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

First TVs, 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 products to maintain profits and limit price cuts as retailers like Walmart Inc (WMT. N) and Inc (AMZN.O) are trying to corner online sales.

As a result, shoppers are enjoying fewer discounts on everyday purchases at a time when inflation is around 8% and retailers are looking to offload hundreds of billions of dollars in excess inventory. Read more

For many years, manufacturers set the lowest price at which retailers could advertise certain big-ticket items like televisions. They wanted to prevent shoppers who searched for an item in the showroom and 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 goods online, companies such as Colgate-Palmolive Co (CL.N) have in recent months used so-called Advertised minimum pricing policies on cheaper products like its Optic White Pro Toothpaste series on Amazon, a person familiar with the matter said.

The Pro Series toothpaste, now advertised for around $9.96 on Amazon, is a higher-margin product where Colgate wants to protect its profits from soaring costs. Read more As a result, consumers have struggled to find a lower advertised price elsewhere.

Toymaker Hasbro Inc (HAS.O) requires retailers to keep all 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.

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Online shopping for consumer staples, coupled with Amazon’s fierce competition with Walmart Inc (WMT.N), has caused manufacturers of many consumer products to set price floors on low-cost products, said e-commerce consultants.

Mr Tortilla, who makes diet tortillas sold online by Walmart and Amazon, decided to set a minimum price as he increased his sales, in an effort to keep prices at e-commerce retailer levels, said Ron Alcazar, the company’s chief operating officer.

“We’re seeing categories adopting (these floors) that have never been adopted, such as food and beverages,” said Jack Gale, account manager at PriceSpider, which saw 120% year-on-year growth. the other from the number of brands using its products. who have been helping to enforce these floor prices since 2018.


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

Agreements dictating the selling price between the retailer and the manufacturer are also not legal in some states, including California and Maryland.

Amazon’s share of these price floors stems from its commitment to offering products at prices as low or lower than competitors like Walmart. This forces brands that sell huge volumes of merchandise on Amazon to set, and then enforce, a minimum price. Otherwise, they face declining profits.

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

“We have no role in their creation or continued adoption,” the Amazon spokesperson said when asked about the announced minimum pricing policies. “Like any store, we reserve the right not to put forward prices that are not competitive with other major retailers. We always set our prices independently.”

A lawsuit California has filed against Amazon claims that vendors 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 an antitrust bill aimed at lowering prices, said: “Amazon routinely abuses its monopoly power to coerce sellers and suppliers, preventing them from offering cheaper prices. somewhere else”.

Amazon replied that this does not prevent sellers from offering lower prices elsewhere.

A 2007 U.S. Supreme Court ruling allowing “within reason” agreements on selling prices between retailers and suppliers helped set the stage for the expansion of such 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 journalist covering American consumer products ranging from paper towels to packaged foods, the companies that make them, and how they are responding to the economy. Previously reported on corporate boards and distressed companies.

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