Notice is hereby given that the state of Wisconsin Department of Agriculture, Trade and Consumer Protection announces that it will hold a public hearing on its emergency rule relating to price discrimination in milk procurement.

The emergency rule, which took effect on January 1, 1996, interprets s. 100.22, Stats., and amends ch. ATCP 100, Wis. Adm. Code.

The public is invited to attend the hearing and comment on the emergency rule. Following the public hearing, the hearing record will remain open until February 14, 1996 for additional written comments, which may be sent to the address given below.

A copy of the emergency rule may be obtained, free of charge, from:

Copies will also be available at the public hearing.

The hearing is scheduled as follows:

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 (608) 224-4972 or by contacting the TDD at the Department at (608) 224-5058.

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.