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Washington Apple Commission Falls

By Greg Brown Associate Editor


After 66 years of marketing the state’s top crop, the Washington Apple Commission (WAC) is shutting down. The commission decided to fold, following its legal defeat over the constitutionality of its marketing and promotion program. U.S. District Judge Edward Shea ruled against the commission, based on a 2001 U.S. Supreme Court opinion that said forcing growers to pay for promotions that benefited their competitors infringed upon their constitutional protection of free speech. The judge released his decision on March 31. The commission issued a press release on April 10, saying its board had decided to wind down operations immediately, rather than spend more money defending the case. The board’s decision meant bad news immediately for 33 of the commission’s 48 employees who were dismissed. The commission also canceled the contracts of 15 overseas representatives. Approximately 15 employees were reportedly going to be kept on to wrap up business, but that number has continued to be cut as various programs cease operation. There continues to be speculation on how the legal defeat will affect the apple industry. In its release, the commission said plans will be developed to protect its logo and intellectual property. The commission will also reportedly continue to fund commitments to the Northwest Horticultural Council, the Northwest Fruit Exporters and the Washington State Horticultural Association through Aug. 31. That funding will be prorated through July 2004. The U.S. Apple Association (USApple) would be fully funded through Aug. 31 and funded at 25% from Sept. 1 through July 2004. The commission ceased collecting mandatory assessments on March 31, the day of the judge’s ruling. The release did not report how much of its financial assets would go toward repayment of assessments to growers for the past year and a half since the lawsuit was filed. The commission will pay for no more marketing activities and has canceled all summer and future promotions. The original lawsuit was filed in 2001 by the apple commission to clarify its authority to collect assessments. The commission agreed to pay the legal bills of two growers who sued in the class-action lawsuit, hoping to affirm its right to collect the fees. The total legal costs of the effort have been estimated at well over $500,000. Intervening in the lawsuit were a handful of organic growers and three Yakima Valley warehouses: Washington Fruit and Produce Co., Borton & Sons and Evans Fruit Co. The defendants were seeking nearly $50 million in refunds for past assessments. According to reports, grower assessments typically represent more than 90% of the commission’s budget. The mandatory fee was 25 cents per 42-pound box of apples, or about $21.5 million for the 2002-2003 crop. Commission President Welcome Sauer did not return phone calls seeking comment. The commission reportedly prosecuted the case hoping to gain a quick decision in their favor, and bar future challenges. While the decision may not affect some growers today, in the long run growers would begin to feel an impact, according to Larry Olsen, an apple grower from Washington state. “If something isn’t put together that includes funding for important groups and programs, you can be sure it will dramatically impact growers,” he said. Olsen currently serves on the USApple Board of Directors as vice chairman, was on the Board of Directors of Tree Top and is a member of the Washington Horticultural Association. Olsen retired from the Board of Directors of the Washington Apple Commission this in 2002, after serving as its chairman. “There are ongoing meetings, primarily between the big shippers that are concerned with putting a collective marketing order together to be able to continue the trade promotion with our retail partners,” said Olsen. “It is far too early, with an industry as divers as ours including as many as 3,000 growers and dozens of shippers to know what will come of this. It is a daunting challenge and it will take some time.” One bright spot is that the WAC board had the foresight to fund key groups that the industry will need throught the next few months, Olsen said. Ed Kershaw agrees that the outgoing board was wise to do as much as it could to fund industry partners. Kershaw is a former member of the WAC board for 10 years, and was chairman of the board in 1999. He said the ruling and subsequent decision to shutter the commission continues to raise questions for fruit growers and shippers in Washington. The judge’s decision does not speak well to the future of groups funded by mandatory assessments, said Kershaw. “I think every single one of them is in jeopardy,” he said. “As the industry continues to consolidate and organizations grow, their willingness to render the funds that they do not control will continue to be somewhat challenged.” Kershaw said that the judge’s decision sets a precedent from a legal standpoint. “Our cheese has moved and it has moved a long ways away,” he said. “What we do know is that the commission’s assets will be sold and somehow those monies will be spent appropriately with continuing the program or whatever the judge deems worthy when he makes another decision in a week or two.” There is also a lot of concern about how Washington will deal with the government’s Market Access Program (MAP) funds, said Kershaw. “MAP funding has been a part of our export promotion through the apple commission for years. If the commission is not going to be the administrator of the export program, who is?” Kershaw is the president of Domex Marketing Company which is an umbrella company for Kershaw Fruit Company. “Obviously there were people who were unhappy with the commission, “said Kershaw. “The commission lost some favor because some people were tired of generic advertising, tired of funding advertising and promotion that they could not control. “ It isn’t that those feeling were directed against anybody or anything, but that the good old American spirit of free enterprise was at work.” Questions remain about how the industry will fund its infrastructure. Money needs to be invested in production and marketing research, Kershaw said. “There is just a lot of things that all of us out here are not willing to let slip-slide away. Because they are critical to our ability to compete in the global market today,” he said. Despite the loss of the commission, Kershaw said he remains committed to collective promotion efforts. “We are all just a bunch of pygmies. None of us are very big and powerful, but collectively we can do a lot,” he said.