Abstract

"From Supermarket Shelves to Online Menus: The Political Economy of Slotting Fees "

Eli Cook, University of Haifa (elicook@gmail.com)

This paper traces the contested rise of pay-to-display “slotting fees” in American supermarket chains in the 1990s and the subsequent role they came to play in the business architecture of Big Tech platforms such as Google and Amazon. Following deregulation in the 1970s and 1980s, newly consolidated supermarket chains realized that their revenues no longer needed to come mostly from shoppers, as stipulated under New Deal anti-chain laws. Rather, as unencumbered “choice architects” with major market power, they could begin to make money not from selling food to consumers but from selling shelf space (sometimes referred to as “slots”) to suppliers. In 1968, only 28 percent of a food producer’s marketing budget went to retailers. The rest was spent on media advertising. By 2010, these ratios had flipped and, as this paper shows, food suppliers’ marketing expenses came to consist mostly of significant slotting and display fees to supermarket chains which insured that their products would make it onto the shelf or be placed in a prominent spot. Furious, small manufacturers demanded that the government step in as they had little chance to compete with the likes of Coca-Cola for shelf space. Yet as the paper demonstrates, regulators, judges and policymakers did very little – especially after Chicago School economists working for the FTC deemed such fees “efficient.” Many small producers were pushed out of the supermarket aisle entirely. The paper ends by showing how, by the early twenty-first century, the business architecture of supermarket slotting fees spread online and became the main source of Google’s enormous profits. It will also show how, when challenged by anti-trust regulators, companies like Google and Amazon refer explicitly to supermarket slotting fees in order to legitimize their own business model.