Originally created 10/01/97

Manufacturers sound retreat on zero coupons



Do you remember my columns about Procter & Gamble's zero-coupon program? Well, it's not smart to fool with Mother Nature, and the next time Procter & Gamble fools with coupons it is likely to do it differently. In a surprising move, Procter & Gamble and nine other major consumer-product companies agreed to a tentative settlement of an antitrust lawsuit brought against them by the attorney general of New York state.

Procter & Gamble's zero coupon campaign began in 1996 in Buffalo, Rochester and Syracuse, N.Y. No more coupons on hundreds of P&G products, from Tide to Pampers. Senior P&G executives loudly proclaimed their dislike for coupons and asserted that coupons no longer worked for the company or consumers. Rochester-based Wegman's Food Markets, a powerful supermarket chain in that area, joined in the vocal attack. Within weeks, several other major grocery-product manufactures showed signs of getting on the coupon-bashing bandwagon.

But consumers in upstate New York were even more vocal, and Dennis Vacco, New York's attorney general, took notice. At the time, a representative of his office told me that a manufacturer or supermarket could make its own decisions concerning when and how it issued coupons but that if supermarkets and manufacturers acted in concert it could have serious anti-competitive and antitrust implications.

Then, in April, the attorney general's office issued a cease-and-desist letter to P&G. The company announced it was ending the test but insisted it would challenge any charges of violation of antitrust laws.

Since then, P&G and others involved have agreed to pay $4.2 million to consumers in a 16-county area of upstate New York to settle charges that they acted in collusion to deprive shoppers of cents-off coupons. The attorney general's lawsuit alleges that the manufacturers communicated with each other on obtaining broad support for P&G's no-coupon test. The manufacturers eliminated or reduced the number of coupons issued, which the attorney general charges was an unreasonable restraint of trade and commerce and a violation of federal antitrust laws.

What is very unusual about the settlement is that these companies have agreed to pay $4.2 million dollars to consumers in upstate New York in the form of $2 coupons - not on their own products, which you might expect - but coupons good on the purchase of any products!

FROZEN-FOOD COMPANIES that import fruit and vegetables are supposed to print the country of origin on their packages. The law requires this to be printed on the frozen-food label in a "conspicuous place" as legibly, indelibly and permanently as the nature of the container will allow.

Gary Condit, a U.S. representative from California, says that companies selling imported produce are able to avoid the law by stamping the country of origin on the back of packages in ink that runs and becomes illegible, or by printing it in extremely small type.

To resolve this problem, the U.S. Customs Service proposed that the country of origin of frozen imported produce be marked on the front panel of the package in a "conspicuous place."

The Washington-based American Frozen Food Institute, which represents most of the large frozen-food companies, strongly opposes the new rule and says the Customs Service should be enforcing the present rule.

The Food Marketing Institute, the supermarket industry trade organization, says that printing the country of origin on the front "gives greater prominence to country-of-origin information than to nutrition and ingredient-labeling information - three times larger than the minimum size required for nutrition labeling."

If you desire to support or oppose this proposed rule (rule No. RIN-1515-AB61), you should write to: Regulations Branch, Office of Regulations and Rules, U.S. Customs Service, Franklin Court, 1301 Constitution Avenue N.W., Washington, DC 20229. Comments will be accepted until Oct. 18.

Send questions and comments to Martin Sloane in care of this newspaper. The volume of mail precludes individual replies to every letter, but Mr. Sloane will respond to letters of general interest in the column.