US companies dictate minimum prices on goods to retailers, shoppers left with fewer discounts

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

For many years, manufacturers set the lowest price at which retailers could advertise certain big-ticket items like TVs. They wanted to stop shoppers who scoped out an item on the showroom floor from going online to find it at a lower price.

But with inflation hovering at 8%, shoppers who have gotten into the habit of buying smaller-ticket items online during the pandemic will have a hard time finding bargains.

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

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

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

Other companies like Hasbro and Mr. Tortilla have managed to set 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 its range of $6.99 to $33.99, unless it’s the holiday shopping season, according to a company memo seen by Reuters. The 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 as compared to rivals like Walmart, Amazon uses its position to compel sellers to sell at prices locked by the e-commerce giant. 

In a lawsuit filed by California against Amazon, suppliers argue that they have to agree to the rules set by the company which leads to brands implementing minimum advertised price policies. 

Agreements dictating the for-sale price between retailer and manufacturer are not legal in some states including California and Maryland.

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

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