Administration inflation-fighters have told the country's biggest merchants to take a "do-it-yourself" approach to meeting President Carter's goals for holding down retail prices.
Rather than issue specific regulations telling retailers how much they can raise prices, the Council on Wage and Price Stability has given the industry a target of a 3.5 percent ceiling for annual price increases and has told the store operators to figure out how to hit it.
The strategy apparently is designed to avoid the difficulties of President Nixon's Phase II controls, on retail prices, which retailers complained were so complicated they couldn't comply with them if they wanted to.
The Carter approach was outlined in meetings between COWPS Director Barry Bosworth and representatives of a dozen major retail chains and was discussed yesterday at a meeting here set up by the American Retail Federation and other industry groups.
Retailers are especially sensitive to price guidelines because, as J. C. Penney Co. Chairman Donald V. Seibert put it yesterday, "We are closest to the final sale so we are estremely visible to the public."
Seeking assurance that they will not become the scapegoats for price increases that can be traced back to manufacturers or raw-materials suppliers, the retailers got some sympathy from Alfred Kahn, the president's chief inflation fighter.
Kahn said the administration does not intend to set specific "guidelines" for increases in either retail prices or retail mark-ups - the amount stores add to wholesale prices to cover their costs and profits.
"We're prepared to provide the flexibility you need," Kahn said, "while we will still be able to insist you honor the goal" of holding down prices.
Merchants contend they cannot hold down retail prices voluntarily when there are no brakes on wholesale price acceleration.
Kahn acknowledged that "if we freeze mark-up" and costs continue to rise, "You may be squeezed unfairly."
Promising the same pro-competition approach he used as chairman of the Civil Aeronautics Board in pushing deregulation of airlines, Kahn drew vigorous applause from the retailers. But members of the audience criticized him on two points vital to their business: minimum wage increases and changes in utility rate structures.
Shifting to time-of-day pricing for electricity so daytime users pay higher rates than nighttime users would be devestating to stores which can't switch to nighttime operation, complained Sumpter Priddy, president of the Virginia Retail Merchants Association.
And Kahn offered no answer when another merchant asked how stores could hold down labor costs when the minimum wage increases Jan. 1 from $2.65 to $2.90 an hour. Most retail employes earn less than $4 an hour and thus are exempt from the administration's wage guidelines.
In meetings with retailers recently, Bosworth and COWPS Deputy Director Robert K. Russell stressed that the administration's anti-inflation program was not designed to allow for the pass-through of all cost increases.
But COWPS officials acknowledged that retailers may not be able to comply with the 3.5 percent price increase guideline because of uncontrolable cost increases. In that case, retailers will be considered in complyiance with the program so long as they do not increase their profit margin based on sales.
COWPS is considering requiring that major retailers - those with sales of more than $400 million - notify the administration of how they intend to meet the president's Price guidelines.
After that, the next step will likely be to require big chains to certify that they are voluntarily complying with the guidelines, the retailers were warned by Louis Neeb, a top official in the Nixon administration's Price Commission.
Neeb also cautioned that well-known companies can expect to be singled out for criticism if they are found to be violating the voluntary guidelines. "It's the psychology as much as the economics" of inflation fighting that results in spotlighing conspicuous violations. Need admitted.
Recalling another lesson from the last time price guidelines were used, Penney Chairman Seibert urged the administration not to require retailers to post base price lists so customers can be sure the store is complying.
Not only did this contribute to the notion that we couldn't be trusted, it also was very costly both in terms of dollars and manpower," Seibert said.
Seibert, who is also chairman of the Business Roundtable's Task Force on Inflation, said "the business community remains vigorously opposed to mandatory controls and skeptical about voluntary standards."
But Kahn said that if voluntary guideliner don't work, the only alternatives will be mandatory controls or "deep, deep depression."