298 F.3d 201 | 3rd Cir. | 2002
Before: SLOVITER, and AMBRO, Circuit Judges(cid:13) POLLAK,** District Judge(cid:13) (Opinion filed: July 24, 2002)(cid:13) Kevin J. McKeon, Esquire(cid:13) Malatesta, Hawke & McKeon(cid:13) 100 North Tenth Street(cid:13) Harrisburg, PA 17101(cid:13) Sheldon A. Weiss, Esquire (Argued)(cid:13) 125 Knightsbridge Road(cid:13) Mountainside, NJ 07092(cid:13) Attorneys for Appellant/(cid:13) Cross Appellee Cloverland-Green(cid:13) Spring Dairies, Inc.(cid:13) Thomas J. Finucane, Esquire(cid:13) (Argued)(cid:13) 14 North Main Street, Suite 500(cid:13) Chambersburg, PA 17201(cid:13) _________________________________________________________________(cid:13) ** Honorable Louis H. Pollak, United States District Judge for the(cid:13) Eastern District of Pennsylvania, sitting by designation.(cid:13) 2(cid:13) D. Michael Fisher(cid:13) Attorney General of Pennsylvania(cid:13) Gwendolyn T. Mosley (Argued)(cid:13) Senior Deputy Attorney General(cid:13) Calvin R. Koons(cid:13) Senior Deputy Attorney General(cid:13) John G. Knorr, III(cid:13) Chief Deputy Attorney General(cid:13) Chief Appellate Litigation Section(cid:13) Office of Attorney General of(cid:13) Pennsylvania(cid:13) Strawberry Square, 15th Floor(cid:13) Harrisburg, PA 17120(cid:13) Attorneys for Appellees/(cid:13) Cross Appellants(cid:13) Allen C. Warshaw, Esquire (Argued)(cid:13) Duane, Morris & Heckscher(cid:13) 305 North Front Street(cid:13) P.O. Box 1003, 5th Floor(cid:13) Harrisburg, PA 17108-1003(cid:13) Attorney for Appellee(cid:13) Pennsylvania Association of Milk(cid:13) Dealers(cid:13) OPINION OF THE COURT(cid:13) AMBRO, Circuit Judge:(cid:13) The primary issue in this case is whether the dormant(cid:13) Commerce Clause allows a state to impose wholesale price(cid:13) floors that shield in-state businesses from more efficient(cid:13) out-of-state competitors. Under the circumstances(cid:13) presented here, we hold that it does not.(cid:13) Federal milk marketing orders fix minimum prices (or(cid:13) price floors) for milk producers’ sales in most of the United(cid:13) States. Pennsylvania, the fourth-largest milk-producing(cid:13) state in the nation, sets minimum producer prices above(cid:13) the federal floors. To compensate its dealers1 and retailers(cid:13) _________________________________________________________________(cid:13) 1. Milk dealers (i.e., processors) buy raw milk from producers (i.e., dairy(cid:13) farmers), process it, and sell it at wholesale prices to retailers (e.g.,(cid:13) supermarkets, convenience stores).(cid:13) 3(cid:13) for paying higher raw milk costs, Pennsylvania enforces(cid:13) minimum prices for wholesale and retail milk sales. The(cid:13) wholesale and retail price floors, which are designed to(cid:13) "best protect the milk industry of the Commonwealth," are(cid:13) fixed according to in-state milk dealers’ and retailers’ costs(cid:13) to guarantee them desirable profits. As a consequence,(cid:13) wholesale and retail milk prices in Pennsylvania are(cid:13) considerably higher than the prevailing prices in(cid:13) neighboring states, none of which imposes price controls.(cid:13) Out-of-state milk dealers want to compete in the(cid:13) Pennsylvania market by offering prices below the wholesale(cid:13) floors, but face criminal penalties for doing so.(cid:13) Cloverland-Green Spring Dairies, Inc. ("Cloverland"), a(cid:13) Maryland milk dealer, sued the Pennsylvania Milk(cid:13) Marketing Board (the "Board") under 42 U.S.C.S 1983,(cid:13) seeking declaratory and injunctive relief with respect to the(cid:13) minimum wholesale prices.2 Three milk consumers who live(cid:13) in Pennsylvania (Thomas McGlinchey, Gertrude Giorgini,(cid:13) and Sue Spigler) intervened to challenge Pennsylvania’s(cid:13) minimum retail prices. The Pennsylvania Association of(cid:13) Milk Dealers (the "Pennsylvania Milk Dealers"), which(cid:13) represents milk dealers within the Commonwealth,(cid:13) intervened to help defend the minimum wholesale prices.(cid:13) The District Court granted summary judgment for the(cid:13) defendants with respect to both the wholesale and retail(cid:13) price floors, prompting this appeal. We affirm the Court’s(cid:13) ruling on the minimum retail prices, but reverse its ruling(cid:13) on the minimum wholesale prices and remand for further(cid:13) proceedings.(cid:13) I. Background(cid:13) Because we are at the summary judgment stage, we(cid:13) describe the facts in the light most favorable to Cloverland,(cid:13) _________________________________________________________________(cid:13) 2. As a state agency, the Board is immune from suit under the Eleventh(cid:13) Amendment. See Fla. Dep’t of Health & Rehabilitative Servs. v. Fla.(cid:13) Nursing Home Ass’n, 450 U.S. 147, 150 (1981) (per curiam). But its(cid:13) three members, whom Cloverland also sued, are not. See Ex parte(cid:13) Young, 209 U.S. 123, 159-60 (1908). For simplicity, we use the "Board"(cid:13) to refer to its members.(cid:13) 4(cid:13) the non-moving party. See Schnall v. Amboy Nat’l Bank,(cid:13) 279 F.3d 205, 209 n.1 (3d Cir. 2002).(cid:13) In most parts of the United States, producer-to-dealer(cid:13) milk sales are subject to price floors imposed by the federal(cid:13) government. Under the federal regulatory scheme, see 7(cid:13) U.S.C. S 608c; 7 C.F.R. S 1001.1 et seq., the Secretary of(cid:13) Agriculture divides the country into geographic regions and(cid:13) issues milk marketing orders that set minimum producer(cid:13) prices for each region. Prices are set at levels that "insure(cid:13) a sufficient quantity of pure and wholesome milk to meet(cid:13) current needs and further to assure a level of farm income(cid:13) adequate to maintain productive capacity sufficient to meet(cid:13) anticipated future needs." 7 U.S.C. S 608c(18).3 Congress(cid:13) first authorized the Secretary to set minimum producer(cid:13) prices in 1937, amidst widespread fear of a milk shortage.(cid:13) Today, more than six decades later, dairy farmers across(cid:13) the United States produce far more milk than our country(cid:13) consumes.(cid:13) Pennsylvania’s dairy industry is among our nation’s most(cid:13) productive. Milk production in the Commonwealth outpaces(cid:13) consumption by roughly 350%. Annual production per-(cid:13) capita is around 900 pounds; consumption per-capita is(cid:13) merely 200 pounds. Only three states (California,(cid:13) Wisconsin, and New York) produce more milk than(cid:13) Pennsylvania.4(cid:13) _________________________________________________________________(cid:13) 3. Beyond inflating prices, the federal floors protect milk producers by(cid:13) eliminating revenue disparities unrelated to efficiency. Milk producers(cid:13) are paid different prices according to the use to which their milk is put.(cid:13) Fluid milk (for example, milk sold in containers) commands the highest(cid:13) price; milk used to make other dairy products, such as cheese and(cid:13) butter, sells for less. To encourage producers to sell milk without regard(cid:13) to its use, the federal scheme pays each milk producer a "blend price"(cid:13) based on the aggregate uses of raw milk within his region. See West(cid:13) Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 189 n.1 (1994); Grant’s(cid:13) Dairy-Me., LLC v. Comm’r of Me. Dep’t of Agric., Food & Rural Resources,(cid:13) 232 F.3d 8, 12 (1st Cir. 2000).(cid:13) 4. See USDA, Federal Milk Market Administrator, Marketing Service(cid:13) Bulletin: 2001 Milk Production (Feb. 2002), http://fmmacentral.com/(cid:13) PDFdata/msb0202.pdf (visited July 16, 2002). In addition, the(cid:13) Commonwealth ranks eleventh in both production per capita and(cid:13) production per cow. Id.(cid:13) 5(cid:13) Nonetheless, to "best protect the milk industry of the(cid:13) Commonwealth and insure a sufficient quantity of pure and(cid:13) wholesome milk to [its] inhabitants," Pennsylvania forces its(cid:13) milk producers to sell at "over-order" prices--meaning(cid:13) prices above those required by federal milk marketing(cid:13) orders--and, unlike any other state in the region, sets(cid:13) minimum prices for wholesale and retail milk sales. 31 Pa.(cid:13) Cons. Stat. Ann. S 700j-801 (2002). The animating statute(cid:13) is the Pennsylvania Milk Marketing Law (the "Milk Law"),(cid:13) originally enacted in 1934, before the federal government(cid:13) began regulating dairy farmers’ prices. See Finucane v. Pa.(cid:13) Milk Mktg. Bd., 582 A.2d 1152, 1153 n.1 (Pa. Commw. Ct.(cid:13) 1990). Pursuant to the Milk Law, the Board divides(cid:13) Pennsylvania into six "milk marketing areas" and sets(cid:13) minimum prices therein, based on "conditions affecting the(cid:13) milk industry in each milk marketing area," i.e., the(cid:13) respective costs of "producers, dealers and stores in the(cid:13) area." S 700j-801. The Board fixes "over-order" producer(cid:13) prices at levels that guarantee Pennsylvania milk producers(cid:13) "a reasonable return." Id. Neighboring states, in contrast,(cid:13) do not impose minimum producer prices, apparently(cid:13) deeming the federal price floors sufficiently protective of(cid:13) their milk supplies.(cid:13) To compensate dealers (and, in turn, retailers) for paying(cid:13) higher raw milk prices, the Commonwealth fixes wholesale(cid:13) and retail price floors at levels that guarantee them, also, "a(cid:13) reasonable return," which the Milk Law defines as"not less(cid:13) than a two and one-half percent (2 %) nor more than a(cid:13) three and one-half percent (3 %) rate of return based on net(cid:13) sales." Id. As a result, Pennsylvania dealers currently reap(cid:13) profits of around 3.3% of net sales, whereas net resale(cid:13) margins for dealers’ sales in other states are typically(cid:13) around 1-2%. Persons who sell (or offer to sell) milk at(cid:13) prices below those dictated by the Board are subject to(cid:13) criminal penalties, including imprisonment. 31 Pa. Cons.(cid:13) Stat. Ann. SS 700j-1001, -1002 (2002).(cid:13) Pennsylvania’s price control regime is virtually without(cid:13) peer. Only two other states (North Dakota and Maine)(cid:13) impose resale price floors. But unlike Pennsylvania, North(cid:13) Dakota and Maine do not require their milk control(cid:13) agencies to set price floors, instead giving them the option(cid:13) 6(cid:13) to do so.5 Everywhere else in the United States, wholesale(cid:13) and retail milk prices are determined by market forces, not(cid:13) government fiat.(cid:13) The five southeastern and ten south-central counties in(cid:13) Pennsylvania (Areas 1 and 4, respectively, under the(cid:13) Board’s regime) are part of the Northeast federal milk(cid:13) marketing region,6 which meanders from northern Virginia(cid:13) through New Hampshire and Vermont.7 7 C.F.R. S 1001.2(cid:13) (2002). Evidence indicates that milk dealers in the states(cid:13) bordering Pennsylvania have the ability to sell fluid milk to(cid:13) retailers located as far as 150 miles away from their(cid:13) processing plants. According to a study the Board(cid:13) conducted in 1992, when the Pennsylvania Milk Dealers(cid:13) asked it to assess the threats posed by out-of-state dealers,(cid:13) at least seventeen out-of-state dealers are capable of selling(cid:13) milk to Pennsylvania retailers. However, while substantial(cid:13) interstate movement of milk occurs within other parts of(cid:13) the Northeast region, out-of-state dealers do little business(cid:13) in Pennsylvania.(cid:13) Cloverland, which is based in Baltimore, profitably sells(cid:13) wholesale milk in Maryland at prices well below the(cid:13) minimum prices applicable to sales in Areas 1 and 4. In the(cid:13) absence of the wholesale price floors, Cloverland would(cid:13) offer similarly low prices to retailers in those areas. It has(cid:13) tried to gain customers in Areas 1 and 4 by competing(cid:13) based on non-price criteria, such as packaging, quality,(cid:13) and service, but has been unsuccessful. Cloverland(cid:13) maintains that the only way it can attract business in(cid:13) Pennsylvania is by offering lower prices. It offered evidence(cid:13) that it is almost impossible for dealers to acquire business(cid:13) in Pennsylvania without offering milk at lower prices(cid:13) because there is little (if any) difference among dealers with(cid:13) respect to factors other than price.(cid:13) _________________________________________________________________(cid:13) 5. Both states’ agencies exercise the option.(cid:13) 6. Other areas within the Commonwealth are not subject to federal(cid:13) producer price floors. Only the minimum prices for Areas 1 and 4 are at(cid:13) issue in this case.(cid:13) 7. Cloverland challenges not only the Milk Law, but also two orders(cid:13) issued pursuant thereto (Orders A-890A and A-900) that set minimum(cid:13) prices for Areas 1 and 4, respectively. For convenience, we also refer to(cid:13) the statute and the orders collectively as the "Milk Law."(cid:13) 7(cid:13) It is unclear why Cloverland is able to offer prices well(cid:13) below Pennsylvania’s wholesale floors. Perhaps out-of-state(cid:13) dealers can acquire raw milk at lower prices because their(cid:13) home states do not impose "over-order" prices, as one of the(cid:13) defendants’ affiants indicated. On the other hand,(cid:13) Cloverland suggests that "large producer cooperatives" may(cid:13) render raw milk prices in neighboring states nearly as high(cid:13) as those dictated by law in Pennsylvania. So perhaps out-(cid:13) of-state dealers process milk more efficiently than their(cid:13) Pennsylvania counterparts, as Cloverland contends.(cid:13) Whatever the reason, it is apparent that the minimum(cid:13) wholesale prices prevent Cloverland from using its(cid:13) competitive advantage in price to attract business in(cid:13) Pennsylvania. At the same time, there is no evidence that(cid:13) any in-state dealer wants to sell milk in Pennsylvania at(cid:13) lower prices; indeed, the Pennsylvania Milk Dealers(cid:13) intervened in this case to help defend the price floors.(cid:13) In an effort to justify the wholesale price floors, the(cid:13) defendants offered evidence, in the form of affidavits from(cid:13) representatives of the Pennsylvania milk industry, that the(cid:13) Commonwealth’s "over-order" producer prices are needed to(cid:13) prevent "predatory pricing" that could cause a milk(cid:13) shortage, and that the minimum wholesale prices are(cid:13) necessary to compensate dealers for paying higher raw milk(cid:13) prices. Cloverland countered with evidence that"for many(cid:13) decades" the federal producer price floors have yielded an(cid:13) ample milk supply in other states within the Northeast milk(cid:13) marketing region, none of which has wholesale or retail(cid:13) price floors. Further, Cloverland offered evidence that(cid:13) Pennsylvania’s minimum wholesale prices are much higher(cid:13) than is necessary to keep reasonably efficient dealers in(cid:13) business. For instance, Cloverland presented evidence,(cid:13) which the defendants did not dispute, that efficient milk(cid:13) dealers can profitably sell milk for thirty cents per gallon(cid:13) less than the minimum wholesale prices.8 (cid:13) _________________________________________________________________(cid:13) 8. This evidence showed that while dealers spend around twenty-six(cid:13) cents per gallon to process raw milk and transport it for sale,(cid:13) Pennsylvania’s price floors inflate dealers’ margins (the difference(cid:13) between raw milk costs and wholesale milk prices) to fifty-seven cents(cid:13) per gallon.(cid:13) 8(cid:13) To put this in perspective, in May 2002, the minimum(cid:13) wholesale prices in Areas 1 and 4 were $2.66 and $2.64 per(cid:13) gallon, respectively.9 The defendants maintain that the(cid:13) wholesale price floors appear excessively high only because(cid:13) the Board bases them on dealers’ average total costs, which(cid:13) include both average variable costs (such as raw milk,(cid:13) processing, labor, and transportation) and average fixed(cid:13) costs (such as equipment, office space, and other(cid:13) "overhead" expenses).10 However, this practice of fixing(cid:13) prices based on average total costs significantly increases(cid:13) dealers’ profits because it will be in their economic interest(cid:13) to sell additional units of milk at any price above their(cid:13) average variable costs, even if below their average total(cid:13) costs. Outside Pennsylvania, in contrast, milk dealers(cid:13) generally offer prices based on their average variable costs.(cid:13) With the record in this state, the parties filed cross-(cid:13) motions for summary judgment, and the District Court(cid:13) issued the first of two opinions. After reviewing the record,(cid:13) the Court determined that, because of the minimum(cid:13) wholesale prices, "[m]ore efficient out-of-state firms with(cid:13) lower costs are prohibited from utilizing their competitive(cid:13) advantage and attracting new customers by offering milk at(cid:13) lower prices." 138 F. Supp. 2d 593, 610 (2001). Further,(cid:13) "the clear effect produced on interstate commerce is that(cid:13) less out-of-state milk passes across the Pennsylvania(cid:13) border to be sold in Pennsylvania than would in the(cid:13) absence of the [Milk Law]." Id. Nevertheless, the Court(cid:13) deemed the burden on interstate commerce merely(cid:13) "incidental," reasoning that the minimum prices do not(cid:13) burden out-of-state dealers, but instead burden more(cid:13) efficient dealers without regard to location. Id. at 607.(cid:13) _________________________________________________________________(cid:13) 9. See Pennsylvania Milk Marketing Board, Minimum Wholesale/Retail(cid:13) Prices - May 2002, http://sites.state.pa.us/PA_Exec/Milk/wr200205.pdf(cid:13) (visited July 16, 2002).(cid:13) 10. See Philip Areeda & Donald F. Turner, Predatory Pricing and Related(cid:13) Practices Under Section 2 of the Sherman Act, 88 Harv. L. Rev. 697, 700(cid:13) (1975) (explaining that "[f]ixed costs are costs that do not vary with(cid:13) changes in output," whereas variable costs "are costs that vary with(cid:13) changes in output"). Average total cost is calculated by dividing total(cid:13) production expenses (both fixed costs and variable costs) by units of(cid:13) output. Id.(cid:13) 9(cid:13) Therefore, the Court applied the balancing test formulated(cid:13) in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), viz.,(cid:13) "[w]here [a] statute regulates even-handedly to effectuate a(cid:13) legitimate local public interest, and its effects on interstate(cid:13) commerce are only incidental, it will be upheld unless the(cid:13) burden imposed on such commerce is clearly excessive in(cid:13) relation to the putative local benefits."(cid:13) The District Court appeared ready to invalidate the price(cid:13) floors under Pike, stating that while the burden on(cid:13) interstate commerce was "clear," no legitimate local benefits(cid:13) were evident. 138 F. Supp. 2d at 610-12. It noted that "the(cid:13) federal minimum pricing is ensuring an adequate supply of(cid:13) milk." Id. at 611. Further, the defendants offered no(cid:13) evidence that the wholesale price floors were necessary to(cid:13) avoid a milk shortage, especially since "much more milk is(cid:13) produced in Pennsylvania than is consumed in(cid:13) Pennsylvania." Id. However, the Court put off deciding(cid:13) whether the price floors fail the Pike test to give the parties(cid:13) thirty additional days to supplement the record. 11 Id. at(cid:13) 612.(cid:13) Based on evidence subsequently introduced into the(cid:13) record, the District Court concluded that the wholesale(cid:13) price floors had some legitimate local benefits and that they(cid:13) burden interstate commerce less than it previously thought.(cid:13) Id. at 622. Relying on Pennsylvania milk industry(cid:13) representatives’ statements that the wholesale price floors(cid:13) are necessary to compensate dealers for paying "over-order"(cid:13) producer prices, the Court determined that the minimum(cid:13) wholesale prices advance the legitimate local interest in(cid:13) averting a milk shortage. Id. at 621-22. Although there was(cid:13) considerable evidence that "Pennsylvania produces more(cid:13) milk than its inhabitants drink and neighboring states have(cid:13) been able to maintain adequate supplies of milk without(cid:13) state-mandated prices," this did not prove "that the(cid:13) putative local benefits are non-existent or that the(cid:13) legislature could not have believed in the purported(cid:13) purpose of the statute." Id. at 622.(cid:13) _________________________________________________________________(cid:13) 11. Having just granted the Pennsylvania Milk Dealers’ motion to(cid:13) intervene, the District Court wanted to give them an opportunity to(cid:13) introduce evidence regarding the price floors’ legitimate local benefits.(cid:13) 10(cid:13) On the burdens side of the scale, the Court reasoned that(cid:13) out-of-state dealers’ ability to compete based on non-price(cid:13) criteria rendered the burden on interstate commerce(cid:13) "minimal," and that Cloverland "offer[ed] no conclusive(cid:13) evidence" that the minimum wholesale prices(cid:13) "substantial[ly]" reduce the flow of milk into Pennsylvania.(cid:13) Id. at 623. The Court relied heavily on statements by four(cid:13) Pennsylvania dealers and twenty-two Pennsylvania retailers(cid:13) that dealers compete based on non-price criteria, such as(cid:13) quality, service, and packaging. Id. It did not mention that(cid:13) many of the retailers listed price as an important factor--(cid:13) indeed, a number called it the most important--in deciding(cid:13) whether to switch dealers. Nor did it mention that several(cid:13) retailers explicitly said that, were it not for the minimum(cid:13) wholesale prices, they would buy milk from out-of-state(cid:13) dealers if they offered lower prices. In addition to(cid:13) underscoring out-of-state dealers’ ability to compete based(cid:13) on factors other than price, the Court emphasized that(cid:13) thirty-three percent of the milk sold by dealers in the(cid:13) Commonwealth was marketed pursuant to state-approved(cid:13) service contracts dubbed "tolling agreements," which allow(cid:13) dealers to sell at prices below the wholesale floors, and that(cid:13) approximately seven percent of overall fluid milk sales in(cid:13) Pennsylvania are made by out-of-state dealers participating(cid:13) in tolling agreements. Id. With this analytical context, the(cid:13) Court concluded that no reasonable jury could find the(cid:13) price floors failed the Pike test. Id. at 624.(cid:13) II. Jurisdiction and Standard of Review(cid:13) The District Court had jurisdiction under 28 U.S.C.(cid:13) SS 1331, 1332, and 1343. We have jurisdiction under 28(cid:13) U.S.C. S 1291.(cid:13) We review the District Court’s grant of summary(cid:13) judgment de novo. Fogleman v. Mercy Hosp., Inc., 283 F.3d(cid:13) 561, 566 n.3 (3d Cir. 2002). Summary judgment was(cid:13) proper if, viewing the record in the light most favorable to(cid:13) Cloverland, there is no genuine issue of material fact and(cid:13) the Board is entitled to judgment as a matter of law.12 Fed.(cid:13) _________________________________________________________________(cid:13) 12. The standard for granting summary judgment on a request for a(cid:13) declaratory judgment is the same as for any other type of relief. See Fed.(cid:13) R. Civ. P. 57; Simler v. Conner, 372 U.S. 221, 222 (1963); Gen. Comm.(cid:13) of Adjustment, United Transp. Union v. CSX R.R., 893 F.2d 584, 586, 589(cid:13) (3d Cir. 1990).(cid:13) 11(cid:13) R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-(cid:13) 23 (1986); Bailey v. United Airlines, 279 F.3d 194, 198 (3d(cid:13) Cir. 2002). A factual dispute is material if it"bear[s] on an(cid:13) essential element of the plaintiff ’s claim," and is genuine if(cid:13) "a reasonable jury could find in favor of the nonmoving(cid:13) party." Abraham v. Raso, 183 F.3d 279, 287 (3d Cir. 1999)(cid:13) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-(cid:13) 251 (1986)).(cid:13) III. Minimum Wholesale Prices(cid:13) A. The Basic Analytical Framework(cid:13) In addition to granting Congress the power "to regulate(cid:13) Commerce . . . among the several States," U.S. Const. art.(cid:13) I, S 8, cl. 3, the Commerce Clause has a negative aspect(cid:13) (commonly called "the dormant Commerce Clause") that(cid:13) limits the states’ power to regulate interstate commerce.(cid:13) The dormant Commerce Clause prohibits the states from(cid:13) imposing restrictions that benefit in-state economic(cid:13) interests at out-of-state interests’ expense, thus reinforcing(cid:13) "the principle of the unitary national market."13 West Lynn(cid:13) Creamery, Inc. v. Healy, 512 U.S. 186, 192-93 (1994).(cid:13) Axiomatic in dormant Commerce Clause jurisprudence is(cid:13) the principle that a state cannot impede free market forces(cid:13) to shield in-state businesses from out-of-state competition.(cid:13) See, e.g., Polar Ice Cream & Creamery Co. v. Andrews, 375(cid:13) U.S. 361, 377 (1964) ("[T]he State may not, in the sole(cid:13) interest of promoting the economic welfare of its dairy(cid:13) farmers, insulate [its] milk industry from competition from(cid:13) other States."); H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S.(cid:13) 525, 532 (1949). Thus state laws that discriminate against(cid:13) out-of-state businesses by forcing them to "surrender(cid:13) _________________________________________________________________(cid:13) 13. Congress can authorize states to impose restrictions that the(cid:13) dormant Commerce Clause would otherwise forbid. See, e.g., Shamrock(cid:13) Farms Co. v. Veneman, 146 F.3d 1177, 1180, 1182 (9th Cir. 1998)(cid:13) (upholding California’s milk composition standards and pooled minimum(cid:13) producer price scheme because Congress expressly immunized the(cid:13) State’s milk regulations from dormant Commerce Clause scrutiny); see(cid:13) also Norfolk S. Corp. v. Oberly, 822 F.2d 388, 392-93 (3d Cir. 1987). The(cid:13) Board does not maintain that Congress authorized Pennsylvania to(cid:13) impose wholesale price floors.(cid:13) 12(cid:13) whatever competitive advantages they may possess" are(cid:13) especially suspect. Brown-Forman Distillers Corp. v. New(cid:13) York State Liquor Auth., 476 U.S. 573, 580 (1986).(cid:13) The initial question in a dormant Commerce Clause case(cid:13) is whether the state regulation at issue discriminates(cid:13) against interstate commerce "either on its face or in(cid:13) practical effect." Maine v. Taylor, 477 U.S. 131, 138 (1986);(cid:13) Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788,(cid:13) 797 (3d Cir. 1995). If so, heightened scrutiny applies.(cid:13) "Discrimination against interstate commerce in favor of(cid:13) local business or investment is per se invalid, save in a(cid:13) narrow class of cases in which the [State] can demonstrate,(cid:13) under rigorous scrutiny, that it has no other means to(cid:13) advance a legitimate local interest." C & A Carbone, Inc. v.(cid:13) Town of Clarkstown, 511 U.S. 383, 392 (1994); Juzwin v.(cid:13) Asbestos Corp., 900 F.2d 686, 689 (3d Cir. 1990). On the(cid:13) other hand, if the state regulation does not discriminate(cid:13) against interstate commerce, but "regulates even-handedly"(cid:13) and merely "incidentally" burdens it, the regulation will be(cid:13) upheld unless the burden is "clearly excessive in relation to(cid:13) the putative local benefits." Pike, 397 U.S. at 142; Harvey(cid:13) & Harvey, 68 F.3d at 797.(cid:13) When a facially neutral law has the effect of(cid:13) disproportionately burdening out-of-state interests, it can(cid:13) be difficult to determine whether the burden rises to the(cid:13) level of discrimination against interstate commerce. See(cid:13) Brown-Forman Distillers Corp. v. New York State Liquor(cid:13) Auth., 476 U.S. 573, 579 (1986); General Motors Corp. v.(cid:13) Tracy, 519 U.S. 278, 298 n.12 (1997). Indeed, sometimes(cid:13) the distinction between state laws subject only to Pike(cid:13) balancing and those that are nearly per se invalid is "hazy."(cid:13) Norfolk S. Corp. v. Oberly, 822 F.2d 388, 400 n.18 (3d Cir.(cid:13) 1987). However, as explained in more detail below, it is(cid:13) clear that state laws that are facially neutral but have the(cid:13) effect of eliminating a competitive advantage possessed by(cid:13) out-of-state firms trigger heightened scrutiny. See Hunt v.(cid:13) Wash. State Apple Adver. Comm’n, 432 U.S. 333 (1977);(cid:13) Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511 (1935).(cid:13) In this case, Cloverland argues for heightened scrutiny,(cid:13) but disclaims any contention that the Milk Law is facially(cid:13) discriminatory. Thus we must consider whether a(cid:13) 13(cid:13) reasonable jury could find that the minimum wholesale(cid:13) prices have the effect of discriminating against out-of-state(cid:13) dealers.(cid:13) B. Heightened Scrutiny(cid:13) Two Supreme Court decisions guide our discussion. In(cid:13) the leading case of Baldwin, the Supreme Court struck(cid:13) down a New York law prohibiting in-state dealers from(cid:13) selling milk purchased outside the State at a price below(cid:13) the New York minimum. 294 U.S. at 521. The law was(cid:13) challenged by a company that bought lower-cost milk in(cid:13) Vermont and shipped it by rail to New York for sale there.(cid:13) Id. at 518, 520. The Court said the law was the functional(cid:13) equivalent of a tariff. Id. at 521. It eliminated Vermont(cid:13) farmers’ competitive advantage of producing milk at lower(cid:13) costs, id. at 522, and thus "neutralize[d] the economic(cid:13) consequences of free trade among the states." Id. at 526.(cid:13) Further, if imitated by other states, it could spark a(cid:13) destructive interstate trade war. Id. at 521-22. "If New York,(cid:13) in order to promote the economic welfare of her farmers,(cid:13) may guard them against competition with the cheaper(cid:13) prices of Vermont, the door has been opened to rivalries(cid:13) and reprisals that were meant to be averted by subjecting(cid:13) commerce between the states to the power of the nation."(cid:13) Id. at 522. While New York contended that the law was an(cid:13) innocuous effort to ensure an adequate supply of(cid:13) wholesome milk, the Court explained that any protectionist(cid:13) law can be couched in non-protectionist terms, and that(cid:13) upholding state-imposed trade barriers simply because they(cid:13) save suppliers from market forces would render the(cid:13) dormant Commerce Clause a nullity.14 Id. at 523.(cid:13) Four decades later, the Supreme Court invalidated a(cid:13) _________________________________________________________________(cid:13) 14. The defendants claim that Baldwin does not apply because New(cid:13) York’s law effectively regulated transactions that occurred outside the(cid:13) State’s jurisdiction, whereas the Milk Law applies only to in-state(cid:13) transactions. But the problem with the law invalidated in Baldwin was(cid:13) not merely its extraterritorial reach, but that it had the practical effect(cid:13) of discriminating against out-of-state milk producers by eliminating their(cid:13) competitive advantage. See Donald H. Regan, The Supreme Court and(cid:13) State Protectionism: Making Sense of the Dormant Commerce Clause, 84(cid:13) Mich. L. Rev. 1091, 1247-50 (1986).(cid:13) 14(cid:13) North Carolina statute that prohibited closed containers of(cid:13) apples sold in the State, regardless of their origin, from(cid:13) displaying any grade other than that of the United States(cid:13) Department of Agriculture ("USDA"). Wash. State Apple,(cid:13) 432 U.S. at 349-54. The statute prevented apple growers(cid:13) from the State of Washington, which imposed especially(cid:13) strict inspection and quality standards, from using the(cid:13) superior Washington grade to market their product. Id. at(cid:13) 336-39. The Supreme Court determined that the labeling(cid:13) rule was subject to heightened scrutiny because it had the(cid:13) "practical effect" of discriminating against Washington(cid:13) apples in three ways. Id. at 350-51. First, it forced(cid:13) Washington apple growers and dealers--but not their North(cid:13) Carolina counterparts--to change their marketing practices.(cid:13) Id. at 351. Second, it eliminated the competitive advantage(cid:13) that the Washington grade gave that State’s apples by(cid:13) requiring them to be marketed under the "inferior" USDA(cid:13) grade. Id. at 351-52. Third, it had "a leveling effect which(cid:13) insidiously operate[d] to the advantage of local apple(cid:13) producers," giving "the North Carolina apple industry the(cid:13) very sort of protection against competing out-of-state(cid:13) products that the Commerce Clause was designed to(cid:13) prohibit." Id. The Court rejected North Carolina’s claim that(cid:13) the statute was necessary to avoid the "deception and(cid:13) confusion" ostensibly resulting from different states’(cid:13) grading systems, noting, inter alia, that it increased these(cid:13) dangers by allowing apples to be marketed without any(cid:13) grade, thereby depriving purchasers of information about(cid:13) the quality of apples concealed from view by closed (cid:13) containers.15 Id. at 353-54.(cid:13) The Supreme Court’s opinions in Baldwin and(cid:13) Washington State Apple show that if a state regulation has(cid:13) the effect of protecting in-state businesses by eliminating a(cid:13) _________________________________________________________________(cid:13) 15. Before Washington State Apple, a three-judge district court concluded(cid:13) that minimum wholesale prices for in-state sales do not offend the(cid:13) dormant Commerce Clause, but did not consider whether the result(cid:13) would be different if out-of-state dealers were disproportionately(cid:13) burdened. See Baxley v. Ala. Dairy Comm’n, 360 F. Supp. 1159, 1165(cid:13) (M.D. Ala. 1973); see also Schwegmann Bros. Giant Super Mkts. v. La.(cid:13) Milk Comm’n, 365 F. Supp. 1144, 1156 (M.D. La. 1973) (same in dicta),(cid:13) aff ’d, 416 U.S. 922 (1974) (mem.).(cid:13) 15(cid:13) competitive advantage possessed by their out-of-state(cid:13) counterparts, heightened scrutiny applies. See Laurence H.(cid:13) Tribe, American Constitutional Law S 6-8, at 1076 (3d ed.(cid:13) 2000) ("[J]ust as it was impermissible in Baldwin v. Seelig(cid:13) for New York to eliminate the price advantage of Vermont(cid:13) milk by mandating a minimum price, so, too, in Hunt v.(cid:13) Washington State Apple Advertising Commission, was it(cid:13) impermissible for North Carolina to eliminate the quality(cid:13) advantage of apples from Washington by proscribing(cid:13) Washington’s use of a quality grading system that(cid:13) distinguished its apples from the local product.").(cid:13) We believe that a reasonable trier of fact could find that(cid:13) Pennsylvania’s minimum wholesale prices eliminate a(cid:13) competitive advantage enjoyed by out-of-state dealers like(cid:13) Cloverland, and thus have an effect indistinguishable from(cid:13) the protectionist effects deemed fatal in Baldwin and(cid:13) Washington State Apple. We therefore hold that the District(cid:13) Court erred by declining to subject the wholesale price(cid:13) floors to heightened scrutiny.(cid:13) As noted above, there is a factual dispute over why(cid:13) Cloverland can profitably sell milk at prices well below(cid:13) Pennsylvania’s wholesale floors. One conclusion that a(cid:13) reasonable trier of fact could reach is that out-of-state(cid:13) dealers have a competitive advantage over their in-state(cid:13) counterparts. Higher raw milk costs necessitate higher(cid:13) wholesale prices. Because dealers buy milk from local dairy(cid:13) farmers, dealers from a state that imposes "over-order"(cid:13) prices are at a disadvantage when exposed to competition(cid:13) from dealers whose home states do not prop up milk(cid:13) producers’ prices above the federal floors. Unlike(cid:13) neighboring states such as Maryland, where Cloverland is(cid:13) based, Pennsylvania forces its dealers to pay "over-order"(cid:13) prices for raw milk. A reasonable trier of fact could find(cid:13) that out-of-state dealers’ ability to acquire raw milk at lower(cid:13) costs gives them a competitive edge over Pennsylvania(cid:13) dealers.16(cid:13) _________________________________________________________________(cid:13) 16. Quite different considerations were involved in Milk Control Board of(cid:13) Pennsylvania v. Eisenberg Farm Products, 306 U.S. 346 (1939), where a(cid:13) Pennsylvania dealer who bought milk from farmers in his neighborhood(cid:13) and sold it in New York challenged the Commonwealth’s minimum(cid:13) 16(cid:13) The District Court acknowledged that a reasonable trier(cid:13) of fact could find that the minimum wholesale prices(cid:13) reduce the flow of out-of-state milk into Pennsylvania by(cid:13) preventing "[m]ore efficient out of state firms with lower(cid:13) costs . . . from utilizing their competitive advantage and(cid:13) attracting new customers by offering milk at lower prices."(cid:13) 138 F. Supp. 2d at 610. Nonetheless the Court determined(cid:13) that heightened scrutiny did not apply because the same(cid:13) burden applies to all non-incumbent dealers, including(cid:13) more efficient in-state dealers. Id. at 607; see also Sch. Dist.(cid:13) of Philadelphia v. Pa. Milk Mktg. Bd., 683 A.2d 972, 977(cid:13) (Pa. Commw. Ct. 1996) (relying on this rationale to uphold(cid:13) minimum wholesale prices as applied to public schools’(cid:13) milk purchases). However, it is not clear that the more(cid:13) efficient in-state dealers postulated by the District Court(cid:13) actually exist. The Pennsylvania Milk Dealers fervently(cid:13) support the minimum wholesale prices, and there is no(cid:13) indication that any Pennsylvania dealer objects to them. In(cid:13) any event, even if there were evidence that some in-state(cid:13) dealers would like to compete for business in Pennsylvania(cid:13) by offering prices below the wholesale floors, a reasonable(cid:13) trier of fact could find that out-of-state dealers’ ability to(cid:13) acquire cheaper raw milk gives them a competitive(cid:13) _________________________________________________________________(cid:13) producer prices. Id. at 349-50. The Supreme Court upheld the price(cid:13) floors, emphasizing that they affected only "essentially local" transactions(cid:13) between in-state producers and dealers, and did not attempt to regulate(cid:13) the prices at which out-of-state businesses bought or sold milk. Id. at(cid:13) 352. Further, the minimum prices had virtually no effect on interstate(cid:13) commerce because "[o]nly a small fraction of the milk produced by(cid:13) farmers in Pennsylvania [was] shipped out of the Commonwealth." Id. at(cid:13) 353. Unlike the wholesale price floors at issue in our case, the law in(cid:13) Eisenberg imposed only an "indirect" burden on interstate commerce,(cid:13) Polar Ice Cream, 375 U.S. at 378, affected "an essentially local activity,"(cid:13) id., and did not have "the practical effect of curtailing the volume of(cid:13) interstate commerce to aid local economic interests." H.P. Hood & Sons,(cid:13) 336 U.S. at 530-31; cf. Highland Farms Dairy v. Agnew, 300 U.S. 608,(cid:13) 614-16 (1937) (rejecting dormant Commerce Clause challenge to(cid:13) Virginia’s milk and cream price floors because they expressly exempted(cid:13) interstate commerce); Grant’s Dairy-Me., LLC v. Comm’r of Me. Dep’t of(cid:13) Agric., Food & Rural Resources, 232 F.3d 8, 21 (1st Cir. 2000) (holding(cid:13) that Maine may impose minimum producer prices that apply only to in-(cid:13) state dealers’ purchases).(cid:13) 17(cid:13) advantage over the most efficient in-state dealers, and that(cid:13) the price floors eliminate this advantage.(cid:13) But the flaw in the District Court’s reasoning is more(cid:13) fundamental. The Court believed that a state may remove a(cid:13) competitive advantage possessed by out-of-state firms if(cid:13) some in-state firms are also adversely affected. As we noted(cid:13) several years ago, however, the Supreme Court’s decision in(cid:13) C & A Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383(cid:13) (1994), "explicitly rejected the argument that a disputed(cid:13) statute would have to favor all in-state businesses as a(cid:13) group--a statute may be invalid if it favors only a single or(cid:13) finite set of businesses." Harvey & Harvey , 68 F.3d at 798.(cid:13) In Carbone, a town claimed that its flow control ordinance,(cid:13) which mandated that all solid waste produced within its(cid:13) borders be processed by a designated local facility, did not(cid:13) discriminate against out-of-state facilities because it(cid:13) burdened all in-state facilities save the favored one.(cid:13) Carbone, 511 U.S. at 390-91. The Supreme Court(cid:13) disagreed, explaining that "[t]he ordinance is no less(cid:13) discriminatory because in-state or in-town processors are(cid:13) also covered." Id. at 391. Indeed, "that the flow control(cid:13) ordinance favor[ed] a single local proprietor," rather than(cid:13) local interests generally, "just ma[de] the protectionist effect(cid:13) of the ordinance more acute." Id. at 392. Similarly, if the(cid:13) wholesale price floors protect incumbent in-state dealers(cid:13) not only from out-of-state competitors, but also from in-(cid:13) state ones (as the District Court conjectured), that simply(cid:13) exacerbates their protectionist effect.(cid:13) In sum, a reasonable jury could find that Pennsylvania’s(cid:13) price floors "neutralize advantages belonging to the place of(cid:13) origin," Baldwin, 294 U.S. at 527, and"violate[ ] the(cid:13) principle of the unitary national market by handicapping(cid:13) out-of-state competitors, thus artificially encouraging in-(cid:13) state production even when the same goods could be(cid:13) produced at lower cost in other States." West Lynn(cid:13) Creamery, 512 U.S. at 193. If out-of-state dealers like(cid:13) Cloverland are able to sell milk at lower prices than the(cid:13) Pennsylvania dealers that currently dominate the wholesale(cid:13) market in Pennsylvania, a reasonable trier of fact could(cid:13) conclude that, by eliminating out-of-state dealers’(cid:13) competitive advantage, the Commonwealth’s minimum(cid:13) 18(cid:13) wholesale prices " ‘cause local goods to constitute a larger(cid:13) share, and goods with an out-of-state source to constitute(cid:13) a smaller share, of the total sales in the market.’ " Id. at(cid:13) 196 (quoting Exxon Corp. v. Governor of Md., 437 U.S. 117,(cid:13) 126 n.16 (1978)). This finding would trigger heightened(cid:13) scrutiny under Baldwin and Washington State Apple.(cid:13) Therefore, the District Court erred in applying the Pike(cid:13) balancing test at the summary judgment stage.17(cid:13) If they are subject to heightened scrutiny, the wholesale(cid:13) price floors cannot satisfy the dormant Commerce Clause.(cid:13) Assuming that Pennsylvania has a legitimate interest in(cid:13) providing special protection for its milk supply beyond that(cid:13) afforded by the federal producer price floors, it can achieve(cid:13) its objective through alternative measures that do not(cid:13) discriminate against interstate commerce. For instance, the(cid:13) Commonwealth could encourage production by purchasing(cid:13) large quantities of wholesale milk from its dealers, or large(cid:13) quantities of raw milk from its dairy farmers. Neither action(cid:13) would impede out-of-state dealers’ ability to compete for(cid:13) retailers’ business, and both might be exempt from(cid:13) _________________________________________________________________(cid:13) 17. Though not necessary to our decision, we note that the minimum(cid:13) wholesale prices’ discriminatory effect on out-of-state dealers is(cid:13) compounded by the fact that they "are set by reference to operations of(cid:13) in-state milk dealers only." Sch. Dist. of Philadelphia v. Pa. Milk Mktg.(cid:13) Bd., 877 F. Supp. 245, 252-53 (E.D. Pa. 1995) (holding that the plaintiffs(cid:13) could establish a dormant Commerce Clause violation by showing that(cid:13) the Board sets minimum prices according to in-state dealers’ costs); cf.(cid:13) New York v. Brown, 721 F. Supp. 629, 641 (D.N.J. 1989) (finding that(cid:13) New Jersey statute prohibiting dealers from selling milk at prices below(cid:13) their average total costs did not discriminate against interstate(cid:13) commerce because it "set an out-of-state dealer’s minimum allowable(cid:13) price with respect to the dealer’s own costs and not with respect to those(cid:13) of New Jersey dealers"). By calibrating wholesale price floors for a(cid:13) particular milk marketing area to the operating costs of average dealers(cid:13) in that area, the Commonwealth enables Pennsylvania dealers to operate(cid:13) less efficiently without fearing losses to lower-cost competitors like(cid:13) Cloverland. This aspect of Pennsylvania’s scheme appears to run further(cid:13) afoul of the cardinal rule that states may not shield in-state businesses(cid:13) from out-of-state competitors. See, e.g., West Lynn Creamery, 512 U.S.(cid:13) at 205 ("Preservation of local industry by protecting it from the rigors of(cid:13) interstate competition is the hallmark of the economic protectionism that(cid:13) the Commerce Clause prohibits.").(cid:13) 19(cid:13) dormant Commerce Clause scrutiny under the market(cid:13) participant exception. See South-Central Timber Dev., Inc. v.(cid:13) Wunnicke, 467 U.S. 82, 93 (1984) ("Our cases make clear(cid:13) that if a State is acting as a market participant, rather than(cid:13) as a market regulator, the dormant Commerce Clause(cid:13) places no limitation on its activities.").(cid:13) C. Pike Balancing(cid:13) As explained in the preceding section, a reasonable trier(cid:13) of fact could find that the minimum wholesale prices have(cid:13) an impermissible "leveling effect" that eliminates out-of-(cid:13) state dealers’ competitive advantage over in-state dealers.(cid:13) Wash. State Apple, 432 U.S. at 351. Even if no such effect(cid:13) is found, the record nonetheless amply supports a finding(cid:13) that the wholesale price floors regulate evenhandedly, but(cid:13) incidentally burden interstate commerce by making it more(cid:13) difficult for out-of-state dealers to attract new business in(cid:13) a market dominated by in-state dealers. Such a finding(cid:13) would require application of the Pike balancing test, under(cid:13) which the minimum wholesale prices violate the dormant(cid:13) Commerce Clause if the burden they impose on interstate(cid:13) commerce clearly outweighs their local benefits. Pike, 397(cid:13) U.S. at 142. Contrary to the District Court’s view, a(cid:13) reasonable trier of fact could conclude that the wholesale(cid:13) price floors fail the Pike test.(cid:13) We begin with the price floors’ putative benefits. The(cid:13) defendants insist that we must accept the Pennsylvania(cid:13) General Assembly’s empirical judgment, expressed in the(cid:13) Milk Law’s text, that the minimum wholesale prices help(cid:13) avert a milk shortage that would harm the public health.(cid:13) Some deference to a state legislature’s asserted purpose(cid:13) may be appropriate when the burden of a state regulation(cid:13) falls on in-state as well as out-of-state interests, because in(cid:13) that context the state legislature’s incentive to protect in-(cid:13) state interests "will serve as a check against unduly(cid:13) burdensome regulations." Kassel v. Consol. Freightways(cid:13) Corp. of Del., 450 U.S. 662, 675 (1981) (plurality opinion);(cid:13) see also Minnesota v. Clover Leaf Creamery Co., 449 U.S.(cid:13) 456, 473 & n.17 (1981) (stating that the "major in-state(cid:13) interests" harmed by the challenged statute provided "a(cid:13) powerful safeguard against legislative abuse"). 18 "Less(cid:13) _________________________________________________________________(cid:13) 18. Clover Leaf Creamery illustrates the importance of adversely affected(cid:13) in-state interests in dormant Commerce Clause analysis. Applying the(cid:13) 20(cid:13) deference to the legislative judgment is due, however, where(cid:13) the local regulation bears disproportionately on out-of-state(cid:13) residents and businesses." Kassel, 450 U.S. at 675-76(cid:13) (striking down Iowa truck-length limitations, which the(cid:13) State claimed promoted highway safety, under Pike); see(cid:13) also Tribe, supra, S 6-5, at 1053-55 (stating that courts(cid:13) should be more skeptical of state legislators’ ostensible(cid:13) objectives "where a restrictive regulation affects only those(cid:13) from other states"). There is no evidence that any(cid:13) Pennsylvania dealers object to the minimum wholesale(cid:13) prices. Because their burden thus appears to fall only on(cid:13) out-of-state dealers, the purpose asserted in the Milk Law’s(cid:13) text deserves little deference.(cid:13) In any event, "the incantation of a purpose to promote(cid:13) the public health or safety does not insulate a state law(cid:13) from Commerce Clause attack. Regulations designed(cid:13) for that salutary purpose nevertheless may further the(cid:13) purpose so marginally, and interfere with commerce so(cid:13) _________________________________________________________________(cid:13) Pike balancing test, the Supreme Court upheld a Minnesota statute that(cid:13) banned the retail sale of milk in plastic non-returnable, non-refillable(cid:13) containers, but allowed such sales in non-returnable, non-refillable(cid:13) containers made of other materials. Clover Leaf Creamery, 449 U.S. at(cid:13) 458, 473. The statute was facially neutral, and, in contrast to the law(cid:13) invalidated in Washington State Apple, did not eliminate a competitive(cid:13) advantage possessed by out-of-state firms. Id. at 472. Nor did it(cid:13) otherwise discriminate against interstate commerce. Id. However, the(cid:13) statute incidentally benefitted some in-state firms at the expense of some(cid:13) out-of-state firms. Containers made of pulpwood,"a major Minnesota(cid:13) product," would likely be used in place of some of the banned(cid:13) containers, the plastic resin in which was "produced entirely by non-(cid:13) Minnesota firms." Id. at 473. But in the aggregate, "there [was] no reason(cid:13) to suspect that the gainers [would] be Minnesota firms, or the losers out-(cid:13) of-state firms." Id. at 472-73. Increased sales of reusable plastic bottles(cid:13) would offset out-of-state plastic producers’ losses, and out-of-state(cid:13) pulpwood producers would increase their sales in Minnesota. Id. at 472-(cid:13) 73. Further, the statute harmed "major in-state interests"--several of the(cid:13) plaintiffs challenging the statute were in-state firms. Id. at 473 & n.17.(cid:13) Finally, the "relatively minor" impediments to interstate commerce(cid:13) imposed by the statute were justified because it was the least(cid:13) burdensome means of promoting the State’s "substantial" interests in(cid:13) conserving natural resources and alleviating solid waste disposal(cid:13) problems. Id. at 472-73.(cid:13) 21(cid:13) substantially, as to be invalid under the Commerce(cid:13) Clause." Kassel, 450 U.S. at 670. Hence the inquiry is not,(cid:13) as the District Court thought, whether "the legislature could(cid:13) not have believed in the purported purpose of the statute."(cid:13) 138 F. Supp. 2d at 622 (emphasis added). Assuming that(cid:13) the General Assembly’s belief was rational, the defendants(cid:13) cannot simply rely on the Milk Law’s stated purpose. They(cid:13) must provide evidence that the wholesale price floors have(cid:13) the benefits contemplated by the General Assembly.(cid:13) Only meager evidence to this effect appears in the record.(cid:13) The defendants offer nothing more than speculation by(cid:13) representatives of the Pennsylvania dairy industry that in-(cid:13) state milk producers would engage in predatory pricing if(cid:13) the Commonwealth did not impose "over-order" prices,(cid:13) along with the representatives’ claims that the minimum(cid:13) wholesale prices are needed to compensate dealers for(cid:13) purchasing raw milk at "over-order" prices. However, a(cid:13) reasonable trier of fact could find that the federal producer(cid:13) price floors provide ample protection against predatory(cid:13) pricing. As the District Court said in its first opinion, the(cid:13) record shows that "the federal minimum pricing is ensuring(cid:13) an adequate supply of milk." Id. at 611. Pennsylvania is the(cid:13) only state in the Northeast milk marketing region that(cid:13) enforces wholesale price floors, yet none of the others has(cid:13) suffered a milk shortage in recent decades.(cid:13) Moreover, the current success of the Commonwealth’s(cid:13) dairy industry belies the defendants’ claims that the(cid:13) minimum wholesale prices do more than artificially inflate(cid:13) in-state dealers’ profits. At oral argument, counsel for the(cid:13) Pennsylvania Milk Dealers accurately noted that(cid:13) "Pennsylvania is one of the top, I think, top five producers(cid:13) of raw milk in the country. It is an exporter." As already(cid:13) noted, the Commonwealth ranks fourth among all states in(cid:13) aggregate milk production. Per-capita milk production is(cid:13) even more impressive--Pennsylvania produces four-and-a-(cid:13) half times as much milk as its residents consume. Unless(cid:13) eliminating the minimum wholesale prices would cause(cid:13) Pennsylvania’s milk production to decrease so dramatically(cid:13) that the Commonwealth would be forced to import milk to(cid:13) satisfy its residents’ needs--and there is no evidence that it(cid:13) would--a reasonable trier of fact could find that the(cid:13) wholesale price floors are superfluous.(cid:13) 22(cid:13) On the burdens side of the scale, a reasonable trier of(cid:13) fact could find that the wholesale price floors substantially(cid:13) impede the flow of out-of-state milk into Pennsylvania by(cid:13) protecting incumbent in-state dealers from price(cid:13) competition. Because in-state dealers dominate the(cid:13) wholesale milk market in Pennsylvania, barriers to(cid:13) competition burden out-of-state interests more heavily than(cid:13) in-state ones. Price floors are a barrier especially likely to(cid:13) safeguard existing suppliers’ market shares; a number of(cid:13) the retailers who provided affidavits in this case said they(cid:13) would switch dealers if offered prices below the floors.(cid:13) Preventing dealers from attracting customers by offering(cid:13) lower prices thus helps in-state dealers maintain their(cid:13) traditional hegemony.(cid:13) The District Court recognized that the wholesale price(cid:13) floors disproportionately burden out-of-state dealers, but(cid:13) concluded that there is "no conclusive evidence" of a(cid:13) substantial burden on interstate commerce because dealers(cid:13) can compete based on other criteria, such as packaging,(cid:13) quality, and service. 138 F. Supp. 2d at 623 (emphasis(cid:13) added). At the summary judgment stage, however, the non-(cid:13) moving party is not required to produce "conclusive"(cid:13) evidence. Instead, it need only offer sufficient evidence for(cid:13) a reasonable jury to find the facts necessary for a decision(cid:13) in its favor. See, e.g., Celotex, 477 U.S. at 322-23.(cid:13) Cloverland did that.(cid:13) There is evidence that it is virtually impossible to displace(cid:13) incumbent dealers in Pennsylvania without offering prices(cid:13) below the Board-mandated floors. Not surprisingly, price(cid:13) seems to be an especially important factor--if not the most(cid:13) important factor--in retailers’ decisions to find new dealers(cid:13) or retain their existing suppliers. Several retailers expressly(cid:13) ranked price as their most important criterion in deciding(cid:13) whether to seek new wholesale milk suppliers, and said(cid:13) they would switch to out-of-state dealers if they offered(cid:13) prices below the current minimums. Therefore, because the(cid:13) vast majority of incumbent dealers are in-state firms, and(cid:13) because there is no evidence that any in-state dealer--(cid:13) incumbent or not--wants to sell at lower prices, a(cid:13) reasonable trier of fact could find that the minimum(cid:13) wholesale prices place a substantial, disproportionate(cid:13) 23(cid:13) burden on out-of-state dealers, and that the ability to(cid:13) compete based on non-price criteria does not noticeably(cid:13) alleviate the burden.19(cid:13) Nor can we agree with the District Court that out-of-state(cid:13) dealers’ ability to enter into tolling agreements meaningfully(cid:13) mitigates the burden on interstate commerce. Tolling(cid:13) agreements can be arranged only with the largest retailers,(cid:13) such as major supermarket chains. For that reason, only(cid:13) thirty-three percent of the milk purchased by Pennsylvania(cid:13) retailers is sold under a tolling agreement. The dormant(cid:13) Commerce Clause does not allow Pennsylvania to hamper(cid:13) out-of-state dealers in two-thirds of its wholesale market on(cid:13) the ground that they may compete freely in the remaining(cid:13) third. Cf. Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992)(cid:13) (rejecting Oklahoma’s claim that it could set aside a "small(cid:13) portion" of its coal market for in-state producers because(cid:13) "[t]he volume of commerce affected measures only the(cid:13) extent of the discrimination; it is of no relevance to the(cid:13) determination whether a State has discriminated against(cid:13) interstate commerce").20(cid:13) _________________________________________________________________(cid:13) 19. Contrast Exxon Corp. v. Governor of Md. , 437 U.S. 117 (1978), which(cid:13) upheld a Maryland statute prohibiting petroleum producers and refiners,(cid:13) none of which were based in Maryland, from operating retail gasoline(cid:13) stations within the State. Though the burden fell entirely on out-of-state(cid:13) companies, it appeared that the statute would not reduce the volume of(cid:13) out-of-state petroleum products sold in Maryland because producer- and(cid:13) refiner-owned stations would likely be replaced by stations owned by(cid:13) independent out-of-state dealers. Id. at 123, 127. Unlike the Maryland(cid:13) statute in Exxon, which merely caused business to shift from some out-(cid:13) of-state suppliers to others, id. at 127-28, Pennsylvania’s minimum(cid:13) wholesale prices protect in-state dealers from losing sales to their out-of-(cid:13) state counterparts.(cid:13) 20. Moreover, the burden on out-of-state dealers may extend to their(cid:13) ability to compete in their own states’ wholesale markets. Cloverland(cid:13) introduced evidence that the minimum wholesale prices enable(cid:13) Pennsylvania dealers not only to maintain their in-state market shares(cid:13) without facing price competition from more efficient out-of-state dealers,(cid:13) but also to leverage their artificially inflated profits from in-state sales to(cid:13) undercut more efficient dealers’ prices in other states. For instance,(cid:13) Pennsylvania dealers located in Areas 1 and 4 have offered to sell milk(cid:13) to Maryland retailers, including many of Cloverland’s customers, at(cid:13) prices as much as fifteen to twenty cents per gallon less than the(cid:13) 24(cid:13) Because the record indicates that the minimum(cid:13) wholesale prices may substantially burden Cloverland and(cid:13) other out-of-state dealers, and because there is scant(cid:13) evidence that the price floors advance a legitimate local(cid:13) interest, summary judgment would be inappropriate even if(cid:13) a reasonable trier of fact could not find facts sufficient to(cid:13) trigger heightened scrutiny.(cid:13) IV. Minimum Retail Prices(cid:13) We can dispense quickly with the milk consumers’(cid:13) challenge to the retail price floors. The dormant Commerce(cid:13) Clause does not prevent a state from forcing its residents to(cid:13) pay more for a product if no out-of-state interests are(cid:13) affected. The intervenor-plaintiffs presented evidence that(cid:13) the retail price floors harm Pennsylvania milk consumers(cid:13) because lower prices are available in Maryland. But they(cid:13) failed to present any evidence that the retail price floors(cid:13) burden interstate commerce by harming out-of-state(cid:13) interests, and thus their dormant Commerce Clause(cid:13) argument fails. See United Dairy Farmers Coop. Ass’n v.(cid:13) Milk Control Comm’n, 335 F. Supp. 1008, 1014 (M.D. Pa.)(cid:13) (rejecting attack on Pennsylvania’s minimum retail prices(cid:13) where the plaintiff failed to introduce evidence that the(cid:13) retail price floors obstructed interstate commerce), aff ’d,(cid:13) 404 U.S. 930 (1971) (mem.). We note, however, that had(cid:13) the intevenor-plaintiffs introduced evidence that the(cid:13) minimum retail prices, for instance, impede out-of-state(cid:13) retailers’ ability to compete in the Pennsylvania milk(cid:13) market or artificially inflate retail prices in other states (by(cid:13) reducing price competition among retailers within the(cid:13) region), the result might be different.(cid:13) _________________________________________________________________(cid:13) minimum wholesale prices in Pennsylvania. Cloverland says it has lost(cid:13) hundreds of thousands of dollars in sales as a result.(cid:13) The District Court refused to consider testimony by Cloverland(cid:13) employees regarding the offers made by Pennsylvania dealers, deeming it(cid:13) inadmissible hearsay. However, a statement offering to sell a product at(cid:13) a particular price is a "verbal act," not hearsay, because the statement(cid:13) itself has legal effect. See Fed. R. Evid. 801 advisory committee’s note;(cid:13) United States v. Montana, 199 F.3d 947, 950 (7th Cir. 1999); Trepel v.(cid:13) Roadway Express, Inc., 194 F.3d 708, 717 (6th Cir. 1999).(cid:13) 25(cid:13) V. Conclusion(cid:13) Genuine issues of material fact exist with respect to(cid:13) whether Pennsylvania’s minimum wholesale milk prices(cid:13) interfere with "the Commerce Clause’s overriding(cid:13) requirement of a national common market." Wash. State(cid:13) Apple, 432 U.S. at 350 (internal quotation marks omitted).(cid:13) A reasonable trier of fact could find that the wholesale price(cid:13) floors eliminate out-of-state dealers’ competitive advantage,(cid:13) and that Pennsylvania could achieve its stated objectives(cid:13) through alternative nondiscriminatory measures. The(cid:13) record also supports a finding that the minimum wholesale(cid:13) prices’ burdens on interstate commerce clearly outweigh(cid:13) their local benefits. Therefore, summary judgment should(cid:13) not have been granted with respect to the wholesale price(cid:13) floors, and we reverse and remand for further proceedings(cid:13) on that issue. We affirm the District Court’s ruling with(cid:13) respect to the retail price floors, however, because there is(cid:13) no evidence that they burden interstate commerce.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 26