Slotting Contracts and Consumer Welfare

Competition Policy and Antitrust

Article Snapshot


Joshua Wright


Antitrust Law Journal Vol. 74, No. 2, pp. 439-473, 2007


This paper looks at how contracts for retail shelf space affect consumers.

Policy Relevance

Competition law should treat “slotting contracts” as a form of competition that ordinarily benefits consumers.

Main Points

  • Product manufacturers often pay retailers to display their products on the best shelf space at eye level or at the end of aisles. These are called “slotting contracts.”

  • Some observers argue that producers or retailers use slotting contracts to harm competition by forcing rivals to buy more shelf space. These theories make little sense:
    • Slotting contracts rarely run long enough to harm competition.
    • Slotting contracts have not increased profits for retailers.
    • Some small retailers use them, and some large retailers like Walmart do not.

  • Others argue that slotting contracts are explained by the increase in the number of products, which raise supermarket costs. But this presents a puzzle, because retailers could also pass higher costs of larger stores on to consumers by charging higher prices.

  • Previous empirical studies of slotting contracts support the view that banning slotting contracts would mean that consumers would pay higher prices. 

  • It makes sense for manufacturers to pay retailers for the best shelf space, because the manufacturer gains more than the retailer if a consumer switches to his brand.
    • Getting paid by manufacturers for shelf space should let allow retailers to charge consumers lower prices overall.

  • Data from grocery stores run by the Department of Defense shows that a ban on slotting contracts in 2002:
    • Increased sales somewhat for products that had previously not been covered by slotting contracts, and decreased sales of slotted products.
    • There is no evidence that the slotting ban decreased prices, increased output, or increased product variety.

  • The effect of slotting contracts seems to be to shift sales from one brand to another, with little effect on prices, competition, or output.

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