Slotting Fee Disclosure Bill Introduced in California

A bill introduced in the California State Senate in February would make it unlawful for retailers in the state to charge slotting allowances to manufacturers without disclosing the amount charged to other manufacturers for placement of similar products.Senate Bill 582, introduced by Democrat Liz Figueroa of the Business, Professions and Economic Development Committee, reads as follows:The people of the State of California do enact as follows: SECTION 1. Section 17045.5 is added to the Business and Professions Code, to read:17045.5. It is unlawful for a retailer to assess a supplier or manufacturer either of the following shelf placement charges without disclosing, at the time of offering to provide shelf placement space, in a clear and unequivocal manner, the amount of the charge the retailer assesses other suppliers or manufacturers for placement of similar products on its shelf space: (a) A lump-sum fee, referred to as a "slotting allowance," for placement of the product or commodity on the retailer's shelf space. (b) A fee, referred to as a "pay-to-stay fee," for continued placement of the product or commodity on the retailer's shelf space. Bill Gage, chief consultant for the California Senate's Business, Professions and Economic Development Committee said the bill was introduced as a first step toward understanding the effects of slotting fees. It would also give some legal recourse to smaller vendors who suspect that they've been forced off shelves by potentially collusive agreements between retailers and larger vendors."From our standpoint we just want to assure that it's a fair and open process and it's not anticompetitive," Gage said.The bill is scheduled to be heard by the committee in April, and would have to work its way through several other committees before making it onto the Senate floor.The bill follows an informational hearing on slotting allowances held earlier in the month before the committee. A panel of California business owners, consumer advocates and antitrust experts gave statements at the hearing. Among the panelists was Gregory Gundlach, professor of management, marketing, and logistics at the University of North Florida and senior fellow of the American Antitrust Institute. Gundlach provided an overview of current thinking on the effects of slotting fees and in particular those that might be considered anticompetitive and harmful to consumers. His statement is attached at right. Gundlach said the proposed bill could affect the amount charged for the fees and how they are used by both buyers and sellers."A past lack of information concerning the amounts of the fees in particular arrangements has been identified as a competitive concern by rival sellers and competing buyers. It has also been identified as an internal concern by some retail employees," said Gundlach. "To the extent that this bill results in information regarding the amount of the fees being made available, it could address these concerns."

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