Unfair Milk Sales Practices

PURPOSE: This regulation places prohibitions or requirements on practices done with the intent of or with the effect of unfairly diverting trade from a competitor or otherwise injuring a competitor or destroying competition or of creating a monopoly. (1) No processor, distributor or nonprocessing retailer shall sell any milk product for less than cost, except in conformance with section (6) of this rule. (2) No processor or distributor shall sell milk products from different price schedules, including any applicable volume price differentials, in different communities in this state from the same plant, except that price differentials which reflect actual transportation cost differences or which are allowed by section (12) of this rule may be made. (3) No person may advertise, offer to sell or sell any milk product with any other commodity or service (except services permitted by section (9) of this rule) at a combined price which is less than the aggregate of the prices for which the milk product and the other commodity or service are offered for sale. This prohibition includes the giving of bonus trading stamps, cash discounts or other things of value specifically tied to the purchase of milk, but does not prohibit a retailer from giving trading stamps, cash discounts and other similar things of value for the purchase of milk products on the same basis as those things of value are given for the purchase of all other products sold by such retailer. (4) No processor or distributor shall differentiate between the price charged for private label products and the price charged for the regular brand products if both contain like grade and quality of the same milk products and are contained in the same size and type of container unless the processor or distributor can establish a cost justification for any price differential. The sale of any private label product for a price less than the regular brand product the difference not being cost justified, will be considered an illegal discount except as that price may be authorized by section (12) of this rule. (5) Delivery tickets or invoices from processors or distributors to retail stores must show the actual unit price of milk products delivered to the retail store. In the absence of delivery tickets or invoices a current report showing the actual unit price of milk products delivered must be furnished to each retail store. (6) No processor or distributor shall give, allow or grant to any customer any rebate or discount from the invoice price of milk products except as follows: (A) Cost-justified volume price differentials based on differences in delivery costs or other provable cost differences may be granted by appropriate discount from list price or by lower net invoice prices, provided that they are made available to any purchaser who buys the required volume; and (B) A processor or distributor, at its option, may allow a discount of no more than two percent (2%) for prompt payment. This discount may be allowed either where a customer requests central billing or when s/he pays on an individual and independent basis. In no event, however, shall a customer who is centrally billed be allowed any greater discount for prompt payment than customers who pay equally promptly for products received on an individual and independent basis. In the event that a processor or distributor chooses to offer this discount, it may do so only after defining the terms of eligibility for this discount through the publication of objective written criteria and the distribution of criteria to all customers. The criteria shall clearly state the amount of discount any customer is entitled to for payment on each of the following items: payment in advance, cash on delivery, payment within ten (10) days of delivery, payment within twenty (20) days of delivery, payment within thirty (30) days of delivery and payment within ten (10) days of monthly billing. A processor or distributor may offer the same rate of discount to more than one (1) of these categories but each category shall have a rate of discount equal to or greater than that given to all categories below it. No discount in any way shall be conditioned on the amount of milk products purchased from the processor or distributor or on the use of central billing. All customers who pay in a timely fashion so as to satisfy the written criteria for prompt payment shall be credited with that discount without further request. (7) No processor or distributor shall extend or offer to extend and no milk product purchaser shall request or accept deferred payments or extend credit for milk products delivered except as expressly provided in this rule: (A) No processor or distributor shall fail to bill each customer at least once each month for all milk products delivered since the last previous billing and not yet paid for; (B) Within twenty-five (25) days from the date of first billing which first billing shall demand payment for all milk products delivered to a milk product purchaser by a processor or distributor, but not paid for since the immediately antecedent first billing, each milk product purchaser billed must make payments in full in each of his/her outstanding milk product accounts; (C) No processor or distributor shall deliver milk products to any customer, which customer has become in arrears on his/her account by reason of failure to pay in full the amount noted on a first billing within twentyfive (25) days of that billing, unless that processor or distributor is paid cash on delivery by the customer in arrears; (D) No processor or distributor shall sell milk products to a customer which customer is in arrears on an open account, as provided in this rule, with any other processor or distributor unless that sale is for cash on delivery; (E) No milk product purchaser shall accept credit terms, as expressly provided for in this rule, from any processor or distributor unless that milk product purchaser is not in arrears on any open account with another processor or distributor; and (F) In each instance where a customer fails to pay in full, within twenty-five (25) days of the first billing for milk products delivered to the customer by any processor or distributor, that processor or distributor shall so advise the director. When a customer making payment, in full, to a processor or distributor, on an account previously in arrears, that processor or distributor receiving the payment shall so advise the director. 4 (8) No processor or distributor shall grant discount or rebate for central billing unless the discount or rebate can be cost-justified by the processor or distributor. (9) No processor or distributor shall make any payment or transfer any merchandise or other thing of value to any customer or credit the account of any customer other than for money received or products returned. (10) No processor or distributor shall provide any free service or labor to any customer, including, but not limited to: (A) Stamping prices; (B) Stacking or carrying out groceries; (C) Setting up cases or displays for products not provided by the processor or distributor; or (D) Otherwise lending assistance to a customer not limited exclusively to preparation of the processor's or distributor's products for sale on a customer's premises; provided, however, that this prohibition shall not apply to— 1. Delivery of milk products to a customer's place of business; 2. Stocking shelves with the processor's or distributor's products; 3. Pulling up and rotating stocks of the processor's or distributor's products; or 4. Cleaning up of dairy display cases when made necessary by presence of the processor's or distributor's products. (11) No processor or distributor shall provide equipment to any milk product purchaser whether the equipment is provided free, by lease or otherwise. (12) No processor or distributor shall provide warehouse or storage space for the use of any customer or for the use of any association whose members are customers of the processor or distributor. (13) No processor or distributor shall meet any lower price or other competition offered by a competitor by means other than lower invoice prices or the introduction of new products or services extended in conformance with the provisions of the Missouri Unfair Milk Sales Practices Act and the rules promulgated by the director of agriculture. (14) No processor or distributor shall purchase any equipment for, on behalf of or for use by any customer. (15) No processor or distributor shall loan money to, or guarantee or facilitate any loan to any customer. As used in the rule, loan does not include the extention of credit for goods delivered but not yet paid for; extensions of credit are governed by section (7) of this rule. (16) No processor or distributor shall provide, or pay in whole or in part for any sign, a sign painting or other advertisement to a customer except for point-of-sale advertising material for the promotion of the sale of the processor's or distributor's products. (17) No milk product purchaser shall accept from any processor or distributor any rebate, discount, free service(s), advertising allowance, pay for advertising space used jointly, donation, free merchandise, rent on space used by the retailer for storing or displaying the milk processor's or distributor's merchandise, financial aid or any other thing of value, including, without limitation, those things of value which are enumerated in sections (4)–(17) of this rule, except to the extent that the giving of that thing of value by processor or distributor is not prohibited by the Act or these rules. (18) The activities, contracts or arrangements or any stockholder, owner, officer, manager or employee of any processor, distributor, nonprocessing retailer or milk product purchaser shall be deemed to be the activities, contracts or arrangements of the processor, distributor, nonprocessing retailer or milk products purchaser, so that, for example, the payment of money to the owner of a store shall be considered the payment of money to the store within these rules. (19) Nothing in these rules shall prohibit a processor or distributor from furnishing to any consumer of milk products a porch box or similar item used for the temporary storage of milk delivered to homes. (20) Taste sampling of milk products for immediate consumption on the premise in quantities not to exceed three (3) ounces is not a violation of the Act. (21) All retailers must have the actual retail price stamped on the container or attached to the display case on all milk products displayed for sale. AUTHORITY: section 416.460, RSMo Supp. 1993.* This rule was previously filed as 2 CSR 40-3.020. Original rule filed Nov. 26, 1975, effective Dec. 10, 1975. Amended: Filed Dec. 18, 1975, effective Dec. 28, 1975. Amended: Filed Sept. 14, 1977, effective Jan. 1, 1978. Amended: Filed July 10, 1984, effective Oct. 11, 1984. *Original authority 1959, amended 1993. Foremost Dairies v. Thomason, 384 SW2d 651 (Mo. 1964). Court held that the following rule, promulgated by commissioner of agriculture, was void because the commissioner of agriculture had no power under the act to so promulgate: “Rule 11. Volume pricing is a discount in price and results in a discrimination in price between localities and is therefore prohibited under the Act.” It therefore follows that the commissioner would not have the authority to make a rule the effect of which would be to prohibit cost-justified volume pricing, as Rule 10: “Rule 10. In determining cost to the processor or distributor for retail sales, all retail stops and rates in a given area should be combined and averaged to obtain a uniform cost for such areas. In determining cost to the processor or distributor for wholesale sales, all wholesale stops and routes in a given area should be combined and averaged to obtain a uniform cost for such areas.” Further, court held that Rule 12 is not authorized by the Act and is beyond the authority of the commissioner to so promulgate: “Rule 12. Public schools districts, agencies and institutions of the state of Missouri and its political subdivisions are not within the purview of sections 416.410 to 416.560, RSMo (1959) and sales of milk products to them are not regulated by the Unfair Milk Sales Practices Act.” Foremost-McKesson, Inc. v. Davis, 488 SW2d 193 (Mo. banc 1972). Four (4) milk processors and distributors brought this action for declaratory judgement and injunctive relief from Unfair Milk Sales Practices rule. Appellants have the burden to plead facts to show the invalidity of the rule. In view of the broad statutory authority granted the commissioner of agriculture, the rule must be regarded as prima facie reasonable. Only in a clear case will the courts interfere on the ground of unreasonableness. The burden is upon those challenging the rules to show that they bear no reasonable relationship to the legislative objective. Administrative rules should be reviewed in light of the evil they seek to cure and are not unreasonable merely because they are burdensome. They must be so at odds with fundamental principles as to be mere whim or caprice.