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

NEW YORK, Nov 17 (Reuters) – Manufacturers of everything from toys to tortillas are increasingly setting floor prices on their goods to maintain profits and limit price drops as retailers like Walmart Inc (WMT.N) and Amazon.com Inc (AMZN.O) trying to make sales from each other online.

As a result, buyers stand out fewer discounts for everyday purchases at a time when inflation is hovering around 8% and retailers are trying to shed hundreds of billions of dollars in excess inventory. Continue reading

For many years, manufacturers set the lowest price at which retailers could advertise certain high-profile items, such as televisions. They wanted to prevent shoppers who chose an item in the showroom and then went online to find it at a lower price at another retailer from buying it there.

Now, as shoppers stick to the pandemic habit of buying more household items online, companies like Colgate-Palmolive Co (CL.N) has applied so-called reserve price guidelines to less expensive products like Optic White Pro-series toothpaste on Amazon in recent months, a person familiar with the matter said.

The Pro-series toothpaste, now advertised on Amazon for about $9.96, is a higher-margin product that Colgate is looking to protect its profits as costs rise. Read more As a result, consumers are struggling to find a lower advertised price elsewhere.

Toy manufacturer Hasbro Inc (HAT O) According to a company memo seen by Reuters, retailers must keep all advertised prices above advertised levels of $6.99 to $33.99 for Monopoly, Twister, Chutes & Ladders and 21 other games and toys except during the holiday shopping season.

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Online shopping for consumer goods coupled with Amazon’s cutthroat competition with Walmart Inc (WMT.N)have prompted manufacturers of many consumer products to set price floors for low-cost products, e-commerce consultants said.

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

“We’re seeing categories (those floors) being launched that never existed before, like food and beverages,” said Jack Gale, an account executive at PriceSpider, which is seeing 120% year-over-year growth in the number of brands adopting its products that help enforce these price floors since 2018.

NOT LEGAL IN EUROPE

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

Agreements that dictate the retail price between the retailer and the manufacturer are also illegal in some states, including California and Maryland.

Amazon’s share of these price floors comes from its promise to offer products at prices as low or lower than competitors like Walmart. This forces brands that sell large quantities of goods on Amazon to set a reserve price and then enforce it. Otherwise, they face shrinking profits.

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

“We have no role in their creation or their continued adoption,” the Amazon spokesman said when asked about the floor price policy for advertising. “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.”

A lawsuit California has filed against Amazon alleges that suppliers must agree to rules set by Amazon, which ultimately prompt brands to adopt and enforce minimum advertised price policies.

U.S. Representative David Cicilline, who is working on proposed antitrust laws aimed at lowering prices, said: “Amazon routinely abuses its monopoly power to coerce sellers and suppliers into preventing them from offering cheaper prices elsewhere.”

Amazon responded that it does not prevent sellers from offering lower prices elsewhere.

A 2007 decision by the United States Supreme Court that allowed retail pricing agreements “within reason” between retailers and suppliers helped set the stage for the expansion of this pricing policy.

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

Our standards: The Thomson Reuters Trust Principles.

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