How To Enforce Minimum Advertised Price Policy Violation - PDF document

How To Enforce Minimum Advertised Price Policy Violation Minimum Advertised Price (MAP) policies are often crucial for brands. For them to be effective, brands must enforce minimum advertised price policy violations. What is a MAP policy ? A Minimum Advertised Price (MAP) policy is a guideline that determines th e lowest price at which resellers – distributors or retailers – can advertise a product. What is a MAP price ? Simply put, Minimum Advertised Pricing (MAP) is the lowest price a reseller can advertise a product for sale. By setting MAP, brands set a bottom boundary on advertised prices by their downstream partners across both online and brick - and - mortar retail. M ore about MA P When we talk about MAP, the key word is “advertised”. MAP policies deal with the advertised price for a product; They do not attempt to enforce the actual selling price of the product. Let’s say your brand manufactures water bottles, and you set your MAP price at $45. This price means that all your sellers in brick - and - mortar stores or online mus t advertise your product for $45 or more. If they advertise it for less, they risk the repercussions that follow a MAP policy violation. Note that resellers cannot advertise the specific product for a lower price, but they can sell it for less. So why do w e need MAP policies when you can sell products for lower than their MAP? To answer that, let’s examine the benefits of MAP. What are the benefits of MAP ? An effective MAP policy benefits all parties, from brands to distributors and retailers. When brands set a price, they have more control over their product downstream. Retaining constant pricing across distribution channels helps to protect the product’s p erceived value in the eyes of consumers and supports brand trust. Through MAP, manufacturers can protect their authorized partners and build stronger business relationships with those who comply with the policy. Maintaining minimum advertised prices also h elps to protect the margins and bottom line. Preventing price erosion is beneficial for both manufacturers and resellers. To stay competitive, retailers cut prices when their competitors do, and even offer in - store price matching. Large retailers, for exam ple, may want to lower prices, sometimes to nearly zero profit, in order to drive out competition. MAP allows them to offer attractive deals, such as BOGO or loyalty programs, but not to advertise for less. Ultimately, if cutting prices is not the way to g o, a robust MAP policy may push them to find other ways to provide value, such as loyalty programs and customer service. MAP in the Physical Worl d In the physical world, MAP policies concern off - site advertising, such as through magazines and flyers. The advertised prices may differ from the prices in the brick - and - mortar store as MAP does not restrict in - store advertising on products or sales prices. A well - enforced MAP policy across offline and online supports brick - and - mortar resellers who must be a ble to compete with digital resellers. MAP in the Digital Worl d In the digital world, an “advertised price” has greater significance since there is often no clear distinction between the advertised price and the sales price. When creating a MAP policy th at applies to online advertising, brands may address the difference between the advertised price and the actual price, which can be communicated in a different way. For example, an e - commerce reseller who displays the minimum price set by the brand can off er coupons or discounts at checkouts, such as “add to cart to see price.” In this case, the price on an e - commerce website or platform is the advertised price, while the online shopping cart is similar to a physical store where a seller can sell for a pric e that is cheaper than MAP. Pricing in a digital worl d Brand owners and resellers track their competition to make pricing decisions. Knowing that consumers compare prices online as part of their customer journey, resellers may try to offer discounts as a means to drive sales against their competitors. The issue of pricing is also affected by repricing tools such as Amazon’s auto - repricing : Following a price drop, Amazon can automatically adjus t your product pricing against your competition within preset limits and continue to do so as prices spiral down. Adopting MAP policies can help brands control the advertised bottom price of their products wherever they are sold. MSRP vs. MAP: What’s the difference ? MSRP and MAP both have to do with product pricing. As explained here, MAP prices define the lowest price at which a product can be advertised for sale. They do not attempt to recommend the actual selling prices. That is what MSRP does. The Manufacturer’s Suggested Retail Price (MSRP) is the selling price that a manufacturer recommends at the point of sale. MSRP reflects the value desired by the bra nd. A luxury brand, for example, requires pricing that reflects the perceived value the brand wishes for its product. A branded t - shirt can have an MSRP of $8 or $80 or any other number, depending on the brand. While MAP is the lower limit, MSRP is the upp er limit. Just as MAP deals with advertised prices, MSRP has to do with suggested or recommended prices. In other words, neither is attempting to set a fixed price. Is MAP legal ? It is advised to check the laws of the country where you conduct business and draft the MAP policy with this in mind. The same is true when a brand attempts to enforce its MAP policy in case of violation. In the US, for example, it is allowed to set MAP po licies. One of the most important precedents in this respect is Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007). In this landmark case, the US Supreme Court reversed its “per se illegal” rule regarding MAP. It stated that it was not per se illegal for manufacturers to set mandatory minimum prices for their products. Instead, mandatory minimum prices would be subject to the “rule of reason”. In this case, Leegin had a policy of requiring retailers to charge minimum prices for their goods. As a result, they stopped selling to the PSKS store. PSKS alleged that by doing so, Leegin violated the antitrust laws. The Supreme Court stated that instead of declaring it per se illegal, the validity of each policy is to be judged by the rule of reason. In other words, the question of MAP policy enforcement is to be determined on a case - by - case basis. In the US, the MAP policy should express that there are no limits on a retailer’s right to se t prices, distinguishing advertised from sale price or Resale Price Maintenance (RPM). It should also state that the MAP policy is unilateral. In the United States v. Colgate & Co. (1919) , the United States Supreme Court held that a private business can announce the prices at which its goods may be resold and refuse to deal with resellers who do not comply with the set price. In other words, if there is no agreement with the retailer, manu facturers can set the limits on a product’s pricing. According to this, brands can enforce MAP policy violations in the US. However, the terms of the MAP policy should not be anti - competitive. What is MAP compliance ? Authorized distributors and resellers can benefit from MAP policies and stay in compliance to promote their business and relationship with the manufacturer. Brands sometimes offer incentives for being in compliance with their MAP, such as awarding compliance with priority in supply. In many M AP policies, compliance is a condition for a reseller’s continued access to the brand goods, such as in the form of termination of a distribution agreement. Still, MAP violations are common. Resellers who have no formal relationship with the manufacturer a re more likely to violate MAP. If the brand then fails to enforce the MAP policy violation, other resellers, authorized and unauthorized alike, often do the same to stay competitive. This spirals into more MAP violations and the brand losing control of pri cing. The solution? Monitoring and enforcement. How to enforce MAP policy violations ? MAP policies do not mean much if they are not enforced. So how to enforce MAP policy violations? The first step for brands is to draw a clear MAP policy that applies to each and every reseller. Publicly releasing the policy demonstrates a commitment and su pports enforcement efforts. Standing behind MAP in the digital world, brands must monitor their product(s) on numerous channels and countless resellers in a landscape that swiftly changes. Once a violation is flagged, it is time to take action by following the MAP policy. The first offense, for example, may entail a written warning. If the retailer does not comply or in case he performs a second violation, the policy may call for suspension of the reseller for a pre - determined period of time. After the thir d strike, the policy often determines that the manufacturer should cease doing business with the distributor or retailer. At this point, if the reseller still has products and does not comply, the manufacturer can send a cease - and - desist letter. In case th e reseller does not comply, the brand can stop selling him goods. Other tools can also be applied together with MAP policies. For example, a distribution policy in which a brand unilaterally suspends resellers that sell through unauthorized e - commerce site s. Wiser MAP policy violation enforcemen t A MAP policy only has value if it is consistently and proactively enforced. Constantly monitoring advertising in the physical and digital world is core to brand performance, including maintaining prices, protecting margins, and detecting unauthorized selle rs. Once violations are detected, it is time to take them down. Wiser Market ’s online brand protection can help your brand identify MAP violations and regain control of your brand online. Wiser Market’s system constantly monitors numerous eCommerce channel s to identify sellers in violation of MAP or territory agreements. Following detection, the Wiser team of in - house experts analyzes the violation and moves on to enforcement. Wiser Market enforces your MAP policies and helps your brand deter sellers from f uture violations so you gain control of your brand and grow your business.