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Fresh Market milk ad

Small-government advocates are in a bit of an uproar, about authorities telling us how much we should pay for milk. “Louisiana Milk Police Combat Prices That Are Too Reasonable,” headlines Libertarian magazine Reason.com. “Holy cow!” says Fox News. “Udderly ridiculous,” writes the conservative news site WND.

They’re all reacting to a recent news report that’s not necessarily news to people who live in states where milk prices are regulated. On Friday, the (Baton Rouge) Advocate investigated a customer’s complaint that his local Fresh Market was no longer offering a gallon of milk for $2.99. The paper noted the price was instead $5.69.

The North Carolina-based grocery chain, which operates stores in 21 states, is offering the special $2.99 price every Tuesday in January – but not to everyone. In January 2012, the offer was good everywhere but Pennsylvania. This year, it’s good everywhere but Pennsylvania, California, Virginia and Louisiana. What’s behind the longer list of exceptions? This year, honoring that price would run afoul of several states’ dairy regulations.

“For the past year and a half, The Fresh Market has run special $2.99 deals on our private label rBST-free milk as part of our $2.99 Tuesday promotions,” Fresh Market spokesperson Drewry Sackett said in a statement provided to Coupons in the News. “Because milk is a commodity product with regulated costs that are subject to change, at the current cost, due to Louisiana state law, we are unable to honor the $2.99 Tuesday deal for TFM milk.”

Louisiana State Agriculture and Forestry Commissioner Mike Strain tells the Advocate that his office sent an auditor to a Mandeville, Louisiana Fresh Market after an unidentified complainant alerted his office to the deal. State regulations fix a “price floor” for milk, and $2.99 would have been below it, for the Fresh Market. The chain was forced to pull the deal in Louisiana, as well as in California and Virginia.

It’s been discussed here before (read: “Milk Prices Won’t Double – But Why Are They So High Anyway?”), but in a nutshell, several states ban retailers from selling milk below cost, which dairy farmers argue would impact their livelihood.

If the notion of regulating grocery prices strikes you as, well, un-American, consider the alternative. Australian grocery stores are two years into a “milk price war” that farmers argue has put hundreds of dairy farms out of business. In Britain, as grocery stores continued dropping prices last year, farmers held protests across the country until retailers agreed to end the heavy discounting.

Besides, Strain explained to KATC-TV, “if you sell these products below cost, either one, you’re marking up other products to make up for that loss. Or two, by unfair business competition you can drive your competitors out of business.” With no competition, he argues, a store could then increase the price of milk.

Got it? So it seems the regulations exist to keep milk prices low, not high. Customer Kenneth Daigle, who first brought the issue to the Advocate’s attention, isn’t buying it. “Should we do the same thing with bread? Should we do the same thing with soft drinks?” he asked. He has no problem regulating the wholesale price paid to farmers, but “if retailers want to take a loss, so be it.”

To make things even more confusing, the “price floor” doesn’t represent a set price – it’s based on a percentage of what the retailer paid for it. That explains why Winn-Dixie was able to sell milk for $3 in Louisiana last week, while Fresh Market couldn’t sell it for $2.99. If Winn-Dixie (or Walmart, or ALDI) can acquire it for less than the Fresh Market does, it can sell it for less than the Fresh Market.

Daigle is vowing to fight the law, but it’s been upheld before. In the meantime, the Fresh Market is offering a dozen organic eggs for $2.99, as a substitute for those who can’t get the milk deal. But many customers are already upset. The Fresh Market announced the Tuesday sale prices on its Facebook page earlier this month, but didn’t mention the state restrictions until a customer asked about it, and left out that small detail in further postings about the promotion as well. “Bait and Switch!” complained one customer. “I went to buy milk, and at my store it was eggs on the sign instead.”

“Because the cost of milk fluctuates,” the Fresh Market’s Sackett added, “it is possible that we will be able to offer the $2.99 deal on milk again in the future.” Whether Daigle and other upset customers will be buying their milk elsewhere by then, is another question.

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