Agencies | Governor
Virginia Regulatory Town Hall

Proposed Text

Action:
Amend certain wholesale category
Stage: Fast-Track
12/12/18  5:28 PM

2VAC15-20-100. Rules of practice.

The following rules of practice shall be observed:

1. The sale of milk products shall be in containers of the size and butterfat content as specified by the regulations of the Virginia Department of Agriculture and Consumer Services.

2. Established wholesale and retail prices.

a. In the event the approving authority establishes wholesale and retail prices, except as provided in subdivision 2 b of this section:

(1) Retail prices shall apply to all sales other than wholesale or where milk is sold and consumed on the premises.

(2) Wholesale prices shall apply to sales of milk products by processing general distributors, producer general distributors or distributors resold for consumption, whether on or off the premises, and shall apply to sales made by all licensed distributors to hotels, restaurants, stores, licensed boarding houses, vending machine operators and other operations which have a sales tax exemption certificate as set forth in § 58.1-623 of the Code of Virginia.

b. Processing general distributors or distributors or producer general distributors may submit bids at other than established wholesale prices to any governing body of any municipality, county or state, or by the federal government, or by any agency operated by the above, or by colleges, universities and schools, either elementary or secondary whether or not they be public or private, provided:

(1) The sales are classified as Class I for the purpose of producer payments, except those sales that are made on federal reservations over which the state government has ceded jurisdiction; and

(2) The processing general distributor, producer general distributor, or distributor has been licensed by the approving authority to distribute milk products in the market concerned.

c. No processing general distributor, producer general distributor, distributor or retail distributor, his officers, agents or employees, shall engage in, permit or encourage any method or device in connection with the sale of milk which results in increasing or reducing the net price for the product above the maximum price or below the minimum price when established by the approving authority.

3. Processing general distributors, producer general distributors, or distributors shall not directly or indirectly:

a. Pay for advertising of milk in any place of business of a milk customer or prospective milk customer without first having obtained the written approval of the agency.

b. Pay for advertising of a milk customer or prospective milk customer. However, a distributor may pay at the published or prorata rate, whichever is less, for the actual space or service used for the advertising of his milk.

c. Provide a milk customer or prospective milk customer with any article for handling or serving milk except on a bona fide sale. In order to be considered bona fide such sale must meet the following minimum requirements:

(1) The sale price shall be not less than the cost (including freight and installation costs) or not less than the book value based on 10% per year depreciation of the cost to the distributor (plus installation costs).

(2) In the event that the article has been fully depreciated on a ten-year basis the price to the milk customer or prospective milk customer shall be not less than original cost or 10% of its current replacement value whichever is the greater.

(3) In order to be considered as a cash sale, payment in full must be made by the milk customer or prospective milk customer within 31 days after installation of the article.

(4) If sale is made on other than a cash basis, as defined in subdivision 3 c (3) of this section, the following requirements shall apply:

(a) A down payment of not less than 10% of the total cost of the article must be made within 31 days after installation.

(b) Interest of not less than the current prime rate at the time of sale must be charged on the unpaid balance due the distributor for all sales.

(c) The unpaid balance must be paid in full within a period not to exceed three years, by monthly payments at least equal to 1/36 of the initial unpaid balance. Said payments may be anticipated in part or in whole.

(d) Payment of the balance due must be secured in such a manner that the article may be repossessed for nonpayment.

(e) In the event any payment becomes overdue by 60 days the article must be repossessed immediately.

However, the approving authority may grant an exemption for charitable purposes when requested in writing. Also, transactions involving milk handling equipment to any governing body of any municipality, county or state; to the federal government or any agency operated by the preceding; or to colleges, universities or schools (elementary or secondary, public or private) are exempted from these requirements.

d. Combine the pricing or sale of milk with any other commodity, product, or service regardless of the cost, if any, to the distributor of such commodity, product, or service.

e. Engage in any practice or practices which may tend substantially to lessen competition in, or substantially to increase the cost of, distribution of milk.

f. Advertise, transfer, sell or offer to sell at wholesale or retail any packaged Class I product purchased for resale at less than cost. Cost shall be the net purchase invoice or transfer price, including all applicable discounts or rebates, plus 6.0% and presumed delivery costs defined in subdivision 3 g 2 of this section, unless a lower amount can be justified to the approving authority's satisfaction by the licensee. When making justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

g. Advertise, transfer, sell or offer to sell at wholesale any packaged Class I product processed and packaged by their own facilities, leased, or subsidiary facilities or by contractual agreement at less than cost.

(1) Cost for Class I items sold at plant dock shall be presumed to be the total of the following cost factors:

(a) The net cost of the fluid milk computed at the established Class I rate (adjusted for butterfat content).

(b) A shrinkage factor of 2.0% of the volume of each container computed at the established Class II rate for the plant average butterfat test.

(c) The net cost of any fortification or added ingredients.

(d) The net container cost.

(e) The net approving authority assessment cost to the licensee.

(f) The weighted average of all other platform costs as determined by the approving authority's current cost study of "Cost Created in Processing and Distributing Milk by Processing General Distributors in Virginia."

(2) The presumed cost for Class I items delivered to wholesale accounts shall be the product of the total platform cost as set forth in subdivision 3 g (1) of this section, multiplied by the following percentages:

More than 99 cases per delivery—Platform Cost x 1.0675 (6.75%)

From 147 to 99 cases per delivery—Platform Cost x 1.125 (12.5%)

Less than 147 cases per delivery—Platform Cost x 1.250 (25%)

Effective December 31, 1997, these percentages may be adjusted each year by the annual percentage of change in the weighted average case delivery cost as determined by utilizing the accounting principles set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc.

However, when two or more wholesale accounts purchase Class I items from a distributor under a contractual agreement which provides for consolidated billing and payment, the average case delivery for the entire group of accounts shown on the consolidated billing shall be used instead of delivery volume to each individual account. For the purpose of this subdivision, a case shall consist of unit fluid equivalent of four gallons.

(3) Instead of the cost determination as set forth in subdivisions (1) and (2) of this subdivision, a licensee may substitute his costs provided they can be justified to the agency's satisfaction. When making such a justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

h. Purchase milk or accept transfer of fluid milk products except from processing general distributors, distributors, or producer general distributors licensed in the market.

4. Processing general distributor, producer general distributor, and distributor sales to a governing body of any municipality, county or state, or the federal government, or colleges, universities and schools, both public and private, are specifically exempt from the below cost and other provisions of this section, provided the sales are classified as Class I for the purpose of producer payments, except those sales made on federal reservations and the processing general distributor, producer general distributor or distributor has been licensed by the approving authority to distribute milk products in the market concerned.

5. Other provisions of this chapter notwithstanding, no distributor shall be prohibited from meeting a lawful competitive price below his cost as determined by the provisions of this chapter provided a written statement is filed with the commission giving the following information prior to meeting that price:

a. The name and address of the distributor licensee offering the competitive price he anticipates meeting;

b. The exact price necessary to meet competition;

c. The effective date of the competitive price he anticipates meeting;

d. The effective date of his price necessary to meet the competitor's price; and

e. A statement that he will not at any time sell or offer to sell at a price that is less than the competitor's price.

6. Retail distributors.

a. A retail distributor shall not purchase milk or accept transfer of fluid milk products except from processing general distributors, distributors or producer general distributors licensed in the market.

b. A retail distributor shall not combine the pricing or sale of milk with any other commodity, product, or service regardless of the cost to the distributor of the commodity, product, or service for the purpose of circumventing the below cost provisions of this chapter.

c. A retail distributor shall not advertise, sell or offer to sell, at retail, any packaged Class I product at less than cost. Cost shall be presumed to be the net purchase invoice or transfer price including all applicable discounts on rebates, plus 6.0%, unless a lower amount can be justified to the agency's satisfaction by the licensee. When making a justification, the licensee shall have the burden of proof on all issues and shall employ the accounting procedures set forth in the Fluid Milk Products Cost Manual, dated March 1, 1979, prepared by Case and Company, Inc., for the Virginia State Milk Commission.

d. Other provisions of this chapter notwithstanding, no distributor shall be prohibited from meeting a lawful competitive price for like products below his cost as determined by the provisions of this chapter provided a written statement is filed with the commission giving the following information prior to meeting that price:

(1) The name and address of the distributor licensee offering the competitive price he anticipates meeting;

(2) The exact price necessary to meet competition;

(3) The effective date of the competitive price he anticipates meeting;

(4) The effective date of his price necessary to meet the competitor's price; and

(5) A statement that he will not at any time sell or offer to sell at a price that is less than the competitor's price.

e. A retail distributor may price code dated milk at less than cost on date of code or after to dispose of inventories of milk.

7. Sales promotions, advertisements, and coupon offers involving fluid milk products are allowable provided the following conditions are met:

a. Sales promotions, advertisements, or coupon offers are submitted to the agency in writing for the administrator's approval;

b. The effect of the promotion, advertisement or coupon is not to circumvent the below cost provisions of this chapter;

c. The promotion, advertisement, or coupon offer does not involve any distributor paying for the cost of any part of the promotion, advertisement, or coupon which results in circumvention of below cost prohibition; and

d. The promotion, advertisement, or coupon does not involve any practice or practices which may substantially lessen competition in or substantially increase the cost of milk.

Upon written request, a distributor may donate fluid milk products, if approved by the approving authority or designee, provided that the donated milk is classified as Class I for producer payment purposes.