Opinion ID: 2261107
Heading Depth: 1
Heading Rank: 2

Heading: The Adequacy of the Maine Milk Commission's Investigation

Text: An evaluation of the Milk Commission's procedures for instituting Order 80-6 must begin with a review of this Court's decision in Cumberland Farms Northern, Inc. v. Maine Milk Comm'n, Me., 377 A.2d 84 (1977) (hereinafter referred to as  Cumberland Farms, 1977 ). In that case the Court was confronted with the question whether the Commission is required to conduct any independent investigation of the Maine milk industry before holding its public hearings on milk pricing. We stressed the necessity of a systematic unbiased inquiry enabling the Commission to evaluate the often partisan testimony presented at the public hearings. We held that the Commission must obtain information from a truly representative sample of Maine milk dealers. Though the Commission must not overburden dealers with the collection of unnecessary data, it must maintain an on-going system of accounting and reporting to assist it in making its determinations. Before setting actual minimum prices of milk, the Commission must establish baseline minimum prices that will insure the theoretically most efficient dealer in Maine a just and reasonable return on his investment. Finally, the Commission may adjust the baseline prices to account for the realities of the Maine market, keeping in mind that the actual minimum prices must reflect the theoretically lowest achievable prices. Only if those procedures are followed does the Commission satisfy its responsibilities under its governing statute, 7 M.R.S.A. § 2954 (1979). Our conclusions in Cumberland Farms, 1977, were not intended as mere recommendations. They were an explication of the substantive law controlling the Commission's price setting. In the light of the foregoing criteria, the Commission has made some improvement since 1977 in its procedures for establishing minimum milk prices. Each dealer was sent a detailed questionnaire in 1979, soliciting data about the costs associated with milk processing and distribution. In the study that formed the core of the Commission's investigation, Dr. Metzger obtained usable information from dealers who represented collectively 93 percent of the milk purchased from producers in Mainecertainly a representative sample. Furthermore, Dr. Metzger performed certain internal checks on the dealer data in an attempt to assure that each dealer's return was at least internally consistent. However, the conclusion cannot be avoided that the Commission has not yet established the kind of independent ongoing investigation required by the statute, as construed in Cumberland Farms, 1977. It has certainly not yet set up such an ongoing system of accounting and reporting as will assist it at any time in making its determinations. Cumberland Farms, 1977, supra, at 90. The heart of the problem is that the Commission's calculations could only be as accurate as the data used in them. The financial information from the 1979 survey used by the Commission in setting the minimum milk prices here in question was supplied voluntarily by the dealers and never independently audited by the Commission. Without an audit, the Commission was not in a position to know whether the information it had received from the dealers was accurate or not. A dealer's costs of operation are critical, of course, in determining his net profit and efficiency. His basis for reporting at least some of those costs, such as depreciation of buildings, machinery and equipment, depends on the accounting procedure he uses for general business purposes. The problem of reliability of the dealer data obtained by the Commission in this case is compounded by the fact that the Commission had not prescribed standard accounting procedures, with the result that differences in dealers' methods of cost allocation could render the cost data they supplied to the Commission unreliable for purposes of comparison. That the data obtained from dealers were not wholly reliable was brought to the Commission's attention during the hearing, when Dr. Metzger testified that data from some dealers showed inexplicably low net profits in view of the reported costs and the minimum returns those dealers were necessarily assured from the sale of price-regulated milk. It is possible that those discrepancies were the result, at least in part, of lack of uniformity in accounting methods rather than the result of misstatement of costs or income. It is especially necessary, when the dealers' accounting procedures are not uniform, that some auditing of their reports going beyond a check for internal consistency be made to assure the integrity of the data base. The 1979 survey did not constitute the independent investigation by the Commission ... required by 7 M.R. S.A. § 2954 ... before the Commission may issue orders that change dealer and retail margins. Cumberland Farms, 1977, supra, at 89.