Central Ark. Milk Prod. Assoc. v. Consumer's Warehouse Market, Inc.

Paul Ward, Associate Justice. This litigation questions the application of Act 380 of the 1955 General Assembly (Ark. Stats. § 70-701-707) which deals with the price to be charged for milk. Appellant is- the Central Arkansas Milk Producers Association, Incorporated, hereafter referred to as CAMPA, which was created by Act 153 of 1939 (Ark. Stats. § 77-1001-1025). Members of CAMPA are dairy farmers who sell raw milk to processors who, in turn, sell the processed milk to retail grocery stores at wholesale for resale, at retail prices, to ultimate consumers. Appellees are some 6 or 8 retail grocery stores located in Fort Smith. CAMPA petitioned the Sebastian Chancery Court to enjoin each of the appellees from selling milk at retail at any price below what the milk cost it plus- 4%, thereby seeking to invoke the provisions of said Act 380. In response to said petition appellees entered demurrers which were sustained by the Chancellor on the ground (a) that said Act 380 does not apply to the sale of milk by retail grocery stores, and (b) that said Act was unconstitutional. Plaintiff, electing not to plead further, prosecutes this appeal. The prohibition is directed against persons engaged in processing and distributing milk. The decisive question is: Is a retail grocery store engaged in distributing milk within the meaning of the Act? (a) A careful analysis of the language used in said Act 380 impels us to agree with the Chancellor’s holding that it does not apply to retail grocery stores. There are several provisions in the Act that cannot be reconciled with any other view. First. Section 1 of the Act contains this language: “However, it is the intention of this Act to prevent any person, firm or corporation engaged in the business of processing and/or distributing milk from lowering its selling price below cost, as herein defined, plus four (4%) per centum, except as hereinafter stated.” It is obvious that the retail grocery stores do not process milk and we do not think they distribute milk in the sense that the word is used in the Act, as we will attempt to show later. Second. Section 2 defines the term “Equivalent competitive prices” as “any legal wholesale or retail price, not less than the minimum prices provided herein, at which fresh fluid milk is sold, advertised, or offered for sale by a competitor who sells not less than five (5%) per centum of the total fresh fluid milk sales in that county” (our emphasis). This clause makes sense only when applying it to the relatively few processors or distributors which would ordinarily be found in any county, but it makes no sense if applied to grocery stores in many counties, such as Sebastian County. It seems unlikely that any one grocery store would ever sell more than 5% of all the milk sold in the county. Third. The Act purports to prohibit the sale of milk for less than cost plus 4%. Section 3 defines the word cost to “include the price the processor or distributor pays the producer . . .” We believe it is common knowledge that in most instances the producer does not sell directly to the grocery store, but to some “middle man” such as a processor or distributor. By this we are persuaded to believe that the framers of Act 380 did not mean for the word distributor to include a grocery store. Fourth. In addition to the above, Section 3 sets out the method of arriving at what constitutes cost. It seems clear to us that this method might reasonably apply to a processor and also to a distributor if the latter refers to a wholesaler of milk as we think it does, but we fail to see how it could reasonably apply to a distributor if that word was meant to include a retail grocery store. Here are some of the items of cost that are included: Labor, rent, interest, depreciation, selling costs, maintenance of equipment (and we know of no special equipment needed by a grocery store in order to sell milk), salaries of officers and executives, transportation, credit losses, all types of permit and license fees, all taxes, insurance, advertising, and all overhead expenses of doing business. Bearing in mind that a retail grocery store sells several hundred different items in addition to milk, we cannot believe the legislature meant for the owner of a retail grocery store to allocate the right proportion of the various expense items to the sale of milk. Fifth. In addition to the foregoing, Section é contains many provisions relating to a determination of cost that could not reasonably be meant to apply to a retail grocery store. Some of these are the allowance of rebates, commissions, discounts, extending certain privileges to certain customers, furnishing free equipment, etc. Beading Act 380 as a whole and particularly because of many of its provisions as set forth above, we are driven to the conclusion that it was not meant to apply to the sale of milk by retail grocery stores, and consequently does not mean for the word distributor to include such stores. It is generally recognized in the milk industry as it is now developed that distributors often buy milk from processors and then sell it at wholesale to the grocery stores or deliver it in trucks to the consumer. Thus, a distributor is engaged in a separate and distinct business from that of a retail grocery store. Appellant attaches much significance to language in section 2 where the Act is made applicable to anyone engaged in the “business of processing and/or distributing fresh milk, either at retail or wholesale.” (our emphasis) However we can see no inconsistency between that language and the view which we have taken. In fact, even under our interpretation, it still could be the purpose of the Act to keep a processor from selling below cost plus 4% to the consuming public, hence the use of the necessary language. (b) The question of the constitutionality of Act 380 has been raised and discussed by both sides, but the conclusion which we have heretofore announced makes it unnecessary for us to render any opinion on it. We have consistently refrained from deciding constitutional questions unless it was necessary to do so. See: Porter v. Waterman, 77 Ark. 383, 91 S. W. 754 and Com. of Labor, C. R. Thornbrough v. Danco Construction Co., 226 Ark. 797, 294 S. W. 2d 336. The decree of the trial court is therefore affirmed. Justice Johnson not participating. Justices McFaddin and Robinson concur.