FTC Releases Staff Report on Slotting Allowances and Other Grocery Marketing Practices

The Federal Trade Commission today issued a staff report discussing information gathered and antitrust issues addressed at its public workshop on slotting allowances which was held last year. Among the recommendations contained in the "Report on the Federal Trade Commission Workshop on Slotting Allowances and Other Marketing Practices in the Grocery Industry," the staff recommended that the agency gather basic data on current industry practices and continue to pursue anticompetitive conduct on a case-by-case basis.

Slotting allowances are lump-sum, up-front payments from a manufacturer or producer to a retailer to have a new product carried by the retailer and placed on its shelf. Because of the substantial debate over the competitive impact of slotting allowances and related shelf allocation practices, such as pay-to-stay fees applicable to existing products, the FTC conducted a public workshop on these issues. On May 31 and June 1, 2000, approximately 40 manufacturers, retailers, antitrust practitioners and academics participated as panelists in the workshop. The Commission also received several written comments and a petition to issue guidelines.

Commenting on the report, Chairman Robert Pitofsky stated, "Slotting allowances pose difficult issues: in some market settings they may make great business sense, but in other settings they could raise competitive problems. This report is one step in an ongoing process to improve the agency's understanding of these practices and to identify the factors that make competitive concerns more or less likely."

The staff report collects the views articulated by the workshop participants; summarizes the claimed benefits and harms of the marketing activities; and identifies a theory of anticompetitive exclusion that potentially could apply in the context of payments for shelf access. The report also addresses topics raised by supermarkets' reliance on suppliers designated as "category captains" for varying degrees of advice and assistance in managing particular departments of their stores. In addition, it provides a brief discussion of retailer market power, describing the nature of potential concerns and the facts developed at the workshop.

The FTC staff recommends that the agency pursue empirical studies on topics that will contribute significantly to future enforcement actions or business guidance, beginning with gathering basic data on current grocery marketing practices. The staff recommended that the agency refrain from issuing slotting allowance guidelines at the present time. In terms of future enforcement, the staff recommends that the agency:

• carefully review exclusive-dealing contracts to determine whether they threaten a harm to competition;
• examine slotting allowances and pay-to-stay fees with particular attention to circumstances that could give rise to exclusionary effects;
• revisit price discrimination issues in the context of appropriate investigations;
• focus any inquiries into category captains primarily on situations that may involve anticompetitive exclusion or tacit or explicit collusion; and
• ensure that supermarket merger policy continues to take account of the potential exercise of retail market power in an anticompetitive manner against suppliers.

The Commission vote to issue the staff report was 5-0.

Copies of the "Report on the Federal Trade Commission Workshop on Slotting Allowances and Other Marketing Practices in the Grocery Industry" are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at https://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC Matter No. P001201)