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 gouging as retailers such as Walmart Inc ( WMT.N ) and Amazon.com Inc ( AMZN .O) ) trying to grab sales from each other online.

As a result, shoppers are getting fewer discounts on everyday purchases at a time when inflation is around 8%, and as retailers try to offload hundreds of billions of dollars worth of excess inventory. read more

For many years, manufacturers set the lowest price at which retailers could advertise certain big-ticket items such as TVs. They wanted to stop shoppers who researched an item on the showroom floor, then went online to find it advertised by another retailer at a lower price, from buying it there.

Now, as shoppers stick to the pandemic habit of buying more household basics online, companies such as Colgate-Palmolive Co ( CL.N ) have in recent months introduced what are known as minimum advertised price policies on cheaper products such as its Optic White Pro use Reeks toothpaste on Amazon, a person familiar with the matter said.

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

Toymaker Hasbro Inc ( HAS.O ) requires retailers to keep any advertised prices above its specified levels ranging from $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 graphic

Online shopping for consumer goods, coupled with Amazon’s cutthroat competition with Walmart Inc ( WMT.N ), has pushed makers of many consumer products to put price floors on low-cost products, e-commerce consultants said.

Mr. Tortilla, which makes diet-friendly tortillas sold online through Walmart and Amazon, has decided to set a minimum price as it increases sales, with the goal of keeping prices consistent across e-commerce retailers, said Ron Alcazar, the company’s ‘s chief operating officer, said.

“We’re seeing categories adopt (these floors) that never had before, like food and beverage,” said Jack Gale, an account manager at PriceSpider, which has seen 120% year-over-year growth in the number of brands it carries. used products that help enforce these price floors since 2018.

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

NOT LEGAL IN EUROPE

Although legal in the United States, these policies are illegal in many countries, including across Europe in most cases.

Agreements that set the sale price between retailer and manufacturer are also not legal in some states, including California and Maryland.

Amazon’s stake in these price floors stems from its promise to offer products as low as, or lower than, competitors like Walmart. It forces brands that sell large volumes of goods on Amazon to set and then enforce a minimum price. Otherwise, they face shrinking profits.

Amazon 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 the goods elsewhere, the e-commerce consultants said.

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

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

In response, Amazon said it does not prevent sellers from offering lower prices elsewhere.

A 2007 United States Supreme Court decision allowing “within reason” agreements on purchase 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: The Thomson Reuters Trust Principles.

Jessica DiNapoli

Thomson Reuters

New York-based reporter covering US consumer products ranging from paper towels to packaged food, the companies that make them and how they’re responding to the economy. Previously reported on corporate boards and companies in distress.

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