Kentucky Milk Marketing and Antimonopoly Com'n v. Kroger Co., 83-SC-695-TR
| Decision Date | 02 May 1985 |
| Docket Number | No. 83-SC-695-TR,83-SC-695-TR |
| Citation | 691 S.W.2d 893 |
| Parties | , 1985-1 Trade Cases P 66,596 KENTUCKY MILK MARKETING AND ANTIMONOPOLY COMMISSION, Commonwealth of Kentucky, Niels O. Ewing, Bob J. Rickard, Lloyd Cassity, Leslie Manley, Kenneth Rushing and James E. Claycomb, Appellants, v. The KROGER COMPANY, Appellee. |
| Court | United States State Supreme Court — District of Kentucky |
John B. Baughman, Hazelrigg and Cox, Frankfort, John S. Palmore, Henderson, for appellants.
O. Grant Bruton, Kenneth S. Handmaker, C. Kent Hatfield, and Kendrick R. Riggs, Middleton & Reutlinger, Louisville, for appellee.
The basic issue we resolve on this appeal is the constitutionality of the so-called Kentucky Milk Marketing Law, KRS 260.675 to KRS 260.760, (1960). 1
On September 18, 1982, the Commission, following a hearing, entered an order Following the voluntary recusal of the regular Franklin County circuit judges, we appointed Honorable George M. Barker as special judge. On a motion by the Commission to dissolve the restraining order, the trial judge heard proof relevant to the merits. 3 Although the court ruled that Kroger was not entitled to a temporary injunction and dissolved the restraining order, it ruled that Kroger was entitled to partial relief; viz., a stay of the Commission's order during the pendency of the action on the merits. This order was entered on January 5, 1983.
which found Kroger in violation of KRS 260.705 2 and levied a $4,500 fine against it. This action was filed on October 4, 1982 in the Franklin Circuit Court and was initially an appeal of that order pursuant to KRS 260.745. On the same day, the trial court, ex parte, entered a restraining order which enjoined the Commission from enforcing its order; from conducting any further investigation or hearings for violations of the law; and from enforcing any rules, regulations or orders against Kroger. Shortly thereafter, Kroger filed an amended complaint which, through the vehicle of a declaratory judgment, KRS 418.040, challenged the constitutionality of the entire Kentucky Milk Marketing Act. The suit is therefore in the nature of an appeal and a declaratory judgment.
Following submission of the case on the merits, the trial judge ruled, on August 26, 1983, as follows:
(1) KRS 260.675 to KRS 260.700, and all regulations and practices related thereto were invalid as being in violation of the Sherman Anti-Trust Act, 15 USC Sec 1 et seq.
(2) The statute, regulations and practices were also invalid and unconstitutional as being in violation of Sections 1 and 2 of the Kentucky Constitution.
(3) The Commission and all its officers and employees were permanently restrained from enforcing the Kentucky Milk Marketing Law and any and all regulations and practices promulgated pursuant thereto.
The judgment found Kroger not guilty of the offense charged by the Commission.
An appeal was filed by the Commission and, upon appropriate motion and for obvious reasons, we transferred the case to this Court.
On appeal, the Commission alleges: (1) that the Kentucky Milk Marketing Law is not in violation of the Sherman Anti-Trust Act; (2) that the trial court erred in holding that Kroger met its burden of proof; (3) that the Kentucky Milk Marketing and Antimonopoly Commission does not violate Sections 1 and 2 of the Kentucky Constitution; (4) that the federal courts have exclusive jurisdiction of all matters involving the Sherman Anti-Trust Act; (5) that the judgment of the trial court should be reviewed with respect to the appellants, as individuals, and (6) that those specific provisions of the Kentucky Milk Marketing and Antimonopoly Commission which were declared unconstitutional are severable.
We disagree and affirm the judgment of the trial court. Because we decide this case on the basis of the Kentucky Constitution, we need not discuss contentions (1) and (4), which relate to the Sherman Anti-Trust Act.
In order to guarantee that the consuming public has an adequate supply of wholesome milk and milk products, government has long been regulating the dairy industry. Marketing conditions in the late 1930's led to federal and state legislation to bring purity and stability to milk products. Federal marketing orders 4 provide a minimum price which must be paid to farmers for the milk they sell. These orders do not guarantee a sale of milk, but do guarantee a minimum price in the event of sale. Under the federal program, milk which is not sold is purchased by the Federal Government and is generally made into butter or cheese, then stored and ultimately given away. 5
As noted, KRS 260.675 to KRS 260.760 (1960) inclusive, is known as the "Milk Marketing Law."
In summary, this law prohibits any distributor, processor, bulk milk handler, store, or producer-handler from engaging in any marketing practice established as unreasonable by the Commission (or the Act), for the purpose or with the effect of restraining, lessening or destroying competition or injuring one or more competitors or injuring one or more persons dealing in milk production or to impair or prevent fair competition in the sale of milk and milk products. KRS 260.705. Specifically, this section of the Act prohibits selling "below cost" for the purpose of injuring or destroying competition or with the effect of otherwise injuring a competitor, or destroying competition, or of creating a monopoly. KRS 260.705(a).
Farmers, as producers of milk, are not affected by the law. The place it first touches is at the level of so-called processor-distributors. 6 The processor-distributors are required to file with the Commission price schedules which can only be superseded, changed or withdrawn on forms prescribed. KRS 260.710. Regulations of the Commission require that price changes be filed at least twenty (20) days in advance of the proposed effective date. Although the Commission, under restrictions set out in KRS 260.710, may not set or establish a price for the regulation of milk products, it does have the authority to review price schedules to insure that no processor-distributor is selling below cost. Thus, KRS 260.705(1)(a) limits and forbids a practice which would:
"advertise for sale any article or product at less than the cost thereof to such vendor ..." (Emphasis added).
In the case of processor-distributors, KRS 260.680(12) defines "cost" as follows:
"Cost to the processor or distributor" means the price paid for raw materials, plus the cost of doing business, as evidenced by the standards and methods of accounting regularly employed by such processor or distributor. The cost of doing business means all costs of doing business incurred in the conduct of the business and shall include without limitation that following items of expense: labor (including salaries of executives and officers), rent, interest on borrowed capital, depreciation, power, supplies, maintenance of equipment, selling costs, transportation, delivery cost, credit losses, all overhead expense, and all types of licenses, taxes, insurance and advertising,....
In the case of retailers, KRS 260.680(17) defines "Cost" as follows "Cost to the store" means the invoice price paid by the retailer plus the retailer's cost of doing business, as evidenced by the standards and methods of accounting regularly employed by such store, including, but not limited to, all costs incurred in the conduct of said store such as labor (including salaries of executives and officers), rent, interest on borrowed capital, depreciation, power, supplies, maintenance of equipment, selling costs, advertising, transportation, delivery costs, credit losses, all overhead expenses, and all types of licenses, taxes, insurance and advertising;
KRS 260.715 sets forth the powers and duties of the Commission. The relevant provisions therein authorize an investigation and hearing in response to alleged violations of the Milk Marketing Law or the regulations enacted pursuant thereto. The Commission has the specific authority to suspend or revoke the licenses of processor-distributors and retailers. KRS 260.735. It also has the power to impose fines up to $500 for each violation, and to imprison violators for not less than 1 day nor more than 30 days. KRS 260.991.
In essence, the ostensible purpose of the Milk Marketing Law is to prevent any practices that would tend to eliminate competition or tend to create a monopoly. By legislative fiat, one proscribed practice the statute says tends to create a monopoly or unfair competition is the sale of milk products below cost. KRS 260.680(17); KRS 260.710.
In a well-reasoned opinion, the trial court found from the evidence presented that the Kentucky Milk Marketing Law, as administered by the Commission, is, in actuality, not an anti-monopoly law but rather, a minimum retail mark-up law. In so finding, the trial court in effect applied the old adage, "If it walks like a duck and quacks like a duck, it is a duck." We agree.
In prohibiting sales "below cost", the statutory definition of "cost to the store" includes the invoice price paid by the retailer, plus his cost of doing business, including (but not limited to): all cost incurred in the conduct of said store such as labor, salaries, rent, interest, depreciation, power, supplies, maintenance, selling cost, advertising, transportation, delivery cost, credit losses, all overhead expenses, and all types of licenses, taxes, insurance and advertising. The evidence is incontrovertible that many, if not all, of the costs incurred by grocery retailers have nothing to do with the actual cost of selling milk. According to the evidence, the procedure used by the Commission requires the seller to submit all costs incurred by the stores in terms of a percentage of gross sales, (less sales and excise...
To continue reading
Request your trial
-
Aetna Cas. & Sur. Co. v. Com.
...our Constitution prohibits the exercise of arbitrary power by any public body, including this Court. Ky. Milk Mktg. and Antimonopoly Comm'n v. Kroger Co., 691 S.W.2d 893, 899 (Ky.1985) ("No board or officer vested with governmental authority may exercise it arbitrarily."). Section 2 applies......
-
Com. Nat. Res. & Envir. Prot. v. Kentec
...rises to the level of a conscious violation of the principle of uniformity, is prohibited by this section." Kentucky Milk Marketing v. Kroger Company, 691 S.W.2d 893, 899 (Ky.1985). The question of reasonableness is one of degree and must be based on the facts of a particular case. Boyle Co......
-
Graham v. Adams
...power may be interposed to protect the rights of persons adversely affected. Kentucky Milk Mktg. &Antimonopoly Comm'n v. Kroger Co., 691 S.W.2d 893, 899 (Ky. 1985) (citations omitted). We find no such contradiction of democratic ideals, injustice, or inequality in SB 3. Again, that Plan res......
-
Beshear v. Acree
...concepts of both due process of law and equal protection of the law." Kentucky Milk Mktg. & Antimonopoly Comm'n v. Kroger Co. , 691 S.W.2d 893, 899 (Ky. 1985) (citing Pritchett v. Marshall , 375 S.W.2d 253, 258 (Ky. 1963) ). Unlike the previously discussed legal arguments which are comprehe......
-
Kentucky. Practice Text
...concepts of both due process of law and equal protection of the law.” Kentucky Milk Mktg. & Antimonopoly Comm’n v. Kroger Co., 691 S.W.2d 893, 899 (Ky. 1985). Based on this broad construction, the court invalidated two separate price maintenance statutes. Id. (holding unconstitutional the K......