Allied Foods v. Bowles

• Decision Date: 25 October 1945
• Docket Number: No. 199.,199.
• Citation: 151 F.2d 449
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals
• Parties: ALLIED FOODS et al. v. BOWLES, Price Administrator.

151 F.2d 449 (1945)

ALLIED FOODS et al. v. BOWLES, Price Administrator.

No. 199.

United States Emergency Court of Appeals.

Heard June 4, 1945.

Decided October 25, 1945.

Abraham Gottfried, of Los Angeles, Cal., for complainants.

John O. Honnold, Jr., Sp. Asst. to Associate Gen. Counsel, and Benjamin Freidson, Atty., both of Office of Price Administration, both of Washington, D. C. (Richard H. Field, Gen. Counsel, and Nathaniel L. Nathanson, Associate Gen. Counsel, both of Office of Price Administration, both of Washington, D. C., on the brief) for respondent.

Before MARIS, Chief Judge, and MAGRUDER and McALLISTER, Judges.

Heard at Los Angeles, Cal., June 4, 1945.

McALLISTER, Judge.

This case involves the Regulation issued by the Price Administrator, affecting the processing of pickles, and in this particular instance has to do with cucumbers so processed.

Maximum Price Regulation No. 488 — Pickles and Certain Pickled Products, which superseded price ceilings formerly existing under the General Maximum Price Regulation, established maximum prices for sales of pickles and pickled products, by all persons except wholesalers and retailers. Fresh cucumber pickles were excepted from the Regulation.

Sellers of pickles and pickled products come under various categories of the Regulation, — farmers, selling fresh cucumbers; sellers of cucumbers which have been fully or partially cured by treatment with salt brine, but which are not yet ready for human consumption; and sellers of processed pickles, which have been converted to the finished product, packed and ready for human consumption. Pickles which are fully or partially cured by treatment with salt brine, but which are not yet ready for human consumption, are designated as "salt stock." Those who convert fresh cucumbers, or "raw stock," into salt stock are defined as salters or briners. Those who convert salt stock into the finished product are defined as final processors.

In this case, complainants are salters and briners, as well as final processors. They complain that the maximum prices established by the Regulation are not generally fair and equitable, as required by Section 2 of the Emergency Price Control Act, 50 U.S.C.A.Appendix, § 902, in that such prices fail to reflect increased costs of raw materials that have occurred since the issuance of the Regulation. They further assert that such maximum prices fail to reflect parity to the producers of the agricultural commodities in question, as required by Section 3 of the Stabilization Act of 1942, as amended, 50 U.S.C.A.Appendix, § 963.

In support of their claims, complainants rely upon the statement of considerations accompanying the issuance of Maximum Price Regulation No. 488, as well as upon the admitted change in the price of the raw product, and the increase in the parity price of raw cucumbers, which has occurred subsequent to the issuance of the Regulation.

In the statement of considerations, accompanying the issuance of the Regulation in question, the Administrator was primarily concerned with two requirements — first, that, as required by Section 3 of the Stabilization Act of 1942, as amended, the prices established by the Regulation, reflect parity to the producers of the raw cucumbers from which the pickle products were manufactured or the highest price received by such producers for such commodities between January 1, 1942 and September 15, 1942, whichever was higher; and second, that, as required by Section 2 of the Emergency Price Control Act, such maximum prices be generally fair and equitable.

With regard to the requirement that the maximum prices established by Maximum Price Regulation No. 488 reflect the higher of parity or the actual 1942 price, the Administrator in his statement of considerations set forth: (1) That the price of raw cucumbers between January 1 and September 15, 1942, was 80 cents per bushel; (2) that the prevailing price of such product, on November 2, 1943 (the date of issuance of the Regulation in question), was $1.05 per bushel; (3) that the United States Department of Agriculture had determined that the parity price for raw cucumbers on November 2, 1943, was $1.05 per bushel; (4) that on November 2, 1943, the increase in the cost of raw cucumbers, since 1942, to salters and briners, amounted to 25 cents per bushel, and that such salters and briners were accordingly permitted to add this amount to their former selling price; (5) that on November 2, 1943, final processors were faced with identical increases in the cost of their raw materials, and were accordingly allowed to increase their former maximum prices by 5%. This latter increase was permitted on the ground that, inasmuch as the raw material cost is 14% of the selling price for the final processors, an increase of 25 cents per bushel (which was allowed to the salters and briners) would be equivalent to a 4½% increase in the cost which the final processors would be obliged to pay for salt stock. Therefore, a mark-up of 4½% over the former prices at which the final processors sold, would exactly compensate them for the increased price of 25 cents per bushel allowed to the salters and briners. The additional ½% allowed — to bring the permitted increase to final processors to 5% — was permitted to take care of the increase in cost of cooperage and possible increase in parity. It apparently was assumed that unless the increases were granted, the growers would not receive parity.

As to the requirement that the maximum prices be generally fair and equitable, the Administrator in his statement of considerations recited that: "As a result of consultation with the industry and from figures submitted by the industry, it has been determined that the average profit for the past three years was about 4% of the selling price. As pointed out above, the increased cost of raw cucumbers amounts to about 4½% of the final selling price of the finished product. * * * In the judgment of Price Administrator, an increase of 5% to final processors of pickles is necessary in order to restore that industry to approximately a normal peace-time level of profits. It is his opinion therefore that the prices established by this Regulation are generally fair and equitable, and allow a fair margin for processing, and that the price increases granted are not beyond the minimum extent required by law."

In considering whether the prices established by the Regulation reflect parity, it should be remarked that the parity price for raw cucumbers has increased from $1.05 per bushel on November 2, 1943 — when the Regulation was issued — to $1.08 per bushel as of the date when the Administrator's answer to the complaint was filed and the hearing before him in this case.

It is claimed that the prices fixed in the Regulation failed to reflect parity to the grower, as required by Section 3 of the Act. Parity, in this case, is defined by statute as the price which will give to the commodity — in this case, cucumbers — a purchasing power with respect to articles that farmers buy, equivalent to the purchasing power of such commodity in a designated base period.¹ "The requirement of reflection," as explained by Senator Wagner, Chairman of the Senate Committee on Banking and Currency, to the Senate, on behalf of the Senate conferees for the Price Control Bill, "means that the price of the processed commodity must be such that it will not prevent the price of the basic agricultural commodity from reaching the applicable statutory standard for a maximum price on that commodity."² In this case, the applicable statutory standard in respect to cucumbers, the basic agricultural commodity from which pickles are processed, is the parity price.³

The parity price of cucumbers as of the date of hearing before the Administrator, was admitted to be $1.08. Complainants' evidence was to the effect that the current cost of the raw material in question was far in excess of the parity price of $1.08 per bushel, and that it ranged from $1.1375 per bushel in 1943 to $1.333 per bushel in 1944.

We find no evidence that the maximum prices established by Maximum Price Regulation No. 488 failed to reflect the parity price to the grower of cucumbers. On the contrary, under those prices, as established for salters, briners and final processors, the grower is receiving much more than the parity price for his commodity. How or why the growers receive such high prices is not explained or disclosed. It may be that the processors, because of factors of competition or scarcity of product, are forced to pay such high prices in order to remain in business, even though they may be presently or temporarily conducting such businesses at a loss.

Complainants, however, seem to have assumed that the statute, in providing that the maximum prices for commodities processed or manufactured in whole or in part from agricultural commodities should reflect to the producers the parity price, means that they should reflect the parity price to the producers, and also include a fair price or profit for the processor. Complainants may have been led into this supposition by the recital in the statement of considerations here involved that the Administrator was increasing the final processors' prices "to take care of * * * any possible increase in parity"; or their misapprehension may have resulted from the fact that, in permitting price increases to salters, briners, and final processors in Maximum Price Regulation No. 488, the Administrator based his allowance thereof on the increase that had taken place in the parity price of cucumbers. For it was considered when the parity provisions were written into the Stabilization Act that the prices which would be permitted to processors and retailers of commodities, might well determine the prices received by growers or producers of such commodities; and it was determined that the government should not arbitrarily fix a ceiling that would not permit...