Court Ruling a Victory for State’s Dairies

The California Supreme Court decided unanimously Monday to bar out-of-state dairies from selling milk that fails to meet California’s strict nutritional standards.

Out-of-state dairies had challenged the state’s right to require milk to be enriched with more protein and calcium than the levels set by the federal government.

California is the only state to require the extra enrichment. It also has among the highest milk prices in the nation. Out-of-state dairies argued that prices would fall if they were permitted to meet only the federal standard.

“The Supreme Court ruling is bad news for consumers because it is going to keep milk prices unnecessarily high,” said Audrie Krause, executive director of Mad About Milk, a coalition of out-of-state dairies and several groups active on health and nutrition issues.

Some leading consumer groups, however, have been skeptical. Consumers Union says California milk prices generally are 20 cents a gallon higher than prices in other states. But the group blames the high prices on “grocer gouging” and argues that production savings are not passed on to consumers.

“There is a growing gap between farm price and what retailers are charging consumers,” said Elisa Odabashian, senior policy analyst for Consumers Union, the nonprofit publisher of Consumer Reports magazine. “If you lowered nutritional standards, people would have continued to pay the same amount or more for a product with less calcium and other nutrients,” she said.

Although the consumer impact is unclear, the ruling upholding the state’s nutritional rules was definitely a victory for the California dairy industry, the biggest milk producer in the nation and the state’s leading agricultural sector.

Monday’s decision arose out of litigation between Arizona-based Shamrock Foods Co. and California. The state filed suit against Shamrock for selling unenriched milk in California, and a trial court fined the company nearly $700,000. A Court of Appeal, overturning that decision, said Shamrock milk could be sold in California as long as it met federal guidelines.

Shamrock contended that a 1994 state law opened the way for it to sell its milk in California. The law allowed for the sale of milk products that comply with federal, but not state, standards. But the state Supreme Court, citing the legislative history of the law, said the statute applied only to milk products, such as yogurt or ice cream, not to milk.

Justice Stanley Mosk, writing for the court, started his opinion by noting that “milk and milk products constitute an important source of nutrition for the people of the state of California, supplying various essential nutrients.” The opinion added that milk products “also amount to a substantial economic resource, since the state’s dairy industry, which is the nation’s largest, is the state’s leading agricultural enterprise.”

Those words had Krause’s group crying foul. The court is “paying homage to the dairy industry,” Krause said. “They are essentially acknowledging that this is about the economic clout of the dairy industry.”

California has relatively low milk consumption, she said. “Even though the dairy industry is making these claims that this is good for people, you are not going to get the nutrients of milk if you don’t drink it,” Krause said. “And if you can’t afford it, you are not going to drink it.”

The state adopted its nutrition standards in 1964 “to ensure a certain level of revenue for dairy farmers,” she said, asserting that only 1% of the milk in California has significantly more calcium than out-of-state milk. Whole milk in California actually has more fat than whole milk produced elsewhere, she said.

But Jim Tillison, chief executive officer of the Alliance of Western Milk Producers, said that although it may cost about 13 cents more a gallon to add the required nutrients in California, “the cost-benefit ratio is very much in the consumer’s favor.”

Shamrock had been selling its milk in California to institutional customers, including restaurants and hotels, and a company spokeswoman said she did not know how its price compared to California-produced milk.

Ann Ocana, the spokeswoman, said the company was disappointed by the ruling and has not yet planned its next step.

The case will now return to the 4th District Court of Appeal in San Diego, which will decide Shamrock’s other legal arguments and whether to uphold the fine against the company.