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ited Pricing (TLP) approval procedure, Price Commission Release No. 37, December 22, 1971, the Commission has issued a TLP order to Company A for 2 percent. The order is based on allowable cost increases incurred for the company in excess of 2 percent. The order is binding for a period of 1 year during which Company A may not apply for any additional price increases.

Issue. What prices may Company A charge and still be in compliance with the TLP order and the Economic Stabilization Regulations?

Ruling. Company A may raise or lower the prices on any of its products during the year in which the order is in effect so long as the weighted average of all price increases from the base prices does not exceed 2 percent. In calculating its weighted average the company may take into account price decreases on items it sells as well as price increases.

For Company A, the 2 percent increase represents the top level weighted average limitation. The order will also include top limit price increases for particular products. Within the limits set by the order, no prenotification of price increases on individual items is necessary. However, special quarterly reports demonstrating and certifying compliance are required. The burden of proving that the TLP order is being complied with rests with the company. Upon challenge by the Price Commission or the Internal Revenue Service, a company must document compliance or be held to have violated the order.

TLP orders do not displace the profit margin limitation found in § 300.12 of the regulations. Thus, Company A cannot increase its prices even within the 2 percent limitation set by its TLP order if to do so would cause it to increase its profits as a percentage of sales over that which prevailed in the base period.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3061, Feb. 11, 1972]

[Price Commission Ruling 1972-41]

NOTICE REQUIREMENTS FOR RENTAL

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and notified the lessee of the proposed in

creased rent effective January 1, 1972. On January 1, 1972, the lessee paid the increased rent for the month of January and continued to occupy the residence. However, the lessee contends that the increase violates economic stabilization regulations effective on December 29, 1971 (Economic Stabilization Regulations, 6 CFR Part 3091, 36 F.R. 25386 (December 30, 1971)), because the notification requirements of § 301.502 were not met. The lessor contends that the increase in rent is allowable since the 30day notification required by § 301.502 would have preceded the effective date of Part 301.

Issue. May a lessor increase the rent on a residence after December 28, 1971, without conforming to the notification procedures of Part 301 when the prescribed notice would have been given prior to the effective date of Part 301 (December 29, 1971).

Ruling. No. Section 301.501 provides that no person may increase a rent, with respect to any transaction after December 28, 1971, involving a lease or implied contract of occupancy of a residence unless he has complied with Subpart F of Part 301 (36 F.R. 25392). Section 301.502 (a) of that subpart requires a lessor to notify the lessee of a proposed rent increase at least 30 days before the date it is to become effective. The definition of "transaction" in § 301.2 includes the coming into being of an implied contract of occupancy or an informal lease on month-to-month terms. Thus, the lessee's occupancy of the subject residence on January 1, 1972, constitutes a "transaction" occurring after December 28, 1971, which is governed by § 301.502 (a), and the lessor may not increase the rent of the residence until the notification procedures of Part 301 are followed.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3061, Feb. 11, 1972]

[Price Commission Ruling 1972-42] INDIRECT MUNICIPAL FEES AS ALLOWABLE COSTS

Facts. A owns an apartment complex and has an agreement with B that B will remove the trash from A's apartments for a specified fee. City X has imposed a new dumping fee on all trash haulers, including B, who use the city's trash dumping facilities. B has increased his

fee to A pursuant to § 300.14 of the Economic Stabilization Regulations to reflect the new dumping fee, as a cost increase incurred after November 13, 1971 in furnishing the trash collection service. A is now seeking to increase the rent he charges for his apartments in order to offset B's increased trash collection fee.

Issue. Is B's higher fee, based on the new city dumping fee, an "allowable cost" to A under § 301.102 of the Economic Stabilization Regulations in order to justify A's proposed rent increase?

Ruling. B's higher fee is not an "allowable cost" to A within the Economic Stabilization Regulations, 6 CFR 301.102 (b), 36 F.R. 25386 (December 30, 1971). Although the dumping fee is a local fee for a municipal service, and would be an "allowable cost" for purposes of increased rentals under the Economic Stabilization Regulations, 6 CFR 301.102(a) (2), 36 F.R. 25386 (December 30, 1971) if it were imposed directly on A's property or A himself, it is on these facts imposed on B according to his usage of city dumping facilities. If B passes along the burden of the fee by increasing his fees, the increased cost to A does not arise from the municipal fee, but from B's increased fee. Moreover, B may choose to pass along only a portion of the increased cost, or none at all. Therefore, increases in trash hauling fees arising from the city dumping fee are not “allowable costs" within § 301.102(b), and may not justify increased rental rates under § 301.102(a) (2). Increased trash hauling fees arising from increased dumping costs are among the increases in operating costs for which the 22 percent annual rent increases of § 301.102 (a) (1) is provided.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3061, Feb. 11, 1972]

[Price Commission Ruling 1972-43] RENTAL OF MOBILE HOME SPACES

Facts. A mobile home park provides spaces upon which patrons can park mobile homes and facilities for connecting electric, gas, water, and sewer lines. Many of its spaces are occupied by patrons to whom the mobile home is the principal place of abode. Other spaces are used by vacationers or travelers on a temporary basis. The park owner has received a notice that water rates are

being increased, and would like to increase his rates on the mobile home spaces to offset the increased water rates, but he is uncertain as to which regulations govern the proposed increase.

Issue. Are rates for mobile home parks subject to the regulations governing rent, or do other regulations apply?

Ruling. Mobile home parks are governed by the general provisions of the rent regulations to the extent that they provide mobile home spaces for use in connection with the principal place of abode of nontransient occupants for a fee. If the park provides a space for a nonresidential use, however, the park is to that extent governed by the regulations applicable to "service organizations".

As defined in the regulations, "rent" means any price for the use of a residence or other real property. Economic Stabilization Regulations 6 CFR 301.3, 36 F.R. 25386 (December 30, 1971). "Other real property" is defined as real property devoted to the use of a residence, and a "residence" is a unit of housing normally occupied as a dwelling place under all the facts and circumstances; a mobile home is included as a "residence" if it is the principal place of abode of nontransient occupants. Economic Stabilization Regulations 6 CFR 301.2, 36 F.R. 25386 (December 30, 1971).

On the above facts, the spaces occupied by persons to whom the mobile home is a principal place of abode are "residence" and are therefore being "rented" within the definitions provided by the rent regulations. Fee increases for those spaces are subject to the rent regulations.

Since water rates are charges for a municipal service, they are "allowable costs" within § 301.102 (b) of the regulations. Increases in such rates occurring after December 28, 1971, allocated to the residence or other real property, will justify increases in rents as the residence or other real property becomes occupied after December 28, 1971, under § 301.102 (a).

Spaces occupied temporarily by vacationers or travelers do not fit the definition of a "residence" provided by §301.2, and § 301.3 (b) excludes fees or charges paid for space not used in connection with a residence from the definition of "rent". Not being a "rent", such charges are still within the definition of

a "price" provided by § 300.5 of the regulations, as compensation for the use of property. In this case, the providing of mobile home spaces on a temporary basis is a leasing or licensing of property to another person which is within the definition of a "service" provided by § 300.5. Therefore, to the extent that it rents spaces for temporary occupancy by travelers and vacationers, the mobile home park is a "service organization" within § 300.5 and the rates on such transactions are governed by § 300.14 of the Economic Stabilization Regulations. [37 F.R. 3062, Feb. 11, 1972]

[Price Commission Ruling 1972-44] EFFECT OF INSUFFICIENT NOTICE UNDER RENTAL REGULATIONS

Facts. Lessor, on February 15, 1972, notifies lessee that the monthly rent of his apartment will be raised effective March 1, 1972. The notification does not contain all of the information required by 301.502(b) of Part 301 (Economic Stabilization' Regulations, 6 CFR Part 301, 36 F.R. 25386 (December 30, 1971)). Tenant has reason to believe that the proposed increased rent is in violation of Part 301. After first meeting with the lessor, lessee complains to the Internal Revenue Service that the increased rent is not allowable under rent regulations effective after December 28, 1971, and provides the Service with a copy of the notification received and a written statement as to why he believes there has been a violation (§ 301.502(e)).

Issue. Is the proposed increase in rent effective on March 1, 1972, pending final action with respect to the alleged violation, despite the fact that the notification does not conform to the requirements of § 301.502.

Ruling. No. No person may increase a rent, with respect to any transaction after December 28, 1971, involving a lease or implied contract of occupancy of a residence, unless he has complied with the rental increase procedures of Subpart F, regardless of whether the increase is otherwise allowable under Part 301 (§ 301.501).

Section 301.502 (e) provides that "any proposed increase of which the lessee is notified pursuant to this section shall become effective as of the date specified in the notification pending final action with respect to the alleged violation." The notification provided in this case did

not meet the 30-day requirement of § 301.502 (a), nor did it set forth all the information required by § 301.502(b). The lessee was clearly not notified of the proposed increase pursuant to § 301.502. Therefore, the proposed increase in rent does not become effective on March 1, 1972, and the lessee need not pay the increase in rent pending final action with respect to the alleged violation.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3062, Feb. 11, 1972]

[Price Commission Ruling 1972-45] WAGE INCREASES INCURRED PRIOR TO NOVEMBER 13, 1971, AS ALLOWABLE COSTS

Facts. On April 1, 1971, a hospital, an institutional provider of health services, entered into a contract with a labor union representing the hospital's employees. The contract provided for an aggregate wage increase for the employees of 9 percent per year, to be paid beginning January 1, 1972. Section 300.18(d) of the Economic Stabilization Regulations provides that generally, aggregate wage increases in excess of 5.5 percent per year incurred after November 13, 1971, are not allowable costs for the purpose of determining allowable price increases by institutional providers of health services. Economic Stabilization Regulations, 6 CFR 300.18 (d), 36 F.R. 25384 (December 30, 1971). A proposed price increase reflecting this 9 percent wage increase will not raise the hospital's annual aggregate revenues more than 6 percent.

Issue. Was the 9 percent wage increase incurred before November 13, 1971?

Ruling. Yes. For the purposes of § 300.18(d) of the Economic Stabilization Regulations a wage increase will be deemed to be incurred prior to November 13, 1971, if a binding contract to pay that wage increase was entered into before August 15, 1971, even if actual payment under the contract does not begin until after November 13, 1971. The price increase reflecting this increased cost, however, may not take effect until the increased wages are being paid.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3063, Feb. 11, 1972]

[Price Commission Ruling 1972-46]

DEFINITION OF RETAILER

Facts. A distributor, D, is in the business of renting, selling, and servicing a multiple line of new and used construction, mining, logging, and road maintenance equipment. D sells a portable cement mixer and several wheelbarrows to a construction company, C.

Issue. Whether D is a retailer as defined in the Economic Stabilization Regulations and consequently subject to the posting requirements?

Ruling. Yes. Section 300.5 defines retailer as a person who carries on the trade or business of selling property to the ultimate consumer. 36 F.R. 23976 (December 16, 1971). A consumer is generally understood to be the person who uses up a commodity or service. The "ultimate consumer," then, is the last person to hold or use an item, in the normal course of events. Thus, for the purposes of the Economic Stabilization Regulations, the ultimate consumer includes a person who purchases an item for use in his trade or business, notwithstanding any other definition or classification, such as the U.S. Standard Industrial Classification Code. Consequently, to the extent that D sells a multiple line of equipment to an ultimate consumer, he is a retailer for the purposes of the price posting requirements. It should be noted, however, that to the extent that D's business involves the sale of used equipment (exempt), or the repairing of equipment (a service), or the leasing of equipment (a service), the price posting requirements do not apply.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3063, Feb. 11, 1972]

[Price Commission Ruling 1972-47] ROYALTIES FOR USE OF A PATENT

Facts. A holds the patent rights to an invention in accordance with an agreement with B. The agreement allows the royalties paid to B to be increased in an amount that reflect any increase in the cost of living index.

Issue. Whether such increase royalties are permissible.

Ruling. Increases in royalty payments keyed proportionately to increases in the cost-of-living index are not allowable.

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The rationale to support this ruling is dependent upon Economic Stabilization Regulation § 300.111, 36 F.R. 25384 (December 30, 1971), entitled Formuladetermined lease of personal property.

A royalty, in substance, is a payment for the use of property, most commonly a patent. As such it is similar to a lease of personal property and therefore the same rules should apply and the consistent results are reached. Regulations § 300.111 will not allow price increases based on increases in the consumer price index and therefore an increase in a royalty payment based on an increase in the cost-of-living index is not to be allowed.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3063, Feb. 11, 1972]

[Price Commission Ruling 1972-48] LIMITATION ON NONINSTITUTIONAL PROVIDERS OF HEALTH SERVICES

Facts. Doctor A, a general medical practitioner and a noninstitutional provider of health services, charges different fees for the various services he performs. With respect to one of the services, routine physical examinations, his allowable costs have increased 5 percent. These physical examinations generally account for about 10 percent of doctor A's annual gross receipts. A price increase of 5 percent for this service would not increase doctor A's profit margin. Economic Stabilization Regulations, 6 CFR 300.19 (c), 36 F.R. 25385 (December 30, 1971) provides that the aggregate price increases of a noninstitutional provider of health services may not exceed 2.5 percent a year.

Issue. Will the proposed 5-percent fee increase for routine physical examinations violate the 2.5-percent test of § 300.19 (c)?

Ruling. The 2.5-percent figure in § 300.19 (c) is applied to the annual revenues of the provider that would result from his charging his base price schedule for all services. The effect of all price adjustments (including reductions of prices) must not increase the provider's revenues more than 2.5 percent over what they would have been had the provider charged his base prices for all services throughout the year. Thus a price increase of more than 5 percent for a particular service may be allowable.

Since the physical examinations produce only about 10 percent of doctor A's income, a 5-percent price increase for that service is within the 2.5-percent requirement of § 300.19 (c).

This 5-percent price increase for physical examinations, however, must be considered in determining if subsequent price increases for other services exceed the 2.5-percent limitation.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3451, Feb. 16, 1972]

[Price Commission Ruling 1972-49] DETERMINATION OF BASE PRICE Facts. On August 16, 1971, a department store offered a large employee's association a 7-percent discount on all merchandise purchased by association members. The department store, a category III firm, wishes to reduce this discount to 5 percent. The department store's costs have not increased.

Issue. May the department store reduce the discount from 7 percent to 5 percent?

Ruling. Yes. Generally, a reduction in the discount given to a group of purchasers is a price increase. If, however, subsequent to August 15, 1971, a retailer who is not a category I firm for reporting purposes has reduced a price below the base price, he may now increase that price up to the base price without cost justification and without regard to the profit margin limitation. Since the 7-percent discount was not in effect prior to August 14, 1971, the department store's base price for its merchandise are determined without regard to this discount. See Economic Stabilization Regulations, 6 CFR 300.402, 36 F.R. 23979 (December 16, 1971). Accordingly the department store may reduce the discount to 5 percent, because in doing so it is not charging prices in excess of its base prices.

If a retailer is a category I firm for reporting purposes, it does not have to request and receive Price Commission approval before it can make such a price adjustment because the adjustment is below the base price as determined under Subpart F of Chapter III of the regulations. Economic Stabilization Regulations, 6 CFR 101.16(b), 37 F.R. 1239 (January 27, 1972).

This ruling has been approved by the General Counsels of the Price Commission and Cost of Living Council. [37 F.R. 3451, Feb. 16, 1972]

[Price Commission Ruling 1972-50] POSTING REQUIREMENTS OF COMBINED SERVICE AND RETAIL FIRMS

Facts. Restaurant operates a food service establishment including a retail delicatessen department. Tavern operates a food and beverage service establishment including a retail beverage carry out department. Ophthalmologist Associates operate an eye examination clinic which includes the sale of eyeglasses. Auto Garage operates an automobile repair shop which also includes a retail parts department. In all the above situations, the service-related sectors generate annual revenues of $200,000, but the retail sectors generate annual revenues of less than $200,000.

Issue. Is a person who is both a service organization and a retailer bound by the posting requirements when his retail business generates less than $200,000 annually?

Ruling. No. The Price Commission now requires a retailer with total annual sales of $200,000 and above to post certain base prices. This requirement applies only to the retail sales of the person rather than his total annual revenue. The persons in the above fact situations would not be required to post base prices since their retail business generates less than $200,000 in annual revenues.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3451, Feb. 16, 1972]

[Price Commission Ruling 1972-51]
BASE PRICE

Facts. A chain wholesale corporation, C, which has offered a product for sale in city X, plans to introduce the product to city Y. C regards Y as a separate marketing area.

Issue. How should C determine the base price of the product in city Y?

Ruling. Section 300.405 of the Economic Stabilization Regulations provides that the base price for a product is the highest price charged by the seller to a specific class of purchasers in a substantial number of transactions involving that product during the freeze base period. 6 CFR 300.45, 36 F.R. 23979 (December 16, 1971). Where a product was offered for sale during the freeze base period, the base price is determined under section 300.405, even though the product is introduced in a new location and of

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