US companies dictate minimum prices for goods to retailers, customers left with fewer discounts

Shoppers will find fewer discounts on everything from toys to tortillas as companies increasingly set minimum prices for their goods to preserve profits and limit price cuts by retailers like Walmart and Amazon.

For years, manufacturers set the lowest price at which retailers could advertise certain large items, such as TVs. They wanted to prevent shoppers who picked out an item in the showroom from going online to find it for a lower price.

But with inflation at 8%, shoppers who got into the habit of buying smaller items online during the pandemic will find it hard to find bargains.

“We’re seeing categories (these floors) being taken over that were never there, like food and beverage,” said Jack Gale, an account executive at PriceSpider, a platform that gives control of the customer journey back to brands.

While this policy is legal in most of the United States, it is illegal in many countries, including most of Europe.

Companies like Colgate-Palmolive have used minimum advertised pricing policies for products like the Optic White Pro Series toothpaste on Amazon in recent months, a person familiar with the matter told Reuters.

Many consumer product categories, including beauty and personal care, have seen significant reductions in discounts in 2022.
Many consumer product categories, including beauty and personal care, have seen significant reductions in discounts in 2022.

Other companies such as Hasbro and Mr. Tortilla have succeeded in establishing a range for retailers to sell their products.

Hasbro requires retailers to keep prices for Monopoly, Twister, Chutes & Ladders and 21 other games and toys above the $6.99 to $33.99 range unless it’s the holiday season, according to a company memo seen by Reuters. Diet-friendly tortilla maker Mr. Tortilla also decided to set a minimum price level for Walmart and Amazon as it expanded sales.

In its efforts to offer competitive prices compared to rivals like Walmart, Amazon uses its position to force sellers to sell at prices set by the e-commerce giant.

In a lawsuit filed by California against Amazon, suppliers argue that they must agree to rules set by the company, which leads brands to implement minimum policies for advertised prices.

Agreements that dictate sales price between retailer and manufacturer are not legal in some states, including California and Maryland.

“Amazon routinely abuses its monopoly to force sellers and suppliers to offer cheaper prices elsewhere,” said U.S. Representative David Cicilline, who is working on proposed antitrust legislation to lower prices.

Amazon does not restrict sellers from offering lower prices elsewhere, the company said.

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