CLOVERLAND-GREEN SPRING DAIRIES, INC. v. PENNSYLVANIA MILK MARKETING BOARD; Beverly R. Minor, Individually and as members of the Board; Luke F. Brubaker; J. Robert Derry, Individually and as members of the Board, Thomas E. McGlinchey; Gertrude Giorgini; Sue A. Spigler, (“Milk Consumers“), Intervenors-Plaintiffs, Cloverland-Green Spring Dairies, Inc., Appellant. Cloverland-Green Spring Dairies, Inc. v. Pennsylvania Milk Marketing Board; Beverly R. Minor, Individually and as chairperson of the Board; Luke F. Brubaker; J. Robert Derry, Individually and as members of the Board, Thomas E. McGlinchey; Gertrude Giorgini; Sue A. Spigler, (“Milk Consumers“), Intervenors-Plaintiffs, Thomas E. McGlinchey; Gertrude Giorgini; Sue A. Spigler, Individually, and on behalf of milk consumers in PMMB Areas # 1 and # 4, Appellants.
Nos. 01-2210, 01-2219
United States Court of Appeals, Third Circuit
Argued Feb. 5, 2002. Filed July 24, 2002.
297 F.3d 201
AMBRO, Circuit Judge.
*(Amended per Clerk‘s Order filed 10/3/01)
Thomas J. Finucane, (argued), Chambersburg, PA, D. Michael Fisher, Attorney General of Pennsylvania, Gwendolyn T. Mosley, (argued), Senior Deputy Attorney General, Calvin R. Koons, Senior Deputy Attorney General, John G. Knorr, III, Chief Deputy Attorney General, Chief Appellate Litigation Section, Office of Attorney General of Pennsylvania, Harrisburg, PA, for appellees/cross appellants.
Allen C. Warshaw, (argued), Duane, Morris & Heckscher, Harrisburg, PA, for appellee Pennsylvania Association of Milk Dealers.
Before: SLOVITER, and AMBRO, Circuit Judges POLLAK,** District Judge.
** Honorable Louis H. Pollak, United States District Judge for the Eastern District of Pennsylvania, sitting by designation.
OPINION OF THE COURT
AMBRO, Circuit Judge.
The primary issue in this case is whether the dormant Commerce Clause allows a
Federal milk marketing orders fix minimum prices (or price floors) for milk producers’ sales in most of the United States. Pennsylvania, the fourth-largest milk-producing state in the nation, sets minimum producer prices above the federal floors. To compensate its dealers1 and retailers for paying higher raw milk costs, Pennsylvania enforces minimum prices for wholesale and retail milk sales. The wholesale and retail price floors, which are designed to “best protect the milk industry of the Commonwealth,” are fixed according to in-state milk dealers’ and retailers’ costs to guarantee them desirable profits. As a consequence, wholesale and retail milk prices in Pennsylvania are considerably higher than the prevailing prices in neighboring states, none of which imposes price controls. Out-of-state milk dealers want to compete in the Pennsylvania market by offering prices below the wholesale floors, but face criminal penalties for doing so.
Cloverland-Green Spring Dairies, Inc. (“Cloverland“), a Maryland milk dealer, sued the Pennsylvania Milk Marketing Board (the “Board“) under
I. Background
Because we are at the summary judgment stage, we describe the facts in the light most favorable to Cloverland, the non-moving party. See Schnall v. Amboy Nat‘l Bank, 279 F.3d 205, 209 n. 1 (3d Cir.2002).
In most parts of the United States, producer-to-dealer milk sales are subject to price floors imposed by the federal government. Under the federal regulatory scheme, see
Pennsylvania‘s dairy industry is among our nation‘s most productive. Milk production in the Commonwealth outpaces consumption by roughly 350%. Annual production per-capita is around 900 pounds; consumption per-capita is merely 200 pounds. Only three states (California, Wisconsin, and New York) produce more milk than Pennsylvania.4
Nonetheless, to “best protect the milk industry of the Commonwealth and insure a sufficient quantity of pure and wholesome milk to [its] inhabitants,” Pennsylvania forces its milk producers to sell at “over-order” prices—meaning prices above those required by federal milk marketing orders—and, unlike any other state in the region, sets minimum prices for wholesale and retail milk sales.
To compensate dealers (and, in turn, retailers) for paying higher raw milk prices, the Commonwealth fixes wholesale and retail price floors at levels that guarantee them, also, “a reasonable return,” which the Milk Law defines as “not less than a two and one-half percent (2%) nor more than a three and one-half percent (3%) rate of return based on net sales.”
Pennsylvania‘s price control regime is virtually without peer. Only two other states (North Dakota and Maine) impose resale price floors. But unlike Pennsylvania, North Dakota and Maine do not require their milk control agencies to set price floors, instead giving them the option
The five southeastern and ten south-central counties in Pennsylvania (Areas 1 and 4, respectively, under the Board‘s regime) are part of the Northeast federal milk marketing region, which meanders from northern Virginia through New Hampshire and Vermont.6
Cloverland, which is based in Baltimore, profitably sells wholesale milk in Maryland at prices well below the minimum prices applicable to sales in Areas 1 and 4. In the absence of the wholesale price floors, Cloverland would offer similarly low prices to retailers in those areas. It has tried to gain customers in Areas 1 and 4 by competing based on non-price criteria, such as packaging, quality, and service, but has been unsuccessful. Cloverland maintains that the only way it can attract business in Pennsylvania is by offering lower prices. It offered evidence that it is almost impossible for dealers to acquire business in Pennsylvania without offering milk at lower prices because there is little (if any) difference among dealers with respect to factors other than price.
It is unclear why Cloverland is able to offer prices well below Pennsylvania‘s wholesale floors. Perhaps out-of-state dealers can acquire raw milk at lower prices because their home states do not impose “over-order” prices, as one of the defendants’ affiants indicated. On the other hand, Cloverland suggests that “large producer cooperatives” may render raw milk prices in neighboring states nearly as high as those dictated by law in Pennsylvania. So perhaps out-of-state dealers process milk more efficiently than their Pennsylvania counterparts, as Cloverland contends. Whatever the reason, it is apparent that the minimum wholesale prices prevent Cloverland from using its competitive advantage in price to attract business in Pennsylvania. At the same time, there is no evidence that any in-state dealer wants to sell milk in Pennsylvania at lower prices; indeed, the Pennsylvania Milk Dealers intervened in this case to help defend the price floors.
In an effort to justify the wholesale price floors, the defendants offered evidence, in the form of affidavits from representatives of the Pennsylvania milk industry, that the Commonwealth‘s “over-order” producer prices are needed to prevent “predatory pricing” that could cause a milk shortage, and that the minimum wholesale prices are necessary to compensate dealers
To put this in perspective, in May 2002, the minimum wholesale prices in Areas 1 and 4 were $2.66 and $2.64 per gallon, respectively.9 The defendants maintain that the wholesale price floors appear excessively high only because the Board bases them on dealers’ average total costs, which include both average variable costs (such as raw milk, processing, labor, and transportation) and average fixed costs (such as equipment, office space, and other “overhead” expenses).10 However, this practice of fixing prices based on average total costs significantly increases dealers’ profits because it will be in their economic interest to sell additional units of milk at any price above their average variable costs, even if below their average total costs. Outside Pennsylvania, in contrast, milk dealers generally offer prices based on their average variable costs.
With the record in this state, the parties filed cross-motions for summary judgment, and the District Court issued the first of two opinions. After reviewing the record, the Court determined that, because of the minimum wholesale prices, “[m]ore efficient out-of-state firms with lower costs are prohibited from utilizing their competitive advantage and attracting new customers by offering milk at lower prices.” 138 F.Supp.2d 593, 610 (M.D.Pa.2001). Further, “the clear effect produced on interstate commerce is that less out-of-state milk passes across the Pennsylvania border to be sold in Pennsylvania than would in the absence of the [Milk Law].” Id. Nevertheless, the Court deemed the burden on interstate commerce merely “incidental,” reasoning that the minimum prices do not burden out-of-state dealers, but instead burden more efficient dealers without regard to location. Id. at 607. Therefore, the Court applied the balancing test formulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), viz., “[w]here [a] statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”
Based on evidence subsequently introduced into the record, the District Court concluded that the wholesale price floors had some legitimate local benefits and that they burden interstate commerce less than it previously thought. Id. at 622. Relying on Pennsylvania milk industry representatives’ statements that the wholesale price floors are necessary to compensate dealers for paying “over-order” producer prices, the Court determined that the minimum wholesale prices advance the legitimate local interest in averting a milk shortage. Id. at 621-22. Although there was considerable evidence that “Pennsylvania produces more milk than its inhabitants drink and neighboring states have been able to maintain adequate supplies of milk without state-mandated prices,” this did not prove “that the putative local benefits are nonexistent or that the legislature could not have believed in the purported purpose of the statute.” Id. at 622.
On the burdens side of the scale, the Court reasoned that out-of-state dealers’ ability to compete based on non-price criteria rendered the burden on interstate commerce “minimal,” and that Cloverland “offer[ed] no conclusive evidence” that the minimum wholesale prices “substantial[ly]” reduce the flow of milk into Pennsylvania. Id. at 623. The Court relied heavily on statements by four Pennsylvania dealers and twenty-two Pennsylvania retailers that dealers compete based on non-price criteria, such as quality, service, and packaging. Id. It did not mention that many of the retailers listed price as an important factor—indeed, a number called it the most important—in deciding whether to switch dealers. Nor did it mention that several retailers explicitly said that, were it not for the minimum wholesale prices, they would buy milk from out-of-state dealers if they offered lower prices. In addition to underscoring out-of-state dealers’ ability to compete based on factors other than price, the Court emphasized that thirty-three percent of the milk sold by dealers in the Commonwealth was marketed pursuant to state-approved service contracts dubbed “tolling agreements,” which allow dealers to sell at prices below the wholesale floors, and that approximately seven percent of overall fluid milk sales in Pennsylvania are made by out-of-state dealers participating in tolling agreements.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction under
III. Minimum Wholesale Prices
A. The Basic Analytical Framework
In addition to granting Congress the power “to regulate Commerce among the several States,”
The initial question in a dormant Commerce Clause case is whether the state regulation at issue discriminates against interstate commerce “either on its face or in practical effect.” Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 91 L.Ed.2d 110 (1986); Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788, 797 (3d Cir.1995). If so, heightened scrutiny applies. “Discrimination against interstate commerce in favor of local business or
When a facially neutral law has the effect of disproportionately burdening out-of-state interests, it can be difficult to determine whether the burden rises to the level of discrimination against interstate commerce. See Brown-Forman Distillers Corp., 476 U.S. at 579, 106 S.Ct. 2080; General Motors Corp. v. Tracy, 519 U.S. 278, 298 n. 12, 117 S.Ct. 811, 136 L.Ed.2d. 761 (1997). Indeed, sometimes the distinction between state laws subject only to Pike balancing and those that are nearly per se invalid is “hazy.” Norfolk S. Corp. v. Oberly, 822 F.2d 388, 400 n. 18 (3d Cir.1987). However, as explained in more detail below, it is clear that state laws that are facially neutral but have the effect of eliminating a competitive advantage possessed by out-of-state firms trigger heightened scrutiny. See Hunt v. Wash. State Apple Adver. Comm‘n, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 55, 55 S.Ct. 497, 79 L.Ed. 1032 (1935).
In this case, Cloverland argues for heightened scrutiny, but disclaims any contention that the Milk Law is facially discriminatory. Thus we must consider whether a reasonable jury could find that the minimum wholesale prices have the effect of discriminating against out-of-state dealers.
B. Heightened Scrutiny
Two Supreme Court decisions guide our discussion. In the leading case of Baldwin, the Supreme Court struck down a New York law prohibiting in-state dealers from selling milk purchased outside the State at a price below the New York minimum. 294 U.S. at 521, 55 S.Ct. 497. The law was challenged by a company that bought lower-cost milk in Vermont and shipped it by rail to New York for sale there. Id. at 518, 520, 55 S.Ct. 497. The Court said the law was the functional equivalent of a tariff. Id. at 521, 55 S.Ct. 497. It eliminated Vermont farmers’ competitive advantage of producing milk at lower costs, id. at 522, 55 S.Ct. 497, and thus “neutralize[d] the economic consequences of free trade among the states.” Id. at 526, 55 S.Ct. 497. Further, if imitated by other states, it could spark a destructive interstate trade war. Id. at 521-22, 55 S.Ct. 497. “If New York, in order to promote the economic welfare of her farmers, may guard them against competition with the cheaper prices of Vermont, the door has been opened to rivalries and reprisals that were meant to be averted by subjecting commerce between the states to the power of the nation.” Id. at 522, 55 S.Ct. 497. While New York contended that the law was an innocuous effort to ensure an adequate supply of wholesome milk, the Court explained that any protectionist law can be couched in non-protectionist terms, and that upholding state-imposed trade barriers simply because they save suppliers from market forces would render the dormant Commerce
Four decades later, the Supreme Court invalidated a North Carolina statute that prohibited closed containers of apples sold in the State, regardless of their origin, from displaying any grade other than that of the United States Department of Agriculture (“USDA“). Wash. State Apple, 432 U.S. at 349-54, 97 S.Ct. 2434. The statute prevented apple growers from the State of Washington, which imposed especially strict inspection and quality standards, from using the superior Washington grade to market their product. Id. at 336-39, 97 S.Ct. 2434. The Supreme Court determined that the labeling rule was subject to heightened scrutiny because it had the “practical effect” of discriminating against Washington apples in three ways. Id. at 350-51, 97 S.Ct. 2434. First, it forced Washington apple growers and dealers—but not their North Carolina counterparts—to change their marketing practices. Id. at 351, 97 S.Ct. 2434. Second, it eliminated the competitive advantage that the Washington grade gave that State‘s apples by requiring them to be marketed under the “inferior” USDA grade. Id. at 351-52, 97 S.Ct. 2434. Third, it had “a leveling effect which insidiously operate[d] to the advantage of local apple producers,” giving “the North Carolina apple industry the very sort of protection against competing out-of-state products that the Commerce Clause was designed to prohibit.” Id. The Court rejected North Carolina‘s claim that the statute was necessary to avoid the “deception and confusion” ostensibly resulting from different states’ grading systems, noting, inter alia, that it increased these dangers by allowing apples to be marketed without any grade, thereby depriving purchasers of information about the quality of apples concealed from view by closed containers.15 Id. at 353-54, 97 S.Ct. 2434.
The Supreme Court‘s opinions in Baldwin and Washington State Apple show that if a state regulation has the effect of protecting in-state businesses by eliminating a competitive advantage possessed by their out-of-state counterparts, heightened scrutiny applies. See Laurence H. Tribe, American Constitutional Law § 6-8, at 1076 (3d ed.2000) (“[J]ust as it was impermissible in Baldwin v. Seelig for New York to eliminate the price advantage of Vermont milk by mandating a minimum price, so, too, in Hunt v. Washington State Apple Advertising Commission, was it impermissible for North Carolina to eliminate the quality advantage of apples from Washington by proscribing Washington‘s use of a quality grading system that distinguished its apples from the local product.“).
As noted above, there is a factual dispute over why Cloverland can profitably sell milk at prices well below Pennsylvania‘s wholesale floors. One conclusion that a reasonable trier of fact could reach is that out-of-state dealers have a competitive advantage over their in-state counterparts. Higher raw milk costs necessitate higher wholesale prices. Because dealers buy milk from local dairy farmers, dealers from a state that imposes “over-order” prices are at a disadvantage when exposed to competition from dealers whose home states do not prop up milk producers’ prices above the federal floors. Unlike neighboring states such as Maryland, where Cloverland is based, Pennsylvania forces its dealers to pay “over-order” prices for raw milk. A reasonable trier of fact could find that out-of-state dealers’ ability to acquire raw milk at lower costs gives them a competitive edge over Pennsylvania dealers.16
The District Court acknowledged that a reasonable trier of fact could find that the minimum wholesale prices reduce the flow of out-of-state milk into Pennsylvania by preventing “[m]ore efficient out of state firms with lower costs ... from utilizing their competitive advantage and attracting new customers by offering milk at lower prices.” 138 F.Supp.2d at 610. Nevertheless the Court determined that heightened scrutiny did not apply because the same burden applies to all non-incumbent dealers, including more efficient in-state dealers. Id. at 607; see also Sch. Dist. of Philadelphia v. Pa. Milk Mktg. Bd., 683 A.2d 972, 977 (Pa.Commw.Ct.1996) (relying on this rationale to uphold minimum wholesale prices as applied to public schools’ milk purchases). However, it is not clear that the more efficient in-state dealers postulated by the District Court actually exist. The Pennsylvania Milk Dealers fervently support the minimum wholesale prices, and there is no indication that any Pennsylvania dealer objects to
But the flaw in the District Court‘s reasoning is more fundamental. The Court believed that a state may remove a competitive advantage possessed by out-of-state firms if some in-state firms are also adversely affected. As we noted several years ago, however, the Supreme Court‘s decision in C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 114 S.Ct. 1677, 128 L.Ed.2d 399 (1994), “explicitly rejected the argument that a disputed statute would have to favor all in-state businesses as a group—a statute may be invalid if it favors only a single or finite set of businesses.” Harvey & Harvey, 68 F.3d at 798. In Carbone, a town claimed that its flow control ordinance, which mandated that all solid waste produced within its borders be processed by a designated local facility, did not discriminate against out-of-state facilities because it burdened all in-state facilities save the favored one. Carbone, 511 U.S. at 390-91, 114 S.Ct. 1677. The Supreme Court disagreed, explaining that “[t]he ordinance is no less discriminatory because in-state or in-town processors are also covered.” Id. at 391, 114 S.Ct. 1677. Indeed, “that the flow control ordinance favor[ed] a single local proprietor,” rather than local interests generally, “just ma[de] the protectionist effect of the ordinance more acute.” Id. at 392, 114 S.Ct. 1677. Similarly, if the wholesale price floors protect incumbent in-state dealers not only from out-of-state competitors, but also from in-state ones (as the District Court conjectured), that simply exacerbates their protectionist effect.
In sum, a reasonable jury could find that Pennsylvania‘s price floors “neutralize advantages belonging to the place of origin,” Baldwin, 294 U.S. at 527, 55 S.Ct. 497, and “violate[] the principle of the unitary national market by handicapping out-of-state competitors, thus artificially encouraging in-state production even when the same goods could be produced at lower cost in other States.” West Lynn Creamery, 512 U.S. at 193, 114 S.Ct. 2205. If out-of-state dealers like Cloverland are able to sell milk at lower prices than the Pennsylvania dealers that currently dominate the wholesale market in Pennsylvania, a reasonable trier of fact could conclude that, by eliminating out-of-state dealers’ competitive advantage, the Commonwealth‘s minimum wholesale prices “cause local goods to constitute a larger share, and goods with an out-of-state source to constitute a smaller share, of the total sales in the market.” Id. at 196, 114 S.Ct. 2205 (quoting Exxon Corp. v. Governor of Md., 437 U.S. 117, 126 n. 16, 98 S.Ct. 2207, 57 L.Ed.2d 91 (1978)). This finding would trigger heightened scrutiny under Baldwin and Washington State Apple. Therefore, the District Court erred in applying the Pike balancing test at the summary judgment stage.17
C. Pike Balancing
As explained in the preceding section, a reasonable trier of fact could find that the minimum wholesale prices have an impermissible “leveling effect” that eliminates out-of-state dealers’ competitive advantage over in-state dealers. Wash. State Apple, 432 U.S. at 351, 97 S.Ct. 2434. Even if no such effect is found, the record nonetheless amply supports a finding that the wholesale price floors regulate evenhandedly, but incidentally burden interstate commerce by making it more difficult for out-of-state dealers to attract new business in a market dominated by in-state dealers. Such a finding would require application of the Pike balancing test, under which the minimum wholesale prices violate the dormant Commerce Clause if the burden they impose on interstate commerce clearly outweighs their local benefits. Pike, 397 U.S. at 142, 90 S.Ct. 844. Contrary to the District Court‘s view, a reasonable trier of fact could conclude that the wholesale price floors fail the Pike test.
We begin with the price floors’ putative benefits. The defendants insist that we must accept the Pennsylvania General Assembly‘s empirical judgment, expressed in the Milk Law‘s text, that the minimum wholesale prices help avert a milk shortage that would harm the public health. Some deference to a state legislature‘s asserted purpose may be appropriate when the burden of a state regulation falls on in-state as well as out-of-state interests, because in that context the state legislature‘s incentive to protect in-state interests “will serve as a check against unduly burdensome regulations.” Kassel v. Consol. Freightways Corp. of Del., 450 U.S. 662, 675, 101 S.Ct. 1309, 67 L.Ed.2d 580 (1981) (plurality opinion); see also Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 473 & n. 17, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981) (stating that the “major in-state interests” harmed by the challenged statute provided “a powerful safeguard against legislative abuse“).18 “Less deference to the legislative judgment is due, however, where the local regulation bears disproportionately on out-of-state residents and businesses.” Kassel, 450 U.S. at 675-76, 101 S.Ct. 1309 (striking down Iowa truck-length limitations, which the State claimed promoted highway safety, under Pike); see also Tribe, supra, § 6-5, at 1053-55 (stating that courts should be more skeptical of state legislators’ ostensible objectives “where a restrictive regulation affects only those from other states“). There is no evidence that any Pennsylvania dealers object to the minimum wholesale prices. Because their burden thus appears to fall only on out-of-state dealers, the purpose asserted in the Milk Law‘s text deserves little deference.
In any event, “the incantation of a purpose to promote the public health or safety does not insulate a state law from Commerce Clause attack. Regulations designed for that salutary purpose never-
Only meager evidence to this effect appears in the record. The defendants offer nothing more than speculation by representatives of the Pennsylvania dairy industry that in-state milk producers would engage in predatory pricing if the Commonwealth did not impose “over-order” prices, along with the representatives’ claims that the minimum wholesale prices are needed to compensate dealers for purchasing raw milk at “over-order” prices. However, a reasonable trier of fact could find that the federal producer price floors provide ample protection against predatory pricing. As the District Court said in its first opinion, the record shows that “the federal minimum pricing is ensuring an adequate supply of milk.” 138 F.Supp.2d at 611. Pennsylvania is the only state in the Northeast milk marketing region that enforces wholesale price floors, yet none of the others has suffered a milk shortage in recent decades.
Moreover, the current success of the Commonwealth‘s dairy industry belies the defendants’ claims that the minimum wholesale prices do more than artificially inflate in-state dealers’ profits. At oral argument, counsel for the Pennsylvania Milk Dealers accurately noted that “Pennsylvania is one of the top, I think, top five producers of raw milk in the country. It is an exporter.” As already noted, the Commonwealth ranks fourth among all states in aggregate milk production. Per-capita milk production is even more impressive—Pennsylvania produces four-and-a-half times as much milk as its residents consume. Unless eliminating the minimum wholesale prices would cause Pennsylvania‘s milk production to decrease so dramatically that the Commonwealth would be forced to import milk to satisfy its residents’ needs—and there is no evidence that it would—a reasonable trier of fact could find that the wholesale price floors are superfluous.
On the burdens side of the scale, a reasonable trier of fact could find that the wholesale price floors substantially impede the flow of out-of-state milk into Pennsylvania by protecting incumbent in-state dealers from price competition. Because in-state dealers dominate the wholesale milk market in Pennsylvania, barriers to competition burden out-of-state interests more heavily than in-state ones. Price floors are a barrier especially likely to
The District Court recognized that the wholesale price floors disproportionately burden out-of-state dealers, but concluded that there is “no conclusive evidence” of a substantial burden on interstate commerce because dealers can compete based on other criteria, such as packaging, quality, and service. 138 F.Supp.2d at 623 (emphasis added). At the summary judgment stage, however, the non-moving party is not required to produce “conclusive” evidence. Instead, it need only offer sufficient evidence for a reasonable jury to find the facts necessary for a decision in its favor. See, e.g., Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548. Cloverland did that.
There is evidence that it is virtually impossible to displace incumbent dealers in Pennsylvania without offering prices below the Board-mandated floors. Not surprisingly, price seems to be an especially important factor—if not the most important factor—in retailers’ decisions to find new dealers or retain their existing suppliers. Several retailers expressly ranked price as their most important criterion in deciding whether to seek new wholesale milk suppliers, and said they would switch to out-of-state dealers if they offered prices below the current minimums. Therefore, because the vast majority of incumbent dealers are in-state firms, and because there is no evidence that any in-state dealer—incumbent or not—wants to sell at lower prices, a reasonable trier of fact could find that the minimum wholesale prices place a substantial, disproportionate burden on out-of-state dealers, and that the ability to compete based on non-price criteria does not noticeably alleviate the burden.19
Nor can we agree with the District Court that out-of-state dealers’ ability to enter into tolling agreements meaningfully mitigates the burden on interstate commerce. Tolling agreements can be arranged only with the largest retailers, such as major supermarket chains. For that reason, only thirty-three percent of the milk purchased by Pennsylvania retailers is sold under a tolling agreement. The dormant Commerce Clause does not allow Pennsylvania to hamper out-of-state dealers in two-thirds of its wholesale market on the ground that they may compete freely in the remaining third. Cf. Wyoming v. Oklahoma, 502 U.S. 437, 455, 112 S.Ct. 789, 117 L.Ed.2d 1 (1992) (rejecting Oklahoma‘s claim that it could set aside a “small portion” of its coal market for in-state producers because “[t]he volume of commerce affected measures only the extent of the discrimination; it is of no rele-
Because the record indicates that the minimum wholesale prices may substantially burden Cloverland and other out-of-state dealers, and because there is scant evidence that the price floors advance a legitimate local interest, summary judgment would be inappropriate even if a reasonable trier of fact could not find facts sufficient to trigger heightened scrutiny.
IV. Minimum Retail Prices
We can dispense quickly with the milk consumers’ challenge to the retail price floors. The dormant Commerce Clause does not prevent a state from forcing its residents to pay more for a product if no out-of-state interests are affected. The intervenor-plaintiffs presented evidence that the retail price floors harm Pennsylvania milk consumers because lower prices are available in Maryland. But
V. Conclusion
Genuine issues of material fact exist with respect to whether Pennsylvania‘s minimum wholesale milk prices interfere with “the Commerce Clause‘s overriding requirement of a national common market.” Wash. State Apple, 432 U.S. at 350, 97 S.Ct. 2434 (internal quotation marks omitted). A reasonable trier of fact could find that the wholesale price floors eliminate out-of-state dealers’ competitive advantage, and that Pennsylvania could achieve its stated objectives through alternative, nondiscriminatory measures. The record also supports a finding that the minimum wholesale prices’ burdens on interstate commerce clearly outweigh their local benefits. Therefore, summary judgment should not have been granted with respect to the wholesale price floors, and we reverse and remand for further proceedings on that issue. We affirm the District Court‘s ruling with respect to the retail price floors, however, because there is no evidence that they burden interstate commerce.