California Senate to Hold Hearing on Slotting Fees

SACRAMENTO, Calif. -- The California Senate Committee on Business and Professions, chaired by Sen. Liz Figueroa (D-Alameda and Santa Clara counties), will hold an informational hearing today on slotting fees in the grocery industry. The hearing is scheduled from 10 a.m. to noon in Room 112 of the State Capitol.

Nationally grocery suppliers pay more than $9 billion per year in shelf fees for new products, and "untold billions" to keep their products on store shelves, according to the United Food and Commercial Workers Bay Area Coalition, which cited an FTC-conducted study completed in 2003.

In an interview with Progressive Grocer, Bay Area Coalition spokeswoman Nicole Daro said that her organization, which represents eight UFCW locals, was concerned about slotting agreements that included services as well as fees, an issue for supermarket workers who might be required to stock shelves as a condition of such an agreement. She added that the coalition was interested in seeing "more transparency" in slotting agreements, such as requiring that they always be in writing, to make it easier for the attorney general to determine whether any agreements are "harmful to competition." Daro added that the coalition wanted to preserve the unique neighborhood character of each local grocery store by preventing those slotting agreements that would rent out whole sections to suppliers and thus lead to an "empty shell" of a supermarket.

Others opposed to slotting fees contend that they block smaller suppliers from selling their products in grocery stores, thus stifling competition. Supporters of the fees say they help bring new products into markets. In addition, "a ban or restriction on slotting allowances is unnecessary and would harm consumers by limiting a legitimate form of competition," California Grocers Association (CGA) president Peter Larkin told PG.

A panel of California business owners, as well as consumer advocates and antitrust experts, are slated to testify at the hearing. Speakers include Gregory Gundlach, a professor of management, marketing, and logistics at the University of North Florida in Jacksonville who has written extensively about slotting fees; Jeffery R. Gilles, a partner at Lombardo & Gilles, a law firm representing many agribusiness clients; Esai Alday, an Albertsons employee who conducted his own research on slotting allowances by speaking to suppliers and vendors; Pamela Mills, owner of Salinas, Calif.-based El Aguila Foods, a tortilla manufacturer and distributor; and Christopher J. MacAvoy, a partner with Howrey, Simon, Arnold & White in Washington, D.C. and outside antitrust counsel to the Food Marketing Institute, testifying on behalf of CGA. Additionally, a background paper on slotting fees will be distributed at the hearing.
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