The New York Attorney General’s Office brought a suit against New Jersey officials that challenged the constitutionality of the New Jersey Milk Price Control Act (N.J.S.A. § 4:12 A-1, et seq.). Among the statutory purposes of the act is protecting the New Jersey dairy industry from price competition from other states. This purpose has been confirmed by the New Jersey Supreme Court.
New York also challenged the constitutionality of a regulation promulgated under the New Jersey Milk Price Control Act, N. J. A. C. § 2:52-6.1, et seq., ?Sales Below Cost: Dealer.? The regulation prohibits the sale to or purchase of milk by a retailer at less than total cost. Cost was defined to include all overhead expenditures and is significantly higher than marginal cost pricing. Pricing below average variable cost is evidence of predatory and anti-competitive pricing but this is not what the New Jersey regulation prohibited. New Jersey prohibited marginal cost pricing which is commonplace and serves as evidence of a competitive market. As a consequence of the lawsuit, the regulation was repealed in 1990.