Professor testifies for plaintiff
By KATE NAGENGAST
Last week was rough for several large companies involved in antitrust trials. Although not as well publicized as the Microsoft decision, a large tobacco company was also found guilty of antitrust violations. Professor of marketing at Notre Dame, Gregory Gundlach, testified in a trial that resulted in $1.05-billion verdict last week against U.S. Tobacco Co. (UST), the nation's largest snuff tobacco company. Gundlach's expert testimony, given on behalf of the plaintiff Conwood Co., supported the firm's claim that UST had attempted to dominate the snuff tobacco marketplace through the use of slotting fees and other monopolistic practices.
Slotting fees — the controversial practice of retailers and wholesalers requiring a payment from manufacturers before agreeing to allocate shelf or warehouse space to their products – have been Gundlach's specialty since he testified before the U.S. Senate about the effects the fees could have on small businesses last September.
"In this particular instance, the slotting practice, amongst a lot of other practices the UST company had engaged in, were [found to be] anti-competitive," said Gundlach. "It doesn't necessarily mean that slotting fees are anti-competitive in every instance, but in this particular case, given the facts, that's what the jury found."
The jury deliberated for just four hours last Tuesday before finding in favor of Conwood Co. Damages were set at $350 million, however that amount tripled under federal antitrust laws.
"UST had up to 50,000 relationships with retail locations nationally and many of these had anti-competitive elements … [including] slotting allowances," said Gundlach.
A Greenwich, Conn. based firm, UST holds approximately 80 percent of the snuff tobacco market with brands like Copenhagen and Skoal. Conwood, Co. of Memphis, Tenn. controls only 13 percent with its Kodiak and Cougar brands. UST said it would appeal the verdict, maintaining their conduct did not violate antitrust laws.
Besides his testimonies at this trial and on Capitol Hill, Gundlach is the co-author of the most comprehensive academic analysis of slotting fees and continues to research their effects. He also assists the Federal Trade Commission, the Department of Agriculture, the General Accounting Office and the American Antitrust Institute with investigations and workshops to better understand the effects slotting fees may have on a variety of business sectors.
All News Stories for Tuesday, April 11, 2000