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1. A Slotting Fee Is A Payment That A Buyer
2. A Slotting Fee Is A Payment That Affect
3. A Slotting Fee Is A Payment That A Dependent
4. A Slotting Fee Is A Payment That Allow
5. A Slotting Fee Is A Payment That Accepts
6. A Slotting Fee Is A Payment That A Real Estate Agent

A slotting fee is a payment that a Select one: O a. Wholesaler makes to place a new product on a retailer's shelf. Manufacturer makes to a wholesaler as compensation for warehousing inventory. Manufacturer makes to a retailer as compensation for sales not made while the product was on the shelf.

A slotting fee, slotting allowance, pay-to-stay, or fixed trade spending is a fee charged to produce companies or manufacturers by supermarket distributors (retailers) in order to have their product placed on their shelves. The fee varies greatly depending on the product, manufacturer, and market conditions. Slotting allowance is the payment made by manufacturers to RETAILERS in other to secure a space on store shelves Andrews, 2000 noted that it is very observable to see some items like Kellogg’s, Colgate, Doritos placed at the top eye level in a supermarket or at end of aisle. Slotting fee or slotting allowance is a payment made by a manufacturer to a retailer in order to secure shelf space. Retailers set fees based on the amount of space allotted to a product, such as a twelve.

A Slotting Fee Is A Payment That A Buyer

“If you swipe your credit card for $2,000, I’ll put you on our menu right now,” said the bar manager at a high-volume bar and restaurant. Sitting at the bar, listening to sales pitches from suppliers and wholesalers, you occasionally overhear proposals like this one. In this case, if the supplier had exchanged money for that menu placement, the transaction would have been illegal. This practice is called pay to play. Although it may be permissible in some industries to pay a store to place your product at eye level, the same is not true for us in the beverage alcohol industry. Lately, the Alcohol and Tobacco Tax and Trade Bureau (TTB), which is responsible for the administration and enforcement of federal beverage alcohol regulations, has been reinvigorated with fresh enforcement funds.

The federal government has allocated $5 million for TTB trade practice enforcement funds in 2018, available during the agency’s fiscal year, which ends September 30. “Prior to receiving this funding, TTB averaged two trade practice investigations per year based on its limited enforcement resources and the resource-intensive nature of these investigations,” noted TTB’s fiscal 2017 report. Thanks to the new infusion, TTB said it will “substantially increase” the number of trade practice investigations. So far, it has kept that promise.

As of late 2017, the TTB reported 11 active trade practice investigations, two of which were joint crackdowns with state regulators in Miami and Chicago, targeting alleged pay-to-play activities. The investigations are probably not yet complete, as settlements and violations have yet to be announced. In March 2018 the TTB commenced a joint operation with agents from the California Department of Alcoholic Beverage Control, investigating alleged prohibited consignment sale arrangements in Napa and Sonoma Counties.

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Possibly setting the tone for the $5 million trade enforcement budget was the 2016 Massachusetts Craft Beer Guild settlement with the TTB for $750,000. The settlement resulted from alleged violations that Craft Beer Guild paid “slotting fees” to retailers in exchange for favorable product placement and shelf space. So what exactly is a “slotting fee”?

Learn Which Practices Are Prohibited

The terms pay to play and slotting fees refer to schemes whereby a supplier, importer, manufacturer, or wholesaler (for simplicity, the “brand”) gives a retailer something in exchange for favorable product placement or shelf space at the retailer’s store, bar, restaurant, or other licensed venue. One of the more common violations is the tied house. Sparing you the history lesson (for that, check out Last Call), this refers to the pre-Prohibition arrangement in which a retailer would be tied to one house or producer. Federal and state tied-house laws were created to keep the upper tiers—for our purposes, the brand—separate from the retailer tier.

A Slotting Fee Is A Payment That Affect

It is unlawful to attempt to induce a retailer directly or indirectly—for example, through an affiliate or agency—to purchase any products from the brand to the exclusion in whole or in part of other brands’ products. (So no, just having your agency do it does not make it legal.) The conduct must be “made in the course of interstate or foreign commerce,” but this is generally an easily provable element for TTB, since most products are sold across state lines. There is a small wrinkle for beer in that the state must also impose similar requirements, though most do.

Prohibited brand conduct includes acquiring or holding any interest in any on-premise or off-premise retailer;acquiring any interest in real or personal property owned, occupied, or used by a retailer;paying or crediting a retailer for advertising or display services;guaranteeing a loan or repayment of a retailer’s financial obligations; extending credit to a retailer beyond reasonable limits;requiring a retailer to buy or sell a certain amount of products; orfurnishing, giving, renting, lending, or selling to a retailer any equipment, fixtures, signs, supplies, money, services, or other “thing of value.” This, naturally, is the most common, as all brands want to give retailers signs and other point-of-sale materials.

As noted, a tied-house violation occurs if a brand induces a retailer to buy from the brand at the exclusion of other brands in interstate or foreign commerce. Exclusion occurs when the practice “puts the retailer’s independence at risk” by means of a tie or link between the brand and the retailer and results in the retailer purchasing less than it would have of a competitor’s product. There is a test to determine whether exclusion exists. The TTB looks at the practice and asks the following questions: Did the practice restrict the free choice of the retailer to decide which products to purchase or the quantity to purchase? Did it obligate the retailer to participate in a brand promotion to buy the product? Did it require an obligation to purchase or promote the brand or require a commitment not to terminate the relationship with the brand with respect to purchasing products? Did it allow the brand to be involved in the day-to-day operations of the retailer? Or did it result in discrimination among retailers—meaning that the brand did not offer the same thing to all retailers in the local market on the same terms without business justification for the difference in the treatment?

There are some exceptions, however. These permit a brand to offer point-of-sale advertising material; consumer and retailer advertising specials; product displays; combination packages; consumer tastings and samplings; coupons and sweepstakes or contests; educational seminars; and stocking, rotation, and pricing of the brand’s own products. Brands that operate legally will work within these exceptions.

Meanwhile, a “tie in” sale occurs when a brand requires a retailer to buy a product that it didn’t want in order to buy a product that it did. For instance, it would not be permissible for a brand to force a retailer to buy a certain amount of regular vodka in order to be allowed to purchase the special holiday version. Similarly, it would be impermissible to require a retailer to purchase 10 cases of Winery X’s Merlot in order to purchase Winery X’s award-winning Pinot Noir. ”Commercial bribery” refers to the practice whereby a brand induces a wholesaler or retailer to purchase its products “by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative.” For instance, it would not be permissible for a brand to offer a promotional sales contest in which retailer employees would get a cash prize from the brand for selling that brand.

A Slotting Fee Is A Payment That A Dependent

In addition to tied-house violations, unfair trade practices also include exclusive outlets and consignment sales. An “exclusive outlet” occurs when a brand requires a retailer to purchase its products to the exclusion, in whole or in part, of other brands by means of a contract or agreement, written or unwritten. In short, it’s prohibited to require a retailer to purchase distilled spirits, wine, or malt beverages from the brand in more than just a single sales transaction. A “consignment sale” refers to a sale, offer for sale, or contract to sell with the privilege of return. For example, a brand testing the popularity of a new product cannot sell it to the retailer under the condition that if it doesn’t sell, the retailer can return the product.

Avoid “This” for “That” Situations

Remember, state law will play a major role in your day-to-day activities. The above discussion refers solely to federal law, so be sure to check each state’s rules to confirm permissibility. Still, there are some things you can do to ensure compliance both in the states and federally. Although giving permissible point-of-sale items is a great way to market a brand, it should not be conditioned on receipt of display space of shelf position. For instance, don’t provide signs or a new retailer specialty only if the retailer agrees to preferential display or menu placement.

Here’s another common example: Say a brand is entering into an otherwise permissible sponsorship agreement for signage at an event or arena. Think twice before including a purchase requirement and placement requirement. The brand is not bargaining to be the only tequila sold and the only tequila on the menu. Rather, the brand is bargaining for advertising space based on the marketing value it will receive from the ads and other branding.

By avoiding situations where you give something, a thing of value or service, in order to get preferential display or shelf or menu placement, you will hopefully avoid tied-house violations. A good rule of thumb is to consider whether the brand is giving “this” for “that.” If the answer is yes, think twice.

Given the TTB’s enforcement budget, the best way to avoid pay-to-play violations is to be sure you are acting compliantly. Many industry professionals seek to play in the “gray area,” which suggests some risk. About risk, a wise attorney used to say, if you’re driving in a 25 mph zone, you need to know if you’re going 30 mph or 60 mph. Of course, it’s never recommended to violate the rules, and strict compliance should be of paramount importance to brands. To that end, the TTB is hosting trade practice seminars in many cities; check out the schedule and RSVP here.

Editor’s note: Nothing in this article is intended to be—and should not be—construed as specific legal advice.

A Slotting Fee Is A Payment That Allow

Ryan Malkin is principal attorney at Malkin Law, P.A., a law firm serving the alcohol beverage industry.Nothing in this article is intended to be and should not be construed as specific legal advice.

A buyer for a major retail chain finally closes the deal and buys your product. The big day has come for your product to shine on the shelf space it deserves. However, you are disappointed to realize you only have a small slot on the shelf and your product is overtaken by the big brands next to it. It is impossible for your product to compete with these brands. What is the process for successfully getting your product to the shelf, and how can you guarantee a good space?

Most consumers unknowingly fall victim to slotting fees controlling their purchasing decisions. Oh, look how convenient it is to grab that eye-level abundant product on the shelf! Why even bother looking at the possibly better product in a single slot on the bottom shelf? With this system in place, retail store offerings shift the control from customer desires to marketing budgets. This can create a barrier for new brands entering the market.

What are slotting fees?

Slotting fees are one-time payments a supplier makes to a retailer as a condition for the initial placement of the supplier’s product on the store’s shelves. This system allows the retailer to protect its return on investment when buying a new product. With 70–80 percent of new products failing, the cost to introduce a product on shelves can be more than the sales received in return. Slotting fees reduce the risk of loss for the retailer.

Where did they come from?

Introduced in the 1980s, slotting fees were initially only demanded by a few stores. Daniel Lubetzky, the founder and CEO of KIND, recalls slotting fees just becoming prevalent when he launched his brand in 1993. In the following years, a grocery store merger mania left many stores desperate and in debt. As a response, these stores looked for any way to make money, and charging slotting fees was an easy one. Lubetzky says, “Slotting ended up becoming more common and more institutionalized.” Nielsen data shows that 85 percent of retailers were charging slotting fees by 2000. Now, almost twenty years later, they have become a standard in the retail industry and almost impossible to avoid.

For many stores, slotting fees are necessary to keep the revenue flowing. Walmart was late to introduce them, first charging certain brands in 2015. It is believed that Walmart’s increase in wages that year was the catalyst for introducing the fees. The company needed to increase its revenues to balance its increase in wage expenses, and slotting fees were an easy fix.

How much are the fees?

Costs vary greatly and depend on the industry or section of the store. According to the trade publication Frozen and Refrigerated Foods, freezer section space in small chains costs up to $9,000. In larger chains, this number skyrockets. For example, Apple & Eve spent around $150,000 to get its fruit punch into a limited number of Safeway stores. These steep one-time costs are sometimes the only way to guarantee shelf space. According to UCONN’s Food Marketing Policy Center, the total market for slotting fees is believed to total around $9 billion, and it continues to grow. Be ready for some steep requests.

What to know

Chains vary on whether their supplier business deals include slotting fees or not. It is important to research these policies and know what to expect before going into a deal. National stores such as Kroger, Safeway, and Walmart use them, as do regional stores such as QFC and Fred Meyer. It is difficult to find stores that do not take advantage of this potential profit, but Trader Joe’s and The Fresh Market are a few.

A study by NAICS reveals the most common industries that are charged slotting fees by retailers or manufacturers. This does not include every retailer, but it can give you a good idea of what to expect for your product.

Common slotting fee industries

• Breakfast cereal
• Confectionary
• Frozen food
• Ice cream
• Bakeries
• Tortillas
• Snack food
• Seasoning and dressing
• Beverage
• Tobacco

A Slotting Fee Is A Payment That Accepts

Common non-slotting fee industries

A Slotting Fee Is A Payment That A Real Estate Agent

• Flour
• Oils
• Sugar
• Dairy
• Meat
• Seafood

How to negotiate slotting fees

It is difficult to avoid the fees entirely, but by presenting a good argument for how you can guarantee early sales, the retailer may take it easy on the expense demands.

• Present a plan. Know what shelf space you want and how much you want to spend on it, but stay reasonable. It is important to prevent the retailer from walking all over you and up-charging for the space.
• Use sales and marketing. Offer promotions, coupons, and demos to guarantee brand awareness and product sales. By showing that yours isn’t going to be one of the 80 percent of products that fail, the retailer will feel less of a need to strongly protect its investment.
• Have the stats. Prove there is current demand for your product and that it will sell if placed right. You need to exceed the average presentation and provide solid evidence that consumers are actively looking for your exact product.
• Measure and renegotiate. Monitor your sales in each store and renegotiate if sales are going very well. Remember that when you win, so does the store. Look for frequent stockouts, for instance, to indicate unmet demand that could warrant another facing on the shelf.

From the looks of it, slotting fees are not going anywhere. They continue to be a battle for small companies while simultaneously protecting retailers from losses. It is important to recognize their place in the future of your product and work to jump the hurdle they create.