Slotting Fees:

Effort to Study the Use of These Payments in the Grocery Industry

T-RCED-00-295: Published: Sep 14, 2000. Publicly Released: Sep 14, 2000.

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Pursuant to a congressional request, GAO discussed its effort to study the use of slotting fees in the grocery industry, focusing on GAO's: (1) planned approach and methodology; and (2) reasons for not being able to perform the study.

GAO noted that: (1) the overall plan was to conduct case studies of slotting fee practices in the industry for various supermarket items at several food manufacturing companies and grocery store chains; (2) the industry associations were to work with GAO to identify companies willing to speak with and provide documentation to GAO; (3) companies are not required to provide GAO access to their internal documents or discuss these trade practices; (4) once the companies were identified, GAO planned to visit them to discuss the extent of their use of slotting fees; (5) GAO also planned to obtain documentation on and analyze the: (a) dollar amounts of slotting fees on several food categories; (b) accounting practices for these fees; and (c) related company policies and procedures; (6) after completing the audit work, GAO planned to issue a report to the Senate Committee on Small Business describing what had been learned about slotting fees; (7) GAO's methodology was designed to produce an informational report that would not contain any conclusions or recommendations; (8) GAO did not design the study to address the controversial issues surrounding slotting fees, such as the impact of slotting fees on competition, small businesses, and consumers; (9) trade associations told GAO that they do not compile detailed information about slotting fees because of its sensitive nature and GAO would have to obtain slotting fee information from individual manufacturing and retail companies; (10) GAO explained that individual companies have no obligation to provide access to their records; (11) thus, GAO would have to rely solely on voluntary cooperation; (12) at those initial meetings, each association said it would inquire among its members and put GAO in contact with those that would be willing to work with it; (13) over a period of several months, GAO sought from Food Marketing Institute (FMI) grocery companies that would be willing to provide detailed information on slotting fees; (14) FMI stated that several of the members they contacted did not want to speak with GAO; (15) however, the association did identify two mid-size grocery chains that met with GAO and discussed slotting fees in general terms; (16) they explained that there are real costs and risks associated with putting new products on their shelves and thus charging slotting fees is a necessary business practice; and (17) however, neither provided documentation nor specific information about the use of and accounting for slotting fees in their businesses.

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