Justice Department watchdogs are sniffing around the potato chip and cheese puff aisle of your grocery store.
The agency's antitrust division has opened an investigation of the salty snack food industry and is asking if Frito-Lay Inc. is gaining an unfair advantage by gobbling up shelf space in grocery stores.Bill Brooks, a Justice spokesman, declined to name specific targets Friday but confirmed that antitrust investigators are "looking into the possibility of anti-competitive practices in the snack food industry."
The Justice review is in a very early stage, but several industry officials have been answering questions about the highly competitive business of obtaining optimal placement on store shelves for snacks most cardiologists and dietitians would have people avoid.
Nicholas Iammartino, vice president of public affairs at Borden Inc., a Frito-Lay competitor, said Justice investigators have contacted his firm about Frito-Lay.
"They raised some questions about the Frito-Lay acquisition of former Eagle Snack plants and more general practices in the industry," Iammartino said. He would not comment further except to confirm that Borden is not a target of and did not initiate the government investigation.
"We've simply responded in recent months to questions asked by Justice," Iammartino said.
An executive of another leading snack food maker said he too was contacted by Justice investigators asking about Frito-Lay and about snack makers' payments to grocers for display of their products.
"It's hard to talk about snack foods without talking about Frito," said the executive, who spoke on condition his name be withheld.
Frito-Lay, based in the Dallas suburb Plano, is the country's largest snack food company, holding more than half of the nation's $15 billion salty snack market.
A person familiar with the investigation, also speaking on condition of anonymity, said the Justice review is examining so-called slotting fees paid to grocers for space on their shelves and whether some firms buy excess space on store shelves in order to keep competitors out. Such fees are a substantial business cost for snack producers, an industry official said.