WASHINGTON, D.C. -- A Federal Trade Communication investigation based around allegations that spice giant McCormick & Co., Sparks, Md., violated the Robinson-Patman Act by paying selective discounts to food retailers could damage the reputations of retailers who may have solicited the differing payments, or even knew about them.
In the wake of recent news reports, Mac Barrett, spokesman for McCormick, said the company has been cooperating with the FTC all along to comply with its requests for documentation. Published reports stated that FTC staff attorneys either have recommended, or are prepared to recommend, a lawsuit alleging that the company discriminated in the prices it charged different retailers. If action is recommended, three of the five commissioners of the FTC would have to vote to pursue it.
"We continue in regular contact with the FTC and have been led to believe that at some point in the not too distant future, a decision by that agency will be forthcoming," Barrett told SN. "McCormick takes pride in conducting its business honestly and ethically. We firmly believe that we have not engaged in any unethical marketing practices," Barrett said, attributing the remarks to Robert J. Lawless, McCormick's chairman, president and CEO, in 1997. In that year the government launched its probe of whether McCormick demanded exclusivity from its customers.
At issue now, apparently, is whether the company paid different allowances, mostly in the form of discounts, to retailers for shelf space and good position for its spice products. Manufacturers can pay for such promotional expenses, but are not supposed to discriminate among retailers unless they are trying to match prices by the competition.
And if McCormick is in trouble over it, then so might be retailers, according to Robert Skitol, an attorney formerly with the FTC and now with the firm of Drinker Biddle & Reath, Washington. Skitol testified in September at hearings held by the Senate Small Business Committee, which is looking into the controversial longstanding practice of paying slotting fees to retailers.
"This is a topic of some interest," said Gene Grabowski, spokesman for the Grocery Manufacturers of America, Washington, a trade organization to which McCormick & Co. belongs. "I am sure there is some connection between the hearings and this," Grabowski said, noting that all the investigations in the past on the issue have come up empty. He said the GMA is opposed to slotting fees, which are widespread and generally viewed as lawful, but frequently are believed to exceed the cost incurred by a retailer in helping to bring a new product to market. The U.S. Department of Justice closed its multiyear investigation into the snack food industry earlier this year without filing any charges, Grabowski noted. "It remains to be seen how this investigation will turn out," he said.
