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The fees, which retailers routinely charge suppliers to guarantee shelf space, are "threatening the profitability and the future of the family produce farmer," said Missouri Replubican Sen. Christopher "Kit" Bond, chairman of the Senate Small Business Committee, which held a hearing on the matter yesterday.

Federal antitrust regulators have also taken a renewed interest in the way retailers will accept discounts from large manufacturers, while demanding upfront payments from smaller ones, to secure prime shelf space.

The Federal Trade Commission is expected to issue a report examining slotting fees by the end of the year. Beginning next year, $900,000 will be earmarked for the agency to cover legal fees to force companies to cooperate with its probe.

Report Ordered

Earlier this year, Mr. Bond ordered the General Accounting Office, the investigative arm of Congress, to prepare a report on slotting fees. But the BAO said it was "unsuccessful in gaining the cooperation needed from the industry to conduct this study."

Massachusetts Sen. John Kerry, the committee's top Democrat, said in a statement yesterday that Congress would nevertheless put the industry's conduct "under a microscope."

Fruit and vegetable growers at the hearing pointed out that slotting fees were originally intended to insture retailers against the risk of placing new, untested products on their shelves. Holding a tomoato in one hand and an orange in the other, Mr. Bond said: "What's so new about these?"

Food-marketing representatives have said that they have tried to work with the government on its review of slotting fees and have defneded grocers' use of them. They also argue that federal antitrust authorities would face an uphill battle challenging such payments.

An Old Issue

Produce-industry complaints about the practice are emerging now because growers are "hearing about it for the first time," said George Green, general counsel at the Food Marketing Institute, a Washington-based trade group tht represents some 1,500 food retailers and wholesalers. He adds that the reason for the practice is an old issue: "the scarcity of shelf space."

John McMillin, a food analyst with Prudential Securities, said that while slotting fees may well affect the choice of food products available to consuemrs, there "is no evidence that the consumer has been hurt by higher prices." He notes that food inflation remains low, at about half the rate of in the 1990s.

Manufacturers are willing to pay the high fees in part because of the intense competition among new products, which are rolling out at the rate of about 35,000 annually, compare with 5,000 20 years ago. But the fees can be problematic for others. Vlasic Foods International Inc., the struggling owners of the Swanson dinner line, says the frozen-food case has had an especially high entry barrier in recent years, due in part of slotting fees. "We have eight new products we'd like to bring out," said a spokesman for the company. "But because of slotting fees, we might be able to launch only six of them."

Brian Sansoni, senior manager of public policy communication at the Grocery Manufacturers Association, whose members include over 140 large food marketers, said, "We don't endorse or condemn the various distribution methods of our member companies."