Register

Thursday   State Agriculture Bldg.

Commencing at 10:00 a.m.   2811 Agriculture Dr.

Handicapped accessible   Madison, WI

An interpreter for the hearing-impaired will be available on request for this hearing. Please make reservations for a hearing interpreter by contacting Judy Jung [phone] or by contacting the TDD at the Department at [phone].

Analysis by the Dept. of Agriculture, Trade & Consumer Protection

Statutory authority: ss. 93.07 (1), 93.15 and 97.20 (4)

Statutes interpreted: ss. 93.15, 97.20 and 100.22

This emergency rule prohibits a dairy plant operator from discriminating between milk producers in the amount paid for milk unless the discrimination is based on a difference in milk quality, is justified by a difference in procurement costs, or is justified in order to meet a competitor's price. This emergency rule establishes standards which a dairy plant operator must meet in order to establish a defense based on milk quality, cost-justification or meeting competition.

This emergency rule also spells out enforcement standards and procedures. The Department may require a dairy plant operator to file documentation justifying discriminatory prices, and may take enforcement action against an operator who fails to provide adequate justification. The Department may ask the Attorney General or a district attorney to prosecute a violator in court, and may take action against a violator's dairy plant license.

Each year, Wisconsin's 27,000 dairy farmers sell nearly $3 billion worth of milk to dairy plant operators. Milk sales represent the primary or exclusive source of income for thousands of Wisconsin farm families. Currently, many dairy plant operators appear to be discriminating between milk producers in the amount paid for milk. Many operators appear to be paying higher prices to large producers which cannot be fully justified on the basis of milk quality or differences in procurement cost. Discrimination in milk prices may injure small milk producers and competing dairy plant operators, and may contribute to unwarranted concentration in the dairy industry.

Section 100.22, Stats., currently prohibits a dairy plant operator from discriminating between milk producers in the amount paid for milk if the discrimination injures producers or competition. However, the law affords the following defenses:

* An operator may justify discriminatory prices based on measurable differences in milk quality. Milk quality premiums, if any, must be based on a pre-announced premium schedule which the operator makes available on equal terms to all producers. The operator must also comply with minimum testing requirements under s. ATCP 80.26.

* An operator may pay discriminatory prices if the operator can justify the price differences based on differences in procurement costs.

* An operator may pay discriminatory prices in order to “meet competition.”

The Department may investigate violations of s. 100.22, Stats., and may request the Attorney General or a county district attorney to prosecute violations in court; however, investigation and prosecution are currently hampered by a lack of clear standards in the law. For example, there are no standards for what constitutes “cost-justification” or “meeting competition.” Prior to the emergency rule, there were no rules interpreting s. 100.22, Stats.

Price Discrimination Prohibited

This emergency rule prohibits a dairy plant operator from doing either of the following if the operator's action injures competition or injures any producer:

* Discriminating between producers in the milk price paid to those producers. “Milk price” means a producer's average gross pay per hundredweight, less hauling charges.

* Discriminating between producers in the value of services which the operator furnishes to those producers but does not include in the payroll price.

Defenses

Under this emergency rule, a dairy plant operator may defend against a milk price discrimination charge by proving any of the following, based on documentation which the operator possessed at the time of the alleged discrimination:

* That the discrimination between producers was based on an actual difference in milk quality. Among other things, the operator must show that the milk quality premiums were based on a pre-announced premium schedule that was available on equal terms to all producers, and that the operator tested the milk according to current rules.

* That the discrimination between producers was fully justified by differences in procurement costs between producers. The rule spells out the relevant costs which the operator may consider, and the method by which the operator must calculate the comparative costs for each producer.

* That the discrimination between producers was justified in order to meet competition. A dairy plant operator may not claim this defense unless the operator proves all of the following:

* The operator offered the discriminatory milk price or service in response to a competitor's prior and continuing offer to producers in the operator's procurement area.

* The operator's discriminatory milk price or service did not exceed the competitor's offer.

* The operator offered the discriminatory milk price or service only in that part of the operator's procurement area which overlapped the competitor's procurement area.

Demanding Justification for Discriminatory Prices

Under this emergency rule, the Department may require a dairy plant operator to file documentation justifying an apparent discrimination in prices between producers. A dairy plant operator must file the documentation within 14 days after the operator receives the Department's demand, or by a later date which the Department specifies in its demand. The Department may extend the filing deadline for good cause shown.

Failure to Justify Discrimination

Under this emergency rule, if the Department finds that a dairy plant operator has not adequately justified the operator's discriminatory milk prices, the Department may give the dairy plant operator written notice of that finding. A notice is not a prerequisite to an enforcement action against the violator; however, the notice is open to public inspection under subch. II of ch. 19, Stats.

Injury to Producer

This emergency rule provides that, in an administrative or court enforcement action, evidence that a complaining producer was paid less than another producer shipping milk to the same dairy plant during the same pay period is presumptive evidence that the complaining producer has been injured.

Calculating Milk Procurement Costs

Under this emergency rule, if a dairy plant operator wishes to justify price discrimination between producers based on a difference in procurement costs between those producers, the operator must calculate procurement costs per hundredweight as follows:

STEP 1: Calculate the operator's average total cost, per producer per pay period, for all of the following:

* Dairy farm field service costs.

* Costs to test dairy farm milk shipments.

* Producer payroll expenses.

* Dairy farm license fees and other routine expenses incurred in connection with the licensing and regulation of dairy farms.

* Other costs which the Department allows in writing before the discrimination occurs.

STEP 2: Calculate the operator's average total cost, per producer per pay period, for milk collection and hauling services. An operator may calculate a separate average cost for producers with every-other-day pickup versus producers with every day pickup. An operator may not include:

* Collection or hauling costs which are charged to a producer.

* Costs which the hauler incurs before the first farm and after the last farm on the hauling route.

STEP 3: Add the above costs. To obtain the procurement cost per hundredweight for each producer, divide the sum by the producer's average milk production in hundredweights per pay period. When comparing procurement costs between volume pay classes, each class member's production is considered to be the same as the class average.

Dairy Plant Operator May Charge Procurement Costs to Producers

Nothing in this rule prohibits a dairy plant operator from charging each producer for the full cost of procuring that producers' milk. For example, a dairy plant operator may charge each producer the actual cost, per hundredweight, of hauling that producer's milk; however, a dairy plant operator may not shift hauling charges or other procurement costs between producers in a manner that discriminates between producers.

Fiscal Estimate

This emergency rule interprets s. 100.22, Stats., relating to price discrimination in milk procurement. This emergency rule will not increase DATCP's costs of administering this program, but will facilitate compliance and enforcement of s. 100.22, Stats. There will be nominal one-time costs associated with the rule-making, including costs to print, mail and hold a hearing on the emergency rule.

Initial Regulatory Flexibility Analysis

This emergency rule interprets s. 100.22, Stats., which prohibits price discrimination in milk procurement. This emergency rule applies to approximately 180 dairy plants that purchase milk from Wisconsin's approximately 27,000 dairy farmers. Some of the dairy plants and virtually all of the dairy farmers are small businesses as defined under s. 227.114 (1) (a), Stats.

This emergency rule prohibits a dairy plant operator from discriminating between milk producers in the amount paid for milk unless the discrimination is based on a difference in milk quality, is justified by a difference in procurement costs, or is justified in order to meet a competitor's price. This emergency rule establishes standards which a dairy plant operator must meet in order to establish a defense based on milk quality, cost-justification or meeting competition.

This emergency rule also spells out enforcement standards and procedures. The Department may require a dairy plant operator to file documentation justifying discriminatory prices, and may take enforcement action against an operator who fails to provide adequate justification. The Department may ask the Attorney General or a district attorney to prosecute a violator in court, and may take action against a violator's dairy plant license.

This rule requires dairy plant operators, many of whom are “small businesses,” as defined by s. 227.114 (1) (a), Stats., to justify discriminatory milk prices; however, that justification is already required by s. 100.22, Stats. This rule does not add to current statutory requirements, but merely clarifies those requirements.

Effective enforcement of s. 100.22, Stats, and this emergency rule may result in a reduction of milk volume premiums to large dairy farmers, most of whom fall within the statutory definition of “small businesses”; however, effective enforcement may also result in increased payments to small dairy farmers, most of whom are also “small businesses”.

Agriculture, Trade &
Consumer Protection

The State of Wisconsin Department of Agriculture, Trade and Consumer Protection will hold public hearings on a proposed Department rule related to the Soil and Water Resource Management program (chapter ATCP 50, Wis. Adm. Code).

Written Comments

The hearings will be held at the times and places shown below. The public is invited to attend the hearings and make comments on the proposed rule. Following the public hearings, the hearing record will remain open until March 15, 1996, for additional written comments. An interpreter for the hearing-impaired will be available upon request for this hearing. Please make reservations for a hearing interpreter by February 9, 1996, by writing or calling Don Houtman at the phone number or address given below or by calling the Department's TTY number [phone].

Copies of Rule & Contact Person

Copies of the proposed rule are available free of charge from:

Don Houtman, [phone]

2811 Agriculture Drive

P.O. Box 8911

Madison, WI 53708-8911

Hearing Information

All locations are handicapped accessible.

Five hearings are scheduled:

February 26, 1996   Informational meeting

Monday   commencing at 2:30 p.m.,

County Board Room   followed by the first

Jackson Co. Courthouse   hearing of the day.

307 Main Street   A second hearing of

BLACK RIVER FALLS   the day will commence

WISCONSIN   at 6:30 p.m.

February 27, 1996   Informational meeting

Tuesday   commencing at 10:00 a.m.,

County Board Mtg. Room   followed by the hearing.

Law Enforcement Center

Rusk Co. Courthouse

311 East Miner Ave.

LADYSMITH, WI