Opinion ID: 2307172
Heading Depth: 1
Heading Rank: 3

Heading: The Validity of the Provisions of Order 69-1

Text: Appellants' second main argument is, in effect, that, even asuming the present legality of price-fixing, the precise provisions of Order 69-1 are invalid as setting too high minimums and as discriminatory against vertically integrated jug store dealers in view of their method operation and claimed lower costs. The scope of judicial review of a milk price-fixing order is now well defined. Although the fixing of prices is to prescribe future conduct and so may be said to constitute rule-making and thus be legislative in nature, the Legislature in section 23 of the 1941 act as amended by L. 1952, c. 159, N.J.S.A. 4:12A-23, specified that the Director must hold a public hearing before fixing or refixing any price and that he shall issue findings of fact and an order based upon the evidence adduced at said hearing. We have interpreted this to require judicial review as if the administrative action were quasi-judicial in character. Abbotts Dairies v. Armstrong, supra (14 N.J. at 331-333); Garden State Farms, Inc. v. Hoffman, 46 N.J. 595, 599-600 (1966). The scope of review in such matters is to determine `whether the findings made could reasonably have been reached on sufficient credible evidence present in the record,' considering `the proofs as a whole,' with due regard to the opportunity of the one who heard the witnesses to judge of their credibility ... and ... with due regard also to the agency's expertise where such expertise is a pertinent factor. Close v. Kordulak Bros., 44 N.J. 589, 599 (1965). We have further said, with respect to judicial review of milk price-fixing orders, that [w]e think it clear that the Legislature expected the reviewing court to do more than merely express an abiding faith in the agency's expertise; that it wished the court to see to it that price fixing rests upon evidence rather than upon a conclusional assertion of what the Director and his staff know or fear. Garden State Farms, Inc. v. Hoffman, supra (46 N.J. at 599-600). In fixing milk prices, the Director must be concerned with three principal elements: whether to fix prices at all; if so, on what basis and to what extent; and what precise figures should be prescribed. The evidence here, originally and even more so on remand, probed deeply, probably more so than ever before, into all aspects of the milk industry, covering all of these elements thoroughly from all points of view. The questions involved were hotly contested, with conflicting expert and industry testimony, cost studies, experience in other states and proofs on almost every conceivable facet fully presented by the differing parties in interest. The findings of the Director, especially those after the remand, are complete and adequate on their face. The whole procedure and record is in sharp contrast to that found in several earlier cases coming from this agency where we were required to set aside price orders. The issue before us is whether the Director's findings and order could reasonably have been reached on sufficient credible evidence present in the record. The question is not whether we would have reached the same conclusions. We think we must also consider as an integral part of the determination of this issue, whether, from the evidence, the order appears reasonably fair to all the sharply diverse interests concerned without improper favoritism to any. In approaching this issue, it must be remembered that the milk industry is both unique and volatile. Its economics are complex and hard to understand for those not closely connected with it. As the United States Supreme Court said in H.P. Hood and Sons v. DuMond, 336 U.S. 525, 529, 69 S.Ct. 657, 661, 93 L.Ed. 865, 870 (1940): ... the economy of the industry is so eccentric that economic controls have been found at once necessary and difficult. These have evolved detailed, intricate and comprehensive regulations, including price-fixing. Milk is a universal food in constant public demand. It must be supplied not only to homes but to schools, hospitals and other institutions. It is produced 365 days a year, which cannot be stopped; it is a perishable commodity which must be handled and processed promptly. Profit above the producer level is measured in pennies per unit and unit costs, and thus profit, depend upon volume, which can result in sharp and destructive competition and an unstable and disorderly market. At the retail store level, milk is frequently used as a traffic builder, with emphasis on price, or even as a loss leader, there being no substantial consumer brand preference. And technological and other advances related to production, processing and distribution, in the last decade or so, which will undoubtedly continue, have brought about vast changes in the industry and its economics. Given all these and other pertinent factors, price regulation and the details of it largely come down, as the economists' report said, to matters of judgment to be exercised by the administrative agency. The element of agency expertise enters heavily into evaluation of a price-fixing order. Judicial reliance thereon cannot be blind, however; a sufficient basis for its exercise and the resulting findings must be found in the hearing evidence. If the latter exists, due regard must be accorded expertise. Dealing with the previously mentioned three elements which must concern an agency in considering the fixing of milk prices, it seems clear beyond any doubt that the record here adequately supports the finding of the desirability for continuing some form of price-fixing in this state. While a completely unregulated market apparently has worked satisfactorily in some other states, that fact does not require the Director, in the exercise of his expert judgment, to adopt that course. We reach the same conclusion with respect to the basis and extent of price regulation. There was ample evidence to support the Director's decision that only a prohibition against sales below the particular seller's cost was too difficult to effectively enforce and would most likely not be satisfactory in New Jersey. Likewise the determination to adopt the single minimum margin concept, applicable only to all sales to consumers, on the theory of a floor price to prevent destructive price-cutting, with actual prices to be dictated by orderly market competition, is fully sustained by the proofs. The Director could reasonably reach the result he did on these aspects from the evidence, especially the economists' report and the corroborative oral expert testimony. We believe the same holds true as to the precise minimum prices he established, where expertise is an equally important factor. There was a plethora of very intricate evidence on costs and prices, including not only the Case study and supplemental material, but also later agency studies and cost figures presented by appellants. [5] Comparable cost figures are most difficult to achieve. There is no uniform method of accounting and cost evidence can speak only as of one exact point of time, subject to very quick change by reason of any number of affecting factors, especially including volume at the particular time. The opinion evidence showed that the appropriate minimums to be fixed depend not only on cost figures, but also on other factors encompassing the objectives sought to be achieved, the number and size of firms in the distributive process, prevailing market prices and the range of market prices. The Director could properly find from the proofs that minimums should not be fixed based on the costs of the lowest cost operator, else the yardstick would be the costs of the producer selling his own milk directly to consumers, nor that the costs chosen should be those of a single specialized dealer with a low cost container and method of operation, else the price thus set would in effect be set at a disaster level for all other dealers. There was ample credible evidence in the record for the Director's conclusion that the minimums he prescribed should be based, to the extent costs are considered in setting prices, on the costs of several low cost efficient operators (including vertically integrated dairy stores) capable of supplying a substantial portion of the market, regardless of the kind of container or the exact method of operation. Nothing in the statute dictates otherwise. We should add that we consider the objectives sought to be achieved by the prices as so fixed to be entirely justified and legitimate, within the statutory scope and fully supported by the proofs. Added financial support to the New Jersey dairy farmer is specifically set forth as a statutory purpose. The maintenance of a stable and orderly market and the availability to the consumer of alternative methods of purchase at fair and reasonable prices bear on the statutory objective of the maintenance of a fresh, wholesome supply of sanitary milk for the consumers of this State. As one expert testified at the remand hearing: Certainly you can have an adequate supply of milk in the farming areas and if you don't have sufficient returns for the businessmen to assemble the milk, process it and distribute it, you don't really have an adequate supply to all consumers. In summary, we find the procedure leading to Order 69-1 to be fair, and the order itself to be reasonable with respect to all the diverse interests involved in the milk industry as a business affected with a public interest (except in two minor aspects to be mentioned). While it represents the commencement of a novel and different long range approach to milk price regulation in this state, it is not to be considered as the be-all and end-all. Continuous reevaluation by the agency, and amendment of the order as changed economic and other factors dictate, is certainly called for. The two aspects of the findings of the Director on remand requiring special note derive from his own recomputation and reevaluation of the original findings of his predecessor. He prepared new worksheets to arrive at minimum prices by a slightly different process and so proposed a revised order. This went beyond the intended purpose and scope of the remand. However, he arrived at the same minimums as in the original findings with two exceptions. As to the first of these, the original order provided no different minimums when half-gallon and gallon containers were made up of banded smaller containers as against single-wall containers. The findings on remand proposed a higher minimum for banded containers. This led to the intervention on this appeal after the return of the remand of intervenor-appellant Dairy Stores, Inc. to urge that such revised minimums should not be ordered. We agree. No party in interest appealed from this portion of the original order, no notice was given by the Director that such a proposal would be considered on the remand and no opportunity to appear and offer evidence in opposition was afforded. This proposed revision of the original order, therefore, cannot be allowed. The second change proposed in the original order by the findings on remand related to minimum resale prices for larger than gallon containers. The original order prescribed that the minimum for such containers should be the quart equivalent of the minimum price for gallon containers, multiplied by the number of quarts in the unit. Cumberland, the only dealer using such containers, urged in its original brief that this price was erroneous. The Director, on remand, agreed and proposed that the minimum therefor should be the quart equivalent of the minimum price for gallon containers minus one cent per quart multiplied by the number of quarts in the unit. We concur, on the basis of the evidence of lesser costs in connection with such larger containers; the minimum originally fixed therefor was arbitrary. Our conclusion therefore is that Order 69-1 as originally promulgated, with the modification as to the minimum prices for larger than gallon containers just noted, is affirmed, to become effective on a date to be fixed by the Director. No costs to any party. For affirmance  Chief Justice Weintraub and Justices JACOBS, PROCTOR, HALL, SCHETTINO and MOUNTAIN  6. For reversal  None.