Some Grocery Products Are “Price-Fixed” Preventing Deep Discounting

groceriesThis week we reveal a dirty little secret in the grocery business.

We’re in the midst of a nasty period of inflation putting pressure on many families’ grocery budgets. But in some cases, the problem is being exacerbated because of a little-known manufacturers’ policy that prevents stores from deep discounting certain products.

First, a little history. When MrConsumer was a teenager, he remembers going to wholesale showrooms with his mother to buy CorningWare at 40% off. You could not get a discount at retail stores in New York because that brand was “fair-traded” — meaning that it had to be sold at full retail price.

Those days are gone, but the concept lives on in modified form under the retail concept called “resale price maintenance” (RPM). For years, high-end products like Sony, Apple, or Bose commanded (and still command) premium prices and are rarely advertised at deep discount. These brands are likely subject to “MAP” — minimum advertised prices. That is a related pricing scheme allowed by federal antitrust law [see pages 3-7] that permits a manufacturer to unilaterally “announce” the lowest price at which it will allow its products to be advertised. Retailers who violate “MAP” could lose out on advertising funding (co-op ad dollars) or be cut off as a distributor of the brand. However, mandatory minimum pricing contracts between manufacturers and retailers while no longer per se illegal, risk legal challenge.

In many court cases, MAP was justified in part because it was applied to sophisticated products that required salespeople at department stores to educate shoppers about the benefits of the particular brand, and the employment and training of these workers was a costly proposition. MAP gave retailers more margin to afford those extra expenses.

MrConsumer has long suspected that MAP had crept into the grocery business, where supermarkets were expected not to advertise certain famous brand products below a floor set by the manufacturer and certainly not be used as a loss leader to build store traffic.

Take this example of regular liquid Tide in the 92 oz. bottle. During early November, checking some supermarket and retail ads around the country, the price was never advertised below $11.95 (give or take a few pennies) except when it typically came with a retailer-supplied manufacturer’s $3 off coupon offered directly to customers. In that case, the price was never advertised below $8.95.

Tide from Amazon
Tide in three stores

How is it that all these independent sellers serving different parts of the country have identical sale prices and not one of them is lower? They are certainly not allowed to conspire with each other. So Tide had to be subject to MAP, I speculated. But how to prove it? Then along came Sam’s Club with the smoking gun.

*MOUSE PRINT:

Tide Sam's Club

There it was in black and white — Sam’s Club disclosed that Procter & Gamble, Tide’s manufacturer, had prevented it from advertising their price for this Tide product (a warehouse size) because their price was lower than the minimum price they were allowed to promote.

Gotcha!

We wrote to P&G to confirm this, and asked some very pointed questions. How do they justify applying MAP to grocery items (since there are no high-priced salespeople in store aisles needed to educate shoppers)? What other P&G products are subject to MAP? How common is MAP in the grocery business? And much more.

P&G has not responded despite multiple requests.

We believe that Tide and P&G are just the tip of the iceberg. The question is which other major consumer products manufacturers are preventing retailers from advertising deep discounts on grocery products at a time when shoppers’ budgets are being increasingly strained by inflation?

What are your thoughts? Should manufacturers be able to dictate sale prices to stores thus limiting discounts?

Money.com Offers to Check Your Data for Breaches, But…

With so many data breaches happening these days, it is hard to keep track if and where you have become a victim. To help check to see if your personal data has been compromised, right at the top of the homepage of Money magazine, the publication is offering to do a free search.

Money- check data

What an easy and valuable service they are providing… except for one thing.

*MOUSE PRINT:

Money check data 2

What? In order to find out about any breaches you may have suffered, you are also signing up for advertising emails not just from Money but from others too.

That’s nasty.

The service that Money is using for the data searches is HaveIBeenPwned? which you can access directly for free. They say they do not retain your email address except if you subscribe to be alerted to future breaches.

Choice Hotels’ Customer Service Gets Points Handling Rewards Issue

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MrConsumer recently got an email from Choice Hotels with some bad news. It said that his accumulated points in their rewards program were about to expire.

Choice Hotels email

The fine print explained how to keep one’s points from disappearing. Basically you have to earn or redeem points every 18 months or they go bye-bye.

*MOUSE PRINT:

Choice fine print

So I looked to see what one could get for 5,000 points. Seemed like a nice round number — surely there was something of value available. But all the gift cards required 8,000 points at a minimum, such as this one.

Choice gift card choices

I did see that I could convert the points to American Airlines frequent flyer miles, but would only get 1,000 miles for my 5,000 points. Nonetheless, that seemed like the best option for me, so I called Choice customer service to make the transfer.

I explained the situation to the agent on the phone, Ken (a female), and she said “let me see what I can do for you.” After reviewing my account, she said that as a one-time courtesy, she would bump up my account from 5,160 points to 8,000 points so I could redeem them for a gift certificate right then and there.

What? WOW! She wished me a Merry Christmas, and proceeded to process a $25 Home Depot gift card for me.

I thanked Ken profusely. What amazing and unexpected customer service she provided! But it would be nice if Choice eliminated their points expiration policy just as most airlines have in their own frequent flyer programs.