First TVs, now tortillas: U.S. companies set minimum prices to halt discounting

NEW YORK, Nov 17 (Reuters) – Makers of everything from toys to tortillas are increasingly setting minimum prices on their goods to maintain profits and limit price cuts as retailers such as Walmart Inc ( WMT.N ) and Amazon.com Inc ( AMZN.O ) are assigning ) try to grab online sales from each other.

As a result, shoppers face fewer discounts on everyday purchases at a time when inflation hovers around 8%, and retailers look to unload hundreds of billions of dollars in excess inventory. Read more

For many years, manufacturers have set the lowest price at which retailers can advertise large-scale items such as TVs. They wanted to stop shoppers who scoped out an item on the showroom floor, and then went online to find another retailer advertised it at a lower price, from making the purchase there.

Now, as shoppers cling to the epidemic habit of buying many household basics online, companies like Colgate-Palmolive Co ( CL.N ) have in recent months used minimum advertising price policies on less expensive products like its Optic White Pro. series toothpaste on Amazon, said a person familiar with the matter.

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The Pro Series toothpaste, now advertised on Amazon for about $9.96, is a high-margin product where Colgate wants to protect its profits amid rising costs. Read More As a result, consumers have struggled to find lower advertising prices elsewhere.

Toymaker Hasbro Inc ( HAS.O ) requires retailers to keep any advertising prices above their specified levels of $6.99 to $33.99 on Monopoly, twisters, chutes and ladders and 21 other games and toys, except during the holiday shopping season, according to the company. . Memo seen by Reuters.

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Online shopping for consumer staples, along with Amazon’s cut-throat competition with Walmart Inc ( WMT.N ), has prompted many consumer products makers to price lower-cost products, e-commerce consultants said.

Mr. Tortilla, which makes diet-friendly tortillas sold online by Walmart and Amazon, decided to set the minimum price in order to maintain price levels at e-commerce retailers, said Ron Alcazar, the company’s chief operating officer.

“We’re seeing categories like food and beverage adopt (these floors),” said Jack Gale, account executive at PriceSpider, which has seen a 120% year-over-year increase in the number of brands using its products. Which helps to implement these price floors from 2018.

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A shopping cart is seen at a supermarket as inflation affects consumer prices in Manhattan, New York City, United States, June 10, 2022. REUTERS/Andrew Kelly

Not legal in Europe

While legal in the United States, these policies are illegal in many countries, in most cases throughout Europe.

In some states, including California and Maryland, agreements between retailers and manufacturers that fix prices for sales are also not legal.

Amazon’s share of these pricing floors stems from its promise to offer products at or below competitors like Walmart. This forces brands that sell large quantities of goods on Amazon to set a minimum price and then enforce it. Otherwise, they face less profit.

Amazon’s wholesalers and sellers on its platform could be penalized by poor placement on Amazon.com, among other practices, if the company finds lower prices on goods elsewhere, e-commerce consultants said.

“We had no role in their creation or their continued adoption,” an Amazon spokesperson said when asked about the minimum ad pricing policies. “Like any store, we reserve the right not to highlight uncompetitive prices compared to other major retailers. We always set our prices independently.”

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A lawsuit filed by California against Amazon claims that suppliers must agree to rules set by Amazon that ultimately lead brands to adopt and enforce minimum ad price policies.

US Representative David Cicilline, who is working on proposed antitrust legislation aimed at lowering prices, said, “Amazon routinely abuses its monopoly power to coerce sellers and suppliers, preventing them from offering lower prices elsewhere.”

Amazon responded by saying it doesn’t prevent sellers from offering lower prices elsewhere.

A 2007 United States Supreme Court ruling allowing “within reason” agreements on sales prices between retailers and suppliers helped set the stage for the expansion of these pricing policies.

Reporting by Jessica DiNapoli; Edited by Vanessa O’Connell and Chris Sanders

Our Standards: Thomson Reuters Trust Principles.

Jessica DiNapoli

Thomson Reuters

The New York-based reporter covers American consumer products ranging from paper towels to packaged foods, the companies that make them and how they’re responding to the economy. Previously reported on corporate boards and distressed companies.

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