10 P.D. 123 



The law can be divided into two parts; the first regarding the licensing of 

 the dealers and its necessary detail, the second regarding the application of 

 the law when its provisions have been violated. 



Under the first part: the licensing of the dealer. Approximately 600 

 dealers applied for a license in 1937 to operate under the law. Constant 

 check is made through various agencies to compel all dealers who are affected 

 by this law to be licensed. Approximately S620,000 was posted by the dealers 

 to secure the payment of milk to the farmer. Some posted surety bonds, and 

 the rest posted notes secured by cash, savings bank books, government bonds, 

 stocks, life insurance policies and mortgages. Accurate checks must be made 

 constantly to protect the dealer from loss due to error and to protect the 

 farmer if the collateral must be seized. The collateral must be properly 

 assigned to the Commissioner by various legal papers of assignment, consent, 

 withdrawal orders, votes of corporations, stock and bond powers, mortgage 

 recordings, etc. The records and papers were carefully scrutinized during the 

 year and checked back with the State Auditors. The amount of collateral 

 posted by some dealers was increased during the year because the dealers 

 increased their business. Collateral was reduced or eliminated by other dealers 

 because of a decrease in their business or retirement from distributing milk. 

 The type of security posted is considered to be a quick asset in most cases. 

 Some chattel mortgages are still on hand from past years, but no new ones 

 are acceptable to the Commissioner. Some were eliminated in 1937 and the 

 policy for 1938 is to eliminate the balance of these chattel mortgages during 

 the year. 



Regarding the second part of the law: the application of the law when its 

 provisions were violated. The great bulk of the men who distribute milk have 

 been found to be honorable, law abiding citizens, who cooperate with the 

 bonding law. The milk business for producer and for dealers has been a most 

 difficult one for over seven years, and 1937 was no exception. Certain health 

 requirements must be lived up to according to State and local requirements. 

 These requirements add to the cost in a quart of milk. The problem of 

 surplus milk is still an aggravating one. And the problems of competition in 

 distributing milk are peculiar to the industry. Despite the difficulties arising 

 during the year from the suggested causes, the bonding law was respected in 

 a large percentage of cases. When investigations were required, the dealers 

 fell into three classes. The first group involved dealers who were complained 

 of and investigation showed that the dispute was beyond the pale of the 

 bonding law. The second group were dealers who intended to live up to the 

 law, but economic conditions beyond their control compelled them to be violat- 

 ors of this law. The bulk of these cases were worked out to the satisfaction of 

 farmer, dealer, and state. On inspection of some of these dealers' books, it 

 appeared that they were in fact small private charitable institutions, extend- 

 ing credit to citizens of this Commonwealth who were temporarily without 

 employment. The third class included dealers who were inefficient or inex- 

 perienced. In this latter class our greatest difficulties arose. Hearings were 

 held, the conditions of the bonding law defined and frequent checks made to 

 note improvement. Two dealers were forced out of business, the collateral 

 posted with the Commissioner of Agricultural was seized and the proceeds 

 distributed to the farmers, according to the law. Four cases were pending on 

 January 1 for decision on which hearings had been held and checks made. 

 Violations of the bonding law create conditions of unfair competition in the 

 industry and cause unsocial practices of price cutting to meet the competition 

 of dealers who sell at a price regardless of cost, because they do not intend to 

 pay the farmer, or cannot pay the farmer due to their inefficient business 

 practices. 



The policy of education must be continued during the coming year. Co- 

 operation with both producer and distributor of milk will be continued so that 

 the citizens of the State will reap the full advantages available from this 

 wise, farseeing law. 



