284 A.D. 147 | N.Y. App. Div. | 1954
This is a proceeding under article 78 of the Civil Practice Act to review a determination by the Commissioner of Agriculture, denying the petitioner’s application for an extension of its milk license so as to authorize it to operate an approved fluid milk plant at Friendship, New York.
Ever since 1926, the petitioner has operated an unapproved milk plant at Friendship, New York. . The petitioner purchases milk from farmer-producers in the vicinity and from milk dealers and uses the milk chiefly for the manufacture of cheese products. The petitioner’s license is limited to the purchase of milk for manufacturing only.
An approved plant is one which handles milk intended for human consumption in fluid form. Its facilities must be approved by a health authority in the marketing area to which the milk is shipped; and an approved plant purchases its milk only from producers whose facilities have been similarly approved. Fluid milk from the petitioner’s vicinity is shipped to the New York metropolitan milk marketing area, which is administered jointly by the Commissioner of Agriculture and Markets of New York State and the Secretary of Agriculture of the United States, under regulations adopted pursuant to the provisions of sections 258-k to 258-n of the Agriculture and Markets Law and the provisions of the Agricultural Adjustment Act (U. S. Code, tit. 7, § 608c).
The farmer-producers from whom the petitioner obtains its milk supply are unapproved producers but in recent years there has been a definite trend in the direction of unapproved producers improving their facilities and becoming approved producers. Many of the petitioner’s former producers have obtained approval and have shifted their business to approved plants. Others are in the process of improving their facilities to a point which will enable them to obtain approval.
It is obviously to the advantage of the producers to obtain approval since this enables them to sell to approved plants and to obtain the uniform or blended price as determined by the administrator under the milk marketing order. This is a higher price than the producers are able to obtain from the operators
It is not economically feasible for the operator of an unapproved plant to pay the equivalent of the uniform price and then use the milk solely for manufacturing purposes. He would not have the benefit, which the operator of an approved plant would have, of the higher price, which milk sold in fluid form would command in the market; neither would he have the benefit of any reimbursement from the equalization fund.
The petitioner has found it necessary in the past to purchase milk from other dealers, operating either approved or unapproved plants, in order to obtain an adequate supply for its cheese manufacturing operation. The petitioner has encountered difficulty, during the seasons of the year when the milk supply is low, in obtaining an adequate supply from other dealers. Furthermore, it has often found that the price
The petitioner therefore conceived the idea of establishing an approved plant of its own. It proposed to build a new plant in compliance with the standards specified by the New York City health department for approved plants, so that it would be allowed to deal in fluid milk and to ship milk and cream for sale in fluid form into the New York City marketing area. Under the petitioner’s proposed plan of operation, it would purchase its milk from approved producers and pay the uniform or blended price. It would ship the milk as fluid milk to the New York market when called upon to do so by the administrator in periods of scarce supply and it would also, from time to time, voluntarily sell milk for resale as fluid milk when market conditions made that advantageous. However, the primary purpose of the plan was to assure the petitioner an adequate supply of milk for its cheese factory. Skim milk, left after the separation of cream in the proposed approved plant, and part of the whole milk received at the plant would be transferred to the petitioner’s cheese factory. The combined operation, the petitioner believes, would be an economically feasible one. It would enable the petitioner to hold its producers, even though they had attained approved status, and to pay them the uniform or blended price and still have skim milk and whole milk left for the cheese factory operation at a net cost which would allow the petitioner to continue to sell its cheese products at a competitive price.
The only obstacle to the petitioner’s putting its plan into effect was the fact that its milk dealer’s license was limited to the purchase of milk for manufacturing only. The petitioner applied to the commissioner for an appropriate extension of its license but the commissioner denied the application upon the ground that there was no need for an additional approved fluid milk plant in the area. The commissioner found that the existing plants had an unused capacity which could absorb all the milk produced by the petitioner’s producers upon their becoming approved producers and that to license an additional fluid milk plant in the vicinity would, in the language of section 258-e of the Agriculture and Markets Law, ‘ ‘ tend to a destructive competition in a market already adequately served ” and would not be “ in the public interest ”.
It is the petitioner’s contention that, if it is not allowed to establish an approved fluid milk plant, it will lose most of its producers as they shift to approved status and it will not be able to obtain a reliable supply of milk from other dealers at a reasonable price and it will therefore have to discontinue its cheese manufacturing business. Whether the denial of the license will have the dire consequences which the petitioner predicts, is open to question. There is some evidence in the record that other cheese manufacturers in the area have been able to purchase surplus milk from other dealers at prices which permitted them to continue in business. It also appears that the petitioner itself has for many years purchased a substantial part of its supply from other dealers.
In any event, even if the situation is as serious as the petitioner claims, this does not of itself entitle the petitioner to the relief it seeks. The petitioner’s predicament is primarily the result of economic changes in the milk production industry in its vicinity. The occurrence of such changes, making it more difficult for the petitioner to operate its cheese manufacturing business, does not give the petitioner the right to go into the fluid milk business without satisfying the statutory standards for entry into that business. If a new fluid milk plant is not needed in the area, the petitioner is not entitled to establish one merely because it would facilitate the operation of its' cheese factory.
Upon the departmental hearing, the petitioner’s counsel recognized that he had to meet the issue of compliance with the statutory standards and he sought to demonstrate that the market was not “ already adequately served ” and that there was a need for an additional approved milk plant in the vicinity of the petitioner’s proposed plant. However, on this factual issue, the commissioner’s proof was much stronger than the petitioner’s. The commissioner convincingly demonstrated that the existing approved plants could adequately serve all the producers in the vicinity and that there was unused capacity
The petitioner also raised the point that many of the existing plants dealt exclusively with the members of co-operatives, and that some of the petitioner’s producers did not desire to join a co-operative. However, the commissioner met this contention by proof that there were independent plants of adequate capacity in the vicinity to which the producers could sell their milk without joining a co-operative.
In its brief in this court, the petitioner broadened its attack and took the position that the statute was not designed to regulate competition among dealers in the purchase of milk but was intended only to prevent unfair and destructive practices in their selling activities. We do not find any basis in the legislative history or in the language of the statute for this construction. It is plain on the face of the statute that the purpose of the Legislature was an all-embracing one and that it was the intention of the Legislature to stabilize the entire distribution structure of the milk industry (Agriculture and Markets Law, § 258-k). The elaborate provisions of the statute for the licensing of dealers are designed not only to prevent destructive competition among dealers in selling their product but also to prevent destructive competition in their buying of milk from milk producers. Destructive competition is equally injurious to the stability and.solvency of dealers, whether it occurs in the buying or in the selling end of the business. While it is true that the primary concern of the Legislature was to assure an adequate supply of milk for the consuming public and to assure a reasonable return to the milk producers, the Legislature recognized that these objectives could not be attained unless the whole of the milk industry was stabilized in all its activities. The provisions of the statute have been uniformly construed in accordance with this view (Matter of Grandview Dairy v. Du Mond, 273 App. Div. 921, affd. 299 N. Y. 695; Matter of Dairymen’s League Co-op. Assn. v. Du Mond, 282 App. Div. 69, 74, appeal on constitutional grounds dismissed 306 N. Y. 595).
It is argued that no destructive competition would result in this case, because the petitioner would simply continue to deal with the producers with whom it now deals and there would be no diversion of producers from the existing plants. The factual premise of this argument is not correct, since the petitioner expects to recapture the business of some of its former producers who are now delivering to approved plants. But apart from this, the protection of the business opportunities of the existing plants, under the scheme of the statute, extends to new producers coming into the field as well as to the old approved producers. While there would be no diversion of the patronage of the existing plants, if new approved producers went to a new plant, there would be a withholding of business which otherwise would have come to the existing plants and which would have helped them to absorb their excess capacity and to reduce their unit cost of operation.
The question of how best to protect the public interest is basically one of legislative policy. Up to this time, the Legislature has adhered to the view that the best way to serve the public interest with respect to the milk industry is to stabilize the milk distribution business by making it “ a quasimonopoly for those already in it ”, under government regulation (Manley, “ Nebbia Plus Fifteen ”, 13 Albany Law Rev. [part 2] 11, 18). An argument may be made the other way, by those sympathetic to the petitioner’s position, that the public interest would be better served by terminating this governmental “ stabilizing activity ’ ’ and permitting free competition among milk dealers. But some students of the subject have made an extreme argument in the opposite direction and have urged that the “ quasimonopolistie ” nature of the business should be strengthened and that the State should “ gradually reduce the number of licensees so that the public can have the benefit of possible operating economies from a more completely monopolized and regulated milk distributing industry” (13 Albany Law Rev. [part 2] 18-19). These arguments raise fundamental questions of policy which are not within our province, and which only the Legislature can resolve.
The determination by the commissioner should be confirmed, with $50 costs.
Foster, P. J., Bergan, Coon and Imrie, JJ., concur.
Determination of the commissioner confirmed, with $50 costs.