A Massachusetts pricing order imposes an assessment on all fluid milk sold by dealers to Massachusetts retailers. About two-thirds of that milk is produced out of State. The entire assessment, however, is distributed to Massachusetts dairy farmers.
Petitioner West Lynn Creamery, Inc., is a milk dealer licensed to do business in Massachusetts. It purchases raw milk, which it processes, packages, and sells to wholesalers, retailers, and other milk dealers. About 97% of the raw milk it purchases is produced by out-of-state farmers.
Since 1937, the Agricultural Marketing Agreement Act has authorized the Secretary of Agriculture to regulate the minimum prices paid to producers of raw milk by issuing marketing orders for particular geographic areas. While the Federal Government sets minimum prices based on local conditions, those prices have not been so high as to prevent substantial competition among producers in different States. In the 1980’s and early 1990’s, Massachusetts dairy farmers began to lose market share to lower cost producers in neighboring States. In response, the Governor of Massachusetts appointed a Special Commission to study the dairy industry.
The commission found that many producers had sold their dairy farms during the past decade and that if prices paid to farmers for their milk were not significantly increased, a majority of the remaining farmers in Massachusetts would be “forced out of business within the year.” On January 28, 1992, relying on the commission’s report, the Commissioner of the Massachusetts Department of Food and Agriculture (respondent) declared a State of Emergency.
In his declaration he noted that the average federal blend milk price 2 had declined from $14.67 per hundred pounds (cwt) of raw milk in 1990 to $12.64/cwt in 1991, while costs of production for Massachusetts farmers had risen to an estimated average of $15.50/cwt. He concluded:
“Regionally, the industry is in serious trouble and ultimately, a federal solution will be required. In the meantime, we must act on the state level to preserve our local industry, maintain reasonable minimum prices for the dairy farmers, thereby ensure a continuous and adequate supply of fresh milk for our market, and protect the public health.”
Promptly after his declaration of emergency, respondent issued the pricing order that is challenged in this proceeding. The order requires every “dealer” in Massachusetts to make a monthly “premium payment” into the “Massachusetts Dairy Equalization Fund.” The amount of those payments is computed in two steps. First, the monthly “order premium” is determined by subtracting the federal blend price for that month from $15 and dividing the difference by three; thus if the federal price is $12/cwt, the order premium is $1/cwt. Second, the premium is multiplied by the amount Each month the fund is distributed to Massachusetts producers. Each Massachusetts producer receives a share of the total fund equal to his proportionate contribution to the State’s total production of raw milk.
Petitioner West Lynn complied with the pricing order for two months, paying almost $200,000 into the Massachusetts Dairy Equalization Fund. Starting in July 1992, however, petitioners refused to make the premium payments, and respondent commenced license revocation proceedings. Petitioners then filed an action in state court seeking an injunction against enforcement of the order on the ground that it violated the Commerce Clause of the Federal Constitution. The state court denied relief and respondent conditionally revoked their licenses.