Bond says slotting fees a threat to competition

In a Sept. 14 meeting of the Senate Committee on Small Business, Sen. Kit Bond said the practice of slotting fees, or fees paid by manufacturers to ensure placement of their products on store shelves, in the grocery, manufac-turing and retailing industries has become "a brutal game of high-stakes poker for small manufacturers that threatens competition, jobs and likely drives up the cost of putting food on the table for millions of American families," according to a Senate press release.

The Sept. 14 meeting was the first hearing into the widespread practice estimated to amount to $9 billion annually that changes hands in private, unwritten deals between grocery retailers and consumer goods manufacturers. Bond is chairman of the Senate Committee on Small Business.

"Manufacturers reportedly are spending billions of dollars for the privilege of offering their products to the consumer and, as some small manufacturers have told us, the ability to exclude competitors from store shelves," Bond said. "Any way you cut it, the practical impact is stacking the deck in favor of manufacturers with large market shares and deep pockets who can afford to pay to play."

Bond said he is particularly concerned about the impact slotting has had on driving established, independent manufacturers from stores with a large consumer base, such as national grocery chains, as well as allegations that some large manufacturers are using slotting fees to retaliate against small competitors attempting to establish a consumer following.

The practice of slotting is defended by many retailers as a necessary step to help compensate for narrow profit margins in the highly competitive consumer goods market, and to help retailers allocate lucrative shelf space only to products that have undergone extensive market research.

Many slotting deals also require the manufacturer to commit to costly advertising campaigns to raise consumer recognition of new products before they arrive on grocers' shelves.

Bond said the Senate Committee on Small Business is examining several proposals to combat slotting practices that harm small manufacturers. The committee will also request that the Federal Trade Commission more aggressively investigate and prosecute unlawful slotting practices and anticompetitive tactics under its jurisdiction.