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destructive competition among producers. To maintain income, producers would increase production even more. In the 1920's, equilibrium was restored to the market by the formation of producer "cooperatives" which pooled their milk supplies and refused to deal with handlers except on a collective basis. However, the drop in commodity prices during the Depression destroyed the market equilibrium attained during the 1920's era of relative stability.

In 1933, in an effort to restore order to the various agricultural markets and boost the purchasing power of farmers, Congress decided to take the matter out of the hands of the free market. To that end, Congress enacted the licensing provisions of the Agricultural Adjustment Act, which resulted in the adoption of "base-rating plans not unlike the private arrangements that obtained in the 1920's. . . ." Zuber v. Allen, 396 U.S. 168, 175, 90 S.Ct. 314, 318, 24 L.Ed.2d 345 (1969). However, in response to judicial decisions disapproving congressional economic initiatives which enacted "broad delegation of power. . . . Congress moved swiftly to eliminate the defect of overbroad delegation and to shore up the void in the agricultural marketing provisions." Id. Accordingly, in 1935, Congress, by amendment to the Agricultural Adjustment Act, adopted the AMAA, which is essentially the current agricultural marketing agreement structure.

Under the AMAA, the Secretary is given the authority, and the responsibility, to formulate and administer federal milk marketing regulations in various regions throughout the United States. See 7 U.S.C. § 608c(5). Each of these regions is referred to as a "marketing area" and the regulations concerning the marketing of milk in the area are commonly referred to as "orders." There are presently forty-four such milk marketing orders being administered by the Secretary throughout the United States. These are described at 7 C.F.R. Parts 1001-1139 (1994), and these marketing areas encompass virtually all major metropolitan areas in the United States.

Although the system established by the AMAA to regulate the sale of milk is of labyrinthine complexity, the first step is relatively simple: Handlers purchase milk from producers. However, the means by which this transaction is handled are quite complex due to the unique market for milk products. Milk which is alike in all other respects varies in price according to the use to which the milk is put. See 7 C.F.R. § 1040.40(1994). Some milk is distributed in fluid form. This milk, called Class I, commands the highest price. 7 C.F.R. §1040.50(a)(1994). Class II milk is milk that is made into "soft products" such as yogurt and cottage cheese. It is priced lower than Class I milk. 7 C.F.R. § 1040.50(b)(1994). Other products with a longer shelf life (such as butter, cheese, and powered milk) are considered to be Class III; the milk used to

produce the products commands the lowest price 7 C.F.R. § 1040.50(c)(1994). The Class I price only is further adjusted based on the location of the plant within the marketing area. See 7 C.F.R. § 1040.52(a) (1994).

Through a device known as the producer settlement fund, the current system ensures that while producers receive a uniform price, handlers pay different rates depending on the ultimate end to which the milk is put. Handlers pay (directly to the producers) a minimum price that is set by regulation and computed by a complex formula that is basically an "average" price for milk that is used for all three classes. 7 C.F.R. § 1040.61 (1994). Because the price is an average price, some handlers end up paying too much and some end up paying too little. The difference between what they have paid and what the milk they have purchased is worth is made up through the producer settlement fund. 7 C.F.R. § 1040.70 (1994). Handlers who have bought milk to be used for Class I purposes (and who have thus paid too little) pay money in to the fund, 7 C.F.R. § 1040.71 (1994), while those who have bought milk for Class III purposes receive payments from the fund. 7 C.F.R. § 1040.72 (1994). Because all producers receive the same uniform blend price, competition among farmers to sell as much of their milk as possible for fluid use is eliminated. Therefore, the theory goes, the producer delivering primarily into the Class I plant will, over time, receive more money than he would have had he priced his milk in competition with milk otherwise going into the Class III plant. The Class I producer thus receives value from other producers' deliveries to the Class III plant and, in recognition of that under the Order, he pools his Class I receipts with those of Class II and III, and all producers receive the uniform blended price. 7 U.S.C. § 608c(5)(C); 7 C.F.R. § 1040.73 (1994).

The minimum blend price paid to the producers is uniform in the sense that it does not vary based on the use to which the milk is put, but there are other factors that affect the amount of money that handlers pay and producers receive for milk. At issue in this case are the changes to minimum price wrought by "location adjustments." Location adjustments are adjustments to the base minimum price of milk, which are used as economic incentives to encourage the movement of producer milk from rural production areas to plants in population centers, and to align prices among neighboring markets. See Walmsley v. Block, 719 F.2d 1414, 1418-19 (8th Cir. 1983). This encouragement in Order 40 is provided by a negative adjustment that "lowers" minimum prices for producer milk that is delivered to plants in rural locations, and a positive adjustment that "increases" minimum prices for milk that is

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delivered from rural production areas to plants in urban areas.1 Location adjustments honor the fact that a handler who receives milk near areas of high consumption has a more valuable commodity than a handler who receives milk in a rural area where it is produced cheaply, but who must undertake the burden of transporting the milk to consumer markets. See Schepps Dairy, Inc. v. Bergland, 628 F.2d 11, 15-16 (D.C. Cir. 1979). Although handlers pay adjustments only on Class I milk, the producers receive adjustments on all of their milk because producers cannot be paid based on their use of milk. See 7 C.F.R. § 1040.75 (1994).

The free market also affects prices to a small extent. Although the minimum price is set by regulation, there is no maximum price. In the winter, when milk is relatively scarce, handlers can negotiate premiums called "overorder" price for the sale of milk. Market forces can, therefore, raise the price of milk but cannot lower it. There are other factors which affect the ultimate milk prices, but they are not involved in this case.

II.

Before issuing, or amending, a milk marketing order, the Secretary must conduct a formal on-the-record rulemaking proceeding. The public must be notified of these proceedings and provided an opportunity for public hearing and comment. 7 U.S.C. § 608c(3). In addition, before a milk marketing order, or amendment, may become effective, it must be approved by the handlers of not less than 50% of the volume of milk covered by the proposed order or amendment and also must be approved by at least two-thirds of the affected dairy producers in the region. 7 U.S.C. § 608c(8).

A. The Rulemaking Proceedings

Prior to September 1989, the Order 40 location adjustments divided the Michigan lower peninsula into seven different zones with price adjustments calculated according to the distance of the zone from the major market

'For example, as explained infra, prior to the amendments to Order 40 at issue in this case, plaintiff Lansing Dairy was located in an area with a -5 cents location adjustment. As a result, Lansing Dairy paid five cents per hundredweight less than the minimum price to producers for the milk that it purchased. The amendments to Order 40 placed Lansing Dairy in a 0 cents adjustment zone; therefore, Lansing Dairy must now pay 5 cents more per hundredweight for its milk than it did prior to the amendments to Order 40.

(Detroit-Flint-Bay City). The price adjustments in these zones (calculated in cents per hundredweight) were 0 cents, -5 cents, -7 cents, -9 cents, -11 cents, 14 cents, and -17 cents. In 1988, intervenor defendant-apellee, Producers Equalization Committee (PEC), presented two proposals for amendments to Order 40 to the Secretary. See 53 Fed. Reg. 15,851 (1988).

The PEC proposed an amendment to the location adjustments that did away with the old zoning scheme and substituted three zones with adjustments of 0 cents, -5cents, and -7 cents. See 7 C.F.R. § 1040.52(a)(1) (1994). The effect of this amendment was to increase the number of counties that were in the zone that had a 0 cent adjustment. In addition, by eliminating the zones with the greatest negative adjustments, the amendment had the general effect of increasing the amount which producers received for milk produced throughout the Southern Michigan milk marketing area, the area in which the member producers of the PEC are located.

Further, the PEC proposed changes to prices outside of the lower peninsula of Michigan. The mileage rate sets the price adjustments for producers located outside of the Southern Michigan region. This adjustment is made by increasing the mileage rate, which has the concomitant effect of lowering the minimum price received by producers outside of the marketing area.2 The regulation is based on the shortest highway distance between the plant located outside the region and a plant within the region determined by the Secretary. 7 C.F.R. § 1040.52(a)(2) (1994). The applicable adjustment rate is based on cents per hundredweight per ten miles. Under the old regulations, the fixed amount was 1 cent; under the PEC's proposed regulation, adopted by the Secretary, the fixed amount is 2.25 cents.

The rulemaking proceeded in an apparently normal fashion, and no challenge is made to the technical aspects of those proceedings. The final decision was issued in June 1989. See 54 Fed. Reg. 26,768 (1989). The net effect of the rulemaking proceeding was the almost in toto adoption of the PEC's proposed amendments to Order 40.

B. The Handlers' Action

On August 22, 1989, three of the handlers affected by the amendments to

2For example, the producer plaintiffs in this action claim that the amendment to the mileage rate adjustment reduced the price paid to producers by an additional 13 to 23 cents per hundredweight.

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the location adjustments in Order 40 initiated an action in the United States District Court for the Western District of Michigan, invoking the jurisdiction of the district court pursuant to 7 U.S.C. 608c(15)(B) and 28 U.S.C. § 1331, and seeking judicial review of the final decision of the Secretary of Agriculture rendered pursuant to 7 U.S.C. § 608c(15)(A). Thereafter, on September 15, 1989, a similar action was initiated in the same court by a group of producers from the area affected by the amendments.

These actions were consolidated; however, the district court dismissed each action. The handlers' action was dismissed on the ground that, under Block v. Community Nutrition Institute, 467 U.S. 340, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984), and United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290 (1946), a handler must "exhaust his available administrative remedies before seeking judicial review of a marketing order." Dismissal of the handlers' action was not appealed; rather, the handlers initiated a proceeding for administrative review, pursuant to 7 U.S.C. § 608c(15)(A). Thereafter, on July 12, 1990, an Administrative Law Judge (ALJ) issued an Initial Decision and Order declaring the Secretary's "action in amending 7 C.F.R. § 1040.52(a)(1) and (2). . . was not in accordance with law."

Pursuant to 7 C.F.R. § 900.65-71 (1994), the Secretary appealed the adverse determination of the ALJ to the Judicial Officer. On December 12, 1991, the Judicial Officer issued his Decision and Order, reversing the ALJ's decision, and rejecting all challenges to the promulgation of the location adjustment amendments and mileage rate amendments. See In re Lansing Dairy Inc., 50 Agric. Dec. 1453 (1991). The Judicial Officer held that the amendments had been properly promulgated by the Secretary in accordance with § 608c(5), that there was no need to consider § 608c(18) economic factors, and that the amendments were therefore valid.

On December 23, 1991, handlers initiated their part of the present action, pursuant to 7 U.S.C. § 608c(15)(B). Plaintiff handlers present action seeks judicial review of the Secretary's final administrative order, issued by the Judicial Officer, which upheld the challenged location adjustment amendments. Handlers also challenge the underlying rulemaking held pursuant to 7 U.S.C. §§ 608c(3) and (4).

C. The Producers' Action

Plaintiffs below who are producers of milk invoked the jurisdiction of the district court pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 70106, and 28 U.S.C. §§ 1331 and 1337, seeking review of that section of the