First TV, now tortillas: US companies set minimum prices to end discounts

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

As a result, shoppers face the least discount for daily purchases at a time of inflation around 8%, and as retailers look unloaded hundreds of billions of dollars of excess inventory. read more

For years, manufacturers set the lowest prices at which retailers could advertise big-ticket items like TVs. They want to stop shoppers who scoped out an item on the showroom floor, then went online to find it advertised by another retailer at a lower price, than buying it there.

Now, as shoppers continue to adopt pandemic habits of buying more household basics online, companies like Colgate-Palmolive Co (CL.N) In recent months, what is known as the minimum advertised price policy has been used on less expensive products like the Optic White Pro Series toothpaste on Amazon, said a person familiar with the matter.

The Pro Series toothpaste, currently advertised for around $9.96 on Amazon, is a higher-margin product where Colgate wants to protect its profits amid rising costs. read more As a result, consumers have struggled to find a price advertised below anywhere else.

Toymaker Hasbro Inc (HAS.O) require retailers to maintain advertised prices above a specified level of $6.99 to $33.99 on Monopoly, Twister, Chutes & Ladders and 21 other games and toys, except during the holiday shopping season, according to a company memo seen by Reuters.

Reuters Graphics

Online shopping for consumer staples, coupled with cut-throat competition from Amazon and Walmart Inc (WMT.N)It has driven the makers of many consumer products to put price floors on low-cost products, said the e-commerce consultant.

Mr. Tortilla, which makes diet-friendly tortillas sold online by Walmart and Amazon, decided to set a minimum price as it expanded sales, aiming to maintain the price level across e-commerce retailers, said Ron Alcazar, the company’s chief operating officer.

“We’re seeing categories adopt (this floor) like never before, like food and beverage,” said Jack Gale, account executive at PriceSpider, which has seen 120% year-over-year growth in the number of brands using its products. which helped implement these price floors since 2018.

NOT LAWFUL IN EUROPE

While legal in the United States, this policy is illegal in many countries, including all of Europe in most cases.

Agreements dictating selling prices between retailers and manufacturers are also illegal in some states including California and Maryland.

Amazon’s share of this price tag comes from its promise to offer products that are priced as low as, or lower than, rivals like Walmart. This compels brands that sell large volumes of goods on Amazon to set, and then implement, a minimum price. Otherwise, they face shrinking profits.

Wholesalers to Amazon and sellers on its platform can be penalized by bad placement on Amazon.com, among other practices, if the company finds lower prices on other goods, said the e-commerce consultant.

“We have no role in their creation or in their adoption,” an Amazon spokesperson said when asked about the minimum advertised price policy. “Like any store, we reserve the right not to highlight prices that are not competitive compared to other major retailers.

A California lawsuit has been filed against Amazon claiming suppliers must agree to the rules set by Amazon which ultimately led the brand to adopt and implement a minimum advertised price policy.

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

Amazon said in response that it does not prevent sellers from offering lower prices elsewhere.

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

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

Our standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published. Required fields are marked *