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Slotting Agreement

62. Sullivan defines slotting only for new products. See S.O. 461. The FTC report indicates that products that frequently use slots include frozen foods, dry foods (non-perishable foods) and beverages, while rare slot products include fresh meat and seafood, products and foods. (63) Suppliers of a wide range of other food products, including general products and special breads, greeting cards, tortillas, air fresheners, baby food and spices, also report the frequent use of slotting payments. (64) Based on a 1997 study comparing tobacco industry practices with other products, we also know that payments for tobacco slots were the most frequent and highest, followed by the average payments order of the beer and wine industry, then the snack and soft drink industry. (65) Both theories are based on increased supermarket costs associated with new product launches to explain the growth of slotting. These theories, however, ignore the larger increase in supermarket operating costs caused by the increase in new products. As described above, the increase in new products since the early 1980s has led to a sharp increase in the size of supermarkets.

The number of SKUs supplied by the average supermarket between 1980 and 2003 increased by more than 270 percent (50), with an increase of nearly 40% in supermarket area per dollar of sales. (51) In addition, theories of transaction costs and the cost of risk do not seek to answer the fundamental economic question underlying the existence of slotting contracts, namely why consumers do not pay the higher costs of operating supermarkets at a higher retail price, rather than letting producers cover the costs increased by one time per unit. Our theory also explains why the way manufacturers pay supermarkets for the supply of advertising space has increasingly shifted towards slotting fees. The transfer to slotting rates is due to the significant increase in the market value of advertising space since the early 1980s, which is due to a significant increase in demand for these areas. (56) As noted above, it is likely that an increase in the value of the advertising shelving area will result in an increase in the use of slots, since at each level of competition between retailers on a manufacturer`s product, the costs to pay retailers for shelf surfaces will increase in full with a reduction in the wholesale price if the required wholesale prices are reduced. (57) 30. Whether a shelf space contract is written or not, it is almost always applied itself, with the manufacturer cancelling payment to a distributor who will not provide the promised shelf surface for its products.

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