FTC Slotting Report: $900,000, 120 Pages and Nada

Nov 18, 2003
George Anderson

Commentary by George Anderson

Three years, up to $900,000 in taxpayer dollars, and 120 pages in pdf format later, the FTC has issued its report, The Use of Slotting Allowances in the Retail Grocery Industry,
and turned up nothing we didn’t already know. (You may download the report for free at http://www.ftc.gov/os/2003/11/index.htm#14.)

Back in September 2000, the Federal Trade Commission (FTC) was asked by the chairman of the US Senate Committee on Small Business and Entrepreneurship, Christopher Bond (R –
MO), and ranking member John Kerry (D – MA) to conduct a study of the use of slotting allowances to determine if these fees provided an unfair competitive advantage to retailers
or manufacturers doing business in the grocery industry.

Here are some of the report’s key findings.

  • Slotting allowances are only one of a series of payments and/or credits retailers receive from manufacturers to carry products in stores.

  • Some retailers say they do not accept slotting allowances although other monies for promotion, etc. seem to serve essentially the same purpose.

  • Retailers say they need the allowances to offset the costs associated with new product failures and increased labor costs.

  • Retailers and manufacturers disagree on how much is actually paid to the retailer for shelf space.

  • The numbers attributed to slotting allowances suggest retailers use them for more than simply offsetting costs.

  • Retailers do not appear to have a real tight accounting of how much of their revenues come from slotting allowances.

  • The amount of dollars charged for slotting a product varies by retailer, category, delivery method, market area and other factors.

  • In some instances, payment of slotting allowances appears to increase competition while limiting it in others instances.

Moderator’s Comment: Do you have any comments on the FTC report? What are your thoughts on the need (or not) for slotting and similar allowances paid
by manufacturers to retailers?

We think we’ve made our opinion on the FTC report known quite clearly so we’ll skip that aspect of the discussion here.

We always found it interesting to hear the rationale for a company such as Trader Joe’s not taking slotting allowances. It views them as a bribe to keep
products on the shelf that may not belong there.

Funny, but when it comes to other retailers, we know many a manufacturer who would say they have to pay a bribe for shelf space no matter how well their
product performs.
Anderson – Moderator

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