Court Opinion

ID: 9660195
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:07:25.215576+00
Date Added: 2024-06-11T18:14:16.316646
License: Public Domain

WELLIVER, Judge,
dissenting.
I respectfully dissent.
It is clear from the record that the Director of Agriculture never intended to issue respondent a license to distribute milk. Although the parties agree that the Department of Agriculture bore the burden of proof, see State ex rel. Thomason v. Adams Dairy Co., 379 S.W.2d 553, 555 (Mo.1964), it is apparent that the Director had, for all practical purposes, determined before the hearing that the license should and would be denied. At the beginning of the hearing the Director made the following opening statement:
DIRECTOR RUNYAN: I would like to call this hearing to order.

The purpose of this hearing is to determine whether a milk products distributor’s license should be refused to Fleming Foods of Missouri, Incorporated.
Grounds upon which application of Fleming Foods of Missouri, Incorporation [sic], for a milk distributor’s license may be refused are as follows:

If issued the license, Fleming Foods of Missouri will be unable to comply with the provisions of Section 416.440, Revised Missouri Statutes, Missouri 1969, due to the extensions of credit and financing provided their retail customers.

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Secondly, if issued a license, Fleming Foods of Missouri would be unable to comply with the provisions of Section 416.440 of Revised Statutes of Missouri 1969, due to this company providing [gjrocery and dairy equipment to their retail customers.

Thirdly, if issued a license, Fleming Foods of Missouri would be unable to comply with Section 416.440, Revised Statutes of 1969, since this company either provides or offers to provide free services and other things of value to their retail customers.

(Emphasis added.) The language is substantially similar to that used in the notice of hearing that the Director sent respondent on July 7,1977, and virtually the same language subsequently became his findings of fact and conclusions of law. The extended hearing1 was but an empty formality.
The scope of our review is set forth in § 536.140, RSMo 1978.2 We must not, however, so defer to the agency that we abdicate our judicial function. This is especially true in cases such as this in which the agency acts as much as an advocate as it does an impartial tribunal. When it is clear that the agency has decided the case before the hearing ever is conducted, we should not give it the blind deference that the principal opinion appears to accord the Director of Agriculture.
Respondent is a wholesale food distributor in Joplin, Missouri. It franchises and supplies independent IGA retail grocery stores in sixteen Southwest Missouri counties and in parts of Arkansas, Kansas, and Oklahoma. Respondent’s franchisees enter into a sales-service plan agreement with respondent under which respondent for a fee provides counseling services on store location and layout, merchandising, advertising and special promotions, public relations, and expansion or diversification. The fee for each four weeks is computed on the amount of each franchisee’s grocery purchases from respondent during the preceding four week period. Respondent also provides accounting services for an additional fee based upon the range of services that a retailer utilizes. In addition, respondent has infrequently assisted its franchisees in obtaining loans, has loaned money to them, has leased property for sublease to them, and has assisted them in the purchase of equipment.
Respondent ships IGA label milk from its warehouse on its own trucks to its franchisees in Arkansas, Kansas, and Oklahoma, and it seeks a license to do so in Missouri. Presently, Fairmont Foods of Kansas City, a milk processor, ships IGA milk directly to respondent’s Missouri franchisees. Respondent estimates that it could lower the delivered wholesale price of milk ten cents per gallon if it were allowed to receive Fair-mont’s milk shipments at its warehouse and distribute the milk on its own refrigerated trucks, which deliver other items to the franchised Missouri stores daily. The Director denied respondent a license because, he concluded, the provision of such services would violate § 416.440(1), RSMo 1969,3 of the Unfair Milk Practices Act.4
*196The record simply does not support the Director’s finding that respondent would violate the statute. The statute provides that milk processors or distributors may not (1) with the intent or effect of (2) unfairly (3) diverting trade from or injuring a competitor, destroying competition, or creating a monopoly (4) give or offer to give to any milk product purchaser anything that the statute proscribes.
There is not one line of testimony of intent to divert trade from or injure a competitor, destroy competition, or create a milk monopoly. There is not one line of testimony that respondent franchisor has given5 anything to its franchisees for the purpose of creating a milk monopoly. Respondent’s president testified that “[o]ur company provides nothing free to the retailer.” There is no evidence to the contrary. Respondent made direct loans to its franchisees only as a last resort, when loans from conventional sources were unavailable, and it did so only at a rate of interest greater than the established prime rate. When respondent leased property for sublease to its franchisees, respondent charged rent on the sublease at five percent more than it paid on the principal lease. When respondent assisted its franchisees in the purchase of equipment, it charged them ten percent more than the cost of equipment to respondent.6 Finally, respondent charged more for its accounting services than the services themselves cost respondent. Under the sales-service plan agreement, franchisees pay for all services except accounting regardless of whether they take advantage of them. None of the services is free.7
Even if respondent’s sale of franchise services could be considered, by some stretch of the imagination, “giving” of services within the meaning of the statute, the record does not support the principal opinion’s summary conclusion that “[t]he giving of such services and things of value is clearly intended to and would have the effect of diverting trade from competing distributors in the field of milk and milk products sales.” Respondent’s franchisees are not required under their agreements with respondent to purchase any or all of their inventory from respondent. Neither are they under any compulsion to do so. Such *197an arrangement was not a prerequisite for the loans that respondent has provided some of its franchisees. Furthermore, of respondent’s twenty-three franchisees in Southwest Missouri, ten do not participate in the milk program. The principal opinion points out that one retailer admitted switching from another distributor to respondent, but nothing in the record suggests that it was to the exclusion of other milk producers or distributors. In fact, one retailer indicated that he would continue to sell Foremost and Hiland milk as well as IGA even if respondent were granted a license to distribute milk.
Neither could respondent destroy competition or create a monopoly if it were granted a license. Respondent operates in only sixteen Southwest Missouri counties. Just thirteen of its Missouri franchisees, participate in its milk program. Respondent occupies only 9.4% of the market within its operating area. In 1977, the year in question, respondent’s fluid milk sales in Southwest Missouri totaled only $403,000. With its small size, there can be little doubt that respondent could neither intend nor effect adverse market consequences.
Finally, nothing in the record suggests that respondent’s actions are unfair. Respondent is not primarily in the milk business. The milk it would distribute were it granted a license would be just one of several thousand items that it distributes. Respondent desires only to permit its franchisees to compete with the large chain stores and competing grocery distributors that themselves provide services similar to those that respondent sells to its franchisees. The Director’s expert witness testified that “it is a very common and competitive process of supplying these services.” Thus,
[t]he evidence shows only a recognized and frequently used practice in the ... industry, which has a legitimate business purpose and which has never heretofore been considered as against public policy or as characterized by deception, bad faith or fraud, and which did not in fact result in any substantial diversion of trade.
Adams Dairy, 379 S.W.2d at 556.
We should not place our imprimatur on what amounts to an artificial price support scheme. Nothing in the record requires the result the principal opinion reaches. The trial court summarily concluded that “the finding of the Director of Agriculture was not supported by competent and substantial evidence upon the whole record and is unauthorized by law.” Our conclusion should be the same. The judgment of the trial court should be affirmed.

. The hearing lasted two days. Ten witnesses testified, and 42 exhibits were admitted into evidence. The testimony fills 388 pages in the transcript.

. Section 536.140(2), RSMo 1978, provides in relevant part that:
The inquiry may extend to a determination of of whether the action of the agency
(1) Is in violation of constitutional provisions;
(2) Is in excess of the statutory authority or jurisdiction of the agency;
(3) Is unsupported by competent and substantial evidence upon the whole record;
(4) Is, for any other reason, unauthorized by law;
(5) Is made upon unlawful procedure or without a fair trial;
(6) Is arbitrary, capricious or unreasonable;
(7) Involves an abuse of discretion.

.Section 416.440(1) provides:
No milk processor or distributor shall, with the intent or with the effect of unfairly diverting trade from a competitor, or of otherwise injuring a competitor, or of destroying competition, or of creating a monopoly, give or offer to give any milk product purchaser any rebate, discount, free service or services, advertising allowance, pay for advertising *196space used jointly, donation, free merchandise, rent on space used by the retailer for storing or displaying the milk processor’s or distributor’s merchandise, financial aid, free equipment, or any other thing of value; except the bona fide return by a cooperative association to its members on a patronage basis of the savings realized on products sold and distributed to the members or patrons.
The statute as codified in RSMo 1978 is identical to the one codified in RSMo 1969, which is involved in this case.

. One would have to be an ostrich with his head in the sand to fail to recognize that the Unfair Milk Practices Act, §§ 416.410-.560, RSMo 1978, although couched in antimonopoly terms, has as its ultimate goal the supporting of milk prices.

. This Court has noted that “[d]isregarding for the moment the word ‘discount,’ it will be noted that the other words and clauses [in § 416.-440(1) ] all carry the connotation of a donation or a discriminatory gift.” Foremost Dairies, Inc. v. Thomason, 384 S.W.2d 651, 660 (Mo. banc 1964). It seems clear that a discount, as well, is in a strict sense gratuitous. We must construe nontechnical words in “their plain or ordinary and usual sense,” § 1.090, RSMo 1978, and “give” means to “transfer ownership or possession without compensation” or to “bestow upon another gratuitously or without consideration,” Black’s Law Dictionary 620 (5th ed. 1979).

. The principal opinion states that “[wjhile this equipment purchase program apparently shows a small profit in some instances, in the overall scheme the 10% charge does not cover Fleming’s cost of securing the equipment.” That assertion is contrary to fact. The uncon-tradicted testimony of respondent’s president was that “[w]e’re not giving them any equipment, I assure you.... That operation does show a profit. Not an outlandish profit, by any means. It does show a profit. Certainly it shows a profit. We wouldn’t stay in business if we didn’t show a profit.”

. It is irrelevant that respondent’s franchisees received services from respondent at a cost less than they could have obtained on the open market. This is not to suggest that transactions made at less than arm’s length should not receive greater scrutiny. Sham transactions at artificially low prices may well violate § 416.-440(1). Nothing in the record of this case, however, suggests that respondent’s agreements with its franchisees were made at less than arm’s length.