At Vorys eControl, we have helped hundreds of companies design, draft, and implement a minimum advertised price (MAP) policy. Our efforts complement each brand's broader eControl program. Inevitably, common themes, issues, and challenges surface as companies independently consider various decision points.
During this four-part blog series, we will be going through twenty things to consider when deciding whether to launch or perhaps update, your MAP policy. The full guide will arrive just in time for the upcoming shopping season. The time of year when policies come up against their biggest challenges. When we're finished, you'll know exactly how you should be preparing a MAP policy.
Let's dive in.
In Part One we'll be defining Minimum Advertised Price (MAP) policies and outline when and where they are critical.
The minimum advertised price, or MAP, is the lowest price at which your product can be advertised and be in compliance with your pricing policies. For example, if you never want your product to go below a certain price threshold, you set that dollar amount as the minimum limit. But that's just one part of your broader MAP policies.
A company that complies with your MAP policy is still free to set the final resale price. The resale price is the price at which a product is actually sold by a reseller to an end user.
Depending on the situation, the minimum advertised price may equal the final resale price. However, the final resale price may also be lower than the minimum advertised price without it being a violation of the company’s MAP policy. It is important that if you have a MAP policy, it does not conflate the minimum advertised price with a resale price. It is also important that a company is not expressly or inadvertently creating a minimum resale price agreement — through a MAP policy or otherwise — because it is illegal in certain states, notably California.
If your company suffers from rampant unauthorized seller activity, then consider delaying the implementation of your MAP policy. You'll delay until you have the necessary control mechanisms in place to effectively address them. Otherwise, a MAP policy may actually penalize your authorized resellers because they will be attempting to
comply while those who do not care about it, will disregard it and win the sale. That is how unauthorized parties frequently win the sale or the buy box.
Generally, a period of cleanup against unauthorized sellers is recommended before the launch and implementation of a MAP policy.
Sometimes, there is confusion about which channel partner’s advertised pricing is subject to a MAP policy.
Generally, a MAP policy is applicable to the advertised prices seen by end user consumers. So, downstream resellers who are displaying advertised prices to an end user consumer will be subject to a MAP policy. Traditionally, a MAP policy would not apply to the advertised prices from a distributor or wholesaler selling products to a reseller. In other words, a B2B sale.
For visual learners, the reseller is where traditional MAP policies apply in the downstream distribution chain.
Company → Reseller → End user
Company → Distributor → Reseller → End user
For brands using two-step distribution, the distributor may need to pass down the MAP policy to its reseller customers if the company does not have direct lines of communication to those customers.
All too often, we see companies attempting to implement a MAP policy they found online with the company name changed. Come to find that the MAP policy is not workable for their own business and it does not drive the desired results.
There are many business decisions to carefully consider in structuring your company’s MAP policy. It is important to work through those decisions methodically with a full understanding of the pros and cons of each provision and the anticipated impact on your resellers. An experienced attorney can help with these decision points and ensure there's ample competition (antitrust) compliance.
It is possible, so you totally can. But you'll need both an eControl program foundation and a well-thought-out MAP policy. Critically, a MAP policy only works if the company has control over both authorized and unauthorized sellers. A company has no recourse under a MAP policy against an unauthorized seller who is violating MAP. Unauthorized sellers will break MAP all day long and twice on Sunday to win the sale. They're more concerned about overcoming the competition.
If your organization is suffering from unknown or unauthorized resellers, then a broader eControl program is a crucial component to setting the stage for successful MAP compliance.
Want to learn more and chat about MAP strategy? Reach out to attorney Jessica Cunning at [email protected] to schedule a virtual session. Jessica is a strategy leader in our nationally recognized Vorys eControl practice, helping companies draft, implement, and execute workable MAP policies.
Want to learn more? Consider reading Vorys eControl’s white paper “The Winning Strategy for MAP Success and Long-Term Brand Value in the eCommerce Market.”
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