A state appeals court ruling Monday opened the way for cheaper but less nutritious milk to be sold in California, offering consumers the prospect of more choices and a price break in what has been the most expensive milk in the nation.
The ruling struck down California's decades-old regulations that require low-fat milk sold in the state to be fortified with more calcium and protein, in effect barring most out-of-state milk. The ruling in the closely watched case means out-of-state producers can sell their unenriched milk here as long as it meets less stringent federal standards. It also opens the way for state dairy producers to do the same.
Since 1962, California agriculture officials have required that dairy producers enrich their low-fat milk to improve children's bone development and ward off osteoporosis. California is the only state that demands enrichment beyond federal standards, a process that is expensive and therefore discourages most out-of-state competition.
The ruling was a major setback for state regulators, state milk producers and some nutritionists who have fought to maintain those standards.
"This is a major shift in policy," said Elisa Odabashian, a policy analyst for Consumers Union. "It effectively does away with the higher nutritional standards, and in the long term it could have some effect on young children and older people who need more nutrients in milk."
California dairy producers and some health groups will most certainly lobby agriculture officials to appeal the ruling to the state Supreme Court.
"This is a huge setback for California milk processors," said Bob Feenstra, executive director of the Ontario-based Milk Producers Council. "With California milk, you know what you're getting. Even if you buy reduced-fat milk, you know you're getting the same level of nutrition."
Out-of-state dairy groups say milk that adheres to federal guidelines supplies all the nutrients adults and children need. But some nutritionists say California standards, which require 27% more calcium and protein in low-fat milk than the federal standard, make it easier for young children and older people to meet dietary needs. (Whole milk, which naturally contains more calcium and protein, does not require fortification.)
Out-of-state dairies, which for years financed legal, legislative and public-opinion campaigns to break into California's $3.7-billion dairy industry, appear to have finally achieved their efforts through the courts.
The decision, by the 4th District Court of Appeal in San Diego, involved a five-year court battle between state regulators and Arizona-based Shamrock Foods Co.
When the state Department of Food and Agriculture ordered Shamrock to take its non-fortified milk off San Diego shelves in 1994, the company sued in federal court, arguing that California's milk standards were preempted by the federal rules.
Shamrock won its first lawsuit. Then California dairies and the state regulators persuaded Congress to allow the state to adopt tougher laws.
Shamrock filed a second suit in state court declaring California's stricter laws unconstitutional, which it lost. The state counter-sued, and Shamrock was fined nearly $700,000 for selling Californians unenriched milk.
In its decision Monday, the state appeals court reversed Shamrock's fine and the ban on the company's products. Even though California obtained an exemption to impose higher milk standards, Shamrock could "legally formulate milk to the federal standard and sell it in California [and] it violated no provision of California law when it did so," the court stated.
In its unanimous ruling, the three-member panel rejected arguments by state lawyers that dairies would stop producing the more-expensive fortified milk if they were only required to meet the federal standard. That would be decided by economics, said Justice Patricia Benke, who wrote the opinion. "A market might well exist for a higher-standard milk," Benke said.
The decision, legal experts said, means California dairy producers can now market unenriched milk to consumers. Sandra Michioku, a spokeswoman for the California attorney general's office, which argued the case for state regulators, said her office was reviewing the court's opinion with state agriculture officials.
Although consumer activists disagree on the ruling's immediate impact on consumers, an official with Mad About Milk, a lobbying group funded by Shamrock and other out-of-state dairies, said the decision is good news for shoppers, who will probably pay less as a result of increased competition.
In Los Angeles, a gallon of whole milk sold for an average retail price of $2.73 in July, according to data from California's Department of Food and Agriculture, compared with $2.47 in Arizona and $2.28 in Portland, Ore.
Californians pay the highest prices for milk in the nation even though dairy producers here incur lower production costs, partially due to milder weather. The cost of adding the extra calcium and protein is estimated at 14 cents to 22 cents a gallon, according to opponents of the state regulations.
But Consumers Union officials say price gouging by supermarkets--not tougher state regulations--are responsible for higher prices in California. Said Odabashian: "Lowering the standards will not bring meaningful savings to consumers at the retail level, so why not have milk with more calcium, protein and minerals?"