This is а petition for review of Official General Order No. A-890 issued by the Pennsylvania Milk Marketing Board, pursuant to Pennsylvania’s Milk Marketing Law. The order fixed minimum wholesale prices for milk in Milk Market Area 1 including the prices charged to schools.
In Pennsylvania, the sale of milk is regulated and controlled by the Milk Marketing Law (“the Law”), Act of April 28, 1937, P.L. 417, as amended, 31 P.S. §§ 700j-101 to 700j-1302. The Law is implemented by the Milk Marketing Board (the Board), an independent administrative agency. 31 P.S. § 700j-201. Section 802 of the Law directs the Board to fix by official order the minimum prices for the wholesale and retail sale of milk. 31 P.S. § 700j-802. Section 801 of the Law requires the Board to base minimum prices “upon all conditions affecting the milk industry in each milk marketing area, including the amount necessary to yiеld a reasonable return ... on aggregate milk sales by milk dealers or handlers and stores selling milk.” 31 P.S. § 700j-801. In ascertaining such returns, the Board considers the costs incurred by a cross-section of dealers representative of dealers in the area. Id. Milk dealers are allowed a rate of return of two and one-half (2 1/2%) percent to three and one-half (3 1/2%) percent “based on net sales of price-controlled products determined in accordance with generally accepted acсounting principles.” Id.
In December 1994, Lehigh Valley Dairies, Inc., applied to the Board for a price hearing to revise Official General Order A-863 (OGO A-863) and establish new minimum prices for the purchase and sale of milk in Area 1. The Board granted Lehigh’s application and the hearing was held over several days in June of 1995.
During the hearing, Area 1 was characterized as a competitive market in which milk dealers from both Pennsylvania and New Jersey compete. In recognition of the New Jersey influence, a nearby New Jersey milk dealer was included in the dealer cross-section considered. The School District of Philadelphia provided evidence that it purchases milk from a dealer who does business in both states and that dealer sells half-pints of milk to the similar urban schools in New Jersey for approximately four cents less than the school district is required to pay in Philadelphia. The School District also presented evidence that the price of milk charged to general consumers is higher in Pennsylvania than in neighboring states.
After the hearing, submission of briefs and a pre-order conference open to all interested parties, the Board issued Official General Order A-890 (OGO A-890) fixing minimum prices in Area 1, effective October 1, 1995. The order reduced half-pint prices for milk sold to schools by approximately one and one-third (1 1/3) cents.
Petitioners make the general complaint that OGO A-890 interferes with market forces and thus denies them the opportunity to purchase milk in Pennsylvania at a competitive price. They contend that enforcement of the Milk Marketing Law causes the School District of Philadelphia to spend an additional one million ($1,000,-000.00) dollars per year to purchase the milk it serves to students. The specific legal issues raised in this appeal are: (1) whether the enforcement of the Milk Marketing Law, particularly [31 P.S.] § 700j — 801, violates the Commerce Clause of the United States Constitution;
Petitioners first contend that Section 700j-801 of the Law, which provides for the establishment of minimum prices, violates the Commerce Clause of the United States Constitution. A lawfully enacted statute carries a presumption of constitutionality. In re Petition To Increase Millage Limit,
The Commerce Clause gives Congress the power to regulate commerce among the several states and with foreign nations. United States Constitution, Art. I, § 8, cl. 3. This affirmative grant of power to Congress “has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such commerce.” South-Central Timber Development, Inc. v. Wunnicke,
In determining whether a legislative enactment violates the Commerce Clausе, a distinction must be made “between state statutes that burden interstate transactions only incidentally, and those that affirmatively discriminate against such transactions.” Maine v. Taylor,
On the other hand, it has been recognized “that incidental burdens on interstate commerce may be unavoidable when a State legislates to safeguard the health and safety of its people.” Philadelphia v. New Jersey,
The crucial inquiry, thеrefore, must be directed to determining whether [the statute] is basically a protectionist measure, or whether it can fairly be viewed as a law directed to legitimate local concerns, with effects upon interstate commerce that are only incidental.
Philadelphia v. New Jersey,
Petitioners claim that the price fixing provision of the Milk Marketing Law is protectionist because the Law precludes more efficient out-of-state milk dealers from selling milk in Pennsylvania at prices less than those charged by less efficiеnt Pennsylvania milk dealers, thereby precluding out-of-state dealers from taking advantage of their natural competitive edge. Such a minimum pricing scheme, petitioners argue, amounts to economic protectionism of Pennsylvania’s milk industry. This argument is meritless. Whatever advantage or burden the Law provides to an efficient dealer, those effects accrue equally to an efficient in-state and an efficient out-of-state dealer. Unquestionably, a wide range of efficiencies among deаlers exists both in and out of state. However, “[t]he fact that the burden of a state regulation falls on some interstate companies does not, by itself, establish a claim of discrimination against interstate commerce.” Exxon Corp. v. Governor of Maryland,
Petitioners attempt to support their case by claiming that Pennsylvania’s higher prices resulting from application of the Law demonstrate the inefficiency of Pennsylvania’s dealers. This argument is devoid of logical or evidentiary support. Since any “protectionism” in the Law aids (or burdens) similarly inefficient dealers from any state, the Law is geography-neutral. As noted by the United States Court of Appeals for the Third Circuit:
Where the “burden” on out-of-state interests is no different from that placed on competing in-state interests, however, it is a burden on commerce rather than a burden on interstate commerce.
Norfolk Southern Corp. v. Oberly, 822 F.2d 388, 406 (3d Cir.1987).
Petitioners’ reliance upon West Lynn Creamery, Inc. v. Nealy,
Conversely, as the United States District Court for the Middle District of Pennsylvania stated regarding Pennsylvania’s Law, “[a]t most, the price controls do not burden but have only an incidental effect on interstate commerce which would not prevent Pennsylvania from pursuing its legitimate goals.” United Dairy Farmers Cooperative Ass’n v. Milk Control Commission,
Having determined that Pennsylvania’s statutory scheme places only an incidental burden on interstate commerce, we must next evaluate the local interests which the Law is designed to foster. We need not engage in extended discussion of this point,
Pennsylvania’s Milk Marketing Law gives the Board authority to establish milk prices “as will be most beneficial to the public interest, best protect the milk industry of the Commonwealth and insure a sufficient quantity of pure and wholesome milk to inhabitants of the Commonwealth, having special regard to the health and welfare of children residing therein.” 31 P.S. § 700j-801. The purpose of the Law “is to regulate the sale of milk and milk products so as to ensure that an adequate supply of milk exists and to establish a uniform economic condition for suppliers of milk.” Township of Muhlenberg v. Clover Farms Dairy Co.,
The General Assembly, in providing for retail minimum price controls to provide stability in the retail milk market, believed a stable supply of milk is ensured When the retailer is assured an adequate return on the sale because the milk industry relies on retailers to distribute their product to the consumers. Since milk remains a vital commodity in Pennsylvania and the General Assembly finds that an adequate supply at a stable price is required for the benefit of the citizеns, retail minimum price controls are a rational means to be employed by the General Assembly to achieve that objective.
Finucane v. Pennsylvania Milk Marketing Board,
Petitioners next allege that they were denied due process of law during the proceedings associated with the issuance of OGO A-890. Petitionеrs claim that the Board favors the interests of milk dealers and, thus, it failed to remain impartial during the proceedings and issued an order which deprived the consuming public of a just price for milk. In fact, petitioners assert the Board and its staff are in collusion with the milk industry which it regulates.
There is no question that due process is required in all hearings before administrative agencies of the Commonwealth. Brookwood Farms v. Milk Marketing Board,
The delicate balance which faces the Milk Marketing Board in fixing prices is to provide a fair return to producers and dealers, while maintaining a just consumers’ price. Colteryahn Sanitary Dairy v. Milk Control Commission,
Carl Herbein, a certified public accountant retained by Lehigh to prepare an expert report on dealer costs, testified that he had not considered consumers’ ability to pay when conducting his Area 1 cost study. The Board sustained an objection to followup questions on relevancy grounds. (R.117a-18а). Petitioners’ assert this ruling demonstrates that the Board ignored its legal responsibility to milk consumers. Mr. Herbein was offered as an expert on dealer costs. His testimony pertained to processing and distribution costs incurred by Area 1
Petitioners’ second argument also arises from the cross-examination of Mr. Herbein. The Board requires all milk dealers to file annual financial stаtements, which were used by Mr. Herbein in preparation of his cost study. During cross-examination, counsel for Cumberland Farms Agency, one of several interested parties to the proceeding, asked Mr. Herbein to produce the financial statements that he had used. An objection was raised and it was argued that the document request was made purely for purposes of delaying the hearing. (R.136a-39a). Petitioners contend that the Board’s decision to sustain the objection shows that dealer financial statements were impermissibly kept confidential and made available only to the dealers and the Board. No such inference can reasonably be drawn. The statute specifically provides that such statements must be made available to the general public upon request. 31 P.S. § 700j-308.1. Yet prior to the commencement of the hearing, neither Cumberland Farms nor petitioners
The remaining evidence of record to which petitioners point in support of their contention that the Board acted partially involves various actions taken by members of the Board’s investigatory staff. The Board maintains an Enforcement and Accounting Division to enforce compliance with Milk Marketing laws and regulations and to gather and interpret financial and accounting information used by the Board in hearings. The Pennsylvania Manual, Vol. 112, p. 4-116 (1995). In a price-fixing hearing, the development and presentation of evidence is performed by members of the investigative staff. The Board itself hears the evidence presented and decides the case. Such dual roles are not at all uncommon in administrative agencies, and due process concerns are implicated only where an impermissible appearance of bias “arises from an actual environment of commingled functions.” Stone & Edwards Ins. Agency v. Department of Ins.,
Finally, petitioners challenge two aspects of the Board’s evaluation of evidence which they claim resulted in an unfairly high price. Specifically, petitioners claim that the Board’s utilization of a sample cross-section which included high-сost, inefficient dealers runs contrary to a requirement that the Board utilize “a cross-section representative of the average of the normally efficient producers or dealers in the district.” Colteryahn Sanitary Dairy v. Milk Control Com.,
In 1938, the average efficiency requirement was announced in Colteryahn Sanitary Dairy.
Nor did it err when it found that the evidence presented satisfied this standard. In this case, the Board staff and the Area 1 milk dealers presented evidence showing the average costs of a cross-section of dealers in 1994 for various sizes of containers. The cross-section considered by the Board consisted of five dealers located within Area 1 and one dealer locаted in New Jersey who sells milk in Area 1. The evidence was that the six dealers comprising the cross-section were representative of dealers in the area based upon consideration of volume of sales in the area, the types of products and variety of container sizes sold, range of customers served, and the type and volume of deliveries made by the dealer. (R.447a-48a, 453a). After reviewing this evidence, the Board found the cross-section to be representative because: (1) thе cross-section was geographically diverse; (2) the cross-section accounted for 62.2% of the total sales of Class I milk in Area 1 during 1994; (3) the dealers in the cross-section sell milk in various container sizes that are representative of the containers sold by dealers in Area 1; and (4) the dealers in the cross-section sell to customer types representative of Area 1, namely supermarkets, convenience stores, “mom and pop” stores, schools and institutions. (Official General Order A-890, Sept. 22, 1995, Finding of Fact 5). Because there was substantial evidence supporting the Board’s finding, we will not disturb it on appeal. Babac,
Petitioners next argue that their evidence showed that the cumulative effect of a number of inflation factors resulted in overstating the price of milk by nearly five (5) cents. The petitioners allege that the Board’s reliance upon total costs, including fixed costs, inflated the cost figures, and suggest that a variable cost approach would have prevented distortion. Petitioners further assert that thе cross-section data weighing method accepted by the Board distorts dealer costs and further inflates the price of milk by systematically and dramatically discounting the low cost processor and magnifying the impact of the high-cost processor.
COLINS, President Judge, dissents.
ORDER
AND NOW, this 18th day of October, 1996, the Official General Order No. A-890 of the Pennsylvania Milk Marketing Board is hereby affirmed.
Notes
. Milk Marketing Area 1 is all municipalities, cities, boroughs and townships located within the counties of Bucks, Chester, Delaware, Montgomery and Philadelphia.
. The case caption suggests that Mr. Haver is the nominal plaintiff in a class action suit. However, a review of the docket in this action reveals that there have been no motions filed or other actions taken to make this a class action. Moreover, Mr. Haver has set forth no basis upon which a class action could be authorized for or would apply to a proceeding before the Milk Marketing Board. See generally: Property Owners, Residents, and/or Taxpayers of Pleasant Valley School District v. Pleasant Valley School District,
. In support of its application, Lehigh had asserted that OGO A-863 was based on cost information for calendar year 1989, that processing costs had risen substantially in the interim, and that orders for all other milk marketing areas had been revised at least once since OGO A-863 went into effect.
. Before the effective date of OGO A-890, Lehigh applied to the Board for a revision of the Area 1 order. On October 20, 1995, the Board issued OGO A-890 Amended, which became effective on December 1, 1995. The amended order provided for a recalculation of the price of milk for all container sizes by allowing an increase for small containers, but exempted from its scope half-pints sold to schools and spread the lost revenue over the other container sizes.
.The Attorney General of Pennsylvania, who has intervened in this matter, asserts that the School District lacks the capacity to make this challenge on the ground that a school district has no rights under the federal constitution which it may assert in opposition to the will of the Commonwealth, its creator. Penn-Delco School District
. The Agricultural Adjustment Act, 7 U.S.C. § 601, et seq. authorizes the Secretary of Agriculture to regulate the minimum prices paid to producers of raw milk by issuing marketing orders for рarticular geographic areas.
. Indeed petitioners have never made a request for these documents, and do not here challenge the evidentiary ruling itself.
. The Colteryahn case interpreted the original version of Section 801 which provided: "The [Board] shall base all prices upon all conditions affecting the milk industry in each milk marketing area, including the amount necessary to yield a reasonable return to the producer and to the milk dealer.” 31 P.S. § 801 (1937) (subsequently amended).
. The determination of the appropriate standard is a ruling of law over which we exercise plenary review; whether the evidence reflected a representative cross-section is a factual determination over which our review is limited to determining whether the finding is supported by substantial evidence.
.Petitioners also contend that Mr. Herbein's testimony on the cost of school deliveries was not credible. The Board resolved the conflicting testimony on delivery costs. Official General Order, Sept. 22, 1995, Findings of Fact 13, 15. We will not disturb these credibility findings on appeal.