Section 100.20, Stats. (Wisconsin's “Little FTC Act”), broadly prohibits unfair trade practices and methods of competition in business. Under s. 100.20 (2), Stats., the Department may adopt rules prohibiting unfair trade practices and methods of competition, and requiring fair practices. The Department has previously adopted rules under s. 100.20 (2), Stats., prohibiting price discrimination related to fermented malt beverages, soda water beverages and motor fuel. The Department is adopting this permanent rule under authority of s. 100.20 (2), Stats., and other applicable laws.
Enforcement Options
Under s. 100.20 (5), Stats., a person who suffers a monetary loss because of a violation of a rule adopted under s. 100.20 (2), Stats., may sue the violator in court, and may recover twice the amount of the loss together with costs and reasonable attorney fees. That private remedy is applicable to violations of this rule.
The Department may also ask the Attorney General or county district attorneys to pursue violations in court, or may pursue administrative proceedings to suspend or revoke a dairy plant operator's license.
RULE CONTENTS
Price Discrimination Prohibited
This 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
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 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 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 rule provides that in an administrative or court enforcement action, or in a private lawsuit under s. 100.20 (5), Stats., 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
If a dairy plant operator wishes to justify price discrimination between two 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.
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 between producers in order to discriminate in the milk price paid to those producers.
Producer Payroll Statements
Under current rules, a dairy plant operator must give each milk producer a written payroll statement for each pay period. The payroll statement documents the amount of milk received from the producer during the pay period, the amount paid for that milk, and the basis on which the pay price was determined. Among other things, the payroll statement identifies the nature and amount of any price adjustments, including any premiums or deductions.
Effective January 1, 1996, federal milk marketing orders changed the way that many dairy plant operators pay milk producers. The milk marketing orders provide for a multiple component pricing method to calculate the price paid for milk.
This rule repeals and recreates current rules related to milk producer payroll statements, so that payroll statement requirements will be consistent with the new multiple component pricing method. This rule also spells out alternative payroll statement requirements for dairy plant operators who continue to use the traditional straight fat pricing method or the 3.5% butterfat differential pricing method.
Fiscal Estimate
The proposed rule interprets s. 100.22, Stats., relating to price discrimination in milk procurement. The rule:
○ Prohibits a dairy plant operator from discriminating between milk producers if 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 competition;
○ Establishes standards which a dairy plant operator must meet in order to establish a defense based on milk quality, cost-justification or meeting competition;
○ Spells out enforcement standards and procedures; and
○ Makes technical changes in current rules related to milk producer payroll statements.
This rulemaking will not increase DATCP's costs of administering this program, but will facilitate compliance and enforcement of s. 100.22, Stats. There will be a one-time cost of approximately $700 associated with printing, mailing and holding hearings on the rule.
Initial Regulatory Flexibility Analysis
This rule amends ch. ATCP 100, Wis. Adm. Code. Specifically, it repeals and recreates s. ATCP 100.75, relating to payroll statements of milk producers, and creates s. ATCP 100.76 (3m) and subchapter VI of ch. ATCP 100, prohibiting price discrimination in milk procurement.
This 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 defined as “small businesses” under s. 227.114 (1) (a), Stats.
This 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. It establishes standards which a dairy plant operator must meet in order to establish a defense based on milk quality, cost-justification or meeting competition. Justification of discriminatory prices is already required by s. 100.22, Stats.
This 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 makes technical changes in existing rules related to milk producer payroll statements. These changes are intended to accommodate the multiple component pricing method used under federal milk marketing orders since January 1, 1996. Effective enforcement of s. 100.22, Stats., and this 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 announces that it will hold public hearings on a proposed rule, relating to grain warehouse keepers and grain dealers. This rule amends ch. ATCP 99, Wis. Adm. Code.
Written Comments
The Department will hold the hearings at the dates and places shown below. The public is invited to attend the hearings and comment on the proposed rule. Following the public hearings, the hearing record will remain open until March 20, 1996 for additional written comments.
Copies of Rule
A copy of the rule may be obtained, free of charge, from:
Division of Trade & Consumer Protection
Telephone (608) 224-4970
Dept. of Agriculture, Trade & Consumer Protection
2811 Agriculture Dr.
P.O. Box 8911
Madison, WI 53708-8911
Copies will also be available at the public hearings.
An interpreter for the hearing-impaired will be available upon request for these hearings. Please make reservations for a hearing interpreter by contacting Judy Jung (608) 224-4972 or by contacting the TDD at the Department at (608) 224-5058.
Hearing Information
The hearings are scheduled as follows:
March 12, 1996 Company E Room
Tuesday Menasha Public Library
Commencing at 1:00 p.m. 440 First Street
Handicapped Accessible Menasha, WI
March 14, 1996 Room 105
Thursday Eau Claire State Office Bldg.
Commencing at 12:00 p.m. 718 North Clairemont
Handicapped Accessible Eau Claire, WI
March 15, 1996 Room 172
Friday State Agriculture Building
Commencing at 1:00 p.m. 2811 Agriculture Drive
Handicapped Accessible Madison, WI
