state of the competitive market. Of course it would have been arbitrary and capricious for the Administrator to designate April 1, 1941, as the maximum rent date for everyone else in the area while setting a date in 1938 for Northwood. But complainant is in error in attributing this effect to Maximum Rent Regulation No. 24. 80 • Seventh Quarterly Report ADMINISTRATIVE OPERATIONS In accord with the policy of the Office of keeping operating expenses at a minimum, defense-rental areas were consolidated and reductions in personnel were continued. Seventy-nine defense-rental areas were combined into 37 areas. Three of the 42 areas thus eliminated had been operating as independent areas, while the remaining 39 had been operated as subareas, supervised by adjacent defense-rental areas. Fifteen area offices were closed or reduced to the status of subarea offices during this quarter, and 9 subarea offices were closed or reduced to the status of branch offices. Area Office Operations Registration.—Nearly 12,000,000 registration statements had been filed by the end of September 1943. Of these, 11,509,209 had been received from landlords of family dwelling units and 384,137 from hotels, rooming houses, and similar establishments. A special category known as “class D” cases consists of any dwelling unit registration where the landlord is charging a rent not in effect on the maximum rent date. Kents fixed by these reg istrations are subject to further review by the area rent office to determine whether or not the maximum rents are in line with those of comparable accommodations on the maximum rent date. By September 30,1943, there were 1,502,119 such cases or 13 percent of total registration. Ninety-five percent of these cases had been reviewed, 237,383 during the July-September quarter. In the vast majority of these cases, the rent set by the landlord was approved. During these 3 months only 29,751 adjustments were made in such cases on the rent director’s initiative, or in 12.5 percent of the cases reviewed. Tenant cases and director's proceedings.—Applications and complaints from tenants are acted upon in the area offices. Because of basic similarities between these cases and the review of class D registrations, they are grouped together for purposes of statistical reporting. During the quarter under review, 176,891 tenant cases and director’s proceedings were received and 199,970 were disposed of. In cases which were disposed of, some adjustment was made in only 62,564 cases, or 31 percent of the total received. Of the Rent Control Program • 81 remaining 137,406 cases, 2,378 were violations reported to the Office on enforcement cards, and 135,028 were dismissed or withdrawn. By September 30, 1943, a cumulative total of 642,105 such cases had been received. Of these, 591,165 or 92 percent had been disposed of, and 50,940 were still pending. Rent adjustments downward were ordered in 188,087 cases, or 32 percent of the total number of cases disposed of. Of the adjustments made during the months under review, 29,751 were based on the review of class D registratipns, 2,808 on formal tenant applications for adjustment, and 30,005 resulted from tenant complaints and other sources. A reduction of rent averaging $10.10 was brought about in 38,649 cases which were adjusted during the quarter. Restoration of services, furniture, furnishings, or equipment was made in 2,035 cases. Refunds were made in 7,327 cases, the total amount refunded amounting to $237,482.11. The other cases adjusted were settled by reregistration, by discontinuance of an overcharge, or some similar adjustment. Landlord petitions.—The rent regulations contain a number of provisions under which landlords may file petitions for adjustment. During the quarter 82,881 landlord petitions for adjustment were received and 88,391 petitions were disposed of. Of the 22,325 landlord petitions pending in area offices as of September 30, 1943, 72 percent were received during September and 16 percent during August. Only 12 percent were more than 60 days old. During the 3 months landlord petitions for an upward adjustment in dwelling rentals were granted in whole or in part in 52,948 cases, or 60 percent of the total number disposed of in the period. In addition, 6,335 petitions on rent adjustments for hotels, decreases in services, determination of maximum rent, or other grounds were also disposed of. In those landlord petitions for increased rent which were granted during the quarter, the average amount of increase requested by landlords was $8.46 and the average amount granted was $6.40. The entire amount asked by the landlord was granted in 65 percent of the cases, and somewhat less in the remaining 35 percent. The cumulative number of landlord petitions received as of September 30, 1943, was 605,201, of which 582,876, or 96 percent, 82 • Seventh Quarterly Report had been disposed of. Adjustments of all types were ordered in 257,277 cases, or 44 percent of this total. Administrative review.—A landlord who is dissatisfied with a rent order may, according to Revised Procedural Regulation No. 3, apply to the regional office for a review of the rent director’s action. Thereafter, he may protest the regional administrator’s decision to Washington. From February 1, 1943, when this procedure became effective, to the end of September, a total of 6,996 applications for review had been filed by landlords, of which over 80 percent had been disposed of. Only 111 protests against regional decisions were filed with the Administrator in Washington in the 8-month period, 74 of these during the quarter under review. Of the 51 protests disposed of during the quarter, 6 were granted, 14 dismissed, and 31 denied. One protest was amended after dismissal and returned for reconsideration. As of September 30, 1943, 52 protests were pending in Washington. ■ VI . ENFORCEMENT Enforcement activity of the Office had passed through two major phases and was entering a third during the quarter under review. The transitions were necessitated by the changing deniands of a country-wide enforcement task on a small professional organization. In its opening phase, during 1942, OPA enforcement concentrated heavily on controls over articles immediately affecting war production—e. g., ferrous scrap, machine tools, lumber, gasoline, tires, war area rents. This period was also one of preparation and acclimatization, both for the Office and for businessmen, working under a sweeping system of unfamiliar economic restrictions. The second phase of enforcement was abruptly inaugurated by the black market food crisis of the winter of 1942-1943, which required an extensive reallocation of available enforcement personnel for urgent new tasks.1 During the quarter under review, the entire basis of previous enforcement activity was revised in response to still another major shift in factors affecting OPA operations. It was decided to divert the greater part of the professional enforcement effort from the retail and consumer level to the manufacturing and wholesale levels. This decision was dictated by a number of developments. Owing to the unrelieved budgetry situation, it was not possible to bring about such substantial additions to the professional enforcement staff as were needed for even a skeleton enforcement coverage. For some time the Office had been working out a program to supplement its limited professional enforcement operations at the retail and consumer level with support from private citizens throughout the country. The essential steps in this program, steps of immense administrative difficulty, were the organization of price panels in all localities and the calculation of proper community dollars-and-cents ceilings for thousands of retail articles, to enable consumers to detect violations readily. These two steps were sufficiently far advanced 1 See Fifth Quarterly Report, pp. 55-57, and Sixth Quarterly Report, pp. 55-60. 83 84 • Seventh Quarterly Report in the quarter under review to justify the Office’s grave decision to turn over, the bulk of retail compliance to nonprofessional groups. An obvious advantage of the new plan is the enlistment of the community as a whole in securing compliance with the price regulations. Personnel recruited under this program has in essence a single function—to assure that all parties to retail transactions are fully informed of the regulations and that any obstacle to full compliance is ironed out. This means neighborly cooperation in doing a difficult job in which the entire community has an interest. The plan is not expected to replace the central function of dealing with the deliberate or negligent violator and with cases which cannot be settled by adjustment or which involve the type of violation which cannot be handled by untrained volunteers. This irreducible minimum of enforcement must be in professional hands and must of course be energetic, for it would be intolerable to secure widespread voluntary compliance through the work of nonprofessional price panels and then to permit violators who will not cooperate with the panels to go unchecked. It is the policy of the Office, therefore, to back up the panels with vigorous enforcement in those cases where professional attention is required. Full community participation in the price program is highly desirable under any circumstances. Nevertheless, the present degree of reliance upon community participation is dictated by budgetary considerations, and it does not represent the most desirable balance between community compliance work and professional enforcement. On the other hand, considerable advantage is expected from the greater concentration of OPA’s professional enforcement facilities at the manufacturing and wholesale levels. Violations at these levels are inevitably followed by widespread violations among retailers. Moreover, a higher net efficiency in the expenditure of professional enforcement efforts is possible when dealing with manufacturing and wholesale violations than when dealing with widely scattered and endlessly multiplied retail violations. Enforcement problems at the manufacturing and wholesale stages are obviously not susceptible of being handled by a nonprofessional staff but require the training and skill of the professional enforcement official. Enforcement • 85 While new vistas for effective enforcement at strategic points in the country’s productive and distributive system were thus opened, the hopes for retail enforcement still rest largely on a continuing development of the price panel program. ENFORCEMENT ACTIVITIES A comprehensive and detailed account of OPA enforcement activities in various fields was furnished to the Congress in the fifth and sixth quarterly reports. Enforcement operations in general have continued along the lines there described. Several developments of special interest occurring during the quarter under review are discussed below. Poultry Despite the filing of scores of criminal suits against hundreds of persons in the east coast poultry-producing areas, it became apparent late in July that black-market operations in poultry were continuing to deprive legitimate civilian and military markets of a large portion of their normal supply. Working in conjunction with the Army, the War Food Administration, and State police agencies, the Office turned from punitive to direct preventive measures. State police officials stopped poultry trucks on the open highways, enabling the Army to requisition live poultry under a procedure authorized by the War Food Administration pursuant to the Second War Powers Act. Ceiling prices were paid for the requisitioned supplies. At the time of the first requisition on July 21 outside Dover, Del., the Price Administrator announced: We are moving into this section because we are determined to put an end to black-market operations affecting important consuming centers such as New York City, and we are going to see that the Army, buying at ceiling prices, obtains the food our fighting men need. This action strikes directly at the chiseler and black-market operator who places personal profit above the needs of the men fighting to defend the country. No honest trucker or shipper can be hurt, since the Army pays to the owner the maximum lawful price. The only man who can suffer is the black-market supplier who has a truck load of poultry for which he may have paid 6 or 7 cents a pound above the legal ceiling, and this man will suffer to the extent that he has violated 86 • Seventh Quarterly Report ’ wartime price regulations. By eliminating the black market, we shall enable the Army and the housewife to buy poultry at fair prices through normal channels of trade. The Delmarva area, comprising parts of Delaware, Maryland, and Virginia, in which this emergency requisitioning program was carried out, is the largest poultry producing section in the East, its shipments running to approximately 4 million pounds a week. The Army requires approximately 1 million pounds a week from this area but had been able to obtain only a small fraction of this amount at ceiling prices. The requisitioning program thus carried out followed a recommendation of the Senate Special Committee on Small Business, as contained in its report 2 to the Senate of July 6. The Committee stated : To assist in the drying up of the black market and to secure adequate supplies, the Committee advocates that the armed forces requisition poultry found on the black market and pay ceiling prices for it. The Committee has heard frequent testimony in its recent hearings that the armed forces have been unable to get adequate quantities of fresh poultry to meet their current demands. Meat An aspect of the beef shortage which has received conspicuous public attention in the metropolitan areas is the virtual disappearance of the higher grades of beef from many restaurant menus. The Office has made particularly vigorous efforts to insure that these scarce supplies shall not be unfairly diverted by a few privileged restaurant owners. The Office of Administrative Hearings in a significant decision prohibited the well-known Toots Shor restaurant in New York City from acquiring additional rationed goods until its over-use of more than 100,000 points had been fully made up. The opinion in the case contains a forceful statement of the public issue presented : There is no doubt that a difficult problem confronts the so-called steak house in a total war economy suffering a shortage of meat. The commodity in which it specializes can no longer be obtained in unlimited quantity. A choice thus confronts such an establishment : To obey the ration regulation and possibly suffer considerable loss, or to violate the regulation and maintain its business substantially as usual. Such a choice is concededly a cruel one. It cannot be said, however, that such cruelty of choice is confined to high-class steak houses. Many of our sons in their last living hours have been confronted with a choice no less cruel. They, too, have the choice 2 Report 12, Part 3, July 6, 1943. Enforcement • 87 between suffering substantial loss and violating the obligations imposed upon them by war. The casualty lists mounting daily are evidence of the choice made and its unanimity. Steps were also taken to deal with a serious situation in the wholesale meat industry. The time-worn device of the tie-in agreement—an agreement whereby a purchaser is forced to accept less desirable articles in order to obtain those he really requires— is being used on an unprecedented scale by meat packers in dealing with their wholesale customers. Wholesalers-are required to purchase large quantities of sausage, bologna, head cheese, liverwurst, bouillon cubes, and similar secondary articles as a condition of receiving supplies of fresh meat. Several prosecutions were instituted in order to curb these practices, the most notable case being against the Armour Packing Co. in New Jersey. Apparel As part of a nation-wide campaign to enforce price ceilings on articles of apparel in the larger retail outlets, numerous injunction suits were filed against chain stores in New York and Chicago. By the end of the quarter, injunctions had already been entered by consent or by court decree in most of these cases. The form of violation involved was particularly difficult to handle. The applicable regulations contain a provision requiring each unit of a chain-store system to stay within the highest price lines handled by such store during a designated base pricing period. The possibilities for evasion are apparent, and evasions were in fact extensively practiced by numerous chains. These prosecutions, with their close and direct meaning for millions of retail consumers, sharply illustrate the continuing im-portance of organized professional enforcement activity at the retail level to supplement the work of volunteer community enforcement agencies. Fuel Oil The policy of vigorously enforcing fuel oil rationing during the summer months so as not to deprive consumers of essential services during the cold-weather season, initiated in the period ending June 30,3 was continued during the quarter under review. Sixty enforcement actions were started in the period and 30 suspension orders were handed do^n against violations. 3 See Sixth Quarterly Report, p. 29. 88 • Seventh Quarterly Report Industrial Violations Indicative of the advantages to be derived from an adequate allocation of professional enforcement personnel to the difficult and important enforcement tasks at the manufacturing and wholesale levels, was a series of large treble damage suits filed against companies in various industries. A suit for more than $350,000 and another for $300,000 were filed against foundries for alleged overcharges in sales of steel castings. Two suits, one for $51,000 and one for $58,500, were filed against dealers engaged in resale of iron and steel products. A wood veneer manufacturing company was sued for $270,000. Four suits seeking about $100,000 in treble damages were filed against companies dealing in hides. A group of actions was filed against mills and dealers in wastepaper seeking upwards of $170,000. A large candy manufacturer was sued for more than $1,400,000 for decreasing the weights of its nationally known candy bars; the company haft previously been found guilty of these unlawful weight decreases by a Federal Circuit Court of Appeals in an injunction suit. In New York City, the center of the American fur and fur-garment industry, 80 injunction suits were filed simultaneously against skin dealers and garment manufacturers. Temporary restraining orders were issued in all cases and a number of consents to final injunctions had already been entered by the end of the quarter. Consumer Services Nowhere more than in the field of consumer service establishments will the benefits of a properly integrated price panel system be felt. Investigations of a spot character in various parts of the country during the quarter disclosed an alarming proportion of violations in these essential trades. In most instances, the violations found were failure to file statements of base period prices. It is obvious that discovery of price violations under these circumstances is a well-nigh hopeless task. The situation calls for the greatest energy and vigilance on the part of the thousands of citizen volunteers who will be manning the price panels throughout the country. LITIGATION During the quarter a number of highly significant court decisions were handed down. These decisions will have an importance Enforcement • 89 in the general field of public law far beyond the statutory operations of the Office. Securing an Injunction In the case of Brown n. The Hecht Company, the United States Court of Appeals for the District of Columbia, reversing a lower court decision, upheld the Office on a point of statutory construction under the Price Control Act which is crucial to the success of OPA’s civil enforcement program. The court held that under the act an injunction must be issued when the Office proves that the law has been violated. A few lower courts had previously held that the statutory injunction provision was not mandatory, and that a court might refuse to issue an injunction where the violator made a showing of “good faith.” The Court of Appeals recognized that “innocent nonconformity ... is as inflationary and as damaging ... as guilty nonconformity.” Quoting from the decision of the Supreme Court in United States v. San Francisco, 310 U. S. 16, 31, the Court further stated that under a statutory provision of this type, the normal mitigating considerations weighed by equity courts “do not militate against the capacity of a court of equity as a proper forum in which to make a declared policy of Congress effective.” The policy of Congress thus made effective in the Heicht case is the policy of preventive enforcement of inflation controls in wartime. The Hecht case gives full recognition to the judgment of the Congress that inflationary acts are a type of public conduct so intrinsically harmful to the national safety that they must be made subject to an absolute prohibitory ban. The Supreme Court agreed to review the decision of the Court of Appeals on writ of certiorari. In view of the importance of the question, the Office, with the approval of the Department of Justice, advised the Supreme Court that the Government would not oppose the granting of the writ of review. Exclusive Jurisdiction In Rettenberg v. United States, the Circuit Court of Appeals for the First Circuit fully sustained the constitutionality of section 204 (d) of the Price Control Act, which contains the “exclusive jurisdiction” provision, a vital feature of the plan of enforcement and judicial review of OPA regulations under the act. 90 • Seventh Quarterly Report Rottenberg was indicted for selling wholesale cuts of meats at unlawful prices. He defended on the ground that the meat regulation was invalid. Both the lower court and the Circuit Court of Appeals ruled that this defense was not open inasmuch as the statute confers exclusive jurisdiction to consider the validity of price regulations on the Emergency Court of Appeals and the Supreme Court. The Circuit Court of Appeals pointed out that the exclusive jurisdiction provision and the special statutory review procedure for testing regulations are indispensable to prevent premature interruptions and nonuniform application of the present wartime price controls. The court held that the exclusive jurisdiction provision is clearly constitutional as an exercise of the war powers of Congress. The court also held that the Price Control Act does not make an unlawful delegation of power to the Administrator. Judicial Procedure The Circuit Court of Appeals for the Fourth Circuit in Brown v. Wright, a rent case, upheld the constitutionality of the delegation of power to the Administrator under the rent provisions of the act; and also held that rent control is a proper exercise of the war powers of Congress. The decision is also important as a landmark in the field of Federal judicial procedure. The court followed the decision in Henderson v. Flecking erf in ruling that a Federal district court may enjoin unlawful eviction proceedings in a State court despite the provisions of Section 265 of the Judicial Code. The latter section was originally contained in the Judiciary Act of 1789 as a protection against improper Federal interference with State court process. The decision in the Wright case contains an exhaustive discussion demonstrating that Section 265 of the Judicial Code cannot be applied as a bar to Federal law enforcement or to the effectuation of lawful Federal objectives. The question posed in this form has not been passed upon by the Supreme Court, and the opinion of the appellate court constitutes virtually the first definitive expression on the matter. Numerous other decisions were handed down during the quarter. A very small number of lower court decisions was adverse to the Office and appeals were taken in these cases. * See Fifth Quarterly Report, p. 66. . VII . ORGANIZATION AND MANAGEMENT1 Since its creation, the Office of Price Administration has tremendously expanded in staff throughout the country, with consequent increase in the complexity of its administrative problems. Conducting economic and industrial research; carrying on extensive relations with business men to obtain accurate information on distribution and pricing practices; developing satisfactory policies of price control, rationing, and rent control; and making effective these policies which apply to virtually every business man and every family in the country—all this has required the development of an unprecedented organization. This organization must be adapted both to the formulation of policy and the administration of regulations throughout the Nation. The Office has grown in the course of two and a half years from a relatively small handful of policy advisors to the Price Stabilization Director into a far-flung agency of almost 55,000 paid personnel, more than 76,000 local board members, and an even greater number of volunteer assistants. The proper organization and management of so many large-scale, diverse operations has been a most difficult task. This section of the report will explain the major problems faced and illustrate the main structure of organization now existing to deal with them. The general structure of the OPA organization is shown in the organization chart on the following page. THE ADMINISTRATOR AND HIS STAFF The Administrator of the Office of Price Administration is responsible for the major policies and general administration of the agency. To assist him in fulfilling these responsibilities, there is a small group of personal advisors and policy officers who report directly to him. 1 This chapter shows the organization of the Office as of November 30, 1943. 91 92 • Seventh Quarterly Report ORGANIZATION CHART OFFICE OF PRICE ADMINISTRATION NOVEMBER 15,1943 Organization and Management • 93 The Administrator has two chief aides who are responsible for the operations of the agency in the national office and throughout the field. One of these acts for the Administrator in coordinating the various program and service departments of the national office and in developing and directing the administration of coordinated polices for the agency as a whole. The other chief assistant acts for the Administrator on matters pertaining to the field and is responsible for coordinating field operations to insure appropriate timing of different programs and consistent application of policies by the field offices. Others on Administrator’s Staff In addition to the two chief assistants, there are eight units directly responsible to the Administrator: The general counsel is the legal advisor of the Administrator. He and his staff do legal research, draft opinions, represent the agency before the Emergency Court of Appeals, and perform other duties of an over-all legal character. The economic advisor is the chief general policy aide of the Administrator. He is also director of research and responsible for examining the development and application of OP A policies and appraising their effectiveness in achieving the objectives laid down by the Congress, the President, and the Administrator. The office of accounting services is responsible for supervising all accounting investigations conducted for the price, rent, rationing, and enforcement departments, both in the national office and in the field. It maintains the professional accounting standards which insure objective treatment of business records examined by the Office in its efforts to develop satisfactory regulations and to administer them effectively. The administrative hearings office supervises the OPA system of hearing, determining, and reviewing suspension order proceedings under rationing orders and regulations, and such other administrative proceedings as may be established by the Office. This system is designed to assure equitable treatment to those citizens and businessmen who are affected by OPA regulations by providing an independent review of administrative findings before suspension orders are issued. The labor office is the central clearance point in the agency for all issues of labor policy and labor relations which arise in 564181—44--------7 94 • Seventh Quarterly Report connection with the OPA programs. It is the channel through which suggestions received from organized labor groups can be transmitted to the appropriate operating divisions within OPA and through which the policies of the agency can be explained to the representatives of organized labor groups. Connected with the labor office is the labor policy committee, consisting of representatives of the major national labor organizations, who are appointed for the purpose of continuous liaison on policy and operating problems between the OPA and the unions which they represent. The industry council is an advisory body designed to represent thé industry point of view to the Administrator and his staff, to assist the OPA staff generally in obtaining accurate information on industry organization and business practices, to supervise the OPA program of industry advisory committees for each of the major industry groups, and to undertake special assignments for the Administrator in developing long-range policies. The Council, which consists of 18 members serving either on a part-time or a full-time basis, is subdivided into the following committees: A Congressional coordinating committee which is a clearance center for information requested by Congressional committees, avoiding duplication in requests for material and also scheduling appearances of witnesses before the various committees; a small business committee which advises the Administrator on policies affecting small business ; and a committee on low-end merchandise which is a joint undertaking of the Office and the War Production Board. This recently organized committee will suggest changes in price regulations to facilitate production and distribution of civilian goods at the lower price levels normally depended upon by a large percentage of the civilian population. The racial relations office was established to develop methods for encouraging the participation of Negroes in the program of OPA and to recommend to responsible officers in OPA action which should be taken to further this effort. The credit policy office grew out of the important relation of installment buying to inflationary pressures. The director of this office represents the Administrator on the intergovernmental consultative committee on consumer credit control, which operates under the general supervision of the Board of Governors of the Organization and Management • 95 Federal Reserve System. It is the duty of this office to see that policies developed by the interdepartmental committee and approved by the Administrator are put into effect by the various OPA subdivisions dealing with matters affected by credit buying. PRICE DEPARTMENT The price department is responsible for issuing maximum price regulations for the control of commodity and service prices throughout the country. In order to issue regulations which will be effective controls against inflationary price pressures and at the same time be fair in their treatment of the business interests involved, the department must conduct intensive research into the industry practices and pricing methods which prevail in each segment of American industry. It is necessary to analyze the facts thus obtained, to determine what provisions should be incorporated in the regulations, to maintain effective liaison with representatives of the industry or trade concerned, to cooperate with the research and regulatory activities of other Federal agencies, to assist the regional staff in the conduct of their price control work, and to develop plans for collaboration with the enforcement department in securing thorough compliance with the provisions of the OPA regulations. In order to carry on this multitude of diverse activities, the price department, under a deputy administrator for price, has been organized on a commodity basis, with related commodities and related industries grouped together in integrated organizational units. Divisions and Branches The price department is organized into an executive office, an export-import price control office, six price divisions—food, consumer goods, fuel, industrial materials, industrial manufacturing, and transportation and public utilities—a legal division, and a standards division. A restaurant price branch and a service trades price branch are also directly responsible to the deputy administrator. The food price division is subdivided into an administrative services branch and six price branches covering fruits and vegetables; meats, fats, and oils; grocery products; poultry, eggs, and 96 • Seventh Quarterly Report dairy products; cereals, feeds, and agricultural chemicals; and food distribution. The consumer goods price division functions through an administrative branch, an economic analysis branch, and three price branches—consumer durable goods, manufactured articles, and primary products. The fuel price division has a petroleum price branch and a solid fuels price branch. The industrial materials price division is composed of four price branches—iron and steel, nonferrous metals, building materials, and lumber—and a metal mining analysis office. The industrial manufacturing price division problems are dealt with by four price branches covering machinery, paper, chemicals and drugs, and rubber. The transportation and public utilities price division is composed of a transportation branch and a public utilities branch. Restaffing of the Department The administration of the price department in recent months has been characterized by the general restaffing of key policy positions in accordance with the intentions of the Congress expressed in the appropriation act providing funds for the fiscal year 1944.2 In order to comply with this legislative provision, the Office has secured men with substantial business experience to direct the price divisions and to fill the position of deputy administrator for price. Similar action has been taken in filling all the regional-administrator and district-director positions. The agency has operated fully within the provision of the appropriation act, as interpreted by the Comptroller General, since August 5, the effective date of the provision. RATIONING DEPARTMENT The newness of rationing in the United States, the lack of administrative machinery and experience for operating this program, and the development of group pressures where scarcities are involved, have created extremely difficult administrative problems. In the organization of the rationing department, as elsewhere throughout the agency, the Office has endeavored to keep adminis- 3 See also chapter on price developments, p. 2. Organization and Management • 97 tration of its programs as close as possible to the points where the problems arise. This has been done by decentralizing administrative operations to the field offices and focusing national office attention on policy and planning matters. The following organr ization has been established in the national office for the rationing programs. Rationing Divisions A deputy administrator for rationing is in charge of the rationing department. The department is composed of an executive office, a legal division, and four commodity divisions—food, fuel, automotive supply, and miscellaneous products. The food rationing division is subdivided into four commodity branches—meats, processed foods, sugar, and dairy products, fats, and oils—an institutional users branch, and an operating relations branch. The fuel rationing division is composed of an administrative operations branch, a program development branch, and three commodity branches for fuel oils, heating and cooking equipment, and firewood. The automotive supply rationing division has four branches including tire, gasoline, automobile, and bicycle rationing. The miscellaneous products rationing division is handled by five branches: administrative, industrial relations, shoe rationing, rubber footwear, and program planning. RENT DEPARTMENT The functions of the rent, department are to assist the Administrator to determine the need for rent control in various areas throughout the country, prepare regulations which will provide the necessary control and make possible adjustments to insure equitable treatment of tenants and landlords, and supervise the administration of the rent control program in the field. The department is organized into an executive office, a program1 and analysis office, an operations division, and a legal division. ENFORCEMENT DEPARTMENT One of the major .changes in the organization of the Office during the quarter under review was the- disestablishment of the legal department and the raising of the former enforcement divi 98 • Seventh Quarterly Report sion of that department to full departmental status. The price, rent, and rationing divisions of the former legal department were assigned to the price, rent, and rationing departments so that these departments would have the necessary legal staff required for developing and administering their respective programs. The former court review, research, and opinion division of the legal department was transferred to the offce of the general counsel. The enforcement department is now one of the six constituent departments which make up the national office. It is headed by the deputy administrator for enforcement. This change represents an effort to clarify the relationship between the various departments which develop regulations, and the staff which is responsible for enforcing them. Plans for administering a given regulation, including the promotion of compliance with its provisions, are developed jointly by the operating departments and the enforcement department. It is the responsibility of the enforcement department to take action when it has been determined that violation of a price, rent, or rationing regulation has occurred. New Organization The enforcement department is organized primarily on a commodity basis, rather than on a program basis, so that a single group of enforcement personnel may deal with each major group of business establishments on both price and rationing violations. The department is organized into an executive office, an office of the chief investigator, and five divisions. The litigation division is divided into an appellate branch, a briefing branch, and a general litigation branch. The food enforcement division has a meat and dairy branch, a groceries branch, and an agricultural commodities branch. The apparel and industrial materials enforcement division consists of four branches covering apparel, textiles and leather, industrial materials, and industrial manufacturing. The fuel and consumer goods enforcement division consists of three branches—automotive supply, heating fuel, and consumer durable goods. The rents and services enforcement division functions through a rent branch and a services branch. Organization and Management • 99 INFORMATION DEPARTMENT This department has the responsibility of explaining OPA programs to the public through the press, radio, and other informational mediums. It also advises officials of the agency as to the attitude and probable reaction of the public to OPA actions on the basis of information assembled by its staff. The department is organized into three divisions under the supervision of the deputy administrator for information, who reports to the general manager. The editorial division prepares written statements explaining the programs of the agency for use in informational work; it conducts relations with the press and plans and executes the informational activities for the price, rent, and rationing programs. The consumer division directs all activities which are designed to explain the price control, rent control, and rationing programs to consumers through the use of educational channels, civic groups, and other similar organizations. The field division plans and supervises the informational activities of the regional and district offices. ADMINISTRATIVE MANAGEMENT DEPARTMENT The administrative management department consolidates the centralized planning, service, and control functions relating to the administrative operations of the agency. It operates through four divisions—personnel, budget and planning, fiscal, and business services—a statistical standards office, and a historical records office. The personnel division has the responsibility of the over-all management of the agency’s personnel program. It provides for classification of all positions, and the selection, placement, and training of personnel. The division is divided into five branches covering personnel operations, personnel planning and analysis, field personnel, employee relations, and training. The budget and planning division assists the Administrator and other executives on problems of organizing and financing the agency so that its work may be achieved most efficiently. It is responsible for developing the organization structure and the methods of work and standard procedures employed, and for improving management practices in the national office and in the 100 • Seventh Quarterly Report field. It analyzes the estimated budgetary requirements submitted by the various regional offices and deputy administrators and adjusts them so that the over-all program of the agency may be achieved most economically. The division functions through seven branches covering management analysis, editorial work, employee suggestions, administrative and information analysis, rationing analysis, price analysis, and rent and enforcement analysis. The business services division is responsible for the procurement and distribution to the national office and the field organization of supplies and equipment required for the operating programs of the agency. These include printed documents, regulations, instructions, and similar operating and informational material and reach an average daily total of more than 300 tons. The division also provides a number of special services and is responsible for the development and maintenance of procedures to furnish prompt and rapid transmission of information and materials, particularly to the field. The division consists of the office services branch, printing and distribution branch, and library, all of which furnish agency-wide service. The fiscal division was recently created through consolidation of the accounts and audits branches of the former budget and finance division. It is responsible for maintaining and auditing the fiscal records of administrative expenditures. The statistical standards office carries technical responsibility in the collection of adequate statistical information concerning conditions in the industries affected by the price, rent, and rationing programs. Such information, of course, is essential for the proper determination of policy and the adequate and appropriate development of the programs. In discharging this responsibility this office assists the operating divisions and branches in developing public reporting forms and methods for the conduct of surveys utilizing such forms. It establishes criteria which such forms must meet and advises in the statistical problems and the interpretation of the data that are secured. Procedures have also been developed for a continuing reexamination of all established reporting requirements with a view toward eliminating reports which have outlived their usefulness, deleting items of information which are no longer essential, and other measures which will aid in reducing the reporting burden on the industry. Organization’and Management * 101 The, historical records office is responsible for planning and supervising the collection and preservation of historically valuable records of OPA policy and administration, so that the experiences of the agency may be referred to after the war. PROFESSIONAL SERVICES DEPARTMENT The disestablishment of the professional services department was a major move in the recent internal reorganization of the Office. The activities of this department were reassigned as follows: The transportation and public utilities division and the standards division were incorporated in the price department; the research division was assigned to the economic advisor, in the office of the Administrator; the accounting division was assigned to the Administrator’s staff as the office of accounting services; and the historical records office was transferred to the administrative management department. It is anticipated that this change will provide better service to the operating departments by tying the professional services more closely into their activities. ORGANIZATION OF FIELD ACTIVITIES The policies developed and promulgated by the various departments of the national office would be meaningless without an extensive and well-organized field staff to assure the effective and equitable application of such policies to specific cases in individual localities. • The field offices are responsible for explaining OPA policies and regulations to the citizens of every city, village, and hamlet in the United States; for securing from town and country, from every corner of the land a reliable picture of the requirements of the Nation for further extensions or modifications of basic price control, rent control, and rationing; for making such adjustments as may be required to bring the comprehensive provisions of the regulations into accord with the highly divergent situations which arise; for seeing that the fullest possible compliance with the regulations is secured through extensive educational and enforcement campaigns; and, in general, for securing the fullest possible active support from every public and private resource in achieving the purposes for which the Office of Price Administration was established. 102^* Seventh Quarterly Report The development of the field organization represents an effort to bridge the gap between the national office in Washington and the millions of consumers and business firms throughout the country. It has been necessary to devise a system of organization which will give full consideration to over-all nation-wide public interest and at the same time gear all Office operations as closely as possible to local requirements. The Local Boards To meet the primary needs of the citizens and retail business establishments located throughout the country, there have been established approximately 5,500 local war price and rationing boards. These boards serve as the ultimate point of contact between the Office of Price Administration and consumers on matters of rationing, and between the Office and retail dealers on problems of information and general requirements concerning price control regulations. In general, the boards operate through panels, each established to consider separate phases of the price and rationing programs. The organization and work of the local boards are described in detail in chapter VIII.3 In some industrial areas, “plant area boards” or “plant area panels” have been established for the convenience of employees of defense industries who would otherwise have to spend time going to their local boards in order to secure their rations of commodities as gasoline, tires, occupational footwear, etc. In many isolated rural or semi-rural areas, “distribution officers,” represent the local rationing board. These officers distribute and receive forms and applications, help applicants fill out required forms, and administer oaths or affirmations on rationing documents. The appropriate board panel passes upon applications after they have been forwarded by the distribution officer. The Rent Control Offices There are 370 defense-rental area offices which administer the the rent regulations in their respective communities. Under the supervision of the district offices, they conduct registration of all housing accommodations, pass on landlords’ petitions for adjustments, consider tenants’ complaints, and take other necessary actions to administer the rent control regulations effectively and equitably. 8 See p. 105. Organization and Management • 103 The staff assisting the area rent director varies in number according to the size of the defense-rental area covered and the complexities encountered. During the period of initial registration of accommodations, voluntary help is utilized and personnel is employed on a temporary basis. A recent development has been the use of some of the war price and rationing boards to give out information and perform certain clerical functions in the rent control program, under the general supervision of the appropriate area rent director. The District Offices The 93 district offices of the Office of Price Administration serve as primary points of supervision over the war price and rationing boards and the defense-rental area offices. They also function as the chief points of contact between the Office of Price Administration and retailers, groups of retailers, and wholesalers whose business activities do not extend beyond the geographic area covered by the district office. The district offices are responsible for adapting the policies of the national office to the actual circumstances which are met in the various parts of the country. In the interest of economy and satisfactory service to the public, factors weighed and considered in relation to one another in determining the location of the district offices were: Location of State capital and largest cities; center of population; geographical center of area; availability of transportation services; location of branch offices of other federal agencies; economic center of normal trading area; and traditional practices within the State concerned. The Regional Offices The regional offices of the Office of Price Administration are the highest level in the decentralized program of field operations. The regional offices make major adjustments in the application of price, rent, and rationing regulations to the areas which they serve. They supervise the activities of the district offices within their regions and perform other regionwide services which fall outside the jurisdiction of any single district office. 104 • Seventh Quarterly Report There are nine regional offices. Eight of these cover the continental United States ; the ninth deals with the territories and possessions. The jurisdiction of the offices is as follows: Region I : Boston Maine, Vermont, Massachusetts, Connect!-cut, New Hampshire, Rhode Island. Region II: New York Pennsylvania, New York, New Jersey, Dela-ware, Maryland, District of Columbia. Region III : Cleveland Indiana, Kentucky, Michigan, Ohio, West Virginia. Region IV : Atlanta Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia. Region V : Dallas Arkansas, Kansas, Louisiana, Missouri, Oklahoma, Texas. Region VI: Chicago Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin. Region VII: Denver Colorado, Idaho, Montana, New Mexico, Utah, Wyoming. Region VIII: San Francisco— Arizona, California, Nevada, Oregon, Washington. Region IX: Washington, D. C_ Territories and possessions. Each regional office is under the supervision of a regional administrator, who in turn is responsible to the OP A Administrator for the satisfactory operation of the price, rent, and rationing programs in his region. There is no standard inflexible pattern of organization strictly adhered to by the field offices, inasmuch as the successful operation of the program can be achieved only through flexible organization permitting variation from region to region to meet local requirements. In general, however, a typical regional office is or: ganized into seven major divisions reporting to the regional administrator. In addition to the three primary program divisions—price, rent, and rationing—each regional office has an enforcement division, an information division, an accounting division, and an administrative division. The district offices follow an organization similar to that of the regional offices, with an additional division to supervise the war price and rationing boards. . VIII . WAR PRICE AND RATIONING BOARDS The war price and rationing boards have been called the heart of the entire price control and rationing structure. In one way or another, every man, woman, and child in the civilian population is affected by the work of the boards. Their successful operation requires much time, energy, and resourcefulness; a keen understanding of human nature and patience and skill in dealing with people; an indestructible sense of humor and a thoroughly up-to-date acquaintance with the rules and regulations of the Office of Price Administration. Originating in the volunteer boards or “committees of neighbors” which were set up in January 1942 to administer the tire rationing and rubber conservation program, the responsibilities of the boards widened greatly as the rationing programs expanded and the cooperation of the community was actively enlisted in price control work. With the continued development of the Office policy of decentralization, more and more authority has been delegated to the local boards which are thus playing a progressively important part in the price and rationing programs. At the end of September 1943, there were 5,521 local boards in continental United States under the direction of 8 regional offices1 and 93 district offices. The number of inhabitants served by individual boards varied from a few hundred in exceptional cases in sparsely settled rural communities to about 1^ million in one of the densely populated areas of the city of New York. WHAT THE BOARDS DO Each local board has a tremendously big and complicated task to perform. It must keep the public apprised of changes in the rationing program and of new price ceilings or adjustments in 1 A ninth regional office located in the national office administers the programs for Alaska, Hawaii, Puerto Rico, the Virgin Islands, and the Panama Canal Zone. The territories have their.own district offices and local boards which operate like those in continental United States. Region IX issues its own price and rationing regulations because of different economic and social problems and also determines which of the continental regulations to use. 105 106 • Seventh Quarterly Report the old ones. It must register members of the community for the ration programs and must determine whether some are more entitled than are others to scarce supplies. It must receive complaints from the public, look into overcharges, and make recommendations on action to higher bodies. The duties of the local board are fourfold: (1) Administration of the rationing program; (2) administration of the price control program; (3) dissemination of information regarding both programs; (4) acting as a focal point for the expression of public opinion regarding the OP A. Rationing Activities Rationing, more generally than price control, has brought people face to face with the local boards. Approximately 131 million persons were registered for War Ration Book One, 130 million for Book Two, and more than 128 million for Book Four.2 The mere mechanical registration of the community for the rationing programs, however, has been only a small part of the boards’ work. Ration Books One and Two had to be individually adjusted before they were distributed, the one for excess sugar stocks and the other for excess canned goods. Aside from the basic sugar rations, the boards have been called upon to issue certificates for special allotments of sugar. From July through September 1943, for instance, they approved a total of 8 million applications authorizing the distribution of 290 million pounds of sugar for home canning. Passing on individual applications.—The determination of fuel oil allowances in the 1942-43 heating season involved an intricate and detailed system of calculation based on individual needs. The granting of certificates for tires or recapping services has been a huge task, for here the boards must consider the eligibility of the individual applicant under specified classifications for specified types of service. In gasoline rationing, also, the boards must consider the eligibility of the individual applicant for any allowance in addition to the basic “A” book. Just as time-consuming as these functions is the consideration of individual applications for such scarce commodities as rubber boots, typewriters, bicycles, stoves, or automobiles, to which certain groups in the community have preference on the basis of 3 War Ration Book Three was distributed through the mails. War Price and Rationing Boards • 107 greater use in the war effort or greater service to the community. Another important task of the local boards is to adjudge applications from individuals for supplementary rations of one or another commodity. Thus the boards must decide upon requests for special shoe stamps, for emergency gasoline rations, and for additional fuel-oil rations in hardship cases. They also have the responsibility of deciding upon special rations of foods for diabetics and other persons in need of diets, upon presentation of a doctor’s certification. Institutional users.—Handling the needs of institutional users, all of which are required to register with the local boards, is a job in itself. In this group are boarding houses, hotels, restaurants, jails, hospitals, etc. Smaller boarding houses obtain rationed foods by using the ration books of their boarders. Other institutional users, however, have to apply to the boards every 2 months for allotments of rationed foods. The boards frequently have to act upon requests and appeals for increased allowances, particularly in war-swollen areas. More than 384,000 institutional users were registered with the local boards at the end of September 1943. Volume of the workload.—A further idea of the workload of the local boards may be gleaned from the following figures. During the 3 months from July through September 1943, the local boards granted purchase certificates for over 70,000 automobiles and 149,000 bicycles. During the same period, over 2^ million new tubes and 6 million tires were authorized for passenger cars and motorcycles. More than 1 million new tubes, 1^ million tires, and 900,000 recapping services were approved for trucks and buses. In addition 219,000 certificates were issued for farm tractor and implement tires. Over 2 million consumers’ special shoe stamp applications were approved and more than 800,000 special shoe stamps were issued to the trade for refunds. The purchase of nearly 360,000 pairs of rationed rubber footwear was authorized. In addition to all this, the boards still handle a large volume of coupons turned in by some retail and wholesale dealers, distributors, and industrial users who do not have ration bank accounts. The boards issue ration currency for the purchase of additional supplies in exchange for these coupons received from consumers. The ration banking program has, however, relieved the boards of a huge load of such work. 108 • Seventh Quarterly Report Price Control Functions With the establishment of the General Maximum Price Regulation in May 1942, the activities of the local boards were expanded to include certain duties and functions concerning price control. At the outset, these functions were primarily the distribution of educational material regarding GMPR, the receipt and filing of base period price lists, the distribution of price materials, and the forwarding to district offices of complaints and applications for adjustment. Attempts during late 1942 and early 1943 to bring the local boards into a more active role in the price control program met with indifferent success. The pressures of the expanding rationing program left little time for the boards to take on new functions. Moreover, it was difficult to awaken community interest in price regulation which had up to that time been largely a matter of each individual seller’s base prices, as governed by GMPR. Price panels?—^ was not until the initiation of the community price program and the issuance of dollars-and-cents prices in May that the facilities of the local boards were more fully mobilized for price control work. At that time the activities of the local boards were further extended through the increased use of price panels and price panel assistants. The main job of the price panels is an educational one. They must see that the local merchant realizes the price regulations apply to him, and that the protections established both for the merchant and the consumer are more than the mere stated intentions of the authors of the regulations. This is accomplished through visits to local merchants, and keeping them up-to-date on regulatory developments; and through providing the public with detailed price information affecting the community. After a retail price regulation has been issued, the boards are responsible for securing compliance with its provisions. This function stems directly from the boards’ educational responsibilities. Compliance work is initiated through consumer complaints and through the boards’ price panels. The procedures are forthright and simple: (1) In the case of consumer complaints, the price panel of the board usually assigns 8 See also this report, pp. 17, 18, 84, and 112, and Sixth Quarterly Report, pp. 10, 11, and 56 War Price and Rationing Boards • 109 one of its members, the price clerk, or a price panel assistant, to visit the store in question to verify the facts and try to secure the merchant’s assurance against recurrence; (2) in the case of a price panel survey, price panel assistants are generally assigned to visit a group of stores to ascertain whether prices and postings are in line with the provisions of the regulations and to attempt to secure corrections where violations are found. If these preliminary negotiations do not bring about compliance, the merchant is asked to attend a conference at the board where the requirements of the regulations are then fully reviewed. In 95 percent of the cases handled through September 1943, price panels were successful in settling the issues brought before them; the remaining 5 percent was referred to the district offices for appropriate action. By September 30, 1943, price panels had been established in 5,100 of the 5,500 local boards and about 20,000 volunteer members were working on price problems.' In addition there were almost 29,000 volunteer price panel assistants. Dissemination of Information Carrying on informational and educational campaigns to win over individuals and groups who do not understand OPA programs is an important part of the boards’ work. Before the price and rationing orders can be made effective the public must be educated as to their value and content. A large share of the responsibility for such education is met by the local boards through radio talks, personal interviews, discussions before neighborhood organizations, and newspaper and magazine articles. Focal Point for Public Opinion Gaging the effects of the program and taking stock of justifiable criticisms and constructive suggestions' is another phase of the local boards’ work. Even under an ideal plan for a nationwide system of price control and rationing, it would be impossible to foresee all of the regional and local differentials and repercussions in terms of eating habits, climatic conditions, occupational requirements, and business and industrial trends and practices. 564181—44---------8 110 • Seventh Quarterly Report Through continuous contact with labor, farm, business, and other representative groups, through newspaper comments, and appeals and criticisms received from both consumers and industry, the boards acquire a great deal of information about such problems. Such information is transmitted through the district offices to the national office. Many of the amendments and supplementary regulations issued by the Office have resulted from further study of these field situations. HOW THE BOARDS ARE ORGANIZED Appointments to membership of each local board are made by the district director who designates one member to act as chairman of the entire board. Nominations for membership are submitted by the Office of Civilian Defense and other local groups. As the responsibilities of the boards have expanded, various kinds of volunteer and paid workers have been added to meet the growing administrative needs. Boards are generally divided into panels of three to five members, each panel specializing in a particular phase of price or rationing. The typical arrangement includes separate rationing panels for mileage, food, fuel, and miscellaneous products, and a price panel. The panel members act on all rationing and price control matters delegated to the local boards and provide local leadership in informing the public of the nature, purpose, and procedures of the rationing and price control programs, as well as in meeting community problems associated with them. Cases with which the boards are not empowered to deal, such as those requiring enforcement action, are transmitted to the district office for consideration. The Board Officials Members of the war price and rationing boards serve the community without financial compensation. From 36,789 members in November 1942, their number had increased to about 76,000 by the end of September 1943. The boards are expected to represent the community as a whole by including members of different occupational, political, racial, religious, economic, and social groups; that they be appreciative of the objectives of the Office of Price Administration; that they have a high regard for membership as a public trust; War Price and Rationing Boards • 111 and that they find it possible to devote at least the minimum number of hours required for effective board work. Composition, of the boards.—Board members have been drawn from business, professional people, religious leaders, farmers, labor, housewives, and racial and lingual minority groups. A special effort has been made to recruit members of organized labor for local board work in view of the fact that they represent the largest single organized consumer group in the country. At the end of September there were about 4,000 labor members on the 5,500 boards. Community service members.—Without the various responsibilities of the members of the price and rationing panels, the community service members are considered members of their boards without voting power. These members maintain an information service in the board office through which educational material can be distributed to the public and consumer complaints registered; they prepare weekly informative reports for the local press, radio, etc.; help to set up consumer clinics supervised by board members; and make arrangements for participation of board members in neighborhood meetings, radio broadcasts, and so forth. Distribution officer.—Provision is made for the appointment in each board of one or more volunteers to fulfill the task of distribution officer. This officer provides residents in outlying sections with all the services that a local board usually gives but he can perform no adjudicative function. He issues applications and informational materials to residents of his area, transmits the necessary documents from the local board to the applicants, and performs clerical duties connected with rationing. The number of such officers has increased since their work was found to be particularly useful in areas situated at some distance from a local board office. Volunteer Workers Several million persons, including thousands of school teachers who helped to issue the war-ration books, have contributed their services to the work of the local boards. Volunteers act as price panel assistants and in a variety of clerical jobs. In recognition of their services, all volunteers receive various forms of awards, such as Distinguished Service Pins and War Service Award Cer 112 • Seventh Quarterly Report tificates, upon completion of the required number of hours of service. Price panel assistants.—A new job for volunteers is that of price panel assistant in connection with the enlarged price control program. These workers assist in retail trade education regarding compliance with community price and dollars-and-cents ceilings and make visits to retailers to instruct them in price and posting regulations. They also help to check consumer complaints, secure compliance on a friendly basis, and report violations to the panel members.4 Regular volunteers.—During the month of June alone, about 27,000 regular volunteers, furnished through the local defense councils and various other organizations, or recruited by the boards themselves, plus an additional 70,000 “peak load” volunteers for special work such as the distribution of Ration Book Three, contributed a total of 18,000 man months of work of 200 hours per man month. These volunteers work under the direction of a volunteer assistance supervisor. Paid Employees in Local Boards As of September 30, there were a total of 33,515 clerical employees in the boards acting as receptionists, registrars, typists and stenographers, recording, reporting, and correspondence clerks, file clerks, certificate processing and counter clerks, and telephone operators. These workers, appointed through Civil Service, are paid with Federal funds allocated by Congress. Nearly 90 percent of the boards have at least one paid clerk who is designated as a price clerk to work with the price panels and price assistants. The chief clerk, formerly known as the executive secretary, is a paid employee who is appointed by the chairman of the board with the approval of the district director. The principal job of the chief clerk is to direct the efforts of the paid clerks and volunteer workers on the staff of the board. The chief clerk assembles data in connection with rationing and price control inquiries and problems, and presents to the panels cases which require board action. ♦ See also pp. 17, 18,108, 109, and 84 for work of price panels. War Price and Rationing Boards • 113 THE BOARDS’ PROBLEMS Despite the magnitude and complexities of operating more than 5,500 local boards, conspicuous progress has been made in recent months in their orientation and integration. The advances made in simplifying procedures and instructions sent to the local boards, have led to a definite improvement in the service which boards have rendered to the public, particularly with respect to the rationing activities and increasingly so in respect to price activities. Progressive efforts are being made in decentralizing to local boards more activity in administering the price control program. The financial, organizational, and functional requirements of local boards are continually being studied and adjusted by the district, regional, and national offices in cooperation with one another. The lack of adequate supervisory and liaison staff at the district office level, however, has made it difficult to appraise fully the extent to which the boards have performed their functions, and the degree of efficiency which they have been able to achieve in administering complex programs. Plans are being carried through to improve this situation. One problem with which the boards have been faced in recent months is the difficulty of enlisting and retaining volunteer workers in the program. This has been true in many parts of the country and particularly with respect to work as price panel assistant. The fact that the price control program was perhaps the latest war activity to appeal for large numbers of volunteers, as well as the increasing calls upon housewives to enter the labor market, has been partly responsible for this situation. It is hoped that a growing awareness of the importance of the work will gradually alleviate this difficulty’ The 5,600 war price and rationing boards have contributed immeasurably in making the battle of the home front an increasingly successful one. Their contributions toward the preservation of our national economy is one which cannot be ignored. The public is becoming increasingly aware of these committees of neighbors and of their contribution to the war effort. o