Opinion ID: 2307172
Heading Depth: 1
Heading Rank: 2

Heading: The Current Viability of Price Regulations Under the Milk Control Law

Text: Appellants contend that the purpose of our milk control law was to assure an adequate supply of milk to consumers only by providing a reasonable return to producers and that such return is now assured by the federal marketing orders fixing prices paid to producers. The argument therefore runs that fixing minimum prices to consumers no longer has any real or substantial relationship to any legitimate public purpose and not only exceeds the statutory authority, but is beyond the valid exercise of the police power. The contention is thus couched in terms both of the scope of the statute and of the constitutional guarantees of due process and equal protection. The two prongs of the argument essentially mesh. At this late date it cannot be disputed that the business of producing and distributing milk is affected with a public interest and subject to governmental regulation, including price-fixing, provided, of course, the particular regulation is substantially related to a legitimate end sought to be attained. Abbotts Dairies, Inc. v. Armstrong, 14 N.J. 319, 330 (1954), and cases therein cited. All stages of the business can be regulated pursuant to this basic principle. The primary question is the purpose and intended scope of our statute, to which we turn. The current law was enacted as L. 1941, c. 274, N.J.S.A. 4:12A-1 et seq., and has since remained practically unchanged in its substantive provisions. [4] There is no doubt that the statute and its predecessors grew out of an emergency which developed prior to 1933  the fact that dairy farmers in the state, who were not then protected by federal marketing orders, were at the mercy of processors and handlers and were receiving less for their milk than the cost of production, threatening ruin to producers and a consequent diminution in the supply of milk for consumers. The immediate aim of the law and the prior acts was to set up a state governmental agency with authority to fix prices and enact other regulations to rectify this evil. The preamble to the 1941 Act, L. 1941, c. 274, p. 713, N.J.S.A. Title 4, pp. 282-283, as had the preliminary recitals in the earlier statutes, spoke in these terms. But study of the entire 1941 act clearly demonstrates that it was designed and intended to be a permanent measure authorizing regulation of all aspects of the industry as the agency might determine from time to time to be necessary or advisable for the benefit of all interested in the production, distribution, sale or consumption of milk. Both the preamble and section 52 of the act, N.J.S.A. 4:12A-52 so indicate, the latter stating: This act shall be effective until such date as the Legislature shall determine an emergency no longer exists and the exercise of the police power of the State is no longer necessary and shall terminate its operation. While it is plain enough that `a statute valid when enacted may become invalid by a change in conditions to which it is applied' and `a law depending upon the existence of an emergency, or other certain state of facts, to uphold it, may cease to operate if the emergency ceases, or the facts change, even though valid when passed,' Garden State Dairies of Vineland, Inc. v. Sills, 53 N.J. 71, 75-76 (1968), a court should be most hesitant to so conclude when the Legislature has been as strongly positive as it has been here concerning the termination of the efficacy of a statute. And it is equally plain doctrine that while a police power act may be conceived by an emergency, that emergency may bring to light weakness in a system which requires permanent application of what was adopted as emergency legislation. A current emergency may be different in kind from that existing at the time of enactment, Como Farms, Inc. v. Foran, 6 N.J. Super. 306, 314 (App. Div. 1950) (speaking of this very law), and it does not follow that the Legislature intended to restrict action to the original evil alone. See Abbotts Dairies v. Armstrong, supra (14 N.J. at 325) again speaking of the 1941 act. That the Legislature intended the 1941 law to have a wide and lasting scope, far beyond the mere financial protection of producers, is best shown by section 21, N.J.S.A. 4:12A-21, broadly and comprehensively enumerating the powers of the Director. Its language speaks for itself in this connection and cannot be stressed too strongly: The director may fix the price at which milk is to be bought, sold, or distributed; regulate conditions and terms of sale; establish and require observance of fair trade practices; supervise, regulate and control the entire milk industry of the State of New Jersey, including the production, importation, classification, processing, transportation, disposal, sale or resale, storage or distribution of milk as defined in this act in the State of New Jersey in those matters and in every way necessary to carry out the purposes of this act and necessary to control or prevent unfair, unjust, destructive or demoralizing practices which are likely to result in the demoralization of agricultural interest in this State engaged in the production of milk or interfere with the maintenance of a fresh, wholesome supply of sanitary milk for the consumers of this State.... (emphasis supplied) We construe these wide powers to amount to an expression of legislative intent that the scope of the statute and the powers of the Director shall extend, for an indefinite time, to regulation of all aspects of the milk industry in this state, far beyond the mere protection of producers, and including the maintenance at all stages of an economically healthy and orderly industry and consideration of the welfare of consumers. Indeed, the underlying rationale of our earlier cases supports the view that the intended purpose and scope of the statute includes consumer protection and benefit. See e.g. Abbotts Dairies v. Armstrong, supra (14 N.J. 319) (sustaining maximum resale prices); Lampert I, supra (35 N.J. 205); Lampert II, supra (37 N.J. 598). We read the last phrase of the quoted section  maintenance of a fresh wholesome supply of sanitary milk for the consumers of this State  to encompass the availability of such a supply at fair and reasonable prices and with a reasonable choice of competitive and convenient places and methods of purchase  supermarkets, small independent grocery stores, vertically integrated and other specialized dairy stores, vending machines and home delivery. Fixing of minimum floor prices for retail sales under Order 69-1 certainly falls within the statutory scope. We further conclude that these objectives of the statute and their implementation by agency orders and regulations are substantially related to a legitimate end. It follows that the statutory powers of the Director as so construed represent a constitutional legislative exercise of the police power. We cannot agree with appellants' contention that statutory price-fixing powers are limited to providing a reasonable return to producers and that price regulation is no longer legally viable because that objective has been attained by the federal marketing orders blanketing the state. Also, the mere fact that some states have done away with milk control and price regulation in whole or in part or exercise controls in a different way does not render our system and legislation invalid. The Legislature is entitled to make the choice as to whether it will regulate the milk industry and, if so, how, so long as the system adopted is not arbitrary and violative of due process. It appears to us that the regulatory scheme empowered by the 1941 statute still clearly passes muster in 1972. Moreover, even if the price-fixing powers were as circumscribed as appellants urge, we are convinced that the Director could properly find from the evidence, as he did, that the federal marketing orders do not fully protect New Jersey producers economically and that they are benefited by price regulations like Order 69-1. A few instances may be briefly noted. The federal orders do not guarantee the producer a market for his milk, nor a stable and orderly distribution system to protect the market he may have, nor payment for his milk. All the orders do is to fix the monthly blend price he is due to receive from his handler, directly or through an operating cooperative. The New Jersey dairy farmer is interested in having as much of his milk as possible used for fluid consumption for that increases the blend price. Increase in per capita consumption is stimulated by consumer prices reasonably low, but high enough to keep processors and handlers in business. By the same token, prosperous wholesales furnish a steady market and they are able to pay the farmer; a number of recent distributor failures in this state have caused substantial producer losses. Distressed handlers may be forced to charge the farmer for haulage and handling and avoid the payment of premiums, thus reducing his take. Many New Jersey farmers belong to operating cooperatives, who must negotiate many items with handlers; if the handler is not financially sound the cooperative cannot meet its operational costs without paying its farmer-members less than the federally fixed price. All in all, the farmer benefits from a stable and orderly processing and distribution system, which regulations like Order 69-1 are designed to bring about. What can happen to the producer when there are no price controls is demonstrated by the situation which quickly developed when all resale price regulation was suspended in 1962. Heavy price-cutting led handlers to look for cheaper milk in distant states and New Jersey dairymen were threatened with loss of their markets.