Milk Commission: It does a crony good?

Carolina Journal’s Lindsay Marchello reports on efforts by some lawmakers to bring back the North Carolina Milk Commission.

Why? To control the price of milk in North Carolina, which would, it is hoped, strengthen dairy farms in this state, which have been declining:

McNeely said the price-setting power was necessary because the state’s dairy industry is struggling to compete with states like Wisconsin and Pennsylvania. The Tar Heel State’s hot summers put North Carolina at a disadvantage compared to northern states with cooler weather better suited for dairy cows.

During the committee hearing, McNeely said North Carolina’s cows have to wear the equivalent of leather jackets during the summer heat.

Under the reworked S.B. 380, a 10-member board would be established to oversee the milk business. The commission could mediate disputes between producers and distributors, and issue licenses for distributors. But the aspect of the bill that drew the most pushback was a provision granting the Milk Commission the ability to set prices for the dairy beverage.

The commission can determine maximum and minimum wholesale and maximum retail prices for milk, so long as it finds price-setting is in the public interest.

OK. It may or may not help dairy farms. But would it be in the public’s interest to force milk prices high enough here to enable farms with higher operational costs to compete? Do poor families with young children prefer higher-priced milk?

The Milk Commission was eliminated in 2004, in part because, as CJ reported, “it was frequently entangled in litigation.” One such case was Flav-O-Rich, Inc. v. North Carolina Milk Com’n, 593 F. Supp. 13 (E.D.N.C. 1983), where the court upheld the Milk Commission’s ability to obtain confidential cost and price information from the milk processor-distributor under an investigation of alleged “below-cost selling.”

I found this portion from the ruling instructive about the milk industry and about the price controls:

Moreover, the milk industry in North Carolina is characterized by a small number of sellers and a large number of buyers. There is little perceptible difference between brands of milk and the primary means of competition among processor-distributors is aggressive pricing. Although small or moderate fluctuations in price do not have a significant effect on the volume of milk and dairy products sold, competition through price is only significant to the extent that an individual seller may increase its share of the market by taking customers away from its competitors. With the obvious short-term life span of milk, orders are, by necessity, placed on the basis of short-term needs. Under these circumstances, the court agrees with plaintiff that price exchanges would result in price stability in violation of United States v. Container Corporation, supra.

Despite agreeing, the court found the actions by the Milk Commission immune from antitrust laws under the “state action” doctrine. Doing so basically meant acknowledging they were “anti-competitive restraints.”

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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