FRITO-LAY PAYMENTS PROBED : JUSTICE DEPARTMENT QUESTIONS WHETHER STORES GET FEES TO KEEP OUT RIVAL SNACKS.

Byline: Rob Wells Associated Press 

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 Department 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 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 that most cardiologists and dietitians want people to 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 said Borden neither initiated nor is a target of the government investigation, but he would not comment further.

``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 payments to grocers for display of snacks.

``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 of Plano, is the country's largest snack-food company, holding more than half of the nation's $15 billion salty snack market. It has a network of 42 plants producing Fritos, Doritos, Rold Gold Pretzels and Lays potato chips. Recently, it has expanded into lower-fat snacks, including Baked Lays and Baked Tostitos.

A person familiar with the case, also speaking on condition of anonymity, said investigators are examining payments to grocers for space on their shelves, called slotting fees, and whether some firms buy excess shelf space to keep competitors out. Slotting fees are a substantial business cost for snack producers, an industry official said.

Frito-Lay spokeswoman Lynn Markley said Frito-Lay worked closely with Justice investigators to put to rest questions over the Eagle Snacks acquisition. Justice officials haven't contacted Frito-Lay about payments to grocers or possible antitrust actions in the industry, she said.