Regulating Dairy Marketing Practices
Obligations of Producers
With the large number of milk and dairy food transactions that occur every day, DMB depends on both producers and handlers to conduct their trade practices within reasonable guidelines. Although the activities of producers are not monitored by the Enforcement Unit, producers have an obligation to assist the Enforcement Unit by exercising due caution when conducting sales. This includes:
- Selling milk to licensed, bonded handlers
- Executing a milk purchase contract with a handler and filing a copy with the Department
- Notifying the Department of any late payments by handlers or payment defaults
- Accepting no less than minimum farm prices, as established by DMB, from handlers as payment for milk
Obligations of Handlers
Any manufacturer, distributor, producer or wholesale customer must adhere to laws administered by CDFA. Processing distributors are required to have a milk handlers license. Non processing distributors are also required to have a license if dairy products constitute the majority of the products they distribute. The following outline highlights some of the obligations of processors conducting business in California.
- Obtain a milk handlers license prior to purchasing bulk milk
- Obtain a surety bond prior to purchasing bulk milk from producers
- Execute a milk purchase contract with the producer prior to purchasing bulk milk
- Pay producers not less than minimum class prices, as established by the Department
- Pay producers in a timely manner and in accordance with the provisions in the contract
- Pay assessments on milk purchases to the Milk Pooling Branch and to marketing programs as charged
- Maintain records for three years on milk purchases, uses, costs, and other financial transactions with producers and with wholesale customers
- Comply with report filings with DMB as required
Other laws have been established to protect the interest of consumers and prevent undermining of the system. Any manufacturer, distributor, producer or wholesale customer that deals with dairy products is prohibited from the following acts.
- The giving or promise of milk, cream, dairy product, money, or service to secure or retain any wholesale customer or consumer
- The extension to any wholesale customer or consumer of any discounted price or special service which is not made available to all wholesale customers or consumers
- False or misleading advertising
- Discrimination in price between distributors or between wholesale customers or consumers
- The sale of dairy products by any wholesale customer, manufacturer, distributor (including any producer–distributor), or nonprofit cooperative at less than cost. Cost for a manufacturer is raw product cost plus total cost of manufacturing, processing, handling, sale, and delivery. Cost for a wholesaler is the invoice price plus their cost of doing business. Cost of doing business is total operating expense divided by total sales income.
- Solicitation by, or collusion or joint participation between or among any manufacturer, distributor, producer, wholesale customer or consumer
Enforcement Authority
Violations of California’s milk marketing laws are made punishable by provisions of the California Food and Agricultural Code. Violations may result in:
- Imposition of civil penalties in the form of fines in amounts of not less than $100 per violation and not exceeding $1,000 per violation
- Criminal penalties, including imprisonment, recovery of costs, action to enjoin, and collection of amounts owed
- License action, including revocation, refusal to grant or renew, suspension, or affixing conditions or probationary orders on the license
- Interest charged to handlers for late payments to producers at the rate of 12% per year (paid to producers), and penalties charged to handlers ranging from $100 to $5,000 per payment date (paid to DMB)
- Requiring a handler to obtain a new or additional bond in a higher amount
- Requiring a handler to pay producers within 24 hours after notification of a payment default; placement of handler on Ineligible List (handlers whose milk purchases are not eligible for Trust Fund coverage) if they fail to comply.