115

APPENDIX

PRICE CONTROL EXPERIENCES IN INDUSTRIALIZED

COUNTRIES

PRICE CONTROL AS COUNTERINFLATIONARY POLICY

The aim of this appendix is to briefly present experiences of price control

carried out in industrialized countries since the end of World War II.
The book has mainly devoted itself to the analysis of the impact of
public price control on the industrial structure of the same industry in
four countries; but several countries, as mentioned above, constrained price
increases of various goods, as counter inflationary policy.
In the past, there have been many experiments of price control by
governments. 1 The first well-known price control act was the Diocletian's
Edict in 301 AD, when the Roman Emperor fixed the maximum prices of
900 goods?
Governments have usually introduced a price ceiling in high-inflation
periods, especially in time of war, when the supply of raw materials and
foodstuffs tends to fall while increasing expenditure on the defense program,
supported by money-supply expansion, brings about an increase in aggregate
demand for goods and services. Governments thus fix a maximum price
level to curb consumers' expenditure, especially on basic foodstuffs, and
thus regulate public expenses. In order to avoid shortages and discourage
the black market, governments must introduce rationing as well as legal
measures to punish infringements of price contro1. 3
As a matter of fact, final price control, as counterinflationary policy,
is an ambiguous means of ruling the economy: the basic assumption is that
prices can be fixed regardless of the specific market condition of supply
and demand, whereas the aim is to induce adjustment in order to reach a
new market equilibrium. Public price fixing is therefore a shock imposed

1. A good survey of price control experiences in the past has been made by
R. L. Schuttinger, 'A Survey of Wage and Price Controls over 15 Centuries', in The
Illusion of Wage and Price Control, ed. M. Walker (Frazer Inst, Vancouver, 1976).
2. H. Mitchell, 'The Edict of Dioc1etian', Canadian Journal of Economics and
Political Sciences (February, 1947).
3. Concerning price control in time of war, see F. W. Taussig, 'Price Fixing as Seen
by a Price-Fixer', The Quarterly Journal of Economics (February, 1919); H. C. Sauvain,
'The Problem of Price Control', in Economic Problem of War, ed. G. A. Steiner (New
York, 1942); and, of course, J. K. Galbraith, A Theory of Price Control (Cambridge:
Harvard University Press, 1952).
116

upon the market forces on the assumption that prices can be fIxed without
intervening 'ex ante' on the quantities subject to transactions, but also
with the realistic expectation that this shock is bound to bring about changes
'ex post' in the conditions of supply and demand.4
Experiences in the following countries will be discussed: Belgium, Holland,
West Germany, France, Italy, the Republic of Ireland, the United Kingdom,
Austria, Sweden, the USA, Canada, Australia, New Zealand, and Japan. In
the most recent experiments, all of these countries have frozen the prices
of nearly every commodity for a defInite period, followed by stages of
more flexible controls and wage policies. Some countries have recently
abolished price control and enforced commissions promoting competition.

CHARACTERISTICS OF PRICE CONTROL

There is no doubt that the initial stage (price freezing) produces positive
effects in the short run. The initial hypothesis is based on the possibility of
diluting through time the inflationary impact of exogenous increases in
raw material prices, thus preventing the development of self-fostering
inflationary expectations. After this stage, however, the maintaining of
control hinges on the possibility of translating the increasing costs of
production into productivity increasing rationalization processes - while
fInal prices are frozen; thus, by defInition, price control becomes a long-term
instrument designed to influence the production structure and alter behaviour
patterns steadily.
The restriction of control to the large corporations, as most of the
experiments have done, is based on the assumption that such corporations
are actually the price leaders of their respective markets and that, therefore,
by controlling their behaviour patterns, it is also possible to influence the
behaviour patterns and the structural changes of all other businesses operating
in the relevant markets. But, in fact, if no suitable measures are taken in
order to ensure the continuity of the control action when passing from the
initial short-term stage (which focuses on expectations) to the long-term
stage (where the focus is on the rationalization of behaviour patterns and,
therefore, on the structural changes), this leads to the apparent freezing of
the behaviour of large corporations themselves, and to the creation of a
strong dynamic thrust above and beyond the boundaries set by the law
(for instance, creation of smaller companies in order to avoid control). 5
Thus, as time goes by, the goal of price control changes. In fact, the fIrst

4. J. Backman, "Direct Price Fixing", Southern Economic Journal, October 1936,

and J. Backman, "Government Control of Prices", Planned Society: Yesterday, Today,
Tomorrow, (F. MacKenzie, New York, 1937).
5. J. R. Gould - S. G. Henry, "The effects of Price Control on a Regulated Market",
Economica, February, 1967.
 117

goal, i.e., reshaping expectations, can be achieved because it entails a decision

or an act of will on behalf of goverment authority to undertake a definite
control action. The consolidation of this result, however, requires careful
control of individual behaviour patterns so as to reach a structural arrange-
ment capable of engendering collective behaviour patterns better suited to
the preestablished economic policy goals.
Price control must become, then, an integral part of government's
economic policy action: (a) because the behaviour adjustment set off by
price control cannot be implemented by acting on prices alone, but requires
the adoption of other tools as well, and (b) because the orientation that
is to be given to the behaviour patterns can only be established in advance
by referring to the overall economic policy.
The degree to which the tools are congruous with the actual stage of
price control becomes, therefore, the corner-stone in order to guarantee
successful government action designed to regulate individual behaviour
patterns dynamically.
The frame of reference of such action, however, can be neither an indi-
vidual product nor an individual business enterprise because both items
are too limited to provide us with a description of the entire economic
structure. The frame of reference can be supplied only by the production
cycle itself, within which products are transformed and in which businesses
may operate on the basis of a number of different mutually integrating
relationships. It is obvious, then, that the focus of control can no longer be
final price alone, but that control must instead be applied to the pricing
process itself in the wider framework of the production cycle. The British
Price Commission 1977-1979 is the best example of switching from price
control to pricing control.
Failure to view price control in all its complexity, and hence to adapt
goals and means to a constantly changing reality in the framework of the
rules established by government authority, could result in the progressive
weakening of the very authority of the government.
The bitter fruit borne by the Italian experience of general price freezing
(1973-1974) is today represented by the widespread lack of confidence
in the ability of the government and public administration to carry out
effectively an action as complex as an articulate price interventi~n.

PRICES CONTROL EXPERIENCES

This analysis deals with 14 countries: nine in Europe (seven EEC members)
and two in North America, as well as Australia, New Zealand, and Japan.
Most of the present price policies derive from the legislation passed during
World War II and reviewed in the early 1950s.6 Much of this legislation

6. See OEeD, "Le contr6le des prix, applications nScentes",Perspectives Economiques,

(Paris, July 1972).
118

was changed and strongly reenforced in 1973, during the period of the
spectacular price increase in oil products.
In that period, in order to curb expectations of extraordinary inflation,
price freeze and control was initiated in all Western countries. This emergency
intervention belonged to a framework of recurrent statutory control of prices
and incomes, enforced by governments in order to stabilize economic fluctu-
ation. Developments of price control policies are summarized in Table 1.

ITALY

Italy's experience in the indusfrial price control area has developed over
several decades, which can be divided into the following four periods: mid-
1930s-1944; 1944-1973; July 1973-July 1974; after 1974.
Up to 1944, price control was thought of as a wartime economic instru-
ment. Through its bureaucratic structure, the State controlled the final
price of a number of scarce products. In 1944, the Comitato Interministeriale
Prezzi (CIP) and an administrative apparatus were established in order to
achieve permanent control over the price of a limited number of goods and
services. In summer 1973, in the wake of the events triggered by the oil
crisis, the government decided to freeze prices for a number of consumer
goods and products of the larger companies. The following summer, however,
such action - which had by then partially developed into a scheme allowing
for specific increases through due authorization - was abandoned altogether;
this meant reverting to the 'price administration' situation that had already
been tried in the past.
In July 1973, supported by widespread consensus, the government decided
to enforce a 'general' price freeze in order to cope with the exceptional
inflationary pressure exerted by the oil crisis. Decree n.425 provided for a
control of prices recommended by big concerns only; indeed, this decree
stated that only 'business enterprises producing or distributing goods, whose
turnover exceeded 5 billion lire in the first semester of 1973, must register
their price lists with the CIP office.' Decree n.427 froze the retail prices of
21 basic goods. This action was based on an initial 90-day freeze; sub-
sequently, controlled prices could vary 60 days after any authorization of
the CIP granting an increase on registered price lists.
Following the impact of the first stage, which undoubtedly led to positive
results, the effectiveness of government action declined rapidly. The two
decrees provided for an intervention spectrum that did not go as far as
covering the entire economy, and in particular did not cover all the various
production stages that lead to the determination of final list prices. Businesses
did, in fact, get around such provisions by selling their products through
the mediation of other concerns that were not subject to the decree, and
by replacing the listed goods with other goods not subject to the freeze.
Table 1. Price control experiences in some OECD countries.
France
Object of control Prices and margins
Starting point 1945
Legislation Orders n. 45.1483
n.45.1484
of 30/6/1945
Proper authorities Direction Generale de la
Concurrence et des Prix
(until 1978).
Commission de la
Concurrence
Controlled goods General control
Sectorial agreements
Controlled subjects Manufacturers,
retailers, services
Prenotification Price lists must be
registered with Direction
Gem:rale des Prix
Exemptions
Sanctions Administrative fines
Belgium Italy
Prices and margins Maximum prices
1945 1944
Orders 22.1.1945 Act. 19.10.1944 n. 347
Act. 30.7.1971 23. 4.1946 n. 363
22.12.71-24.12.75 22. 4.l947n. 83
24. 7.1973 n. 425
24. 7.1973 n. 427
Minister of Economic Price control committee
Affairs; Price Control (CIP)
Office
General control Control on some goods
Sectorial and firm ('44-'73) (1974).
agreements General control (VII-1973/
VII-1974)
Manufacturers, Manufacturers (administered
retailers, services prices); largest prices and
basic good producers
The largest firms must Firms must get explicit
give prenotification adjudication of price
within 3 months riser by CIP, for the
con trolled sectors
Small firms
Administrative fines
Germany (FRG)
Prices and services
1936
It stems from the freeze
decree of November 26th
1936
Antitrust Act 1958-1973
Minister of Federal Economy
who decentralizes his authority
in Landers; Federal Cartel
Office
'Strategic goods'
Every controlled subject is
asked for information
Fines
\0
-
Table 1. continued N
o
The UK USA Holland
Object of control Prices, wages margins, shares Prices, wages and profit margins Prices and wages
and rents of firms
Starting point 1965 1970 1945
Le gisla ti 0 ns White paper 1965. Counter- Defence production Act Special powers decree 1974-
inflation Act 1972. White paper Amendments 1970 1977 ordinance 'good and
1973, Counter-inflation (Price services prices'
and Pay Code) Order 1973,
Counter-inflation (Price Code)
Order 1977
Proper au thorities Price Commission '73-'79 Cost of living Council, Minister of Economic Affairs
Pay Board 1971
Controlled goods General control All basic goods Main goods and services in the
domestic market
Controlled subjects Manufacturers, wholesalers Manufacturers, Trade companies Manufacturers, distr. prod. services
professionist' indo Services prod.
Prenotifications I and II class firms must give I and II class firms must give The largest firms must give
reports to Price Commission every reports to Price Commission prenotification within a month;
3 months, III class firms don't have every 3 months, III class firms dealers are exempted from
to give any prenotification don't have to give any pre- prenotification
notification
Exemptions Exemption very much limited Exemptions for agricult. sector
to coal and steel
Sanctions Administrative fines Infringements are fined by
reducing prices and repaying
customers
Table 1. continued
EIRE
Object of control Goods, services and margins
Starting point 1970
Legislations Price Act. 1958. Price
(amendment) Act. '72. Price
(Stabilisation of Profit margins
of retailers) order 1973
Proper authorities Minister of Industry and Trade,
National Price Commission
Controlled goods Control on basic goods
Controlled subject Manufacturers, wholesalers
Prenotifica tions The largest firms must give 2
months' prenotification, others
21 days' prenotification
Exemptions Small firms; agric. produce,
bank interest and exported goods
prices
Sanctions
Austria
Goods, services and wages
1962
'Gentlemen's Agreements'
Paritiitishe Kommissione
General supervision
Manufacturers
Authorities can ask for
information on each controlled
subject
Imported goods and services
and new products are exempted
Sweden
Goods services and margins
1956
Price control decree in 1968.
Restrictive regulations decree
in 1968
National Swedish office for
prices and trusts
Partial control on each product
Manufacturers, wholesalers
Coffee and margarine produce
must give prenotification
Wine-spirits and public
expenditures
..-
N
Table 1. continued N
N
Canada Australia New Zealand Japan
-
Object of control Guide-lines for wages Gross profit margin Price and profits Rice price and production
prices, shares and rents
Starting point 1969 1973 1948 1971
Legislations Anti-inflation program Price Justification Act. Commerce Act. 1975
1969 1973 Stabilisation of Price
Regulation of 1974
Proper authorities Anti-inflation Board Price Justification Tribunal Department of Trade Minister of Public Finance
1975. Prices and 1973
incomes Commission
'69
Controlled goods General control General control Class A and B goods Rice as basic good
Controlled subject Manufacturers, whole- Manufacturers and whole- Manufacturers, wholesalers
sa1ers salers unit 1976 and service produce
Prenotifications Annual reports for all The largest firms must give Prenotification criteria for
firms; trimestrial for prenotification to the both classes goods similar
the largest ones. prices Justification Tribunal to U.K. ones.
Exemptions Only for firms operating Very few
under particlar con-
ditions
Sanctions Administrative fines Fines Infringements are fined
 123
Indeed, new distribution companies sprang up everywhere, the demand
for services of smaller businesses grew, and goods formally subject to con-
trol were exported and subsequently reimported at free-market prices.
Since no clear definition of the subject of control was available, there was
evasion in the form of production-cycle-destructuring processes. While
inflationary expectations concerning the postcontrol period grew, the price
control experiment was drawing to a close by spring 1974.7
The 1973-74 program was an addition to a longstanding pricing policy
implemented by government authority, the CIP, concerning a large number
of industrial prices and service rates. The CIP fixes, directly or through the
local boards, the rates of most services (e.g., water supply, telephone, rail-
ways, hotels, and transportation) and the prices of a number of industrial
products (oil products, fertilizers, pharmaceuticals, detergents, pasta, milk,
sugar, and, of course, cement). Thus, up to 1973 and after 1974, a 'public
price administration' situation characterized the pricing of several industrial
products. In these cases, price control - or better price 'administration' -
by public authority resulted in a market-regulating action at a time when
demand was growing; this action was designed to prevent (or at least to
reduce) sectorial growth from producing structural changes that might
have altered the existing balance among the various businesses competing
in the sector at that particular stage. After 1974, soaring inflation and a fall
in the demand added elements of uncertainty and instability to the basic
picture, which external regulation could no longer control.

BELGIUM

In Belgium, the present price control legislation dates back to the wartime
and has been changed frequently.s The Minister of Economic Affairs has
the power to control prices of goods and services. He can forbid the sale
of a product if the price is considered too high in terms of cost, market
condition, and 'reasonable' profit (the so-called 'normal' price).
Most prices are controlled by the Minister of Economic Affairs, who
uses a highly discretionary power to accept or delay the preindicated price
increases (not beyond six months). Importers and manufacturers have
to give a three-month notice before they can increase their prices. Maximum
prices and margins are fixed for some goods and services, particularly basic
products; these prices are fixed for six months, but this can be prolonged.
An industry as a whole can reach an agreement with the government
to regulate price increases; since 1971, firms are allowed to reach individual

7. The best analysis on the Italian experience of price control is F. Gobbo, Il controllo
dei prezzi industriali industriali in Italia, Il Mulino, Bologna, 1982.
8. Ministere des Affaires Economiques, La politique des prix en Belgique (Bruxelles,
1977).
124
agreements with the government. Retail prices are directly related to whole-
sale prices in manufacturing industry and import through specific margin
controls. Maximum prices and margins are fixed for meat, milk, potatoes,
pasta, fruit, vegetables, and fertilizers. However, from 1969 on, only seven
'contract programs' have been agreed upon between industrial associations
and the government, five of which are still working, the most important
concerning oil products. The domestic price is fixed according to a pre-
agreed formula based on exogenous costs and fixed margins. Maximum
prices and margins for individual firms have been more frequent: in three
years (1976-78), there have been 154 procedures against specific firms,
and the Minister has fixed a maximum price in 97 cases.
A permanent Board for Price Regulation has been established to give
informal advice to the Minister of Economic Affairs, who makes the formal
decisions for each case. This technical committee has several representatives
in charge of each industrial or related field. Recently 'ad hoc' commissions
have been appointed to control prices and supervise pricing of strategic
goods, such as petrolium products, gas and electricity, medical treatment,
and pharmaceutical products.
The Belgian price legislation is on the whole quite confused; because
of this, it can be variously enforced in periods of inflation. The intervention
system is really working dependent upon the general economic situation.
Recently, the Planning Office estimated that the price control policy
introduced by the government has contributed positively (about 2%) to
reduce the impact of raw material price fluctuations on the domestic
economy; this is considered positive, since the country is small and
quite open to international trade and, therefore, to the erratic movement
of international prices.

FRANCE

In France, the price control experience dates back to 1945, and only recently
has the government substituted competition policy for the more traditional
approach based on price surveillance. 9 As mentioned in chapter 5, from
1945 to 1965 governments alternated between price freezing and the relaxing
of control; At the beginning of 1965, a new system of price control based on
agreements with industrial associations on behalf of firms was tried.
Since 1971, the government has countered price increase tendency by
enforcing stricter contracts according an annual price increase plan. After a
short period of relaxation, at the end of 1976 a price freeze was imposed
for three months; afterward a progressive liberalization was promoted.

9. J. Sheahan, "Problems and possibilities of industrial price control, postwar French

experience",American Economic Review, 1961.
 125

The Direction Generale de la Concurrence et des Prix was abolished

and replaced by the Commission de la Concurrence appointed by the
Minister of Economic Affairs to promote competition and supervise pricing
methods in oligopolistic markets.
Price control has been a very important feature of French economic
policy for decades. It has become a permanent economic policy, enforced
differently depending on the general aim of governments for both the short
term and the long term.

WEST GERMANY

In West Germany, price control is supposed to be connected with compe-

tition policy, which means that in the long run it is impossible to affect
prices without regarding market structure. According to the Second Cartel
Act (1973), mergers are controlled as well as monopolistic conduct. All
of this aims at protecting the consumer against unfair trading.
Natural monopolies and dominant positions are regulated by anti-trust
authority through price-fixing methods; i.e., transports, insurances, health
services, electricity, energy, water, etc., are regulated. Although the law
should allow government to control the prices of every sector, except wages,
in West Germany price control is considered as an uncommon means to
deter oligopolistic price fixing. In fact, the abuse has to be proved in order
to enable public price fixing by the antitrust authority. Legal actions against
oil companies (1974) and Hoffman-La Roche (1980) were rejected by the
Federal Appeals Court because the Federal Cartel Office was considered
slow in proving the abuse of price fixing.

THE UNITED KINGDOM

In the United Kingdom, price and income policy dates back to the time
of war. In the late 1960s, a National Board of Income and Price Policy
was set up in order to supervise wage and price tendencies. to
In 1973, after a brief period of price freezing, a Price Commission was
established with its chairman appointed by the Secretary of State for
Industry and Trade, and six part-time members appointed by industrial
associations and unions.
This Commission had the power to enforce price codes, hold enquiries,
and freeze or require prenotification of price increases. In the beginning,
the aim of the Price Commission was to control price increases in term of

10. R. Evely, "The Effects of the Price Code", National Institute Economic Review,
August, 1976, and D. J. Gribbin, "The United Kingdom 1977 Price Commission Act and
Competition Policy", The Antitrusf!Bulletin, Summer 1978.
126
cost increases and to compel price reductions as a result of productivity
gains. To implement its goal, the Commission had specific and proper powers,
both over firms and sectors. These powers were enforced by a series of
very precise mechanisms agreed upon between government and social groups,
i.e., to absorb partial labor cost increases.
However, general control regulations have changed since 1973, according
to different stages of inflation, to such an extent that recently (1977) price
and cost control was abolished, and a wider system of enquiry into enter-
prises and industries was established in light of the previous experience,
e.g., the Monopolies and Mergers Commission, established since 1948.
As described in chapter 3, the New Price Commission (1977-1979) has
an innovative approach to price control, based on the assumption that price
increases depend on increases in exogenous commodities price or inefficiency
level and market power increases. Price control concerned the so-called
'possible cost', fixed on the basis of the most efficient production system,
on margins of enterprises playing a dominant role in the industry and market.
In fact, price control became an intervention to orient industrial structural
adjustments.

THE NETHERLANDS

In the Netherlands, there have been different stages of price control: years
of strict price regulation followed by complete-release price periods followed
by voluntary schemes. Since 1965, the Minister of Economic Affairs himself
has been regulating prices according to the development of wage policy.
These price interventions concern the economy as a whole. Moreover,
maximum prices of some commodities, manufactured goods, and services
are individually controlled. As far as a general regulation of the entire
economy is concerned, prices can be raised only because of exogenous
cost increases. There is a profit margin regulation for retailers, but the
Minister of Economic Affairs can advise firms to freeze profit margins under
specific circumstances. Large firms are compelled to give the Minister prior
notification of price increases. This is compulsory for food suppliers and
some public services.
All of this implies that the price control system aims at introducing a
cooling-off in price increase within an income policy scheme.

THE REPUBLIC OF IRELAND

In Ireland, the present price control system dates back to 1958, but it was
revised and adjusted in 1965 and in 1972. At present, a National Price
 127
Commission that was established in 1971 consists of five members appointed
by firm associations, trade unions, and consumets. The chairman is an
independent member appointed by the government. This commission reviews
price and cost developments, and has wide powers such as freezing prices,
fixing maximum prices, requiring prenotjfication of price increases, and
holding inquiries into market structure.
Bread, dairy products, sugar, cigarettes, and some other goods are subject
to maximum retail prices. Large firms have to give prenotification of price
increases for most goods and services. Medium-sized and small firms must
inform the authorities within three weeks, while the very small ones need
not. Service suppliers, importers, and wholesale dealers are also compelled
to give prenotification of price increases.

AUSTRIA

Austria has had price and wage control since 1962 that is based on 'gentle-
men's agreements'. There is a Liaison Committee whose members are
appointed by trade unions, entrepreneur and retailer associations, and
chambers of commerce. The methods used by this Committee include a
specific price for a list of commodities considered of strategic importance
year by year, maximum price fixing for other commodities according to
government suggestions, and a voluntary scheme to apply controls to residual
goods.
According to control methods, price increases are to be justified by firms
and accepted by proper subcommittees and, if there is no agreement, by
the Liaison Committee. If the members of Liaison Committee fail to agree,
the Minister of Trade himself fixes the price. Firms might refuse this price,
but they seldom do because of the long procedure required.
The system is formally 'unregulated', but a series of widely accepted rules
compels the trade unions and industrial associations to reach an agreement.

SWEDEN

The authority in charge is the National Price and Cartel Office (SPK) , set
up in 1956, which has used several price regulations. Some prices are con-
trolled (i.e. beef, pork, bread, dairy products and some building materials);
for others it is compulsory to give prenotification of an intended price
increase.
The SPK is in charge of price policy and promotes competition. Thus,
the National Swedish Price and Cartel Office analyzes not only the short-
term cost fluctuation, but also the industrial structure according to the
consumer's defence.
128

The SPK watches over the price development of the whole economy by
frequent investigations into retail prices and profit margins. If production
structure is considered inefficient or collusive conduct is recognized, the
SPK advises firms to move toward a price policy more favorable for con-
sumers.

CANADA

In Canada, price control was established in 1969 with a special Price and
Income Commission, which has the power of controlling the matter in the
long run. Price control is considered, however, part of the income policy.
Guidelines for prices, wages, shares, and rent are suggested by the govern-
ment through the advice of an antiinflation office.
Controls and compulsory prenotification of increases concern mainly
the output of the 300 largest firms. Both prices and margins, for which it
is compulsory to refer to a certain period, are subject to control. Controls
and intervention have been slowing as the inflation decreases.

THE USA

In the USA, there were significant experiences in price control during and
after the First and Second World Wars. Afterward, the authorities tried to
curb inflation by monetary and fiscal policies. They continued to intervene
in industrial division and particularly in firms through antitrust legislation
that dates back to the end of the last century.
Only in 1971, as inflation increased after the failure of voluntary agree-
ments between producers and unions did the authorities decide to intervene
directly through a price control program that developed until 1974 in four
stages: (a) freezing, (b) maximum price control, (c) releasing, and (d) lib-
eralisationY The first stage was a general price freeze for a very short time.
During the second stage of price control (1972), there was the following
regulation:
- Firms had to justify the cost transferring on prices, deducting the positive
effects of productivity gains.
- Large-scale firms had to reach particular agreements about their price
lists, fixing maximum increases.
- Price increases, even if allowed according to a previous agreement, were
not accepted when they caused an increase in profit margins.
- Increases in labor cost were only partially (5.5%) allowed to be applied to
prices.
11. "Price and Wage Control: An Evaluation of Current Policies". Hearings before the
Joint Economic Committee - Congress of the U.S., Wash. DC. 1972, in particular papers
by W.G. Shepard; R.H. Haveman, T.W. Mirer, G.E. Brandow.
 129
At this stage, there were exceptions, particularly for imports, exports, and
agricultural products. The firms with a turnover of over 100 million dollars
had to obtain authorization before raising prices; those with a turnover of
between 10 and 100 million dollars had only to give prenotification, without
having to get authorization; and the smallest firms were controlled by the
appropriate commissions.
Even if the controls were compulsory, their effectiveness mostly depended
on the voluntary agreement of the concerned parties. Violations were fined
by reducing prices and repaying customers rather than by administrative
sanctions.

AUSTRALIA

In Australia, price control started in 1973, when a Price Justification Tribunal

was set up. His responsibility is to examine prices of goods offered by the
largest firms which must notify price increases. The decision, made by the
tribunal within a few weeks time, must consider also the market power of the
firms and their previous conducts concerning prices. Bargains between firms
and the tribunal are frequent. If no agreement is reached, inquiries are made
and public meetings are called in which trade unions', consumers', and firms'
representatives are allowed to put forward their views. The tribunal has no
legal power to enforce the decisions taken during these meetings; the tribunal's
decisions have to rely on the pressure of the public and the trade unions.

NEW ZEALAND

Price control dates back to 1948, but the subject was completely settled in
the early 1970s in order to control prices and margins in the face of inflation.
The control, ruled by the Minister of Trade and Industry, concerns the whole
economy. Prenotification for each price change is compulsory. Goods and
services are listed in two classes:

(1) Prices of some goods are controlled directly by the public authority; if
firms do not agree, an independent commission makes the final decision.
(2) Prices and profit margins of the residual goods and services can be
increased according to a guideline approved by the authority.

JAPAN

Since the early 1970s, there have been some kinds of price control. Price
control is applied to agricultural products, and particularly to rice. An
130
authority regulates the price of rice in order to balance supply and demand in
a basic field characterized by irregular overproduction. The aim of the
government is to stabilize and promote farmers' income and improve efficiency
of agricultural production. An Antistrust Commission strictly prohibits
collusive conduct in domestic makets, and the Minister of Trade and Industry
promotes export cartels to increase export.

EXPERIENCES WITH PRICE CONTROL AND THE AUTHORITY OF THE

STATE

If we look at the articulate experiences that industralized countries have had

with price control, we may conclude that it has proved to be an ambiguous
measure. A basic contradiction appears when we look at price control as an
antiinflationary measure: since they are unable to undertake any action
regarding the elements that influence the pricing process - namely, the real
causes of inflation - government authorities tend to bind the companies'
final decisions, Le., the final price of their products, thus assuming that this
belated intervention may lead to the desired adjustments that were not
achieved in a preceding stage.
Price interventions thus lend themselves to several weaknesses and ambi-
guities, which may easily result either in the discredit of any economic policy
undertaken in this field or, or the contrary, in the implementation of more
and more rigid and complex administrative constraints based on the con-
viction that inflation may be somehow controlled only through a stricter and
tigh ter regulation of the economy.
On the other hand, where price control is employed as a market-regulating
measure, it proves efficient in controlling the pricing process under monopoly
conditions. Where monopoly conditions exist, an official intervention
designed to depress administered prices leads to increases in the supply that
undoubtedly appear to be made in the interest of the public. Similarly, under
such conditions, cost reductions obtained through technical improvements
may be shifted onto final prices by virtue of some kind of official price
control action. These positive effects relate, however, simply to strict
monopoly conditions; where oligopoly is concerned, price control leads to
collusive behavior that must then be subjected to continual controls so as to
prevent such behavior from turning against the public interest.
This last type of action, however, can only take place in a situation where
both production factor prices and demand growth are steady. Where con-
ditions arise such as those of the 1970s - continual increases in the price of
raw materials and in labor costs, coupled with a static demand - this kind of
action regarding controlled prices interferes with the demand to undertake
action with regard to final prices for antiinflationary purposes, and thus
results in an unmanageable situation unless the theoretical foundations on
 131

which the intervention is based are upset radically and, at the same time,
available instruments are changed considerably. In other terms, one should
bear in mind that the economic system resulting from the merging of less-
than-perfect markets is itself a means through which inflationary processes
are multiplied. Therefore, price control should not be restricted to freezing
final prices, but should become the tool for supervising and controlling the
pricing processes, a pricing control action where public intervention may
prove its ability to make the entire economy more dynamic. 12
Price control should be based on production-cycle analysis, by inquiring
into how costs are created within the production processes themselves. The
tasks and the goal of price control must, therefore, be that of destroying
unearned income positions, thus driving the prices of the individual markets
toward the levels established by the most innovative business. These are tasks
that pertain to a Competition Board. In small countries open to international
trade, and 'American-style' antimonopoly intervention policy is hindered by
the very size of the market; some important markets are larger than the whole
territory subjected to the authority of a single government; on the other
hand, the limited size of the domestic markets may involve the existence of
just a few or, perhaps, a single plant that is technically sufficient to fulfill the
entire home demand. Under such conditions, action based on the 'a priori'
prohibition of collusive actions is not feasible. Instead, it is necessary to be
capable of managing the industrial structure development processes even
where conditions and settings differ from one another. A price control inter-
vention conceived as a measure designed to regulate the nature of the markets
may succeed in performing this task in a small, open country.
This goal must be set into the wider framework of an economic and
industrial policy, and one must supply whomever undertakes such inter-
vention with suitable tools.

12. Franco Modigliani wrote an article in 1937 on price control as industrial policy:
F. Modigliani, "Controllo dei prezzi ed economia corporativa", Commercia, August
1937, quoted by H.S. Miller,Price Control in Fascist Italy, Columbia, New York, 1938
 133
Author Index
Allen, G.C., 3 European Community Commission of
Angelier, J.P., 25,73,81 Restrictive Practices, 106
Aspidin, J., 1, 34 Evely, R., 125
Associated Portland Cement Manufac-
turers-APCM Lim., 47 Federal Energy Administration (US), 2, 4,
Associazione Italiana Societa per Azioni, 5,7,58
68 Federal Trade Commission (US), 40
Associazione Tecnico Economica del Francis, A.T., 34
Cemento-AITEC, 54, 55, 57,58,59,
67 Galbraith, J.K., 115
Gobbo, F., 49, 123
Backman, J., 116 Gould, R.R., 24, 39, 46
Battara, P., 3,50,60,62 Greenhut, M.L., 11
Beacham, A., 24, 39 Gribbin, D.J., 125
Bianchi, P., 25
Brandow, G.E., 128 Hambidge, J., 108
BundesKartellamt (Federal Republic of Hauptverband der deutschen Bauindustrie,
Germany), 85 86
Bundesverband der deutschen Industrie, Haveman, R.H., 128
98 Hay, D.A., 111
Bundesverband der deutschen Zement- Heath, J.B., 24, 39
industrie, 87,95,97 Heidelberger Zement, 98
Burns, A.R., 11 Hemy, S.G., 116
HoIsted, P.E., 34
Carlson, B., 3,4 Hoover, E.M., 11
Cembureau, 8, 15, 17, 18, 30,41,54,58, Hyton, W.P., 11
71,80,89
Cement and Concrete Association (UK), 1 Jaeger, F.M., 108
Cement Makers' Federation-CMF (UK), Joint Economic Committee (Congress of
38,41 the US), 128
Cesareni, C., 57
Ceyrac, F., 73 Loasher, S.M., 3, 11,22
Chamberlin, E.H., 105,111,114 Lenel, 0., 88
Clark, J.M., 11 Lenz Wagner, K., 25, 90
Comitato Interministeriale Prezzi-CIP
(Italy), 64 Machlup, F., 11,23,69
Commons, J.R., 11 Mader, F., 77,81
Cook, P.L., 35 Manas, A.T., 25
Council on Wage and Price Stability (US), Mangel, S., 87
40 McAvoy, P.W., 46
Cova, F., 57 Mediobanca,64
Metzner, M., 85
Dafsa,65 Miller, H.S., 49,131
Davis, A.C., 35 Miller, J.P., 86
Dyckerhoff Zementwerke, 98 Ministere des Affaires Economiques, 123
Mirer, T.W., 128
Economist, The, 36 Mitchell, H., 115
134
Modigliani, F., 131 Schuttinger, R.L., 115
Monopolies and Mergers Commission, The Shaw, R.W., 21,41
(UK),44 Sheahan, J.B., 72,124
Monteel, H.T., 73 Shepard, W.G., 128
Morris, D.J., 111 Sherman, R., 112
Smith, A., 110
National Board for Prices and Incomes- Soulie, D., 73
NBPI (UK), 3,29,31,42,47 Spackman, C., 34
Nickell, S.J., 103 Steiner, G.A., 115
Nicolle, J., 108 Stevens, R.B., 24, 39
Norman, G., 3,4,41 Stigler, GJ., 106,109,111
Sutton, C.J., 21,41
Organization for Economic Cooperation Syndicat National des Fabricants de
and Development-OECD, 12, 15, 16, Ciment et Chaux-SNFCC, 74, 76
19,20,25,26,27,30,41,42,54,71,
81,117 Taussing, F.W., 115
Orr, D.,46
United Nations (Monthly Bullettin), 6
Phlips,L., 11,25,77
Pratten, C.F., 3
Vasseur, M., 73
Price Commission, The (UK), 4,5, 6, 7,
Vernon, R., 102, 110
24,29,31,32,42,43,47
Voltaire, 111
Voight, F., 86
Redgrave, G.R., 34
Restrictive Practices Court, The (UK), 37,
38,39,47 Walker, M., 115
Robinson, J., 111 Weiss, L.W., 3
Roll, L., 88, 93 Weyl, H., 108, 111
Rowley,C.K., 31, 32, 109, 111 Wied-Nebbeling, S., 88, 93
Willmot, F.G., 34
Sauvain, H.C., 115
Scitovsky, T., 112 Yamey, B.S., 24, 39
Scherer, F.M., 3,4,9 Yarrow, C.K., 31, 32
 135
Company Index
Aberthaw (UK), 30, 31, 32 Hannoverische PZW (FRG), 88
Adom, Cim.de, (F), 77,78 Haut-Plin (F), 78
Aktienselskabet (Den), 17 Heidelberger Zement (FRG), 17,83,86,
Alsen-Breitenburger (FRG), 88 88,89,90,92,94,97,98,99,108
Annelise (FRG), 88 Helkis (Gr), 17
APCM-Blue Circle Group (UK), 4, 16,17, Hellbak (FRG), 88
21,23,24,29,30,31,32,33,35,36, Holderbank Group (CH), 17,50,86,88,
38,39,42,43,44,45,47,65,83,109, 89,90,108
113
Anic (1),54 ICI (UK), 30, 31, 37
Asland (E), 17 lise (FRG), 88
Atlas (US), 23 Italcementi (I), 17,50,52,53,54,64,65

Barletta, Cem.di (1), 88 Ketton (UK), 30, 31, 32

Bianche, Cim.de (F), 77,78,79 Klopstein (FRG), 77
Bonner (FRG), 88
Bosenberg (FRG), 88, 89 Lafarge (F), 17,65,71,75,76,77,79,83,
BPCM Lim. (UK), 35 108
Breisgauer PZW (FRG), 88 Lafarge F.l. (F), 77,78
Buderus (FRG), 90, 97 Lambert (Lambert-Lafarge) (F), 77, 78
Buechl (FRG), 89 Lavaziere (F), 77
Bundner (CH), 17 La Dernoise, (F), 78
Buzzi-Presa (1), 54 Lehigh PCC (US), 99
Loire, Cim.de la (F), 77, 79
CBR (B), 17,65 Loisne (F), 77
CCB (B), 17 London Bricks Co. (UK), 45
Cement Limited (Ireland), 17 Lone Star (US), 65
Cementa (Sw), 17 Lorraine, Cim.de (F), 77
Cementir (1), 17, 52, 53, 54,57,64,65,
69 Marienstein (RG), 89
Cemij (Ne), 17 Marker (FRG), 89, 97,99
Champagnole, Cim.de (F), 78 Marseille, Chim.de (F), 77, 79
Chiron, Cim.de (F), 77 Mediterraneenne (F), 77
Ciment Franliais (F), 17,65,71,75,76, Merone, Cem.di (I), 54, 65, 88
77,79,83,108 Mieback (FRG), 86, 88,90,97
Cimpar (Par), 17 Milke H. (FRG), 86, 88, 97,99
Moccia (I), 69
Dennes et Lavocat (F), 77
Donopo (FRG), 88 Nocem (No), 17
Dotternhausen (FRG), 89 Nord, Cim.du (F), 77, 79
Dyckerhoff Zementwerke (FRG), 17, 65, Nordcement (FRG), 88
83,86,88,89,90,92,94,97,98,99,
108 Obergimpern (FRG), 89
Obourg (B), 17
Eerste (Ne), 17 Origny (F), 76, 77,78,79,88
Oy Lohiya (Fin), 17
General (Gr), 17
Gmuder (Au), 17 Parlmooser (Au), 17
136
Perenstein (Fin), 17 Teutonia (FRG), 88
Phoenix (FRG), 88 Thionvilloise (F), 77,79
Poliet et Chausson (F), 71, 76, 77, 79 Thos. W. Ward (UK), 30, 31, 32
Pont aVendin (F), 77 Titan (Gr), 17
Porte de France (F), 77 Tuborg (FRG), 88
Tunnel (UK), 17,30,31,32
Rambas d'Hagondange (F), 77,79
Readimix (FRG), 97,99 Unicem-Marchino (1),17,50,52,53,54,
Red Triangle Group (UK), 36,44 64,65
Ribblesdale (UK), 30, 31, 32 Uniland (E), 17
Rosemberg (Ne), 17
Rugby (UK), 17,24,29,30,31,32,39 Valenciana (E), 17
Vicat (F), 17,71,75,76,77,79
Saeci (1),54,69 Villeneuve (F), 77
Sehunch (FRG), 89 Voreppe (F), 77
Schwenk (FRG), 17,89,90,92,97
Sedil (Por), 17 Weisbock (FRG), 89
Segni (I), 50, 5 3,54,64,65 Westdeutsche ZW (FRG), 88
Seibel (FRG), 86, 88, 90, 97,99 Wiesenbock (FRG), 97,99
Sementsverkemidie (leel), 17 Wieterd (Au), 17
Sippental (CH), 17 Wossingen (FRG), 89
Solnhofer (FRG), 89 Woton (FRG), 88
Spenner (FRG), 86, 88, 90 Wlilfratener Zement (FRG), 88
Sud-Ouest, Cim.de (F), 77, 79 Wiirttembergische ZW (FRG), 89
 137
Subject Index
Administered Price, 35, 37,47,60, 61, 68, Efficiency, 17,38,39,40,45,46,47,57,
69,73,74,83,118 63,68,83,90,94,96,113
Advertising, 46 Energy Consumption, 2, 4, 5,40,53,57,
Ancillary Agreements, 39 63,74,80,81,94,95,97,113
Antitrust Policy, 3,22,23,24,29,32,37, Energy Crisis, 6, 34,41,47,58,80
38,39,47,71,73,85,114,125,130, Expectation, 63, 68, 69, 96, 107, 116,
131 118,123

Barriers to entry, 35,45,46,50,56,60, Federal Energy Administration, 2, 4, 7,

66,69,81,82,86,96 58,81
Basing-point System, 11, 12,23,24,37, Federal Trade Commission, 3, 22, 58
45,46,47,59,60,62,69,105 Firm Size, 16, 17, 18, 30, 35,46,50,56,
87,98,100,101,102,103,105,108,
Capacity Utilization, 2, 6,18, 19,20,30, 109,110,117
32,34,35,39,41,44,45,46,47,50, Firm (Theory), 9, 10, 11, 12, 21,23,35,
51,53,54,56,60,62,63,64,68,69, 39,41,44,46,59,60,61,62,69,92,
71, 81, 84, 86,94,95,96,97, 101, 93,102,105,108,109,110,111,114,
105,108,109 116,130,131
Capital Requirements, 4,5, 38,63 F.O.B. Pricing, 9,11,45
Cartels, 22,23, 24,25,43,44,45,46,85,
87, 88, 89, 97, 100, 101,108, 112, Government, 23, 25, 36, 49, 53, 59,72,
113 73,115,117,125
Champion Firms, 73 Growth,19,29,49,66,71,86
Clayton Antitrust Act, 23
Competition, 21, 32, 38, 40, 45,46,47, Herfindal Index, 87
62,65,66,71,81,82,94,100,102, Homogeneity (product), 7, 8, 22, 45, 60,
107,109,110,111,112,113 69,82,107, 110
Concentration, 15, 16, 17, 18,30,50,71,
73,77,85,86,98,102,108,112,113, Inflation, 6, 25, 47,49,63,66,69,71,83,
114 106, 107, 109, 114, 118, 123, 128,
Consumption, 15,16,29,30,45,58,59, 129,130
71,81,92,95,108,114 Information, 46,102
Cost of Production 4,5,6,7,8,9,22,23, Industry Structure, 30,49,66,71,76,85,
35,38,39,40,60,62,63,66,68,78, 88,102,106,107,115
86,102,106,113 International Trade, 12, 13, 34,35,47,
71,73,98
Demand, 13, 19, 25,31, 32, 46,50, 58, Investments, 3,4,6, 19,21, 24, 25,34,
63, 68, 82, 83, 84, 86, 88, 99, 102, 40,41,42,62,71,78,82,83,96,99,
107,109,113,116,123,130 100,108,112, 113
Differentiation (product), 8, 11, 12, 22,
32,46,53,58,59,62,63,78,81,90, Kinked demand curve, 106
101
Lags (in investment decision), 31,43,96
Early History, 1,2,34,35,36,37,38,49,
50,72,86 Market share, 17,31,35,36,50,53,54,
Economies of Scale, 2, 3, 4, 7,9, 10,21, 64,66,79,90,99,100,102,108
22,42,45,50,54,57,60,68,78,81, Market size, 15,17,29,32,44,45,46,69,
82,108,113 74,82
138
Market organization, 47,73,75,80,82,
84,85,87,88
Merger, 35,44,52,53,54,77,78,126
Monopolistic Competition, 73, 92, 111
Monopoly, 35,44, 47,90,92,93, 109,
125,130
Multiplant Operation, 9, 32,50,53, 75,
90,100,101,108
Objectives, 69, 83, 101, 102, 103, 107,
116,131
Oligopoly, 23, 74, 77, 81, 92,94, 105,
109,113,114,125,130
Ownership and Control, 30, 31, 32, 36,
50,53,54,63,65,76,77,82,86,88,
89,101
Patents, 1, 34
Performance, 64, 97,105,131
Plant Location, 33,52,53,56,60,69,75,
76,86,91,100,106
Plant Size, 17,22,42,50,53,54,56,60,
63,66,71,81,83,96,97,99,101
Price Commission, 4, 6, 7,24, 31,39,42,
47,117,120,125
Price Control, 21, 22, 23, 24, 25, 29, 36,
39,42,47,49,50,58,59,60,62,66,
68,69,71,72,73,78,82,83,84,106,
107, 109, 112, 113, 114, 115, 116,
117,124,125,126,130,131
Price Discrimination, 22, 23,35, 39, 45,
66, 69, 81, 87, 100, 102,106, 108,
113
Price Fixing Agreements, 22, 23, 24,25,
29,34,36,37,38,39,44,45,47,62,
86,105,109,129
Price Leadership, 92
Price Movements 25, 26, 27,35,39,59,
67,86,93
Pricing System, 9,11,12,21,35,36,38,
39,45,46,50,58,59,60,61,62,69,
71,74,86,92,94,123
Process Diversification, 2,5, 7, 10,42,43,
50,53,57,58,78,80,82,85,95,113
Production Index, 18, 19,29,30,51,72,
85
Production Techniques, 1, 6, 7, 34, 42,
57,78,80,95
Profit, 38,39,44,64,65, 102,106, 128
Public Firms, 50, 53, 56,64
Rationalization, 6,7,42,58,78,95
Restrictive Practices Court (The), 23, 24,
29,32,37,38,39,46,47,97,105
Risk, 24, 25, 38, 39,44,45,46,62,81,
100,107,113
Sales, 9, 29, 35,46,58,64,75,86,105,
106,109
Spatial Distribution (Production), 9, 10,
11,12,22,24,32,33,35,38,45,52,
56,59,60,66,74,75,76,85,90,106
Sherman Antitrust Act, 22
Supply, 20, 29, 35, 37, 53, 96,118
Symmetry, 101, 103, 108, 109,110,111,
112
Technological Progress, 4, 34, 40, 42, 43,
45,56,58,60,66,78,80,81,83,94,
95,100,105,·107,108,113,130
Transport Costs, 8, 9,10,11,17,21,35,
36,37,38,40,45,56,59,60,68,69,
74,92,105
Uncertainty, 69,102,110,112,123
Uniform delivery price, 11,22,45
Vertical Integration, 40, 53