Slotting Fees Revisited
March 4, 2005
Michael Brill Newman - San Francisco
The California Senate Committee on Business and Professions in mid-February
held an informational hearing on slotting fees and allowances provided by
suppliers to retailers. The Committee is considering restrictive legislation
governing slotting fees. Slotting fees are generally legal for businesses except
for the alcohol beverage industry. Testimony was given on the alleged abuses of
such fees as well as exclusivity agreements and “pay-to-stay” and other forms of
access fees. The debate centers on the benefits retailers and consumers can
receive by having suppliers share in the costs of getting new products on the
shelves versus the anti-competitive effect of such fees. The U.S. Senate and the
FTC have held similar hearings in the past without result.
Although it does not specifically address slotting fees, California alcohol
beverage law generally prohibits suppliers from furnishing anything of value to
retailers. The ABC Department has construed a slotting fee to be a “thing of
value.” Similarly, federal alcohol beverage regulations administered by TTB
expressly identify slotting fees as a “red light” trade practice and prohibits
them because they place the retailer’s independence at risk.
When TTB’s predecessor, ATF, proposed amendments to liberalize its trade
practice regulations in the mid-1990’s, slotting fees far and away engendered
the greatest amount of debate among the industry tiers, as many retailers sought
to keep slotting fees off of the “red light” list. Attempting to legislate
restrictions on slotting fees as under consideration by the California Senate is
sure to foster another round of debate on this controversial business practice.
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